British American Tobacco p.l.c. (No. 3407696) Annual Report 2024.
This document constitutes the Annual Report and Accounts of
British American Tobacco p.l.c. (the Company) and the British
American Tobacco Group prepared in accordance with UK
requirements and the Annual Report on Form 20-F prepared in
accordance with the U.S. Securities Exchange Act of 1934 (the
Exchange Act) and the rules promulgated thereunder for the year
ended 31 December 2024, except that certain phrases, paragraphs
or similar sections denoted with a ‘@’ symbol do not form part of
the Annual Report on Form 20-F as filed with the U.S. Securities and
Exchange Commission (the SEC) and certain phrases, paragraphs
or similar sections denoted with a ‘»’ symbol do not form part of the
Annual Report and Accounts. In addition, the Report of Independent
Registered Public Accounting Firm on pages 260 and 261 will only
be included in the Annual Report on Form 20-F. Moreover, the
information in this document may be updated or supplemented
only for purposes of the Annual Report on Form 20-F at the time of
filing with the SEC or later amended if necessary. Any such updates,
supplements or amendments will also be denoted with a ‘»’ symbol.
Insofar as this document constitutes the Annual Report and
Accounts, it has been prepared and is presented in accordance
with, and reliance upon, applicable English company law and the
liabilities of the Directors in connection with this report shall be
subject to the limitations and restrictions provided by such law. This
document is made up of the Strategic Report, the Governance
Report, the Financial Statements and Notes, and certain other
information. Our Strategic Report, pages 2 to 163, includes our
purpose and strategy, global market overview, business model,
global performance, as well as our financial performance and
principal Group risks. Our Governance Report on pages 164 to 247
contains
detailed
corporate
governance
information,
our
Committee reports
@ and our Responsibility of Directors
@. Our
Financial Statements and Notes are on pages 247 to 388. The Other
Information section commences on page 389. This document
provides alternative performance measures (APMs) which are not
defined or specified under the requirements of International
Financial Reporting Standards (IFRS). We believe these APMs
(which are Non-GAAP measures) provide readers with important
additional information on our business. We have included a Non-
GAAP measures section on pages 395 to 410 which provides a
comprehensive list of the APMs that we use, an explanation of how
they are calculated, why we use them and a reconciliation to the
most directly comparable IFRS measure where relevant. British
American Tobacco p.l.c. has shares listed on the London Stock
Exchange (BATS), the Johannesburg Stock Exchange (BTI), and, as
American Depositary Shares, on the New York Stock Exchange
(BTI). The Annual Report is published on bat.com. A printed copy is
mailed to shareholders on the UK main register who have elected to
receive it. Otherwise, shareholders are notified that the Annual
Report is available on the website and will, at the time of that
notification, receive a short Performance Summary (which sets out
an overview of the Group’s performance, headline facts and figures
and key dates in the Company’s financial calendar) and Proxy Form.
Specific local mailing and/or notification requirements will apply to
shareholders on the South Africa branch register. References in this
publication to ‘British American Tobacco’, ‘BAT’, ‘Group’, ‘we’, ‘us’
and ‘our’ when denoting opinion refer to British American Tobacco
p.l.c. and when denoting business activity refer to British American
Tobacco p.l.c. and its subsidiaries, collectively or individually as the
case may be, as well as in some circumstances those who work for
them. When denoting business activity these collective expressions
are used for ease of reference only and do not imply any other
relationship between British American Tobacco p.l.c. and its
subsidiaries. The companies in which British American Tobacco
p.l.c. directly and indirectly has an interest are separate and distinct
legal entities. The material in this Annual Report and Form 20-F is
provided for the purpose of giving information about the Company
to investors only and is not intended for general consumers. The
Company, its Directors, employees, agents or advisers do not
accept or assume responsibility to any other person to whom this
material is shown or into whose hands it may come and any such
responsibility or liability is expressly disclaimed. The material in this
Annual Report is not provided for product advertising, promotional
or marketing purposes. This material does not constitute and
should not be construed as constituting an offer to sell, or a
solicitation of an offer to buy, any of our products. Our products are
sold only in compliance with the laws of the particular jurisdictions
in which they are sold. References in this document to information
on websites, including the web address of BAT, have been included
as inactive textual references only. These websites and the
information contained therein or connected thereto are not
intended to be incorporated into or to form part of the Annual Report
and Form 20-F. Cautionary statement: This document contains
forward-looking statements. For our full cautionary statement, see
page 447.
A refined purpose:
The best choice any adult smoker can make will always be quitting
combustible tobacco products completely.
For the last few years, our aim has been to build A Better Tomorrow™.
This has meant working to reduce the health impact of our business by
offering adult consumers a greater choice of enjoyable and reduced-risk*
†
products compared to cigarettes. Now is the time to take a step forward.
BAT’s New Category products are not smoking cessation devices and are
not marketed for that purpose.
Learn more about how we’re
Building a Smokeless World
at bat.com/reporting
+
A Better Tomorrow™
means Building a
Smokeless World.
A Smokeless World built
on Smokeless products
where, ultimately,
cigarettes have become
a thing of the past.
A world where smokers
have migrated from
cigarettes to smokeless
alternatives.
A world where Tobacco
Harm Reduction is both
understood and accepted.
A world where smokers
make a switch to better.
*
Based on the weight of evidence and assuming a complete switch from cigarette smoking.
These products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject
to FDA regulation and no reduced-risk claims will be made as to these products without
agency clearance.
1
Strategic Report
Overview
Our Global Business
2
Our Multi-
Category Portfolio
4
Chair’s Introduction
6
Chief Executive’s Overview
8
Our Year in Numbers
10
Introducing
Omni
TM
11
Our Strategy
Our Strategic
Navigator
12
Our Business Model
14
Engaging with Our Stakeholders
18
Chief Financial Officer’s Overview:
Investment Case
20
Chief Financial Officer’s Overview:
Our performance
22
Our Markets and Megatrends
24
Quality Growth
Strategic Pillar Overview
26
Our Vapour
Products
28
Our Heated Products
30
Our Modern Oral Products
32
Our Traditional Oral Products
34
Our Combustible Products
35
Beyond Nicotine
37
Dynamic Business
Strategic Pillar
Overview
38
Capital Efficiency
40
U.S.
42
AME
44
APMEA
46
Financial Performance Summary
48
Treasury and Cash Flow
55
Sustainable Future
Strategic Pillar Overview
60
Our Sustainability
Strategy
66
2024 Sustainability Highlights
68
Tracking Progress
69
Double Materiality Assessment
70
Our Five Focus Areas:
Tobacco Harm Reduction
72
Climate
78
Nature
86
Circularity
94
Communities
102
Sustainability Governance
114
Sustainability Policies, Procedures
and Standards
116
Creating a Culture of Integrity
118
TCFD Reporting
120
TNFD Reporting
137
Sustainability 2024 Assured Metrics
153
Sustainability Limited Assurance
Report
@
154
Group Principal Risks
155
Viability Statement
163
Governance
Directors’ Report
Chair’s Introduction on Governance
164
Board of Directors
166
Management Board
170
Governance Framework
172
Board Leadership
173
Values and Culture
174
Board Activities
in 2024
176
Board Engagement with
Stakeholders
178
Principal Decisions
Made by the Board
184
Our Approach to Division
of Responsibilities
185
Board Effectiveness
187
Nominations Committee
189
Audit Committee
194
Remuneration Report
Annual Statement on Remuneration
205
2024 Remuneration at a Glance
216
Directors’ Remuneration Policy
217
Annual Report on Remuneration
227
Responsibility of Directors
247
Financial Statements
Independent Auditor’s Report
@
248
Group Financial Statements
262
Group Companies and Undertakings
371
Parent Company Financial
Statements
@
381
Other Information
Additional Disclosures
389
Shareholder Information
448
Other Information
467
In this year’s report
Our regional profile maximises opportunities for quality
growth in our sector. Each of our markets is accountable
for its own performance and driving growth.
Our business is divided into three
complementary regions, with a balanced
presence in both high-growth emerging
markets and highly profitable developed
markets.
Our in-depth marketplace analysis delivers
insights on consumer trends and
segmentation, which facilitates our
geographic brand prioritisation across
our regions and markets.
Consumer preferences and technology are
evolving rapidly, and we are staying ahead
of the curve with our digital hubs and
innovation centres. We are also leveraging
the expertise of our external partners
and are looking forward to exciting
results from our venturing initiative,
Btomorrow Ventures.
Revenue by Region
£25,867m
Total revenue
U.S.
£11,278m
AME
£9,241m
APMEA
£5,348m
For more key detail on our Regional
Performance, see pages 42 to 47
+
Note:
Map is accurate as at 31 December 2024 and is representative
of general geographic regions and does not suggest that
the Group operates in each country of every region.
Three Complementary Regions
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Overview
Our Global Business
2
United States of America (U.S.)
Top Markets:
U.S.
Americas and Europe (AME)
Top Markets:
Combustibles: Brazil, Germany,
Mexico, Romania
HP: Germany, Greece, Hungary, Italy,
Poland, Romania, the Czech Republic
Vapour: Canada, France, Germany,
Poland, Spain, the UK
Modern Oral: Denmark, Norway,
Sweden, Switzerland, Poland, the UK
Asia-Pacific, Middle East and
Africa (APMEA)
Top Markets:
Combustibles: Bangladesh, Japan,
Pakistan
HP: Japan, South Korea
Associates and Joint Ventures
Top Markets:
India
Read more about our Markets
and Megatrends on pages 24 and 25
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
3
48,000+
employees
5
major product
categories
140
employee
nationalities
3
regions
BAT is a consumer-focused business operating internationally.
Our multi-category approach means we are well placed to
provide adult consumers with products designed for every mood
and moment. Our portfolio reflects our commitment to meeting
the evolving and varied preferences of today’s adult consumers.
Revenue by Product Category
£25,867m
Total revenue
New Categories
£3,432m
13.3%
Traditional Oral
£1,092m
4.2%
Combustibles
£20,685m
80.0%
Other
£658m
2.5%
Strategic Portfolio
These are our key brands in both the
combustible and Smokeless
*† categories.
This ensures focus and investment on the
brands and categories that will underpin
the Group’s future performance.
The strategic portfolio is:
Smokeless
All brands within New Categories
(Vapour, Heated Products and Modern
Oral) and the strategic Traditional Oral
brands in moist and snus.
Combustibles
Dunhill, Kent, Lucky Strike, Pall Mall,
Rothmans, Newport (U.S.), Natural
American Spirit (U.S.), Camel (U.S.).
Vapour
Vapour products contain an e-liquid,
nicotine and flavours, and a battery-
powered heating element. When
activated, via puff or button, the
heating element heats the liquid
and forms an aerosol, commonly
known as vapour.
+
Read more on page 28 and 29
Global Drive Brands
Heated Products
Heated Products (HPs) have two
main functional parts: a battery-
powered device and a consumable -
which contains a plant-based
(tobacco leaf or non-tobacco leaf)
substance that is heated. Once the
consumable has reached the
necessary temperature, it forms
an aerosol releasing nicotine
and flavours.
+
Read more on page 30 and 31
Global Drive Brands
33
markets
where our Heated Products
are currently available
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Overview
Our Multi-Category Portfolio
4
63
markets
where our
Vapour products
are currently
available
Building a Smokeless World via Smokeless products
Notes:
BAT’s New Category products are not smoking cessation
devices and are not marketed for that purpose.
*
Based on the weight of evidence and assuming
a complete switch from cigarette smoking. These
products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo,
Grizzly, Kodiak, and Camel Snus, are subject to FDA
regulation and no reduced-risk claims will be made
as to these products without agency clearance.
Modern Oral
Modern Oral products are pouches
which contain high-purity nicotine,
water, and other high-quality
ingredients. Consumers place the
disposable pouch within the mouth,
between the lip and gum. Nicotine
and flavours are then released and
absorbed through the inner lining
of the mouth.
+
Read more on page 32 and 33
Global Drive Brands
44
markets
where our Modern Oral products
are currently available
Traditional Oral
Traditional Oral products include
snus and snuff. Snus is a moist
form of oral tobacco originating
from Sweden. It is available in
loose form or as pouches.
With Traditional Oral products,
consumers take a single portion
or pouch and place it within the
mouth, between the lip and gum.
The nicotine and flavours are
then absorbed through the inner
lining of the cheek.
+
Read more on page 34
Global Drive Brands
3
markets
where our Traditional Oral
products are currently available
Combustibles
The Group sold 505 billion
cigarette sticks and 13 billion
other tobacco products
(stick equivalents) in 2024.
With 37 fully integrated
cigarette manufacturing
facilities in 35 markets, the
Group operates internationally.
+
Read more on page 35 and 36
Global Drive Brands
U.S.-specific
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
5
In 2024, we saw yet another year
of significant challenges across the
globe, with continued economic and
political volatility.
The impact of these issues was further
exacerbated by high interest rates and
inflation, alongside persistent cost-of-living
pressures. As a result, major economies
have witnessed changes in consumer
confidence and buying behaviours.
Across our industry we have seen a rapid
evolution of markets, like the U.S., for
example, where cigarette volumes have
declined at pace as adult consumers seek
out both value-for-money combustible
products and smokeless alternatives.
However, I believe that when changes and
challenges arise, so do opportunities to
grow, overcome and even thrive.
Transforming with Purpose
As a Board we have a responsibility
to ensure that the Group delivers for
stakeholders. In 2020, we began the
journey of our A Better Tomorrow™
purpose. Four years on and our corporate
purpose is being lived by thousands of
colleagues globally. At the same time, our
refined strategy is enabling us to navigate
transformation with focus, enhanced
execution and resilience.
2024 was a year for BAT to build, invest,
innovate and refine for a sustainable future,
and it is crucial that shareholders have a
clear view of the path ahead.
We have invested in bolstering our U.S.
business, and in new product development
and launches across our categories, while
thoughtfully extracting value from our
combustibles franchise. All of this has been
done through the lens of having a better
understanding of adult consumers and our
evolving industry.
It has never been more important to
maintain both momentum and strategic
focus, and I’m confident we will continue
to do just that.
Driving Sustainable Change
Our Combined Annual and Sustainability
Report gives a full view of BAT’s business
strategy and performance. It also outlines
our progress towards our purpose of
A Better Tomorrow™ and reaffirms our
commitment to Building a Smokeless World.
This is the third year that we have
embedded our sustainability data into our
Annual Report. It is also the first year that
we have refined some of our focus areas
from a sustainability perspective,
demonstrating our ongoing efforts to
create a meaningful impact. You can read
more about our refined sustainability
strategy on page 66.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Overview
Chair’s Introduction
6
Our corporate purpose is
being lived by thousands of
colleagues globally. At the
same time, our refined strategy
is enabling us to navigate
transformation with focus,
enhanced execution
and resilience.
Luc Jobin
Chair
Ultimately our goals have not changed.
If anything, we are more acutely focused
on how we reach them. Meaning how we
migrate adult cigarette consumers actively,
sustainably and responsibly to reduced-
risk
*† Smokeless alternatives, and
importantly, how we measure success.
In doing so, BAT will be well positioned to
deliver for investors, consumers and wider
stakeholders, while employees can benefit
from a purpose-driven business that they
can feel excited about.
Our Values and Culture
A happy and engaged workforce moving
in tandem typically leads to better
performance, productivity and a sense of
pride. It is here that our six corporate
Values and cultural transformation play an
important role, as they contribute to BAT's
success and strategic delivery. The key
is to bring everyone along on the journey,
so expectations and behaviours are clear,
along with what needs to be achieved.
To be an exciting and winning company
means being a place where our people are
passionate about what they do and the
difference they make. It is also about
understanding and being invested in
BAT's success.
Market Dynamics
With over one billion adult smokers in the
world, there are many jurisdictions which,
with the right regulatory approach, could
see smoking rates decline faster through
greater acceptance of Smokeless products.
We know that Tobacco Harm Reduction
– encouraging smokers who would
otherwise continue to smoke to switch
completely to less risky alternatives
*† – is
the fastest route to achieving a Smokeless
World. This is why we’re actively working
with various stakeholders to make this a
reality. The growth of adult smokers
seeking Smokeless alternatives is a long-
term, sectoral trend.
In many countries, the challenges presented
by illicit trade continue to persist across
the industry. This is a problem for both
combustibles and New Category products,
intensified by increasing costs in regions
across the world. We believe more
appropriate regulation and enforcement
is needed to tackle these issues, and we
welcome signs of increasing action.
Building a Smokeless World
Our aim to reduce the health impact of
our business remains prominent, and one
of the ways in which we are demonstrating
our resolve on these issues is through
our science.
We took a step forward in October by
publishing a series of new industry-leading
ambitions for our Vapour devices,
supported by evidence-based solutions.
‘BAT's Commitment to Responsible
Vaping Products’ is a comprehensive
resource which sets out how we intend
to tackle some of the most pressing
societal concerns.
We believe that growth within the
Smokeless category will be driven by
sustained investment in our brands and
targeted innovation to respond to the
evolving tastes of adult consumers. With
our multi-category portfolio, BAT is well
placed to capitalise on this adult consumer
shift to Smokeless products while
continuing to manage the combustible
cigarette business responsibly. Together
with active portfolio management, we
recognise that investing in our brands is
fundamental to sustaining BAT's
performance for the future.
Dividends and Share Buy-backs
Reflecting the confidence in our business
and its future prospects, the Board has
declared a dividend of 240.24p per ordinary
share, payable in four equal instalments of
60.06p per ordinary share, to shareholders
registered on the UK main register or the
South Africa branch register and to
American Depository Shares (ADS) holders,
each on the applicable record dates.
The dividends receivable by ADS holders
in US dollars will be calculated based on
the exchange rate on the applicable
payment dates.
Further information on dividends can
be found on page 54 of the Financial
Performance Summary and page 449
in the Shareholder Information section.
As part of our active capital allocation, in
March we launched a programme to buy
back BAT ordinary shares worth £1.6 billion
using proceeds from a partial share disposal
of the Group’s shareholding in ITC Limited
(ITC). The first tranche of the programme
saw the buy-back of BAT ordinary shares
for a total amount of £700 million in 2024,
with the remaining £900 million due to
complete in 2025.
We continue to carefully review our capital
allocation to provide value for shareholders
and support the growth of BAT.
Board Changes
I was very pleased to welcome Soraya
Benchikh to our Board this year.
Soraya joins the Board as Chief Financial
Officer and Director, and she possesses
extensive financial and leadership experience.
I would like to congratulate Soraya on her
appointment, and I look forward to her
contribution. With the breadth of experience
and skills that we have on the Board, I am
confident that our focus on accelerating
our strategy will yield results.
Additionally, Uta Kemmerich-Keil will join
the Board with effect from 17 February
2025. With her general management
background in regulated industries and her
experience in consumer, digital and
strategic transformation, she makes a
strong addition to our Board. Murray
Kessler will step down from the Board with
effect from 17 February 2025 and I would
like to thank him for his contributions and
wish him well in his new endeavours.
Summary and Outlook
It is encouraging that the outlook for the
year ahead – according to some
economists – is one of cautious optimism.
While it's fair to say that there are still
some clouds on the horizon from a
geopolitical and economic standpoint, our
business has demonstrated time and time
again that it is resilient. The diverse nature
of our organisation, products, people and
geographies are our strengths.
Building a sustainable future isn't always
linear, and that was the priority for BAT
in 2024. Looking ahead to the next few
years, our efforts will be focused on delivery
and innovation across the markets we
serve globally.
Through continued investment in our
brands and prioritising adult consumers
and their preferences, the Board believes
we are well placed to maximise opportunities
in tobacco and nicotine as consumer
preferences evolve. These markets remain
attractive, and we are confident we have
the right strategy in place, an exciting and
winning culture, and the right people to
deliver. Progress in these dimensions has
bolstered our ability to execute consistently
and sustainably. Tadeu discusses this in
more detail on page 9.
BAT's Board and leadership team remain
focused and confident in the Group's ability
to deliver long-term, sustainable growth and
value, while delivering A Better Tomorrow™.
Notes:
*
Based on the weight of evidence and assuming
a complete switch from cigarette smoking. These
products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo,
Grizzly, Kodiak, and Camel Snus, are subject to FDA
regulation and no reduced-risk claims will be made as
to these products without agency clearance.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
7
Our six corporate Values and cultural
transformation play an important
role, as they contribute to BAT's
success and strategic delivery.
When I was appointed Chief Executive in
May 2023, I set out to do two things: bring
focus and discipline to the execution of our
strategy, and deliver profitable transformation.
Despite a challenging external
environment, I believe 2024 was a pivotal
year in BAT's transformation with a real
focus on investment for future growth.
We set a compelling ambition to be a
predominantly Smokeless business by
2035, driven by our refined strategy, and
this is already paying dividends.
Our global footprint and multi-category
product portfolio have enabled us to
continue to deliver resilient performance
and value for shareholders – even during
uncertain times. This, combined with our
inclusive and delivery-focused culture,
means we can achieve results today
while pursuing future opportunities,
reinforcing our commitment to enhance
shareholder returns.
The foundations we have in place are
strong. Looking ahead, strategic delivery
and deployment are where we will focus
our efforts to create A Better Tomorrow™.
Full-Year 2024 Performance
Despite a challenging environment, the
resilience of BAT was reflected in our 2024
performance. Our focus on investment
throughout the year is evident, with
delivery in line with our guidance. Total
Group revenue declined by 5.2%, largely
due to the negative impact of the sale of
our businesses in Russia and Belarus,
partway through 2023 (and which, in turn,
had an impact on 2024) and a translational
currency headwind.
We continued to perform well in both AME
and APMEA, growing total revenue
(excluding Russia and Belarus and foreign
exchange). I am pleased with the
acceleration of our performance in the
second half of the year, driven by the phasing
of New Categories innovation and the
benefits of investment in U.S. commercial
actions, together with the unwind of related
wholesaler inventory movements.
In the U.S., I am encouraged that our
investment approach is strengthening
our business, despite a challenging macro-
economic backdrop and the continued
prevalence of illicit single-use nicotine
products. Through our commercial actions,
we are confident we can further improve
our performance through sharper
execution and by opening up untapped
growth opportunities, particularly related
to Modern Oral.
Our New Categories delivered another
strong performance, after achieving
profitability (at a category contribution
level) two years ahead of plan last year.
In 2024,
@New Category contribution
was £249 million, with category
contribution reaching 7.1 ppts.
@ Revenue
from our Smokeless products accounted
for 17.5% of Group revenue.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Overview
Chief Executive’s Overview
8
We set a compelling ambition to
be a predominantly Smokeless
business by 2035, driven by our
refined strategy, and this is
already paying dividends.
Tadeu Marroco
Chief Executive
2024 also saw further progress towards an
agreement regarding the ongoing litigation
in Canada. I am pleased that there appears
to be a pathway to an agreement of all
parties which we believe will enable the
Group to continue to transform in this
important market.
While the headwinds in our operating
environment remain, I am assured by the
strength demonstrated by the business.
However, the prospect of ongoing volatility
gives us even more impetus for sharper
strategic focus and delivery.
A Refined Strategy
I believe we have the right strategy to drive
us forward to greater success. 2024 was
an investment year, paving the way
towards our ambition. The direction of
travel is clear, and execution and cultural
transformation are where we are focusing.
One of my highlights of 2024 was leading
our Capital Markets Day in Southampton,
where my Management Board showcased
the progress made against priority areas
for the business. From achieving
profitability of our New Categories
business two years ahead of schedule to
improving our financial flexibility and strong
cash generation, it is evident that our
strategy is working.
Another highlight for me this year was the
launch of Omni
TM, a dedicated resource
created by BAT specifically for scientists,
public health authorities, regulators, policy
makers and investors. It articulates our
progress towards A Smokeless World, and
demonstrates how science, innovation and
over a decade's worth of evidence can
combine to achieve it.
None of this would be possible without
the 48,000+ talented people who work at
BAT, who are guided by BAT’s core values
every day.
The truly inclusive culture we are building will
ensure we have the talent to deliver both now
and in the future. Further details on our new
people strategy and culture transformation
can be found on pages 38–39.
Our refined strategy is now embedded
across the business, and it is fundamentally
built upon three pillars: Quality Growth,
Sustainable Future and Dynamic Business.
Together they form a roadmap which we
believe will enable BAT to continue to grow
and transform sustainably, responsibly
and successfully.
Quality Growth
As the driving force behind our transformation,
our Quality Growth pillar is about how we
innovate, transition into the future, and
deliver great products in a sustainable way
for consumers.
With a more balanced focus on top-line and
bottom-line delivery, we are already seeing
results in AME and APMEA. Meanwhile, our
investments in the U.S. have put us on a
stable footing which will enable us to
replicate that success. Despite recent
challenges, the U.S. remains the most
profitable tobacco and nicotine market in the
world and I believe it will be the cornerstone
of our future growth.
We will maximise our growth potential by
focusing on brands, efficiency and margin
delivery across our business. At the same
time, we will continue to build and maintain
our competitive edge, while progressing
our Beyond Nicotine portfolio and
investments with an eye to medium-
and long-term growth.
Effective regulation, both in the U.S. and
the rest of the world, will be pivotal to
ensure a level playing field and to allow
consumers to switch to Smokeless
alternatives if they choose. Our long track
record of managing regulatory change
gives us confidence that we will be able
to navigate these issues.
Sustainable Future
The Sustainable Future pillar is crucial
to achieving our goal of creating A Better
Tomorrow™ by Building a Smokeless World.
It emphasises our investment in the quality
of our Smokeless products – driven by
science, and our commitment to further
external engagement and advocacy,
including with regulators, to make our
purpose a reality.
Sustainability and integrity remain a priority
in everything we do as we work to provide
more adult consumers around the world
with access to Smokeless products
responsibly.
Dynamic Business
Building further on BAT’s success, the
Dynamic Business pillar reflects our
commitment to ensuring the business
operates efficiently and effectively across
all areas.
This will be achieved by creating financial
flexibility to invest in our people, our products
and to maximise shareholder returns.
Our new Chief Financial Officer, Soraya
Benchikh, and I will be working closely
together to build on our financial foundation.
We will also continue our disciplined
approach, with a focus on capital allocation
and debt management.
@With a leverage
ratio of 2.44x, inside our narrowed leverage
target range of 2.0-2.5x adjusted net debt
to adjusted EBITDA
@, we have increasing
flexibility to deliver sustainable value, while
remaining agile to respond to macro-
economic and regulatory developments.
As part of our active capital allocation, in
March we announced a £1.6 billion share
buy-back programme, consisting of
£700 million in 2024 and £900 million in
2025. This, in addition to maintaining a
growing dividend, reflects our commitment
to enhancing shareholder returns.
Ensuring that BAT is a diverse, inclusive
and people-oriented place to work is
another core part of the Dynamic Business
pillar. I am truly proud of the culture we
have built and the thousands of people
across the globe who are bringing BAT's
ambitions to life.
Looking Ahead with Confidence
What is clear to me is that our refined
strategy is right and the foundations we're
building upon are firm.
We are transparent about our intention
to move our business beyond cigarettes
by migrating adult smokers from cigarettes
to Smokeless products.
What we won't do is shy away from the
challenges that may come as a result. An
example of this in 2024 was the launch of
our new industry-leading ambitions for our
Vapour devices and liquids, supported by
evidence-based solutions, to tackle some
of the most pressing societal concerns. We
are actively engaging with stakeholders,
and investing heavily in our science,
innovation and resource to enable us to
execute with precision and achieve high
quality, long-term growth – with
sustainability and integrity throughout.
Our transformation journey is well
underway, and we are an organisation
ready to deliver, with operational excellence
and improving capital allocation flexibility
for the benefit of all stakeholders.
The future is bright for BAT. I am excited
about the difference we can make, and the
potential we have to Build a Smokeless
World and drive A Better Tomorrow™.
Notes:
1.
Please refer to the Non-GAAP section from page 395
for the Non-GAAP measures definitions.
*
Based on the weight of evidence and assuming
a complete switch from cigarette smoking. These
products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo,
Grizzly, Kodiak, and Camel Snus, are subject to FDA
regulation and no reduced-risk claims will be made as
to these products without agency clearance.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
9
The future is bright for BAT. I am
excited about the difference we can
make, and the potential we have to
Build a Smokeless World and drive
A Better Tomorrow™.
Non GAAP
Our Performance Metrics
2024
%
2023
%
2022
IFRS GAAP
Transformation
Incentive - 2024
Incentive - 2025
Other Non-Gaap
Consumer
Number of Smokeless Product Consumers
1 (see page 392)
29.1m
25.5m
22.3m
Cigarette and HP volume share growth (bps)
10 bps
-10 bps
-10 bps
•
Cigarette and HP value share growth (bps)
-30 bps
-50 bps
flat
Volume
Vapour (mn units)
616
-6 %
654
+7 %
612
HP (bn sticks)
21
-12 %
24
-1 %
24
Modern Oral (bn pouches)
8.3
+55 %
5.4
+34 %
4.0
Cigarettes (bn sticks)
505
-9 %
555
-8 %
605
Financial
Revenue (£m)
25,867
-5.2 %
27,283
-1.3 %
27,655 •
Organic
Revenue at cc (%)
2,3,5
+1.3 %
+3.1 %
•
•
•
Revenue from New Categories (£m)
3,432
+2.5 %
3,347
+15.6 %
2,894 •
Organic Revenue from New Categories at cc (%)
2,5
+8.9 %
+21.0 %
•
•
Smokeless revenue as % of total revenue (%)
17.5 %
16.5 %
•
•
Profit/(loss) from Operations (£m)
2,736
n/m
-15,751
-250 %
10,523 •
Adjusted Organic
Profit from Operations at cc (%)
2,3,5
+1.4 %
+3.9 %
•
•
@Adjusted Organic Gross Profit growth at cc (%)
2
+0.5 %
n/a
•
@New Category Adjusted Organic Gross margin at cc (%)
1. 2, 5
55.7 %
53.7 %
•
@New Category Contribution at cc (£m)
2, 5
249
n/m
17
n/m
-366
•
@New Category Contribution margin at cc (%)
2, 5
7.1 %
0.9 %
•
•
Operating Margin (%)
10.6%
-57.7%
38.1% •
Adjusted Operating Margin (%)
3
46.0%
45.7%
44.9%
•
Diluted Earnings/(Loss) per Share (p)
4
136.0
n/m
-646.6
-322 %
291.9 •
Adjusted Diluted Earnings per Share (p)
3,4
362.5
-3.5 %
375.6
+1.1 %
371.4
•
Adjusted Organic
Diluted Earnings per Share at cc (%)
2,3,4,5
+3.6 %
+5.2%
•
•
Dividends per Share (p)
240.24
+2.0 %
235.52
+2.0 %
230.88
Dividend Payout Ratio (%)
66.3%
62.7%
62.2%
Net Cash Generated from Operating Activities (£m)
10,125
-5.5 %
10,714
+3.1 %
10,394 •
@Adjusted Cash Generated from Operations (£m)
7,554
-3.4 %
7,824
-0.8 %
7,889
•
•
@Free Cash Flow before Dividends (£m)
7,901
-5.5 %
8,360
+3.9 %
8,049
•
Cash Conversion (%)
370%
-68%
99% •
@Operating Cash Conversion (%)
101%
100%
100%
•
•
Borrowings, including Lease Liabilities (£m)
36,950
-7.0 %
39,730
-7.9 %
43,139 •
@Adjusted Net Debt to Adjusted EBITDA (ratio)
3
2.4x
2.6x
2.9x
•
@Adjusted Return on Capital Employed (%)
3
12%
11%
10%
•
•
Total Shareholder Return (rank)
5 of 15
13 of 24
4 of 24
•
•
Find our key sustainability ambitions,
targets and metrics on page 69
+
Please refer to the Non-GAAP section from page 395 for the Non-GAAP measures definitions. See the section ‘Non-Financial Measures’
on page 391 for more information on these non-financial KPIs.
Notes:
@ Denotes phrase, paragraph or similar that does not form part of BAT’s Annual Report on Form 20-F as filed with the SEC.
1.
Excludes Russia and Belarus.
2. Where measures are presented ‘at constant rates’ or ‘at cc’, the measures are calculated based on a re-translation, at the prior year’s exchange rates, of the current year results of the
Group and, where applicable, its segments. See page 58 for the major foreign exchange rates used for Group reporting.
3. Where measures are presented as ‘adjusted’, they are presented before the impact of adjusting items. Adjusting items represent certain items of income and expense which the Group
considers distinctive based on their size, nature or incidence.
4. 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 remuneration purposes, and reflective of the Group's positive earnings on an adjusted basis,
Management included the dilutive effect of share options in calculating adjusted diluted earnings per share.
5. This measure is presented as it forms part of the Group's incentive schemes and is presented excluding the distortive effect of the sale (in 2023) of the Group's businesses in Russia
and Belarus.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Overview
Our Year in Numbers
10
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Introducing Omni™
11
Forward Thinking
for a Smokeless
World
Review the evidence.
Join the conversation.
Tobacco Harm Reduction
presents a significant public
health opportunity.
It is our hope that Omni™
will spur a dialogue with
stakeholders – scientists,
public health authorities,
regulators, policy makers, and
investors – and across the
wider scientific and regulatory
ecosystem related to tobacco
and nicotine products.
Omni™ is an evidence-based
manifesto for change, which captures
BAT’s commitment and progress
towards Building a Smokeless World
to create A Better Tomorrow™.
It makes a compelling case, offering
insights into our scientific and real-
world evidence of Tobacco Harm
Reduction (THR) in action, supported
by hundreds of independent scientific
studies, our own research into
innovations, and real-world examples.
Our ambition is for Omni™ to
be a platform for a necessary
societal conversation founded
in evidence, a manifesto for
change and a mandate for
action.
Kingsley Wheaton
Chief Corporate Officer
www.asmokelessworld.com
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Our Strategy
Our Strategic Navigator
12
Purpose/Vision/Mission
Pillars & Building Blocks
We are BAT:
Our Values
Delivering for
Consumers
Society
Employees
Shareholders & Investors
Quality Growth
In the tobacco and nicotine industry, steady
combustibles revenues and growth of
New Categories have driven continued
revenue growth.
Meanwhile, only around 10% of the world’s
one billion smokers have Switched to
Better
*, replacing combustibles with
Smokeless products.
The opportunities for future growth, as
we look to accelerate this transformation,
are vast.
Our human and financial resource
allocation decisions will be guided by the
geographies and products we focus on,
aided by our market archetype.
We will enhance our innovation ecosystem
to achieve our aim of developing an
incredible pipeline of new, scientifically
substantiated products.
Our combustibles business remains
essential to funding our transformation
and continuing to reward our shareholders.
To enhance BAT’s growth beyond 2025,
in Beyond Nicotine we will pave the way
to a new portfolio of non-nicotine-based
products. Within this space, there are two
categories that BAT is exploring: Wellbeing
and Stimulation – functional consumable
products that help people manage their
mood and wellbeing; and cannabis.
Our commitments
under Quality Growth:
Progressing toward quality, margin-
accretive growth in Smokeless products
FMC volume decline but
expecting continuing value delivery
Sensibly investing for the future
Beyond Nicotine
For more details on the Quality
Growth pillar of our refined
strategy,see page 26
+
Sustainable Future
In recent years real strides have been
made with Tobacco Harm Reduction (THR).
As a result, there are now three significant
global Smokeless tobacco and nicotine
product categories: Vapour products,
Heated Products and Modern Oral
nicotine products.
Reducing the health impact of our business
via THR is our ambition, which we believe is
achievable by migrating more smokers to
Smokeless products and advocating for the
right regulatory environments for these
products to flourish. We must do this
responsibly and with integrity.
We recognise and support the objective
of governments to reduce smoking rates
and its associated health impact.
Combustible tobacco products pose
serious health risks. The only way to avoid
these risks is not to start or to quit smoking.
For those adults who would otherwise
continue to smoke or start smoking, we
believe they should be able to make better
choices by opting for Smokeless
alternatives instead of cigarettes.
Our efforts will be led primarily by science,
supported by ongoing active external
engagement with regulators and key
stakeholders, while embedding
sustainability across the Group.
As we transition from cigarettes to
Smokeless products, our transformation
must be comprehensive – addressing not
only our products' public health impact but
also our other material sustainability topics.
Our commitments
under Sustainable Future:
Building a Smokeless World
Investing in the products, science
and engagement to make A Better
Tomorrow™ a reality
Conducting our business sustainably
and with integrity
For more details on the Sustainable
Future pillar of our refined strategy
see page 60
+
Dynamic Business
We are confident that we can create the
financial flexibility to invest in our people,
enhance our products and deliver returns
to shareholders.
Our commitment to building an organisation
where people and performance come
together to create excellence remains.
This is why creating an exciting, winning
company is one of the building blocks of
the Dynamic Business pillar.
Additionally, delivering value for
shareholders through sustainable returns
remains essential to achieving our strategic
ambition. For more than 25 years we have
consistently grown the dividend per
ordinary share in absolute terms.
We have returned over £27.5 billion to
shareholders over the last five years,
through our progressive dividend policy
and sustainable share buy-back, starting
with £700 million in 2024 with a further
£900 million committed for 2025. We have
also continued to reduce leverage and
closed the year within our narrowed target
range,
@with an adjusted net debt to
adjusted EBITDA ratio of 2.44x
@.
Reducing gross debt is another core
component of the Dynamic Business pillar.
The Group continues to target a solid
investment-grade credit rating target
@of Baa1, BBB+ and BBB+ by Moody’s/
S&P/Fitch.
@
Given current challenges in the external
environment, the Group aims to de-lever
its gross debt levels (£37.0 billion in 2024)
and moderate the annual net financing
cost levels to better support the overall
strategy of the Group. While net financing
costs were £1.1 billion in 2024, this included
a net gain in respect of a debt liability
management exercise (described on page
55) of £590 million. On an adjusted basis,
our net finance costs were £1.6 billion in 2024.
Our commitments
under Dynamic Business:
Creating a diverse, inclusive and
people-oriented place to work
Being data-driven and delivering
operational excellence/cost management
Focused on investors’ returns
For more details on the Dynamic
Business pillar of our refined
strategy,see page 38
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
13
Note:
*
Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
Our eight-step business model
Our business model begins and ends with the consumer.
The insights we gather from adult consumers, backed by robust
science, unlock value by ensuring we offer the right product
choices to meet their preferences. Our product portfolio is
constantly being enhanced through innovations designed to
better serve adult consumers and build A Better Tomorrow™.
Following the responsible sourcing of raw materials and
components, we utilise our global footprint to manufacture
at speed and scale. We use our global distribution capabilities
to ensure our products are where they need to be, when they
are needed, based on our market archetype model. Through
our responsible marketing practices and powerful portfolio,
we market and sell our products which, in turn, generate
further insights.
Read more about our
stakeholders on page 18 and 19
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Our Strategy
Our Business Model
As a global thought-leading business, it’s crucial for us to understand
our adult consumers’ preferences, so we can develop products
they love and distribute them around the world. Listening to
feedback from stakeholders also enables us to refine our strategy,
deliver sustainable value and build A Better Tomorrow™.
14
Seeing over the horizon
We possess a deep understanding
of consumers and their diverse
preferences. This is aided by our rich
heritage as one of the most
established tobacco and nicotine
businesses in the world, and our data
and analytics-led approach.
These insights enable the
development and responsible
marketing of our products, so that
they are fit to satisfy consumer
preferences.
Powered by our consumer insights
platform, we focus on product
categories and consumer segments
across our global business that
have the greatest potential for
sustainable growth.
Link to Principal Risks
Tobacco, New Categories and other
regulation interrupts growth
strategy; Inability to develop,
commercialise and deliver
the New Categories strategy;
Climate change; Circular economy;
Cyber security
Accelerating Tobacco Harm
Reduction acceptance
To substantiate the product safety,
quality and reduced-risk potential of
our New Category products we rely
on world-class science. It is crucial
for building trust with consumers
and regulators, and encouraging
adult smokers to completely switch
to less risky alternatives
*†1.
Chemistry, molecular biology, and
toxicology are just some of the fields
that our extensive scientific research
programme covers. We are transparent
about our science and have recently
published a compendium of
information in the Omni™, which
explores over a decade’s worth of
Tobacco Harm Reduction evidence,
alongside science and research.
Link to Principal Risks
Competition from illicit trade;
Tobacco, New Categories and other
regulation interrupts growth strategy;
Significant increases or structural
changes in tobacco, nicotine and New
Categories related taxes; Inability to
develop, commercialise and deliver
the New Categories strategy
Read more about our science at
www.asmokelessworld.com
+
Staying ahead of the curve
With consumer preferences and
technology evolving at pace, we
rely on our growing global network
of digital hubs, innovation hubs,
world-class R&D laboratories,
external partnerships and our
corporate venturing initiative,
Btomorrow Ventures.
Innovation is central to us driving
sustainable growth, and we invest
significantly in research and
development to create incredible
products that satisfy consumer
tastes. Led by data and consumer
insights, each innovation takes us
a step further towards building
A Better Tomorrow™ by reducing
the health impact of our business.
Link to Principal Risks
Inability to develop, commercialise
and deliver the New Categories
strategy; Climate change; Circular
economy; Cyber security
Sourcing materials
responsibly
Most of our tobacco is sourced by our
Group-owned vertically integrated Leaf
Operations through direct contracts
with c.91,000 farmers. The remaining
tobacco is sourced from third-party
suppliers that, in turn, contract with an
estimated 157,000 farmers. The vast
majority of tobacco farms in our supply
chain are smallholder family farms.
Beyond tobacco, we source product
materials like paper and filters for
cigarettes and, for our New Category
products, we have a growing supply
chain in consumer electronics and
e-liquids. We also have a vast network
of suppliers of indirect goods and
services that are unrelated to our
products, such as for IT services
and facilities management.
Link to Principal Risks
Geopolitical tensions; Supply chain
disruption; Inability to develop,
commercialise and deliver the New
Categories strategy; Injury, illness
or death in the workplace; Solvency
and liquidity; Foreign exchange rate
exposures; Climate change; Circular
economy; Cyber security
Read more about our
supply chain on page 109
+
Utilising our global
manufacturing footprint
Our high-quality products are
manufactured in our facilities across
the globe. These products and the
tobacco leaf we source are then
optimised for distribution and sale.
Our New Category products are
manufactured in a mix of our own
and third-party factories. We work to
keep our costs globally competitive
and endeavour to use our resources
as effectively as possible.
Link to Principal Risks
Geopolitical tensions; Supply chain
disruption; Disputed taxes, interest
and penalties; Injury, illness or death
in the workplace; Solvency and
liquidity; Foreign exchange rate
exposures; Climate change;
Circular economy
Moving our products
seamlessly everywhere
Using modern technologies, including
AI and machine learning, helps us to
get our products to the right place at
the right time.
Our products are sold around the
world and distributed efficiently using
distribution models tailored to suit
local circumstances and conditions.
These distribution models include
retailers, supplied through our direct
distribution capability or exclusive
distributors, and our Direct-to-
Consumer business – which has been
accelerated through the deployment
of owned e-commerce sites.
Link to Principal Risks
Geopolitical tensions; Tobacco,
New Categories and other regulation
interrupts growth strategy; Supply
chain disruption; Inability to develop,
commercialise and deliver the
New Categories strategy; Foreign
exchange rate exposures; Climate
change; Cyber security
Marketing our
products responsibly
Using a globally responsible
approach to marketing, we seek to
help raise standards and prevent
under-age access, while growing our
market share by encouraging adult
consumers to choose our products.
Our marketing across all our tobacco,
nicotine and nicotine-free products
and brands is governed by our
Responsible Marketing Principles
(RMP) and Responsible Marketing
Code. They include strict requirements
to be accurate, responsible, and
targeted at adult consumers only.
Our RMP are applied even when
they are stricter than local laws.
Link to Principal Risks
Competition from illicit trade;
Tobacco, New Categories and
other regulation interrupts growth
strategy; Inability to develop,
commercialise and deliver the
New Categories strategy; Litigation;
Foreign exchange rate exposures
Read more about
responsible marketing
on page 77
+
Offering the
consumer choice
We are proud of our powerful
portfolio of brands. This includes
our combustibles portfolio and our
Smokeless product brands which
we believe will accelerate us towards
our strategic aim. Our product
pipeline is strong, aided by our quality
insights, science and innovation,
and being well-positioned globally.
We offer adult consumers all over
the world a range of high-quality
products – from value-for-money
to premium, including combustible
products, Vapour, Modern Oral
and Heated Products.
Link to Principal Risks
Competition from illicit trade;
Geopolitical tensions; Tobacco,
New Categories and other regulation
interrupts growth strategy; Supply
Chain disruption; Litigation; Significant
increases or structural changes in
tobacco, nicotine and New Categories
related taxes; Inability to develop,
commercialise and deliver the New
Categories strategy; Disputed taxes,
interest and penalties; Foreign
exchange rate exposures;
Circular economy
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
15
Notes:
*
Based on the weight of evidence and assuming a complete switch
from cigarette smoking. These products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus,
are subject to FDA regulation and no reduced-risk claims will be made as to these
products without agency clearance.
A Better Tomorrow™ for:
Consumers
Adult consumers are at the core
of everything we do and our success
is underpinned by addressing their
preferences, offering them a choice
of enjoyable, innovative and less
risky products
*†.
Measured by:
63
Countries where Vapour
products are available
33
Countries where Heated
Products are available
44
Countries where Modern Oral
products are available
Suppliers
Across the BAT Group, we work
with thousands of different suppliers
worldwide. Our suppliers are valued
business partners and we believe,
by working together, we can raise
standards, drive sustainable practices,
create shared value and build A Better
Tomorrow™ for all.
Customers
Our customers include retailers,
distributors and wholesalers who are
essential for driving growth and
embedding responsible marketing
practices.
Our People
We employ 48,000+ people
worldwide. Attracting and retaining
an increasingly diverse workforce and
providing a welcoming, inclusive
working environment are key drivers
in BAT’s transformation journey to
build A Better Tomorrow™. Our focus
is on providing a dynamic, inspiring
and purposeful place to work.
Measured by:
84%
Engagement Index score in our
Your Voice employee survey
0.12
Lost Time Incident Rate (LTIR)
vs 0.17 in 2023
44%
Proportion of women in
Management
‡ roles
Accredited as Global Top
Employer by the Top
Employers Institute
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Our Strategy
Our Business Model
Continued
16
Note:
‡
As at 31 December 2024. Refer to the BAT
'Reporting Criteria' for a full description of key
terms and definitions bat.com/reporting.
Society
We believe the greatest contribution
we can make to society is Building a
Smokeless World and reducing the
health impact of our business. We will
do this by encouraging those smokers
who would otherwise continue to
smoke to switch completely to
Smokeless alternatives. Achieving
this, while working to reduce our
impact on the environment, is central
to delivering A Better Tomorrow™.
Measured by:
29.1m
Consumers of Smokeless
products
31%
Reduction of waste generated
(vs 2017 baseline)
-42.6%
Reduction in Scope 1 & 2
emissions from our
2020 baseline
Notes:
*
Based on the weight of evidence and assuming
a complete switch from cigarette smoking. These
products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse,
Velo, Grizzly, Kodiak, and Camel Snus, are subject
to FDA regulation and no reduced-risk claims will
be made as to these products without agency
clearance.
‡
Refer to the BAT 'Reporting Criteria' for a full
description of key terms and definitions at
bat.com/reporting
Shareholders
& Investors
We are committed to delivering
sustainable and superior returns to
our shareholders and investors. It is
essential that we maintain the
support of our shareholders and
investors to enable access to capital.
This allows us to implement our
strategy and achieve our business
objectives.
Measured by:
@3-5%
Revenue growth over
the medium term
65%
A progressive dividend being
a 65% dividend payout ratio
over the long term
@2-2.5x
Deleveraging the balance
sheet into our 2.0-2.5x adjusted
net debt to adjusted EBITDA
target range
@Medium-term, 4-6%
increase in adjusted
profit from operations
growth (excluding
currency)
@
Non-Financial and
Sustainability Information
Statement
Non-financial and sustainability
information reporting required under
the UK Companies Act is included in
the Strategic Report as referenced below:
Our business model is
set out on pages 14 to 17
+
See pages 155 to 162
for Group Principal Risks
+
See page 10 and page 69 for the
Group’s financial and non-financial
key performance indicators
+
Our reporting in the following areas
includes information about the
policies and principles that govern our
approach, due diligence processes,
outcomes and non-financial
performance indicators:
Environmental matters
pages 65 to 71, 78 to 101, 114 to 117,
and 120 to 152
+
Social matters
pages 65 to 71 and 102 to 117
+
Anti-bribery and anti-corruption matters
pages 114 to 119
+
Employees
pages 38 to 39, 68 to 71, 110 to 116
and 182 to 183
+
Respect for human rights
pages 65, 102 to 109, and 110 to 117
+
Our climate-related financial disclosures
are set out on pages 120 to 136. Further
details of our Group policies, procedures
and standards can be found on pages 116
and 117 and at www.bat.com.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
17
Consumers
Shareholders & Investors
Our People
Why this stakeholder
is important to us
As preferences and attitudes change in
an evolving industry, understanding our
adult consumers is essential to
both successful portfolio and
business growth.
It is essential that we maintain the
support of our shareholders and
bondholders to maintain access to
capital. This allows us to implement
our strategy and achieve our
business objectives.
The quality of our people is a major
reason why our Group continues to
perform well. We understand the
value of listening and responding
to feedback from our people to
maintain a fulfilling, rewarding
and responsible work environment.
Examples of how we
engaged in 2024
– Consumer panels, focus groups
and interviews
– Consumer care helplines
– Responsible marketing and
transparent communication
– Real-time digital platforms
– Annual General Meeting
– Investor relations programme
and shareholder engagement,
including on our Directors’
Remuneration Policy
– Institutional shareholder meetings
– Capital Markets Days
– Investor roadshows
– Results announcements
– Annual Report and Form 20-F
– Suite of focused sustainability reports
and wider disclosures
– Stock exchange announcements
– Shareholder information on website
– Launch of Omni™
– Director market and site visits
– Virtual forums
– Employee town halls
– Global and regional webcasts
– Your Voice employee surveys
– Works councils and European
Employee Council meetings
– Graduate and management
trainee events
– Individual performance reviews
– Speak Up channels
What matters to
our stakeholders
– Health impact of our products
and other social considerations
– Product quality
– Affordability and price
– Ingredients/nicotine levels
– Plastics/post-consumption
product waste
– Business performance
– Sustainability agenda
– Corporate governance
– Strength of Group leadership
– Board succession planning
– Reward
– Career development
– Diversity and inclusion
– Corporate responsibility
– Health and safety
– Business ethics
How we respond
– Development of innovative products
– Product stewardship, quality and
safety standards
– Clear and accurate product
information
– Responsible Marketing Principles
and Responsible Marketing Code
– Circular economy strategy
and initiatives
– Regular dialogue and communications
with shareholders and investors
– Robust corporate governance
– Double Materiality Assessment
^
and review of reporting landscape
– Continual improvement of our
Delivery with Integrity programme
– Our range of enjoyable and innovative
products
– Product quality and safety standards
– Responsible Marketing Principles and
Responsible Marketing Code
– Extensive communications and
engagement with our people
worldwide during and following
the pandemic
– Board review of and feedback
on workforce engagement
– Training and development
programme
– Diversity & Inclusion Strategy
– Delivery with Integrity programme
Principal risk impact
– Competition from illicit trade
– Tobacco, New Categories and other
regulation interrupts growth
strategy
– Supply chain disruption
– Significant increases or structural
changes in tobacco, nicotine and
New Categories related taxes
– Inability to develop, commercialise
and deliver the New Categories
strategy
– Climate change
– Circular economy
– Cyber security
– Competition from illicit trade
– Geopolitical tensions
– Tobacco, New Categories and other
regulation interrupts growth strategy
– Litigation
– Significant increases or structural
changes in tobacco, nicotine and New
Categories related taxes
– Inability to develop, commercialise
and deliver the New Categories strategy
– Disputed taxes, interest and penalties
– Solvency and liquidity
– Foreign exchange rate exposures
– Climate change
– Circular economy
– Cyber security
– Geopolitical tensions
– Supply chain disruption
– Injury, illness or death in
the workplace
– Climate change
– Circular economy
– Cyber security
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Our Strategy
Engaging with Our Stakeholders
We work with, take into account and respond to the views and concerns
of our stakeholders. This enables us to adapt to emerging risks and work
to meet the expectations placed upon us as a multinational business.
18
UK Companies Act:
Section 172(1) Statement
Suppliers
Customers
Government & Wider Society
Our Directors have a duty,
individually and collectively
as the Board, to act as they
consider most likely to promote
the success of the Company for
the benefit of our members as
a whole.
As part of this duty, our Directors
must have regard for likely long-
term consequences of decisions
and the desirability of maintaining
a reputation for high standards of
business conduct. Our Directors
must also have regard for our
employees’ interests, business
relationships with our wider
stakeholders, the impact of our
operations on the environment
and communities in which we
operate and the need to act
fairly between shareholders.
Consideration of these factors
and other relevant matters is
embedded into all Board
decision-making, strategy
development and risk
assessment throughout the year.
Our key stakeholders and primary
ways in which we engage with
them are set out in the table to
the left. Pages 164, 172 to 175
and 178 to 184 provide further
explanation of our Board’s
approach to understanding
stakeholder interests to enable
relevant considerations to be
drawn on in Board discussion
and decision-making.
Where the Board delegates
authority for decision-making
to management, our Group
governance framework
discussed on pages 172 and 173
mandates consideration
of these factors and other
relevant matters as a critical
part of delegated authorities.
Examples of some of the ways
that these factors have shaped
Group strategy and initiatives
during the year are referenced
in the table to the left. Examples
of how these factors have been
taken into account in Board
decision-making and strategy
development during the year are
provided on page 184.
Note:
^
Although financial materiality has been
considered in the development of our
Double Materiality Assessment (DMA),
our DMA and any conclusions in this
document as to the materiality or
significance of sustainability matters
do not imply that all topics discussed
therein are financially material to our
business taken as a whole, and such
topics may not significantly alter the
total mix of information available
about our securities.
Effective relationships with farmers
and suppliers of tobacco leaf, product
materials and indirect services are
essential to an efficient, productive
and secure supply chain.
Our customers include retailers, global
and local key accounts, distributors
and wholesalers that are essential for
driving growth and embedding
responsible marketing practices.
We seek to be part of the debate that
shapes the regulatory environment
in which we operate, and to work
collaboratively to develop joint
solutions to common challenges.
– Extension Services farmer support
– Ongoing dialogue and relationship
management
– Supplier Voice survey, events
and supplier summits
– Strategic partnerships
– Ongoing dialogue and account
management
– Customer Voice survey
– Audits/performance reviews
– Sales calls and visits by trade
representatives
– B2B programmes
– Digital B2B eCommerce platforms
– Meetings and ongoing dialogue
– Submissions to government
and advisory committees
– Multi-stakeholder partnerships
and working groups
– External Scientific & Regulatory
Panel
– Peer-reviewed research
– Biodiversity standards and
improvement programmes
– Community investment
programmes and NGO partnerships
– Double Materiality Assessment^
related engagements
– Launch of Omni™
– Productivity/quality/cost
– Sustainable agriculture
– Farmer livelihoods
– Human rights
– Health and safety
– Climate change impacts
– Double Materiality Assessment
^
and review of reporting landscape
– Route-to-market planning
– Contingency planning
– Cost, price and quality
– Stock availability
– Consumer buying behaviour
– Underage access prevention
– Digital B2B eCommerce platforms
– Product regulation
– Tax/excise/illicit trade
– Responsible marketing
– Public health impacts
– Human rights
– Climate change impacts
– Supplier Code of Conduct
– Sustainable agriculture and farmer
livelihoods programme
– Leaf operational standards for PPE
and child labour prevention
– Farmer Extension Services support
and training
– Customer loyalty programmes
and incentives
– Global Underage Access Prevention
(UAP) Guidelines and initiatives
– Standards of Business Conduct
(SoBC)
– Delivery with Integrity programme
– Targeting 50% absolute reduction in
Scope 1 and 2 GHG emissions
by 2030 (vs 2020 baseline)
– Human rights and climate
impact assessments
– Community investment
programmes and
charitable donations
– Geopolitical tensions
– Supply chain disruption
– Inability to develop, commercialise
and deliver the New Categories
strategy
– Injury, illness or death
in the workplace
– Solvency and liquidity
– Foreign exchange rate exposures
– Climate change
– Circular economy
– Cyber security
– Competition from illicit trade
– Geopolitical tensions
– Tobacco, New Categories and other
regulation interrupts growth
strategy
– Supply chain disruption
– Significant increases or structural
changes in tobacco, nicotine and
New Categories related taxes
– Inability to develop, commercialise
and deliver the New Categories
strategy
– Climate change
– Circular economy
– Cyber security
– Competition from illicit trade
– Geopolitical tensions
– Tobacco, New Categories and other
regulation interrupts growth strategy
– Litigation
– Significant increases or structural
changes in tobacco, nicotine and
New Categories related taxes
– Inability to develop, commercialise
and deliver the New Categories
Strategy
– Disputed taxes, interest and
penalties
– Climate change
– Circular economy
– Cyber security
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Listening to our stakeholders helps us better understand their
views and concerns, and enables us to respond to them appropriately.
It gives us valuable inputs to, and feedback on, our strategic approach,
as well as our policies, procedures and ways of working.
19
w
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Our Strategy
Chief Financial Officer’s Overview:
Investment Case
20
Soraya Benchikh
Chief Financial Officer
>50%
Group revenue ambition from
Smokeless products by 2035
50m
Consumers of our Smokeless
products by 2030 ambition
3-5%
Expected medium-term Group
revenue growth
@
4-6%
Expected medium-term Group
adjusted profit from operations
growth
@
>£50bn
Total free cash flow before
dividends expected to be
generated between 2024
and 2030.
We are committed to delivering
sustainable shareholder returns
by driving quality New Category
growth and extracting value from
Combustibles, together with
maximising cash generation to
fund our progressive dividend
and sustainable share buy-back.
Soraya Benchikh
Chief Financial Officer
Download our new Investor Relations
app to access live share prices, news,
reports and webcasts at:
myirapp.com/bat/
@
@
@
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
21
Transformation Driving
Quality Growth
Our corporate purpose is to build A Better Tomorrow™ by
reducing the health impact of our business. To accelerate the
next phase of our transformation, we are committed to Building
a Smokeless World. We will deploy our global multi-category
portfolio to actively encourage adult smokers to 'Switch to
Better' nicotine products, and continue to seek long-term
opportunities Beyond Nicotine in Wellbeing and Stimulation,
realising the multi-stakeholder benefits of A Better Tomorrow™.
Our commitment is demonstrated by our ambition to become
a predominantly smokeless business, with over 50% of our
revenue from Smokeless products by 2035. Revenue growth
in the global nicotine industry is accelerating through the
development of New Categories, which offer reduced-risk
alternatives
*† to smoking.
We continue to make progress towards our target of 50 million
adult consumers of our Smokeless products by 2030, adding
another 3.6 million in 2024 to a total of 29.1 million.
Prioritising where and what products to focus on, via our market
archetype model, will guide our resource allocation decisions.
We are profitable within our New Categories business, on a
category contribution basis
@, and we expect to be increasingly
profitable in the coming years
@.
We strive to continue to profitably and responsibly manage
our transition away from combustibles, generating funds to
further invest in our transformation and deliver sustainable
profit growth and cash flow over the long-term.
In order to achieve this, our refined strategic pillars will act as
our executional compass, and we will drive performance using
KPIs to track our journey.
Building a Sustainable Future
for Our Stakeholders
Building a Sustainable Future is about seeking to actively
migrate consumers away from cigarettes and to Smokeless
alternatives sustainably, responsibly and with integrity.
We seek to take a leading role in tackling some of the biggest
global issues in sustainability. We intend to do this by
responsibly Building a Smokeless World, reducing our use
of natural resources and delivering our climate goals as we
transition to A Better Tomorrow™. We strive to create
a meaningful impact in the communities where we operate
and inspire all our people to drive change.
In 2024, we refined our sustainability strategy to better address
our material topics and continue to deliver greater value to our
stakeholders, with five strategic delivery areas:
1. Tobacco Harm Reduction, 2. Climate, 3. Nature, 4. Circularity,
and 5. Communities.
Action plans to address these focus areas are underway, and
our commitments in each are rooted in ambitions and targets
against which we will track and share the progress as our
transformation continues.
Science will be a primary driver of our efforts, supported by
more active external engagement and regulatory focus, while
embedding sustainability across the organisation.
As we continue working towards reducing the health and
sustainability impact of our business, we will drive growth,
create shared value and build a stronger, more sustainable BAT.
For more details on the five strategic delivery areas, see page 67.
Dynamic Business Making
Active Choices for the Future
Our multi-category portfolio benefits from decades of consumer
insights that have driven our No. 1 global revenue position in
combustibles.
In addition, leveraging the benefits of our expertise in science and
R&D, our manufacturing, distribution and marketing has enabled
us to build three global brands, Vuse, glo and Velo, delivering over
£3 billion of annual revenue in less than a decade.
Our long-standing experience operating within complex
regulatory, legal and fiscal frameworks provides us with a
compelling competitive advantage to transform within the
wider tobacco industry in the long-term. With our Corporate
and Regulatory Affairs function we are driving a more proactive,
science-led engagement with all stakeholders.
We will continue to increase investment in new capabilities,
including enhancing our innovation pipeline, leading responsible
New Category development and further leveraging our broad
digital enablers. Our transformation will also be accelerated by a
culture of inclusivity and collaboration, supported by senior talent
recruitment from a diverse range of industries. Together with our
Chief People Officer, we are focused on developing a skills-enabled
and performance-driven organisation.
We continuously monitor and assess our capital allocation
framework to: unlock shareholder value through investing in
the right opportunities; optimise the return on our investments;
and maximise our cash generation; reduce our leverage
and generate sustainable cash returns for our shareholders.
@Continuing our Track
Record of Delivery
We are confident in our growth outlook, and have a proven track
record of performance.
Over the last 10 years, we have delivered 8% adjusted diluted
EPS growth (at constant rates) and a 5% dividend CAGR and are
confident in moving progressively to our medium-term targets
of 3-5% revenue growth and 4-6% adjusted profit from
operations growth on a constant currency basis by 2026.
The Group is highly cash generative. Over the last five years, we
have delivered at least 100% operating cash conversion annually
and returned, since 2020, a total of £27.5 billion to shareholders.
We expect to deliver in excess of £50 billion of free cash flow
before dividends between 2024 and 2030 (inclusive).
We remain committed to continuing our track record of
consistent dividend growth for over a quarter of a century,
rewarding our shareholders through all economic cycles. In 2024
we initiated a sustainable share buy-back programme starting
with £700 million in 2024 and £900 million in 2025.
We have an active capital allocation framework to deliver
long-term value for shareholders. This includes:
– a progressive dividend;
– operating within our target leverage corridor of 2.0-2.5x
adjusted net debt to adjusted EBITDA;
– considering potential bolt-on M&A opportunities to accelerate
our transformation; and
– sustainable share buy-back programmes to enhance
shareholder returns.
@
Notes:
*
Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products
without agency clearance.
I am honoured and delighted to be the
Chief Financial Officer of BAT.
I am confident that we are in a strong
position to deliver on our ambitions, and
I share the passion and conviction to Build
a Smokeless World.
Our strategy is designed to maximise
shareholder sustainable returns.
Our key financial focus areas are:
fuelling our transformation as
we maximise value from
combustibles, using our scale
and efficiencies to release cash;
deploying capital in a disciplined
and targeted manner. This means
investing wisely in the largest profit
pools whilst maintaining a laser
focus on return on investment;
strengthening our financial position
by reducing debt, providing us with
greater financial resilience; and
a balanced capital allocation
approach – prioritising our
transformation while delivering
a progressive dividend, maintaining
a sustainable share buy-back
programme and exploring
bolt-on acquisitions.
We believe we will achieve our priorities
through an algorithm built around five key
drivers.
Our five key drivers are:
Quality revenue growth.
Increase our adjusted gross
profit.
Accelerate New Category
contribution.
Sustainable growth in
Adjusted Profit from
Operations.
Deliver
@in excess of
£50 billion of free
@ cash flow
@
by 2030.
@
@Notes:
*
On an organic, constant rate basis.
** Category contribution: Profit from operations before the
impact of adjusting items and translational foreign
exchange, having allocated costs that are directly
attributable to New Categories.
*** On an adjusted, organic, constant rate basis.
^
Net cash generated from operating activities before the
impact of trading loans provided to a third party and
after dividends paid to non-controlling interests, net
interest paid and net capital expenditure.
^^ Net cash generated from operating activities before the
impact of adjusting items and dividends from associates
and excluding trading loans to third parties, pension
short fall funding, taxes paid and net capital expenditure,
as a proportion of adjusted profit from operations.
@
§
Adjusted gross profit as defined on page 399.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Overview
Chief Financial Officer’s Overview:
Our performance
22
Our strategy is expected to
deliver shareholder value
creation as:
Combustibles fuel our transformation
Targeted capital deployment focuses on return
on investment
Soraya Benchikh
Chief Financial Officer
2024 financial performance summary
Our financial results have been impacted
by a number of events that impacted the
current and comparator period.
In 2024, revenue was down 5.2% to
£25,867 million (having declined 1.3% in
2023 to £27,283 million). This was partly
due to the timing of the sale of our Russia
and Belarus businesses in September 2023,
negatively impacting the comparative
revenue and profit from operations by
£479 million and £193 million, respectively.
Profit from operations was £2,736 million,
against a loss of £15,751 million in 2023.
2023 was also negatively impacted by the
impairment charges (£27.3 billion) largely
associated with our U.S. combustibles
business. 2024 included a total charge
of £6.2 billion in respect of the anticipated
settlement of Canadian litigation (see page
328), the first year of amortisation charges
of the U.S. combustibles brands (£1.4 billion),
a charge of £646 million in respect of Camel
Snus, a charge of £449 million in respect of
an excise assessment in Romania and
£149 million of fixed asset impairments
related to the Group’s London head office
and the intention to seek an orderly exit
from Cuba.
In 2024, translational foreign exchange was
a headwind on both revenue (by 4.7%) and
profit from operations (by 4.4%).
Excluding these items, on a constant
currency basis, which we believe reflects
the operational performance of the Group:
– Revenue was up 1.3% driven by the
continued growth of New Categories,
which grew revenue by 8.9%; and
– Adjusted profit from operations was up
1.4%, as New Categories further grew
profitability (at the category contribution
level) building on the momentum shown in
2023 as those products became profitable
two years earlier than originally planned.
On a reported basis, basic EPS was 136.7p
compared to -646.6p in 2023, which was a
decline of 320.5%. Diluted EPS was 136.0p
in 2024, while in 2023 it was -646.6p, or
down 321.5%. This was mainly due to the
impacts to profit from operations
described earlier, offset by a one-off gain
of £1.4 billion, recognised as the Group
monetised a portion of the investment
in its Indian associate ITC and a credit
of £0.6 billion related to debt refinancing
undertaken in 2024.
Excluding the adjusting items (discussed
on pages 50 and 51) and the effect of
translational foreign exchange, adjusted
diluted earnings per share, at constant
rates, increased by 1.7% to 381.9p, building
on the 4.0% growth in 2023.
We remain highly cash generative. This
allows us to balance investment in the
future while rewarding shareholders with
a further increase in dividends (up 2.0%
to 240.24p)
@, while targeting our narrowed
leverage range of 2.0-2.5x adjusted net
debt to adjusted EBITDA - reaching 2.44x
in 2024. However, excluding the provision
recognised in respect of cash and cash
equivalents and investments held at fair
value, and adjusted EBITDA earned, in
Canada, this would have been 2.75x
@.
Delivering our financial algorithm
Quality revenue growth
We aim to maximise the value from
combustibles while driving growth in our
New Categories through innovation and
premiumisation.
Excluding the impact of currency:
– Combustibles pricing remained a driver
of value, with Group price/mix of 5.3%
in 2024 (compared to 7.5% in 2023).
However, our combustibles revenue was
down 1.6% (2023: down 0.8%), driven by
lower combustibles volume (down 9.0%
in 2024) largely due to the difficult
trading in the U.S. where volume was
10.1% lower. Both years were also
impacted by the timing of the sale of
our businesses in Russia and Belarus
@,
excluding which would have seen a
marginal growth of 0.1% in 2024 and
growth of 0.6% in 2023
@.
– New Categories revenue was up 6.1%
in 2024 and 17.8% in 2023,
@with growth
(excluding the impact of Russia and
Belarus)
@ driven by all three regions as
the increases in Modern Oral
@and HP
@
more than offset a decline in Vapour.
Increase our adjusted gross profit
We aim to continually increase our adjusted
gross profit*, as defined on page 399.
Adjusted gross profit is a new measure,
introduced in 2024, with comparative
movements to 2023 only.
@Total adjusted gross profit*, on a constant
currency basis, grew by £396 million, an
increase of 2.2% in 2024.
@
Adjusted gross profit from our combustibles
portfolio, through pricing and efficiencies,
has remained resilient
@, up 0.3% in 2024
@.
The main driver of growth has been New
Categories, which has improved in each of
the last four years.
@This continued in 2024
with an increase of 19.8% in adjusted gross
profit,
@ driven by volume growth, revenue
growth management programmes and
cost optimisation.
Accelerate New Category
contribution
We will continue to invest in our
transformation. We will focus on the right
opportunities in the key growth areas -
evaluating opportunities to maximise
returns, freeing up resources for growth
and incremental profit.
In 2023, this resulted in our New
Categories being profitable (on a
contribution basis), two years ahead of our
original plan.
@In 2024, we have further increased New
Category contribution by £251 million (at
constant rates), with New Category
contribution margin at 7.1% up from 0.0%
in 2023 (excluding the impact of the
businesses sold in Russia and Belarus).
@
Sustainable growth in Adjusted
Profit from Operations
@Adjusted profit from operations*, on
a constant currency basis, was up 1.4%
in 2024, having grown 3.1% in 2023.
@
This is supported by our strict
management of overhead expenses.
We are committed to disciplined cost
management and to continue to explore
opportunities to optimise our footprint.
In 2024, our cost optimisation programmes
delivered savings of £402 million. This
largely offset the impact of inflation of 6.5%
(or £387 million), mainly due to higher leaf
prices (impacted by adverse weather
conditions) and manufacturing costs
(labour and utilities) and which we expect
to continue into 2025 due to the timing
and utilisation of leaf inventory.
@We have
committed to deliver cost savings of over
£1.2 billion in the three years to 2025 (with
over 70% delivered to date) and an
additional £2 billion from 2026 to 2030.
@
Deliver
@in excess of £50 billion
of free
@cash flow
@(2024-2030)
@
@Our operating cash conversion, as defined
on page 406, has been ahead of our 90%
target for a number of years. In 2024,
we again delivered ahead of expectations
at 101%.
@
The Group remains highly cash generative.
@Excluding material payments in areas
such as the Canadian litigation settlement,
repayments in respect of FII GLO (refer
to page 287), we expect to generate over
£8 billion of average annual free cash flow
before dividends, growing at least in line
with adjusted profit from operations.
@
In 2024, the Group generated £10.1 billion
(2023: £10.7 billion) of net cash generated
from operating activities.
@This translates
to £7.9 billion (2023: £8.4 billion) of free
cash flow before dividends.
@
Since 2020, we have returned £27.5 billion
to shareholders, including a £700 million
share buy-back programme in 2024, with
a further £900 million committed for 2025.
@Yet our leverage ratio (being adjusted net
debt to adjusted EBITDA) has continued
to improve towards our narrowed target
range, decreasing from 2.57 times to
2.44 times.
@
Our liquidity profile remains strong, with
average debt maturity close to 9.5 years
and maximum debt maturities in any one
calendar year of around £4 billion
@. We
continue to target a solid investment-
grade credit rating of Baa1, BBB+ and
BBB+
@, with a current rating of Baa1 (stable
outlook), BBB+ (stable outlook), BBB+
(stable outlook) from Moody's, S&P and
Fitch
**, respectively.
Facing the Future with
Increasing Confidence
We believe our business is well placed for
the future.
Our track record of delivering robust
financial performance and consistent
cash generation demonstrates how we
navigate the near-term macro-economic
uncertainties and challenges, underpinned
by geographic diversity and a portfolio of
international brands.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
23
Notes:
*
@Excluding the sale of Russia and Belarus.@
** A credit rating is not a recommendation to buy, sell
or hold securities. A credit rating may be subject to
withdrawal or revision at any time. Each rating should
be evaluated separately of any other rating.
@ Denotes phrase, paragraph or similar that does not
form part of BAT’s Annual Report on Form 20-F as filed
with the SEC.
As a global business, operating at scale within a rapidly evolving landscape,
our markets are shaped by long-term consumer, economic, cultural and
social trends. We continue to respond to this changing environment by developing and
advancing our strategy and long-term priorities.
Megatrends:
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Our Strategy
Our Markets and Megatrends
24
TECHNOLOGY
AND INNOVATION
Data-Driven Consumers
Technology and data are transforming
consumer behaviours in profound
ways. Wearable devices like fitness
trackers and smartwatches deliver
real-time insights into physical activity,
heart rate, sleep and more. This
feedback empowers consumers to
make more informed, better choices.
By analysing patterns in daily habits,
companies can also refine their
products and services, placing
consumers firmly at the centre of
product design. This consumer-
focused, data-driven approach is
impacting sectors across the board.
The nicotine industry
In the nicotine industry, for example,
data and connectivity are enabling
innovations such as age-restriction
locks and other restrictions on devices
and ensuring products meet safety
standards and are compliant with
regulations. Additionally, new nicotine
products are emerging that allow
users to track their consumption
patterns, while advanced technology
can deliver consistent dosages and
customisable features allow
consumption to be tailored to
individual preferences.
CLIMATE CHANGE AND
CIRCULAR ECONOMY
Climate Change
Consumers are increasingly urging
companies to commit to the
principles of Net Zero emissions and
circular economy. Studies indicate
that two thirds of consumers want
brands to reduce their environmental
impact, with this expectation
increasingly influencing purchasing
decisions. Businesses that fail to meet
these expectations risk reputational
damage and loss of market share.
Adapting to the realities
Simultaneously, the tangible effects
of climate change are becoming more
apparent. Extreme weather events are
now more frequent, disrupting
communities and causing
displacement. Adaptation to climate
change is becoming as essential as
taking preventive measures.
With the political will to address
climate change fluctuating across
regions, businesses must also
anticipate and adapt to climate-
related disruptions within their supply
chains. This involves building resilience
through strategies such as sourcing
diversification, adopting climate-
resilient infrastructure, and
strengthening logistics flexibility.
GEOPOLITICS
AND TRADE
New Leadership
2024 was a record year for electoral
activity, with over 50 jurisdictions,
including the United States and
various countries across the European
Union, holding major elections involving
more than 2 billion voters overall.
Among the notable developments, in
the UK, the Labour Party achieved its
first victory in 14 years, campaigning
on a platform for change. In the United
States, both the executive and
legislative branches pivoted to
new leadership.
Trade policy
In 2025, businesses are likely to face
both opportunities and challenges in
navigating these new political landscapes.
Many sectors are watching closely for
policy signals from newly elected
governments, particularly around
trade, which may be subject to new
strategic priorities or even potential
frictions under new leadership. Further
elections are also due to take place in
Australia, Canada and Germany.
Meanwhile, persistent global conflicts,
including the war in Ukraine and
tensions in the Middle East, add layers
of complexity to the geopolitical
environment. Some of the broader
global impacts of the unrest, such as
high inflation, appear to be reducing,
having negatively impacted our
results by £387 million in 2024 as
discussed on page 50. However, these
ongoing challenges will continue to
influence political and economic
stability, underscoring the importance
of adaptive strategies for businesses
and governments alike in the year ahead.
Overview
The global nicotine market continues to
evolve rapidly, with heated tobacco and
oral nicotine products gaining traction.
It is also increasingly complex with new
and Reduced-Risk Products
*† (RRPs) being
developed and brought to new markets
each year.
Global Market for Combustibles
and Smokeless
The most recent sales data for the legal
global tobacco and nicotine market
indicated that it was worth approximately
US$927 billion (incl. China).
Combustible cigarettes remained the
largest product category within the market,
with a global value of US$763 billion,
representing 82% of the total value of
tobacco and nicotine product sales
worldwide. Around 2.8 trillion cigarettes
were sold globally, based on the most
recently available data. The value of the
global Smokeless products market
continues to grow, standing at US$76billion.
Despite combustibles being one of the
most highly regulated products in the
world, roughly 17% of the world’s adult
population (incl. China) continue to choose
to smoke. This sizeable group is likely to
continue to smoke unless they are offered
suitable smokeless alternatives.
The illicit market
The illicit tobacco market has continued
to increase since the COVID-19 pandemic,
reaching just above 14% of total global
volume in 2024. Exacerbated by the
increased cost-of-living in many countries,
overall illicit volumes are expected to
approach an unprecedented level of sales
by 2027.
Illicit trade exists in all world regions, but its
growth is forecast to worsen in the Middle
East and Africa, Australasia and Asia Pacific.
Global combustible regulation
Combustible tobacco products are among
the most regulated consumer goods
globally. Some of the more established
measures in different countries include
restrictions on flavour additives,
standardised (or plain) packaging, bans
on smoking in public areas, and prohibitions
on displaying tobacco products at points
of sale. These policies aim to curb tobacco
use by reducing its appeal and accessibility.
More recently, and driven in part by World
Health Organization (WHO) initiatives,
countries are setting ‘smoke-free’ targets,
aiming to reduce tobacco use prevalence
to below 5% by specified dates.
Some countries have also begun examining
new types of restrictions on products to
meet these targets. Canada, for example,
has recently passed legislation to require
health warnings be placed on cigarette
sticks, a policy which Australia is also
looking at. A small number of countries are
considering prohibitionist approaches to
stop smoking among younger generations.
The UK, under a new government, has re-
initiated examination of a bill which would
ban sales of cigarettes to anyone born
after 2008.
The Turkish Government is reported to be
drafting a bill with similar provisions, while
both the Australian and Norwegian
Governments have indicated they are
evaluating comparable policies. Additionally,
some individual lawmakers in various
countries and in some regional legislatures
have attempted to introduce bills aiming to
ban sales of tobacco to future generations.
New Zealand and Malaysia were among
the first countries to move to implement
this idea. However, in 2023, both countries
reversed legislative efforts to introduce
a generational sales ban amid concerns
about the constitutionality, practicality
and enforcement of such measures.
Lastly, environmental concerns have led
to a rise in policy initiatives targeting
combustible materials. The EU’s Single-
Use Plastics (SUP) legislation mandates
that Member States implement extended
producer responsibility programmes for
items including cigarette filters. A review
of the SUP Directive is planned for 2027
to evaluate its impact and guide potential
updates. A small number of other countries
have also looked at banning the use of
filters in cigarettes. Additionally, the United
Nations is still considering a pioneering
global Plastics Treaty, with some
stakeholders pushing for specific targets
that would require Member States
to eliminate waste from cigarettes,
as well as from single-use vapour
product consumption.
See pages 155 to 162 to read more
about our Group Principal Risks
+
For further discussion regarding the
Regulation of the Group’s Business,
please see pages 436 to 440
+
Continued transition to new products
The continued adoption of new and less-
harmful
* alternative nicotine products is
revolutionising the market. The range of
these alternatives is expanding rapidly,
now including tobacco heating products
(THPs) and reduced-risk
*†, tobacco-free
options such as vapour products, nicotine
pouches, and, more recently, herbal
products designed for heating. These
alternatives are gaining popularity among
smokers who wish to continue consuming
nicotine but not via cigarettes.
By 2028, it is estimated that the number
of adult smokers will have declined by
20 million. Alongside societal changes
in attitudes to smoking, this decrease is
driven by consumer preferences shifting
to RRPs
*†, which are forecast to make up
an increasing percentage of revenue for
the nicotine market.
The most recent external forecast
estimates the value of the Vapour product
market at US$21 billion, with THPs valued
at US$34 billion. Closed-system vapour
products have become rapidly popular
among consumers, owing to their ease of
use. Nicotine pouches, which are one of the
newer innovations in RRPs
*†, currently have
a global value of US$7.4 billion in 2022
(led by the U.S.), which is projected to grow
to just under US$16 billion by 2027.
New Categories Regulations
While alternative nicotine products are
gaining traction in markets worldwide,
there is considerable variation among
countries in how RRPs
*† are regulated.
The potential benefits of RRPs
*† in reducing
smoking-related harm have been
embraced by regulators in the UK and New
Zealand who have actively communicated
that RRPs
*† are a better alternative to
smoking. These countries have
implemented regulatory frameworks that
reflect this view while remaining vigilant
about preventing youth access.
In contrast, certain markets such as Brazil
and India remain sceptical about the
potential public health benefits of RRPs
*†,
opting instead to restrict or ban access to
these products. While other countries have
opted to ban specific categories or flavours
thereby limiting choices for consumers.
For instance, in Belgium the sale of nicotine
pouches is now prohibited and
in Kazakhstan vapour products are banned.
It is increasingly pressing that this debate
be better understood and guided by data
so that millions of smokers are not
deterred from switching to these less-
harmful alternatives. In the U.S., for
example, where RRPs
*† are becoming
widely established, youth use of tobacco
products is falling.
Beyond Nicotine
The Wellbeing and Stimulation category
covers products that consumers are
seeking to better manage their daily
wellbeing. It is expected to grow
to £495 billion by 2030, from around
£296 billion by most recent estimates.
The adult-use cannabis market has also
grown with global legal sales estimated to
have reached US$49 billion. Though this
growth is predominantly concentrated in
the U.S., the global cannabis market is
anticipated to expand as more countries
reassess their prohibitionist approaches.
In Europe, Germany has become the first
major EU Member State to legalise the
personal cultivation and possession of
cannabis for recreational use. Luxembourg
and Malta have already taken similar steps,
and the Czech Republic is actively considering
comparable measures.
This regulatory shift may reflect a broader
trend across countries as policymakers
explore the potential health, social, and
economic benefits of legalisation.
Notes:
All data sources on this page are from Euromonitor
International research published in 2024 and based on 2023
data (the latest full year available), unless otherwise stated.
All figures exclude China unless otherwise stated.
*
Based on the weight of evidence and assuming a
complete switch from cigarette smoking. These
products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo,
Grizzly, Kodiak, and Camel Snus, are subject to FDA
regulation and no reduced-risk claims will be made
as to these products without agency clearance.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
25
Quality Growth
Delivering Quality Growth emphasises
the transition to a more balanced focus on
top-line and bottom-line delivery, centred
around our brands and innovation,
and continuing to seek long-term
opportunities Beyond Nicotine.
The key building blocks of
the Quality Growth pillar are:
Inspiring New Category Innovations
& Brands
Managed Combustibles Transition
Beyond Nicotine Foundations
Our commitments
under Quality Growth:
Progressing toward quality, margin-
accretive growth in Smokeless
FMC volume decline but expecting
continued value delivery
Sensibly investing for the future
Beyond Nicotine
Inspiring New Category Innovations and Brands
Since the launch of our first Vapour product in 2013, we have been
on a transformation journey to become a truly multi-category
consumer products business. We are creating new Smokeless
products that encourage adult smokers, who would otherwise
continue to smoke, to switch to scientifically-substantiated,
reduced-risk
*† alternatives.
In 2024, our Quality Growth imperative delivered better returns on
more targeted investments across all three of our New Categories.
We have built a fast-growing portfolio of New Category products
in a short period of time with New Categories annual revenue now
exceeding £3.4 billion.
@We further increased New Category contribution by £251 million
(on a constant currency basis), with New Category contribution
margin reaching 7.1%.
@ Our focus on driving revenue growth and
margin expansion will continue, leveraging our deep cross-
category consumer insights. We aim to enhance our innovation
pipeline by further investing in our capabilities, our intellectual
property, our people and our science, driving an innovation-
focused culture.
Our centres of excellence in Southampton, Trieste and Shenzhen
continue to provide access to wider internal and external strategic
partnerships focused on developing consumer-relevant
premium propositions.
Three New Category product types underpin our efforts to Build
a Smokeless World:
Vapour
Our global Vapour brand, Vuse, is the #1 brand in the category
(in tracked channels). It plays a major role in providing smokers
with the opportunity to Switch to Better.
Vapour revenue was down 5.1% to £1,721 million in 2024, largely
driven by a lack of enforcement of illegal flavoured single-use
vapour products in the U.S. and a flavour ban in the province of
Québec in Canada where a lack of enforcement has also led to
an increase in the use of illicit products.
Vapour was the largest contributor to New Categories usage
reaching 11.9 million adult consumers, adding 0.1 million in 2024.
For more information on our
Vapour Products see page 28
+
Heated Products
Our flagship Heated Product brand, glo, provides an alternative
to smoking that doesn't involve burning and, following scientific
studies, producing lower levels of certain toxicants than cigarettes.
Revenue for the category was down by 7.6%, due to the sale of our
Russian and Belarusian businesses last year. The momentum for
growth in Heated Products has been impacted by competitor
innovation and intensified activity in the below-weighted average
price segment.
However, while glo's performance has not met expectations,
our newly released innovations like Hyper Pro and veo, our non-
tobacco heated platform consumables, have strengthened our
pipeline and competitive position.
Hyper Pro is now present across 29 markets. The Group was the
first to introduce a distinct EasyView screen with HeatBoost
technology for better performance. Due to this improvement and
coupled with the revamp of our consumables portfolio, glo is now
in a stronger position to compete in the premium segment and
contribute to accelerating growth. glo continued to show early
signs of category volume share momentum vs 2023 in the top
markets, with volume share in the top HP markets declining 40 bps
to 16.7% vs 110 bps decline in 2023.
For more information on our
Heated Products see page 30
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Quality Growth
Strategic Pillar Overview
26
Modern Oral
Unlike inhalable products like Vapour or
Heated Products, Modern Oral products
are different. Modern Oral products come
in the form of tobacco-free nicotine
pouches that are placed under the lip so
that nicotine can be absorbed effectively.
In 2024, Modern Oral was the fastest
growing New Category, driven by
consumer acquisition – up 54.2%, reaching
7.4 million adult consumers.
1
Our refreshed Velo brand expression and
the launch of Grizzly Modern Oral boosted
volume and revenue growth in the U.S.
The opportunities for these products in
markets with established oral nicotine
consumption and beyond, are plentiful –
including in emerging markets.
For more information on our
Modern Oral products see page 32
+
Accelerating our progress
Our innovation ecosystem is designed
to deliver products that meet consumer
demands and bring value to our business.
In designing our products, we seek to
assess their environmental impact and
ensure they are compliant, ready for global
market rollout. Most importantly, they
must align with our A Better Tomorrow™
vision through Building a Smokeless
World and reducing the health impact
of our business.
To drive quality growth and transform
faster, we will focus our resources on
combining powerful innovations and world-
leading brands. To deliver an ‘innovation
step change’, we will continue to use
powerful consumer foresights and their
application to drive innovations that appeal
to adult consumers. We will further
strengthen and differentiate our New
Categories brands to profitably accelerate
our New Categories business and achieve
significant scale in order to realise our vision.
Managed Combustibles Transition
We are committed to becoming a
predominantly smokeless business, with
an ambition to reach 50% of our revenue
from Smokeless products by 2035.
The best choice any adult smoker can
make will always be quitting combustible
tobacco products completely. Yet many
do not. With only 10% of the world’s one
billion smokers currently using New
Category products, the long-term
opportunity for growth as we deliver on
our transformation is vast.
The continued performance of our
combustibles business is key to delivering
Quality Growth and generating the funds
necessary to invest in New Categories and
Build a Smokeless World.
Our aim is for the combustibles business
to deliver sustainable revenue, adjusted
gross margin and category contribution
growth. Sustainable pricing, digital
integration and Revenue Growth
Management play a key role in delivering
revenue growth.
A product transformation programme
is underway to enable a simpler and
rationalised product portfolio to enable
adjusted gross margin growth.
As part of this, we continue to refine the
number of tobacco leaf grades, blends,
cigarette formats and stock keeping units
(SKUs) in our portfolio.
To deliver category contribution growth,
we will focus on marketing spend
optimisation and on simplifying our
combustibles portfolio to enable the delivery
of a managed combustibles transition.
For more information on our
Combustible products see page 35
+
Beyond Nicotine Foundations
Wellbeing and Stimulation
Consumers are increasingly seeking
healthier lifestyles and ‘better-for-you’
products that help them manage their daily
wellbeing. We call this category Wellbeing
and Stimulation (W&S) and expect the
category to grow to £495 billion by 2030,
from around £296 billion, according to
most recent estimates.
1
Many of these products historically are
in common formats like pressed tablet
supplements and sugar-based sports and
energy drinks. Recently, however, there has
been a consumer shift towards products
that are less artificial, more enjoyable, have
greater functional efficacy, are easier to use
and understand, and that provide for a wider
range of functional benefits.
After over a century in nicotine, BAT
has significant expertise in providing
stimulation through enjoyable solutions
supported by our science and regulatory
capability, alongside robust route-to-
market infrastructure.
As a result, we are well positioned
to explore the development of a W&S
business by leveraging existing
capabilities and external partners.
Over the last two years, we have been
piloting, growing and developing a
functional wellbeing shots brand called
Ryde in Australia and Canada. In the second
half of 2024, a commercial test was also
initiated in the U.S. online via Amazon and
in Texas retail.
In addition to Ryde wellbeing shots, we are
building a W&S pipeline of products to
ensure sustained competitiveness to win in
this exciting category. This includes internal
scientific development of new products and
also working with Btomorrow Ventures
(BTV) to guide and support our investments
or potentially larger scale M&A in the future.
Cannabis
As a growing and exciting category for the
future, cannabis has significant potential
for BAT’s development and progression of
Beyond Nicotine. The global legal
recreational cannabis market has grown,
from around £5 billion (2019) to £12.1 billion
(2023).
2 It is predicted to continue growing
by 16%
3 each year, with non-combustible
formats driving this category growth.
We believe this is signalling a shift away
from traditional smokable combustible
cannabis formats into other, potentially
less harmful, more progressive
consumption methods.
The regulatory environment and consumer
sentiment towards recreational cannabis
are also evolving. From the legalisation of
cannabis in Germany, to the U.S.
Department of Health and Human Services'
recommendation to the Drug Enforcement
Administration to reschedule cannabis, we
are seeing progress across the globe. Such
developments are essential to further
exploration of the category and we will
continue to monitor the changes in the
regulatory environment as it evolves.
As part of our strategic investment in 2021
into the Canadian cannabis company
Organigram, BAT established a joint-
Product Development Collaboration (PDC)
Agreement and Centre of Excellence. The
PDC was set up to leverage the expertise
of both organisations, to develop the next
generation of non-combustible cannabis
products. In 2024, the PDC team made
progress in this space with Organigram
bringing new innovations to market
through the launch of Edison Sonics
gummies. The gummies feature new nano-
emulsion technology which enables quicker
and more efficient absorption during
consumption, addressing a key consumer
pain point in edible technology.
BAT strengthened its partnership with
Organigram in 2023 by signing an
agreement for a further investment to
a value of CAD$125 million (£74 million)
payable in three tranches between January
2024 and February 2025. In 2024, the
Group paid two of the three tranches. As
part of this investment, Organigram have
established Jupiter, a strategic investment
pool, intended to be applied for emerging
opportunities within the cannabis space.
Two investments have been made by
Organigram via Jupiter in 2024, including
one in Sanity Group, a leading German
medical cannabis company in which the
Group also has a direct equity interest.
For more information on
Beyond Nicotine, see page 37
+
Notes:
1.
IRI/Circana Consulting
2. Euromonitor 2023 Market Sizing Data | Global.
3. Euromonitor 2023 Market Sizing Data | Global.
4. Euromonitor 2023 Market Sizing Data | Global.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
27
Vapour products
*†
are battery-powered
devices that heat
e-liquids to produce
an inhalable aerosol
(vapour).
Our leading, global Vapour
brand, Vuse, plays a major
role in providing smokers
with a reduced-risk
*†
alternative to cigarettes.
Vapour Top markets ***
the U.S., Canada, France, the UK,
Spain, Poland and Germany.
Highlights
BAT maintained global value
share leadership despite a
1.2 ppts decline vs 2023 to
40.0% value share (in
tracked channels) in our
Top Vapour markets.
BAT maintained its value
share leadership position
in the U.S., at 50.2%
(down 2.0 ppts vs 2023,
in tracked channels).
Consumer acquisition
up 0.1 million, reaching
11.9 million.
Vapour volume down 5.9%
in a strong price environment
(+3.3%), with revenue 2.6%
lower at constant rates
of exchange.
63
Number of markets where
the Group’s Vapour products
are sold
Overview
Vapour is the largest category of our
Smokeless products. Both in terms of its
global footprint, and the estimated 82
million consumers who use Vapour
products
1. These products are an attractive
proposition to convert adult smokers to
reduced-risk
*† Smokeless products.
Low barriers to entry and an absence of
consistent regulatory frameworks lead
to a highly fragmented and competitive
landscape.
Key challenges for the Vapour category
include regulatory risks, illicit trade and
the pace of innovation.
The Scientific Evidence
Evidence continues to emerge from the
public health community and academia
about the role of Vapour products as a
reduced-risk
*† alternative to smoking.
In 2022, we conducted an innovative study
of Vuse, using a cross-sectional approach.
This provided a snapshot of the differences
in indicators of potential harm between
Vuse consumers and smokers. The findings
revealed that BAT's Vapour products
produce 99% less toxicants when
compared to cigarette smoke
2, while the
laboratory cell tests also demonstrated
that our products don't cause
DNA mutations or promote cancer,
unlike cigarettes.
3,4
In New Zealand, the introduction of Vapour
products has been associated with a
dramatic decrease in the daily smoking
rate
5, with ASH New Zealand stating
that the country remains on track to
reach its 2025 smoke-free goal of <5%
of the population.
6
In our pursuit of accelerating towards
our purpose, in 2024, ‘BAT's Commitment
to Responsible Vaping Products’ was
published, unveiling a series of new
ambitions for our Vapour devices
supported by evidence-based solutions
to tackle some of the most pressing
societal concerns.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Quality Growth
Our Vapour Products
28
Notes:
*
Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk
free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and
no reduced-risk claims will be made as to these products without agency clearance.
*** Top Vapour markets are defined as the Top markets by industry revenue, being the U.S., Canada, France, the UK, Spain,
Poland and Germany and accounting for c.80% of global industry closed systems consumables revenue (being
rechargeable closed systems and single-use products) in 2024. The Top markets were revised in 2024, with a reduction
in value share in respect of 2023 to 41.2%. Also in 2024, the Group changed from Marlin to Retail Scan Data for the U.S.
vapour market, with the Group's Vapour value share in 2023 rebased to 52.1%.
1. Jerzyński, T. and Stimson, G.V. (2023), "Estimation of the global number of vapers: 82 million worldwide in 2021", Drugs, Habits and
Social Policy, Vol. 24 No. 2, pp. 91-103. Available at: www.doi.org/10.1108/DHS-07-2022-0028
2. Comparison with smoke from a scientific standard reference cigarette (approximately 9mg of tar) in terms of the
average of the 9 harmful components the World Health Organisation recommends to reduce in cigarette smoke.
3. Thorne, D., Crooks, I., Hollings, M., Seymour, A., Meredith, C., Gaҫa, M. The mutagenic assessment of an electronic-cigarette
and reference cigarette smoke using the Ames assay in strains TA98 and TA100. Mutation Research 2016, 812; 29-38.
4. Breheny, D., Oke, O., Pant, K. & Gaça, M.D. Comparative tumor promotion assessment of e-cigarette and cigarettes using
the in vitro Bhas 42 cell transformation assay. Environmental and Molecular Mutagenesis, 2017, Volume 58, Issue 4 p.
190-198; doi.org/10.1002/em.22091
5. Snowdon, C., et al., Vaping Works. International Best Practises: United Kingdom, France, Canada and New Zealand.
Property Rights Alliance,2021. www.propertyrightsalliance.org/wp-content/uploads/PRA_VapingWorks.pdf
6. Action on Smoking and Health (ASH), Smoking rate continues record decline to only 6.8% daily use, Māori and Pacific
rates are also reduced. Action for Smokefree 2025, 2023.
7. Haswell, L.E., Gale, N., Brown, E. et al. Biomarkers of exposure and potential harm in exclusive users of electronic cigarettes
and current, former, and never smokers. Intern Emerg Med 18, 1359–1371 (2023). doi.org/10.1007/s11739-023-03294-9.
8. Bishop, E., East, N., F. Miazzi, Fiebelkorn, S., Breheny, D., Gaca, M. and Thorne, D. (2023). A contextualised e-cigarette
testing strategy shows flavourings do not impact lung toxicity in vitro. 380, pp.1–11. doi: doi.org/10.1016/
j.toxlet.2023.03.006.
In 2023, results from our innovative cross-
sectional clinical study
7 showed that exclusive
Vuse users had significantly lower exposure
to tobacco toxicants, and favourable results
for indicators linked to smoking-related
diseases, compared with smokers.
Also in 2023, we published a laboratory
study
8 which showed flavoured e-liquid
toxicity was >95% reduced when compared
to cigarette smoke and concluded that
flavoured e-liquids do not increase the risk
profile of well stewarded e-cigarettes.
Regulation and PMTA
The future of Tobacco Harm Reduction has
always depended on robust science and
ensuring that this science is accessible to
audiences outside the scientific community
is crucial. This need is growing stronger
than ever, and consumers deserve to
understand the relative risk profiles
of these products.
In addition, perceptions of nicotine continue
to evolve; however, many consumers –
and healthcare professionals – do not
adequately understand the risks associated
with nicotine generally.
We strongly support a well-functioning
regulatory system within which regulatory
oversight leads to accelerated reductions
in underage tobacco use and in tobacco-
related harm. We are invested in that
system and are fully committed to
those goals.
The tobacco industry is undergoing
transformational change. Smokeless
technologies like Vapour, Modern Oral and
Heated Products offer great potential for
moving more adult smokers to potentially
less harmful alternatives. This change is
underscored by the U.S. Food and Drug
Administration’s Premarket Tobacco
Product Application (PMTA) process.
PMTAs include, among other things, robust
science packages composed of analytical,
toxicological, pre-clinical, clinical, and
behavioural data to demonstrate that the
marketing of a tobacco product is
“appropriate for the protection of the public
health” and underpinned by science.
We welcome the FDA’s marketing
authorisation for our Vuse Alto device
and tobacco flavour consumables, based
on a finding that marketing these products
are appropriate for the protection of
public health.
We are continuing to challenge the FDA’s
Marketing Denial Orders (MDOs) for Vuse
Alto’s Menthol and Mixed Berry products in
court and have obtained a permanent stay
of enforcement for Vuse Alto Menthol,
allowing it to remain on the market.
Menthol variants account for 73% of total
Vuse consumables (2023: 65%).
We believe that public health officials,
legislators, and regulators – especially
the Food and Drug Administration (FDA) –
should be concerned about the continued
influx of illegal flavoured and single-use
vapour products into the U.S. market,
which we estimate accounts for 70%
of the total U.S. Vapour market.
It is unacceptable that these products,
marketed in youth-appealing flavours
such as bubble gum and cotton candy,
continue to be sold.
We continue to call for appropriate
regulation and enforcement to tackle illicit
products in the category, and we welcome
signs of increasing action, including:
– The FDA increasing frequency of warning
letters, seizures and penalties;
– Implementation of vapour directories
in three states, with an additional
11 states having passed vapour directory
and enforcement legislation, with
staggered implementation up to
Q4 2025; and
– Continued signs of illicit products volume
decline in Louisiana, the first state to
implement a vapour directory and
enforcement legislation in October 2023,
with Vuse Alto capturing the majority
of the volume outflow back into the
legal segment.
However, there is more to do and effective
regulation and enforcement of Vapour
products will remain a key focus to unlock
the full potential of the category. Currently,
we believe there is a lack of enforcement
of the flavour ban in the province of Québec
in Canada and regarding the 2ml liquid tank
limit in the UK, both of which continue to
negatively impact the legitimate market.
Performance Summary
Vapour consumables volume declined 5.9%
to 616 million units in 2024 (having grown
7.0% to 654 million units in 2023), impacted
by the lack of enforcement of illegal
flavoured single-use Vapour products in
the U.S. and the impact of the flavour ban
in the province of Québec in Canada.
@Four of the seven Top Vapour markets are
profitable (on a category contribution basis),
driven by increased scale and marketing
spend effectiveness, as we continue to
focus on delivering Quality Growth.
@
BAT maintained global Vapour value share
leadership (in tracked channels) with a full-
year closed system value share of 40.0%
(down 1.2 ppts vs 2023) led by Vuse Alto.
We consolidated our position in all Top
markets, with consumers of our Vapour
products up 0.1 million to 11.9 million.
Proportion of Vapour revenue
by region in 2024
(£m)
2024
£m
2023
£m
U.S.
998
1,033
AME
611
686
APMEA
112
93
Total
1,721
1,812
We continue to have strong value share
positions in the rechargeable sub-category.
Specifically, on a full-year basis in 2024:
– In the U.S., the world's largest Vapour
market, we maintained leadership in
closed system value share (in tracked
channels) at 50.2%, down by 2.0 ppts.
In 2024, revenue was down 3.5%, or 0.8%
on a constant currency basis. Pricing in
both consumables and devices during the
year contributed to growth by 2.9% in
2024 and 20.4% in 2023, but was more
than offset by lower consumables volume
(down 3.7% in 2024 and 6.6% in 2023),
driven by the growth of illegal flavoured
and single-use products.
– In AME, our Vapour volume declined 11.5%
with revenue down 10.8%, largely driven
by Canada (discussed earlier), where
volume declined 32%. The rechargeable
closed system device segment began to
return to growth at industry level in
Europe with Vuse Go Reload, our new
rechargeable closed system, performing
well. We believe we are well-positioned to
capitalise on this momentum with global
leadership in the rechargeable closed
segment, with value share of 59.9%.
Following the Mexican Government’s
decision to ban the sale of Vapour
products, Vuse will no longer be sold in
Mexico. We believe this decision is
counter to the goal of reducing smoking
rates, a goal we share. Smokeless
products, including Vapour devices, are
an effective way of helping smokers
switch away from cigarettes.
– In APMEA, total Vapour consumables
volume grew strongly by 19.1%, with
revenue up 19.6%, driven by South Korea
and New Zealand.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
29
Vaping can benefit public health,
given the substantial evidence
supporting the potential of vaping
to reduce smoking’s [health] toll.
Joint published statement from 15 past Presidents
of the Society of Research on Nicotine and Tobacco
1
Note:
1.
D. Balfour, N. Benowitz, S. Colby, D. Hatsukami, H. Lando, S. Leischow, C. Lerman, R. Mermelstein, R. Niaura, K.
Perkins, O. Pomerleau, N. Rigotti, G. Swan, K. Warner, R. West, “Balancing Consideration of the Risks and Benefits
of E-Cigarettes”, American Journal of Public Health 111, no. 9 (September 1, 2021): pp. 1661-1672.
Heated Products
* (HPs) use heat
to generate a nicotine-containing
aerosol, which the user inhales.
This category includes Tobacco
Heated Products (THP) and Herbal
Products for Heating (HPH).
Within HPs, because the tobacco or
herbal substrate is heated instead
of burned, the resulting aerosol
comprises mainly water, glycerol,
nicotine and flavours – different
to cigarette smoke.
HP Top markets **
Japan, South Korea, Italy, Germany,
Greece, Hungary, Poland, Romania
and the Czech Republic.
Highlights
glo HP category volume
share down 40 bps in
Top markets vs 2023
to reach 16.7%.
glo consumer acquisition
up 1.6 million reaching
10.2 million.
glo consumable volume
down 11.6%, with the industry
volume up 12%, with our
performance impacted by
the sale of our businesses
in Russia and Belarus
partway through 2023.
glo revenue declined by 7.6%.
33
Number of markets where
the Group’s Heated Products
are sold
Overview
Heated Products offer the most familiar
route for smokers to adopt a reduced-risk
*†,
Smokeless product.
Our latest glo devices, Hyper Pro and Hyper,
utilise induction heating to externally heat our
tobacco and non-tobacco consumables that
contain nicotine to a specific temperature
range. With Hyper Pro having launched in
2024, the evolution in our innovation and
design is clear, offering adult consumers a
more differentiated device, with new digital
features. As we continue to build glo as a
strong and consistent global brand, we must
transform our product portfolio through our
robust innovation pipeline.
The Scientific Evidence*
When tobacco is burned by combustion
at over 900ºC, the smoke produced is
incredibly complex with over 7,500
individual chemicals present, of which
150 chemicals are known to be harmful,
and more than 60 are known carcinogens.
In contrast, HPs heat natural material,
including tobacco or other ingredients like
rooibos, to much lower temperatures
(below 400ºC).
Due to the heating, as opposed to burning,
HPs are considered reduced risk
* compared
to continued smoking for those who
switch completely.
In 2018, Public Health England
***, while
highlighting the need for more research,
found that “compared with cigarettes,
heated tobacco products are likely to
expose users and bystanders to lower
levels of particulate matter, and potentially
harmful compounds.”
1
More long-term studies are needed on HPs
and in 2021 we conducted a year-long
clinical study
2 to evaluate the reduced-risk
potential of glo. It found that smokers who
switched from cigarettes to the exclusive
use of glo significantly reduced their
exposure to certain toxicants and
indicators of potential harm related to
several smoking-related diseases, in some
measures to a level found in participants
who had stopped smoking entirely.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
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Other Information
Quality Growth
Our Heated Products
30
Notes:
*
Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk
free and are addictive.
** Top HP markets are defined as the Top markets (excl. Russia) by industry revenue. Top markets are Japan, South Korea,
Italy, Germany, Greece, Hungary, Poland, Romania and the Czech Republic. These markets account for 80% of global HP
industry revenue in 2024. The Top markets were revised in 2024, with a reduction in volume share in respect of 2023
to 17.1%.
*** Public Health England (PHE) was replaced in Oct 2021 by the UK Health Security Agency and Office for Health
Improvement and Disparities.
1.
McNeill A, Brose LS, Calder R, Bauld L, Robson D. Evidence review of e-cigarettes and heated tobacco products 2018.
A report commissioned by Public Health England. London: Public Health England, 2018.
2. Gale, N., McEwan, M., Hardie, G., Proctor, C.J. and Murphy, J. (2022). Changes in biomarkers of exposure and biomarkers
of potential harm after 360 days in smokers who either continue to smoke, switch to a tobacco heating product or quit
smoking. Internal and Emergency Medicine. doi:doi.org/10.1007/s11739-022-03062-1.
Designed with Purpose
Hilo and Hilo Plus are the newest additions
to our flagship glo
range of Heated Products.
Hilo is a one-piece device featuring an
innovative AMOLED EasyView
TM screen for
consumers to stay in control of their device
usage and monitor its battery life.
Consisting of two pieces, Hilo Plus has a
charging case and a heating device. The
heating device is known as the
EasySwitch
TM heating pen, which can be
removed from the charging case and used
independently for a maximum of two
sessions, or can be used while docked in
the charging case. Additionally, the pen can
be inserted or removed from the case
during the heating session without
disrupting the session.
Hilo builds on Hyper Pro, which was
introduced to address the evolving
preferences of consumers of
Heated Products.
Featuring our HeatBoost™ technology,
Hyper Pro delivers superior taste
satisfaction, a step up on immediacy, more
intense boost taste mode and a longer
session, compared to earlier Hyper devices.
Paired with our upgraded blended tobacco
stick range and our veo tobacco-free herbal
stick novel flavour range with capsule, it
delivers an enhanced experience compared
to other Hyper products.
Hyper Pro is a smart and intelligent device
equipped with a progressive EasyView™
display for interactive and intuitive control
of the experience through a simple screen
interface displays the selected taste mode,
session progress and battery power. The
device has better palm fit and convenience
in use with a TasteSelect dial enabling one
move to open the shutter and select the
taste mode. This is also combined with the
convenience of a faster charge than other
Hyper products.
Hyper Pro is now present across
29 markets. veo™, our first brand to launch
a non-tobacco consumables range,
continues to outperform peers and is now
in 20 markets.
We continue to expand our geographic
footprint with glo now available in
33 markets.
Performance Summary
Impacted by the sale of the Group's
businesses in Russia and Belarus in 2023
(which negatively impacted performance
by 2.5 billion sticks due to the timing of the
sale partway through that year), total
consumable volume declined 11.6% to
20.9 billion sticks in 2024 having declined
1.3% (to 23.7 billion sticks) in 2023.
In 2024, glo HP category volume share
in the Top markets declined 40 bps
to 16.7% as growth in Poland and the Czech
Republic and stabilisation in Italy was offset
by the highly competitive markets in Japan
and South Korea and the deprioritisation of
the super-slim format in both markets.
Revenue declined 7.6% to £921 million
(2023: down 6.0% to £996 million), largely
due to the sale of the Group's businesses
in Russia and Belarus partway through
2023 which acted as a comparative drag
on performance of £78 million in 2024 and
by £75 million in 2023. Excluding the impact
of the relative movements in sterling, at
constant rates of exchange revenue
declined 2.5% in 2024, compared to a
decline of 2.5% in 2023.
In AME, which has seen strong industry
volume growth of 9% in 2024 (2023: 17%),
our consumable volume declined 24.6% to
8.3 billion sticks, having decreased 7.5% in
2023. The decline in both 2024 and 2023
was largely due to the sale of the Group's
businesses in Russia and Belarus, which
negatively affected volume, compared to
the respective prior period, by 2.7 billion
sticks in 2024 (and 2.5 billion sticks in
2023). This more than offset higher volume
in Spain and Greece.
Accordingly, in 2024, revenue declined
by 12.2%, or 10.4% at constant rates of
exchange. This compares to 2023 which
grew by 2.3% (or 3.0% at constant rates
of exchange).
AME now represents 39.9% of our global
HP volume.
Proportion of HP revenue
by region in 2024
(£m)
2024
£m
2023
£m
U.S.
0
0
AME
443
505
APMEA
478
491
Total
921
996
In APMEA, where the most mature HP
markets are, our consumable volume was
down 0.2%, having grown 4.9% in 2023.
Revenue was down 2.8% (2023: down
13.2%) yet grew 5.6% (2023: 7.3% decrease)
at constant exchange, driven by the
innovations and activation of commercial
plans in Japan.
Pricing was a positive contributor to the
regional HP performance by 5.8% in 2024,
having been a negative impact in 2023
by 12.2% due to the price repositioning
in that period.
In Japan, glo’s volume share of total HP
and combustibles was 16.7%, down 40 bps
on 2023 (2023: 17.1%), as consumers
continue to switch to reduced-risk
*
alternatives to cigarettes, with our
HP category volume share at 17.8%, down
50 bps from 18.3% in 2023.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
31
Using tobacco in forms that don’t burn,
like smokeless tobacco or heat-not-
burn products, will reduce your
exposure to harmful combusted
chemicals, including carbon monoxide.
Canadian Centre for Addiction and Mental Health
Lower Risk Nicotine User Guidelines, 2021
1
Note:
1.
Canadian Centre for Addiction and Mental Health (2021). 7 tips to lower your risk when using nicotine. Available at: intrepidlab.ca/en/Documents/Quick%20Tips.pdf
In recent years, a new
category of Modern Oral
products
*† has emerged.
These come in the form of tobacco-free
nicotine pouches that are placed
under the lip so that nicotine can
be effectively absorbed.
Modern Oral
Top markets **
the U.S., Sweden,
Norway, Denmark,
Switzerland, Poland
and the UK
Highlights
Continued strong global
volume growth (up 55.0%),
with adult consumer numbers
up 2.6 million to 7.4 million.
Category volume share
in Top markets was 28.4%,
up 1.3 ppts, driven by
an increase in the highly
competitive U.S. market.
Strong volume and revenue
growth in the U.S., led by Velo
and Grizzly Modern Oral.
Volume share leadership
in Modern Oral in AME
at 64.7%, with continued
market leadership (through
Velo) in 21 European markets.
AME revenue up 40.3%,
with volume up 50.2%.
44
Number of markets where
the Group’s Modern Oral
Products are sold
Overview
The Modern Oral category has a clear
trajectory for growth in markets with
established oral nicotine consumption. The
U.S. and the Nordics are prime examples of
such markets, as adult consumers already
have the experience of Traditional Oral
products.
However, the key challenge in unlocking the
category's potential in new markets relates to
how the oral nicotine product is used, which
is different to how nicotine has previously
been consumed, typically through inhalation.
Building a portfolio of strong brands and
products/ranges to accelerate adult
consumer adoption is essential to
establishing a leading, global Modern
Oral business.
The Scientific Evidence*
Modern Oral nicotine pouches build upon
the extensive scientific evidence available
for snus, including long-term studies
1,2
which demonstrate that snus use is
associated with less risk of many diseases
compared with cigarette smoking.
Modern Oral products, however, are designed
to offer adult consumers an improved,
reduced-risk
*† alternative, with many
Modern Oral products manufactured as
tobacco-free.
Laboratory scientific studies for our
Modern Oral products show they produce
less than 1% of the toxicants found in
cigarette smoke
3 and lower levels than
snus
4 – a Traditional Oral tobacco product
which is already regarded as a reduced-
risk
*† alternative to smoking.
Toxicology tests assessing the biological
effects of our Modern Oral products also
show they have reduced effects relative to
cigarettes and snus
5.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Quality Growth
Our Modern Oral Products
32
Notes:
1.
Ramström L, Borland R, Wikmans T. Patterns of Smoking and Snus Use in Sweden: Implications for Public Health. Int J
Environ Res Public Health. 2016 Nov 9;13(11):1110. doi: 10.3390/ijerph13111110. PMID: 27834883; PMCID: PMC5129320.
2. Sohlberg, T., Wennberg, P. Snus cessation patterns - a long-term follow-up of snus users in Sweden. Harm Reduct J 17,
62 (2020). doi.org/10.1186/s12954-020-00405-z
3. Gaca, Marianna, et al. "Bridging: accelerating regulatory acceptance of reduced-risk tobacco and nicotine
products." Nicotine and Tobacco Research 24.9 (2022): 1371-1378.
4. Azzopardi, David, Chuan Liu, and James Murphy. "Chemical characterization of tobacco-free 'modern' oral nicotine
pouches and their position on the toxicant and risk continuums." Drug and chemical toxicology 45.5 (2022): 2246-2254.
5. East, N., et al. "A screening approach for the evaluation of tobacco-free ‘modern oral’ nicotine products using Real
Time Cell Analysis." Toxicology Reports 8 (2021): 481-488, and Bishop, E., et al. "An approach for the extract generation
and toxicological assessment of tobacco-free ‘modern’oral nicotine pouches." Food and chemical toxicology
145 (2020): 111713.
*
Based upon the weight of evidence and assuming a complete switch from cigarette smoking. These products are not
risk free and are addictive.
** Top Oral and Modern Oral markets are defined as the Top markets by industry revenue, being the U.S., Sweden, Norway,
Denmark, Switzerland, Poland and the UK and accounting for c. 90% of global industry Modern Oral revenue in 2023. The
Top markets were updated in 2024, with a revision in 2023 volume share to 27.1% (Group) and 64.7% (AME). Also in 2024,
the Group changed from Marlin to Retail Scan Data for the U.S. Modern Oral market, with the Group's Modern Oral
volume share in 2023 rebased to 4.5%.
*** Source: based on NielsenIQ volume share of Total Oral.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and
no reduced-risk claims will be made as to these products without agency clearance.
Published in 2022, results from our
innovative cross-sectional clinical study
showed that exclusive Velo users had
substantially lower exposure to tobacco
toxicants, and significantly better results
for indicators linked to smoking-related
diseases, compared with smokers. In 2023,
in a study where daily smokers were
provided with Velo, the majority of
participants significantly reduced their
daily cigarette use.
On the basis of our evidence and informed
by the wealth of independent evidence
regarding snus, switching completely to
Modern Oral products can be expected to
reduce the risk of smoking related disease
when compared to continued smoking.
*†
Our Products
Our Modern Oral products are white in
colour and contain high-purity nicotine,
water and other high-quality food-grade
ingredients, including plant-based fibres,
flavouring and sweeteners.
Originating in Scandinavia, Velo is now a
leading global brand of nicotine pouches.
These typically appeal to a broader
audience than Traditional Oral tobacco
because of their attractive price
positioning. With comparatively lower
excise rates (versus Traditional Oral and
combustibles), Modern Oral generally has
higher margins than Traditional Oral.
Our Velo product range spans across
tobacco, mint and fruit flavours and are
sold in various nicotine strengths, from
3mg to 17mg of nicotine per pouch.
Building on the growing trend of Traditional
Oral consumers moving to Modern Oral,
we launched Grizzly Modern Oral in the U.S.
in 2024.
We are also delivering a step change in
Modern Oral manufacturing. Truly living
our ethos, our Modern Oral factory in
Pécs, Hungary, put together a bold plan
to implement food industry standards
for Modern Oral manufacturing.
With a cross-functional team across
quality, production, engineering and EHS
teams delivering technical changes and
process improvements, Pécs became the
first site in BAT’s history to obtain the
ISO 22000 certification for food safety
management systems.
We have also built and commissioned a
new facility in Trieste, Italy that will further
enhance our capabilities and provide
additional capacity (in Modern Oral and
Heated Products).
In line with the Group's sustainability
ambitions, Velo plastic cans are being
upgraded to use single polymer plastics,
with the use of bio-based materials also
being trialled to achieve International
Sustainability and Carbon Certification.
Performance Summary
2024 maintained the momentum from
2023 with growth in volume and value.
Volume was up 55.0% to 8.3 billion
pouches, having grown 33.6% to 5.4 billion
pouches in 2023.
Revenue increased 46.6% to £790 million
(2023: up 35% to £539 million). Excluding
the impact of foreign exchange, this was
an increase of 51% in 2024 and 39% in 2023,
as price/mix was down 2.9%, after the
increase of 5.4% in 2023.
Volume share of the Modern Oral category
in our Top markets was 28.4%, up
1.3 ppts compared to 2023. This was driven
by the U.S. where our volume share of
Modern Oral increased by 2.1 ppts with
volume up 234% to 991 million pouches
(2023: down 1.3% to 297 million pouches).
Revenue in the U.S. increased in 2024 to
£80 million, an increase of 223% (or 232%
at constant rates), driven by the traction of
our refreshed Velo brand expression and
Grizzly Modern Oral roll-out.
While we await the outcome of our PMTA
submission for our successful European
product, Velo 2.0, we are encouraged that
we have started to reinvigorate our
performance in 2024.
The Group reinvested in trade activation
in 2023, leading to a decline in net pricing
of 30.5% and revenue down to £25 million
in that year.
In our Top markets outside the U.S., we
maintained volume share leadership, which
was down 10 bps at 64.7%.
In AME, we maintained volume share
leadership in 21 European markets. Revenue
increased by 40.3% (2023: up 41.5%) or
44.4% (2023: up 44.6%) at constant rates
of exchange. Price/mix was a negative drag
of 4.6% in 2024 having been positive by
8.1% in 2023. The higher revenue was
therefore largely driven by volume growth
(up 50.2% in 2024 and 36.5% in 2023), with
Sweden, the UK, Norway, Austria and
Finland all performing well as the Modern
Oral category continued to grow.
As the Modern Oral category continues
to grow and becomes more established in
Europe, we continue to see strong growth
in adult consumer numbers. In Sweden,
Velo is the largest (by volume share) of any
snus or Modern Oral nicotine pouch brand
***.
Proportion of Modern Oral
revenue by region in 2024
(£m)
2024
£m
2023
£m
U.S.
80
25
AME
676
482
APMEA
34
32
Total
790
539
In APMEA our volume grew 16.8% and our
revenue grew 5.7% (being 10.0% at
constant rates), fuelled by robust growth
from Global Travel Retail and continued
strong Emerging Market volume
performance in Pakistan (up 27.3%). Our
insights and foresights in these markets
give us confidence in our ability to unlock
the Emerging Markets opportunity for
Modern Oral going forward.
We continue to seek opportunities and
develop the category in other markets as
we believe that Modern Oral is an exciting
longer-term opportunity to commercialise
reduced-risk products
*†.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
33
Switching from cigarettes to nicotine
pouches could represent a reduction in
health risks for a person who smokes.
German Federal Institute for Risk Assessment (BfR)
1
Note:
1.
Bundesinstitut für Risikobewertung, 2022. Health Risk Assessment of Nicotine Pouches: Updated BfR Opinion No. 023/2022 of 7 October 2022, BfR-Stellungnahmen. Bundesinst. für
Risikobewertung. www.doi.org/10.17590/20220204-105615
The most common products
in Traditional Oral are largely
moist oral tobacco popular in
the U.S., with our main brands
being Grizzly and Kodiak.
These products are
less finely ground than
another Traditional
Oral product referred
to as Swedish-style
snus. Both of these
Traditional Oral
products are available
in loose form, as well
as in pre-packed
pouches.
Our Products
We also sell a range of Traditional Oral
products, including Swedish-style snus
and American moist snuff, available in loose
tobacco form or as pre-packed pouches.
We have long sold snus in Sweden and
Norway through our Fiedler & Lundgren
business, whose brands include Granit
and Mocca; and in the U.S. we market snus
under the Camel brand. Our American
moist snuff products include our flagship
Grizzly brand, as well as the premium
moist snuff brand Kodiak.
We remain committed to offering
potentially reduced-risk
*† products that help
adult smokers migrate from combustible
cigarettes while meeting the evolving needs
of other adult nicotine consumers.
Performance Summary
Total revenue decreased 6.0% to
£1,092 million (2023: down 3.8% to
£1,163 million).
Translational foreign exchange impacted
both years, being a headwind in 2024
of 2.6% (compared to a headwind of 0.7%
in 2023) due to the relative movement of
sterling. On a constant rates basis, revenue
fell 3.4% in 2024 having declined 3.1%
in 2023.
In 2024, volume was lower (down 8.2%) than
the prior year (at 6.1 billion stick equivalents),
following a decline of 10.3% in 2023. While
pricing remained strong in both years (2024:
+4.8%; 2023: +7.2%), this was more than
offset by the volume decline.
In the U.S., which accounts for 96.9% of
the Group’s revenue from Traditional Oral,
volume declined 8.9% in 2024 (2023: down
10.9%). The higher decline rate in 2023 was
in part due to the normalisation of
inventory levels (being a drag of 1.7%). Both
2024 and 2023 were negatively impacted
by strong macro-economic headwinds
leading to downtrading, accelerated cross-
category switching (notably to Modern
Oral) and reduced consumption.
Value share of Traditional Oral was down
40 bps (2023: up 40 bps), while volume
share was down 40 bps (2023: down
20 bps).
Outside the U.S., being 3.1% of the Group's
revenue from the category, volume was
3.3% lower in 2024, driven by Sweden
where the Group’s volume share (as a
proportion of Total Oral) declined 90 bps
(2023: declined 50 bps). This decline was
due to the launch of the Lundgrens Modern
Oral product and higher pricing of Granit
to drive value.
Proportion of Traditional Oral
revenue by region in 2024
(£m)
2024
£m
2023
£m
U.S.
1,058
1,127
AME
34
36
APMEA
—
—
Total
1,092
1,163
Due to the ongoing U.S. market dynamics,
as discussed on page 293, the Group has
recognised an impairment charge of
£646 million in respect of the carrying value
of Camel Snus. This reflects the reduced
sales as consumers switch to alternative
products including Modern Oral.
Commencing 1 January 2025, Camel Snus
will be assigned a 20-year useful economic
life and will commence amortisation from
that date which approximates to
£23 million annually.
Notes:
*
Based on the weight of evidence and assuming
a complete switch from cigarette smoking. These
products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo,
Grizzly, Kodiak and Camel Snus are subject to FDA
regulation and no reduced-risk claims will be made as to
these products without agency clearance.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Quality Growth
Our Traditional Oral Products
34
We are focused on driving
value from our strategic brands of
Dunhill, Kent, Lucky Strike, Pall Mall,
Rothmans, Newport (U.S.), Natural
American Spirit (U.S.) and Camel
(U.S.), which now account for 67%
of our combustible volume.
Our combustibles business is
founded on understanding and
meeting the preferences of adult
smokers in all parts of the world
Highlights
Group value share was
down 20 bps, as APMEA (flat)
and AME (flat) were more
than offset by the U.S.,
down 30 bps.
Volume share 20 bps higher
than 2023.
Strong price/mix +5.3%.
37
Number of cigarette
factories in 35 countries
Note:
*
Top cigarette markets are defined as the Top cigarette
markets by industry revenue, being the U.S., Japan,
Bangladesh, Brazil, Germany, Pakistan, Mexico and
Romania, accounting for c.60% of global industry
cigarettes revenue in 2024.
Value and Volume Share
Group cigarette value share was 20 bps
lower in 2024 (2023: down 40 bps), mainly
driven by the U.S. (down 30 bps). This,
combined with lower cigarette value share
in Germany, Romania and Bangladesh, was
partially offset by higher value share in
Brazil, Mexico and Pakistan.
Group cigarette volume share was up
20 bps in 2024 (2023: flat vs 2022). In 2024,
the Group grew volume share in Brazil,
Bangladesh, Pakistan and Mexico.
However, this was offset by Germany,
Romania and Japan. In 2023, the Group
grew volume share in Bangladesh, Ukraine,
Mexico, Italy, Spain, Pakistan, France,
Colombia and Germany. However, this was
offset by Japan, Brazil, South Korea, the
U.S., Switzerland, Australia, the Czech
Republic, Canada and Romania.
Volume Performance
In 2024, Group cigarette volume was down
8.9%, at 505 billion sticks (2023: down 8.2%
to 555 billion), with the total cigarette
market continuing to decline at 2%.
Both years were impacted by the disposal
of the Group's businesses in Russia and
Belarus partway through 2023. Volume
declined in the U.S. in both 2024 and 2023
(discussed below), with 2024 also
negatively impacted by Sudan (as the
ongoing conflict affected the supply chain).
Change in cigarette value share
in Top markets* (bps)
-20 bps
2024
2023
-20
-40
-20
-40
Definition: Annual change in cigarette value
share – being the value of cigarettes bought by
consumers of the Group’s brands in Top markets*
as a proportion of the total value of cigarettes bought
by consumers in those markets (see page 391).
Change in cigarette volume share
in Top markets* (bps)
20 bps
2024
2023
40
20
flat
Definition: Annual change in cigarette volume
share – being the number of cigarettes bought by
consumers of the Group’s brands in Top markets*
as a proportion of the total cigarettes bought by
consumers in those markets (see page 391).
In other markets in 2024, volume growth in
Türkiye, Brazil, Indonesia, Pakistan,
Venezuela and Mexico was more than
offset by lower volume in exit markets,
notably in Africa and Bangladesh.
In 2023, volume was down in Pakistan,
driven by significant excise increases.
This was partly offset by volume growth
in Bangladesh, Brazil and Türkiye.
In the U.S., industry volume declined 8.4%,
having declined 7.5% in 2023 on a sales to
wholesaler basis. Our combustibles revenue
in the U.S. declined 6.7% (or 4.1% at constant
rates of exchange), driven by 10.1% lower
volume (2023: down 11.4% to 52 billion).
U.S. premium volume share was up 50 bps,
driven by Newport soft-pack and Natural
American Spirit.
The U.S. combustibles market continues to
be negatively affected by macro-economic
pressures impacting consumer behaviour,
with a growth in the deep-discounted
category (in which the Group is not
present) and the increase of solus-usage of
alternative nicotine products, driven by the
growth of illicit single-use Vapour products.
Cigarette volume in the U.S was also
negatively impacted by the flavour
ban in California in 2023 and the increase
of solus-usage of alternative nicotine
products, driven by the growth of illicit
single-use Vapour products.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Our Combustible Products
35
Regulation
On 15 January 2025, in the final days of the
outgoing Biden administration, the FDA
issued a proposed product standard
whereby the agency would limit nicotine
levels in cigarettes following a two-year
effective date from publication of any final
rule. The proposed rule is currently subject
to public comment, but may be de-
prioritised by the Trump administration as
it considers all proposed regulations
advanced by the Biden administration.
Thus, it is not known whether or when this
proposed rule will be finalised, and, if
adopted, whether the final rule will be the
same as or similar to the proposed rule.
Under the Biden administration, the FDA
announced its intention to issue a final rule
to ban menthol as a characterising flavour
in cigarettes. In January 2025, the Trump
administration has withdrawn the rule
from the Office of Management and
Budget and it is currently held pending the
new Trump administration’s reconsideration
of regulations advanced by the Biden
administration.
We have been clear that a ban on menthol
cigarettes would harm, not benefit,
public health.
Published science
1 indicates that:
– menthol cigarettes do not present any
greater risk of smoking-related disease
compared to non-menthol cigarettes; and
– the weight of scientific evidence does not
indicate that menthol cigarettes adversely
affect initiation, dependence, or cessation.
Additionally, evidence from other markets
where similar bans have been imposed
demonstrates no impact on overall cigarette
consumption because smokers switch to
non-menthol cigarettes, turn to the illicit
market, and resort to product tampering.
We believe that a ban on menthol is
contrary to the FDA’s stated goal of
reducing the health effects of tobacco use.
Our U.S. business will continue
to participate in public discourse and will
likely challenge this unsupported and
counterproductive rule in court if, and when,
it is released.
In December 2022, the sale of all tobacco
products with characterising flavours
(including menthol) other than tobacco
was banned in the State of California. This
has negatively impacted the Group's
volumes in both 2023 and 2024 in the U.S.
and the Group will continue to monitor the
impact in the coming periods.
Strategic Brand Performance
In 2024, strategic cigarette brands’ value
share was flat (2023: down 30 bps):
– Dunhill’s overall value share was up 10 bps
(2023: flat) as growth in Brazil and
Pakistan was partly offset by reductions
in Romania. Volume was 0.9% lower
(2023: up 0.9%), largely driven by South
Korea and our exit from Mali;
–
– Kent’s value share was up 10 bps
(2023: 10 bps down) as growth in Brazil
and Romania was partly offset by lower
value share in Japan. Volume was down
1.2% (2023: down 9.4%) due to the
negative impact of the sale of the Group's
businesses in Russia and Belarus partway
through 2023. Kent increased volume in
Türkiye, Poland and Brazil, which was
partly offset by lower volume in Japan;
– Lucky Strike’s value share grew 70 bps
(2023: up 40 bps), as growth in the U.S.,
Bangladesh, Brazil and Japan more than
offset lower value share in Germany.
Volume declined 4.8% (2023: up 16.7%)
driven by the sale of our business in
Russia partway through 2023. This more
than offset higher volume in Bangladesh,
the U.S., Brazil and Indonesia;
– Rothmans’ value share was down 20 bps
(2023: flat) driven by lower value share in
Brazil, Romania and Pakistan. Volume was
13.3% lower (2023: 14.6% down) partly
due to the sale of our business in Russia
with volume lower in Poland, Romania,
Ukraine and Nigeria. This more than offset
higher volume in Brazil and Italy; and
– Pall Mall’s value share was 30 bps lower
(2023: 30 bps down) as growth in
Pakistan, Mexico and Romania was more
than offset by lower value share in the
U.S. and Germany. Volume was down
7.0% (2023: down 15.9%) as higher
volume in Pakistan was more than
offset by lower volume in the U.S. and
Chile, and the impact of exit markets.
The Group’s U.S. domestic strategic
combustible portfolio was 20 bps down:
– Newport value share decreased 20 bps
(2023: down 50 bps), while volume
declined 11.1% (2023: down 14.7%);
– Natural American Spirit performed
well with value share up 10 bps
(2023: up 30 bps). Volume was 10.0%
down (2023: down 3.5%); and
– Camel’s value share declined 30 bps in
the U.S. (2023: down 50 bps) with volume
13.2% down (2023: 14.0% down), driven
by competitive pricing pressures.
Volume of other tobacco products (OTP)
declined 11.2% to 13.0 billion sticks
equivalent (2023: 11.0% decline), being 3%
of the Group's combustible portfolio
(2023: 3%).
Revenue
In 2024, revenue from combustibles
was down 6.4% to £20,685 million
(2023: £22,108 million, down 4.0%). Pricing
in both years was strong with price/mix in
2024 at 5.3% and 7.5% in 2023. However,
this was offset by the decrease in volume
in both years as described earlier.
Proportion of combustibles
revenue by region in 2024
(£m)
2024
£m
2023
£m
U.S.
9,094
9,744
AME
7,039
7,614
APMEA
4,552
4,750
Total
20,685
22,108
Revenue is affected by the relative
movement of sterling against the Group's
reporting currencies. In 2024, this was a
translational foreign exchange headwind
of 4.8%, compared to a headwind of 3.2%
in 2023.
In both 2024 and 2023, revenue was
impacted by a combination of lower
comparative performance from Russia and
the sale of the Group's businesses in Russia
and Belarus partway through 2023, which
in aggregate acted as a negative drag on
performance by £389 million in 2024 and
£380 million in 2023.
After adjusting for the currency headwinds,
revenue from combustibles at constant
rates of exchange was down 1.6% to
£21,748 million, having declined by 0.8%
in 2023.
In 2025, we expect significant combustible
headwinds to impact performance in
APMEA, particularly in Australia where new
tobacco regulations come into effect in
April 2025 and in Bangladesh following a
substantial increase in excise and VAT.
Amortisation of the U.S.
Combustibles Brands
Following a review of the Group's
performance expectations in the U.S.
reflecting continuing macro-economic
headwinds, with effect from 1 January 2024,
the Group’s indefinite-lived combustible
brands are being amortised on a straight-
line basis over periods not exceeding
30 years.
In 2024, and the immediate years following
this change in accounting estimate, the
increase in annual amortisation expense
was £1.4 billion.
Note:
1. Scientific evidence available at www.regulations.gov/
comment/FDA-2021-N-1349-175111
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Quality Growth
Our Combustible Products
Continued
36
As well as offering less
risky
*† nicotine-based
alternatives, we see
a new range of non-nicotine-
based products forming
an expanding part
of our portfolio.
Highlights
As consumers increasingly seek products
offering Wellbeing and Stimulation
characteristics, our venturing unit,
Btomorrow Ventures (BTV), is partnering
to strengthen our positioning in this market.
Our well-established market research has
given us a detailed understanding of
consumer needs, allowing us to invest in,
acquire and develop natural ingredients
and new delivery formats that satisfy
these needs.
We believe our supply chain strengths and
trade market capabilities mean that, when
ready, we can deliver associated products
to consumers at speed and scale.
BTV has completed 28 investments since its
launch in 2020, and continues to invest
in innovative, consumer-led brands, new
sciences and technologies, and sustainability
to support the Group’s transformational
strategy for A Better Tomorrow™.
In 2024, BTV launched a new £200 million
fund, continuing its commitment to
minority investments, with a focus on the
Wellbeing and Stimulation space. This
funding is in addition to the original £150
million fund in 2020.
Throughout 2024, BTV has continued to
support its portfolio of companies with a
number of follow-on investment rounds
and commercial partnerships with BAT,
including new investments in a U.S.-based
adaptogens and nootropics beverage
company, Hop Wtr Inc., and a German AI-
powered sustainable packaging company,
one.five.
As discussed in note 27 in the Notes on
the Accounts on page 336, in November
2023, the Group announced the signing
of an agreement for a further proposed
investment in Organigram of
CAD$125 million (£74 million), payable
across three tranches, with approvals
received from the shareholders
of Organigram on 18 January 2024.
On 24 January 2024 and 30 August 2024,
BAT made the first and second tranche
investments of CAD$42 million (£24 million)
each respectively. The final tranche is due
on 28 February 2025. The Group’s equity
position at 31 December 2024 was c.30.6%
and is anticipated to rise to c.36.65%
(restricted to 30% voting rights) once the
final tranche has been completed.
The Group has continued to explore Beyond
Nicotine organically through our subsidiary,
The Water Street Collective Ltd, with a
series of pilot launches of our own
functional shot brand, Ryde. This offers a
scientifically formulated range of Energy,
Focus and Relax products in three markets
– Australia, Canada and the U.S.
Find out more at
www.btomorrowv.com
+
Notes:
*
Based on the weight of evidence and assuming
a complete switch from cigarette smoking. These
products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo,
Grizzly, Kodiak, and Camel Snus, are subject to FDA
as to these products without agency clearance.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Beyond Nicotine
37
Dynamic Business
The Dynamic Business pillar envisages
a future-fit, data-driven organisation;
ensuring we are efficient and effective
in all of our operations.
This will ensure that we deliver financial
flexibility to invest in our business, people
and products to win in a fast-changing
environment and deliver superior returns
to our investors.
The key building blocks of
the Dynamic Business pillar are:
Exciting, Winning Company
Operational Excellence
Capital Effectiveness
Our commitments under
Dynamic Business:
Creating a diverse, inclusive and
people-oriented place to work
Being data-driven and delivering
operational excellence/cost management
Focused on investors’ returns
An Exciting and Winning Company
A Better Tomorrow™
At BAT, our people are the heart of our business and they are key
to driving our purpose. This is why our focus on culture
transformation is so important.
Our 2024 people strategy is centred around three ambitions
for 2030:
– enabling tomorrow’s success for our business and colleagues;
– creating an amazing people experience; and
– making BAT the place to be for current and prospective talent.
This is complemented by our six corporate Values, which act as a
compass to ensure our people have a clear understanding of what
is expected of them to help us Build a Smokeless World™. The
Values are:
– Truly inclusive
– Empowered through trust
– Stronger together
– Love our consumer
– Passion to win
– Do the right thing.
We purposefully designed our people strategy to ensure we can be
ready for future changes and respond to consumer needs at pace.
Our strategy is anchored around five bold intentions which we
expect to be owned and driven by every people leader at BAT.
People Strategy
Shaping a performance-driven & dynamic organisation
As a responsible employer, we are focusing on the link between
accountability, performance and reward to ensure we meet the
needs of our business and our people. We also regularly assess the
design of our organisation to make sure it is adaptable, enabling us
to access and develop the capabilities we need to help deliver
our purpose.
Our efforts to create a great experience for our people have been
recognised externally, and we are proud that we have won awards
for being an employer of choice – including recognition in 2024 as
a Global Top Employer for the seventh consecutive year.
Nurturing relevant capabilities
From global graduates to senior hires, we are committed to
attracting, developing and retaining talent to drive our
transformation agenda - whether through in-house development,
assignments, or hiring new skills. We have invested significantly in
our learning and development programmes to ensure they are
impactful and deliver the capabilities we require.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
Strategic Pillar Overview
38
In 2024, we launched three new global
programmes focused on developing
capabilities in areas such as Supply Chain
for multi-category markets, Brand
Management, Science, Innovation
and Leadership.
Accelerating simplification
& digitalisation
Our focus over the next two years will be
on driving simplification in our people
processes, further leveraging digitalisation,
and ensuring our line managers are
equipped with the data, insights and
foresights they require.
Creating a purposeful
& energising environment
We pride ourselves on being a diverse,
global, people-centric organisation that
respects and fosters conscious inclusion.
Being truly inclusive is one of our core
Values and it is integral to our identity
at BAT.
Alongside our six corporate Values and the
Diversity and Inclusion enablers we have in
place, we are transforming our approach to
employee listening and wellbeing to ensure
everyone feels supported and included.
In 2024, we launched our Truly Inclusive
Leaders Programme which aims to help
our leaders to develop inclusive mindsets
and behaviours, fostering a psychologically
safe and inclusive work environment. This
programme encourages self-reflection and
aims to spark cultural transformation at
BAT through critical questioning,
awareness and open conversations for
ongoing improvement.
To deliver on our commitment to well-
being, we introduced our Global Benefits &
Wellbeing guidelines and the LiveWell
framework across all markets. The LiveWell
framework reflects a holistic view of
wellbeing, focusing on emotional, physical,
financial, and social pillars. Informed by
employee needs and feedback, the
framework drives greater consistency
across our offerings, ensuring we prioritise
wellbeing and create an empowering
environment where our people can thrive
both personally and professionally.
Evolving into a future-ready HR function
While our people strategy is ultimately
owned by the Human Resources (HR)
function, every leader at BAT is a co-owner
and responsible for ensuring its effective
deployment across the business. To
achieve this, we will continue to work
with our HR teams around the world
to equip them with the skills needed to
help BAT and its leaders to achieve our
strategic ambitions.
For more information on our Employee
Communities, see pages 110 to 111
+
Operational Excellence
Focus areas
Delivering on our refined corporate
strategy and Building a Smokeless World
will require greater focus on our global
execution. This includes getting the U.S.
back to growth, where and how we allocate
resources at a regional and market level,
and driving greater productivity while
reducing complexity.
Getting the U.S. back to growth
In 2024, we made investments to further
bolster our portfolio, following a deep and
thorough review in 2023. We reinvigorated
our Modern Oral offering with the launch of
a new Velo mix, and the introduction of
Grizzly Modern Oral.
Recognising the importance of our U.S.
business to our future growth, we will
continue to invest and focus on sharpening
our portfolio management, strengthening
our route-to-market, and further leveraging
our broad, digitally enabled, revenue
growth management capabilities.
We are confident this should drive quality
growth over the longer-term and ensure
greater resilience through economic cycles.
Driving productivity and growth
Through our digital transformation, we are
increasing our use of data to become a
data-led organisation. Our focus is on the
effective and efficient delivery of our
market-leading products and innovations
to satisfy consumers, drive growth and
create value and Build a Smokeless World.
In order to meet and respond to the
challenges of an ever-changing external
environment, we continue to invest in
technology to be a more efficient and
effective business, with AI-enabled,
data-driven systems and ways of
working to match.
Under the Operational Excellence pillar of
our refined corporate strategy, three focus
areas will be key to driving progress:
optimising our manufacturing operations;
reducing complexity in our ways of working
and processes, including using AI and data-
enabled technology; and our Global Business
Services (GBS) Centres of Excellence.
At-scale operations
We have a global manufacturing footprint
designed to ensure an efficient supply
chain across both combustible and
Smokeless products.
Manufacturing tobacco and nicotine
products is a large-scale operation and
we have state-of-the-art manufacturing
facilities all over the world.
In 2024, the Group manufactured
cigarettes in 37 factories in 35 countries.
Our factory outputs and facilities vary
significantly in size and production
capacity. We also have manufacturing sites
for our range of Smokeless products.
In line with our corporate commitment
to fight climate change, our factories have
in place decarbonisation, water usage and
waste optimisation programmes.
We work to ensure that our costs are
globally competitive and that we use our
resources as effectively as possible. Our
production facilities are designed to
meet the needs of an agile and flexible
supply chain.
We also use third-party manufacturers to
manufacture the components required,
including the devices, related to our
Smokeless New Category products. Such
third-party manufacturers supplement our
own production facilities in the U.S., Poland
and Indonesia to produce the liquids used
in Vapour products.
By continuing to improve our productivity
in all areas of our supply chain, we can
increase our profitability and continue
to deliver sustainable returns to our
shareholders.
However, it is not just about today, it also
underpins our future. The more efficient
and effective we become, the more we are
able to generate funds to invest in the
things that will fuel future growth: our
products, our innovations and our people.
Working with farmers
While we do not own tobacco farms
or directly employ farmers, we source
tobacco leaf directly from c.91,000
contracted farmers and through third-
party suppliers mainly in emerging markets.
With our contracted farmers, we
continually strive to improve sustainability
and viability. We focus on improved quality,
cascading more resistant hybrid seeds,
tailored mechanisation to reduce costs
of production, and increased yield.
We review our contracts on an annual
basis considering Group requirements over
the medium-term to promote the stability
of demand and supply on production volume.
We have similar expectations of our
third-party suppliers in relation to their
farmer contracts.
As with any other global agricultural
commodity, international tobacco prices
vary from year to year. This is driven by
changes in the cost of production, like
labour costs and agricultural inputs, local
inflationary pressures and economic,
political and market conditions, as well as
climatic conditions that impact supply,
demand and quality of the tobacco grown.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
39
Cash generation
Maximising cash generation is an essential
component in our capital allocation decisions.
@Driven by rigorous working capital
management, the Group generated an
operating cash conversion in each of the
last five years of at least 100%.
@
While the Group remains highly cash
generative, cash is a critical resource to
ensure that we can invest in the right
opportunities in Building a Smokeless World.
Recent macro-economic trends including
geopolitical instability, conflicts, inflation
and interest rate volatility have meant that
cash is a costly resource. As such, internally
generated cash and working capital are
much more valuable and they must be
mobilised effectively and optimised
efficiently.
This will be done by continuing to focus
on a high cash conversion rate as well as
rigorous focus on working capital.
@Our commitment:
To generate over £50 billion of free cash
flow before dividends between 2024 and
2030 (inclusive).
Our record:
The Group has generated around £8 billion
of free cash flow (before dividends) in each
year since 2020.
This is despite the significant investment in
New Categories and while incurring external
payments made in respect of litigation
and settlements.
This demonstrates the resilience of the
Group to continue to generate exceptional
cash flow, while delivering the Group's
transformation ambitions.
@
Maximising our investments
As we continue to build A Better
Tomorrow™, the Group seeks to optimise
the return on our investments and seeks
to invest in the right opportunities.
In 2025, the Group expects to invest
around £650 million of gross capital
expenditure to enhance our growth
opportunities and deliver operational
efficiencies. This includes purchases of
property, plant and equipment and certain
intangibles, and the investment in the
Group’s global operational infrastructure
(including, but not limited to, the
manufacturing network, trade marketing
software and IT systems and the expansion
of our New Categories portfolio).
We will continue to proactively assess the
performance of our assets to ensure value
is maximised through operational returns
or through disposal.
In addition, as part of our transformation
we invest in the Wellbeing and Stimulation
space and through our venturing unit,
Btomorrow Ventures, and in the cannabis
space, including in Organigram.
Our commitment:
To continue to actively assess investments,
be it for acquisition or disposal, to
maximise our delivery and provide the right
infrastructure for the BAT of tomorrow.
@Strong operating cash conversion
driven by continued focus on cash
delivery
£7,889
£7,824
£7,554
100
100
101
2022
2023
2024
Adjusted cash generated from operations (£m)
Operating cash conversion (%)
@Adjusted Return on Capital
Employed
9.9%
10.9%
12.1%
2022
2023
2024
0%
5%
10%
15%
Adjusted return on capital employed (%)
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
Strategic Pillar Overview
Continued
40
Capital Effectiveness
Capital Effectiveness is a key focus of
delivering a Dynamic Business to Build
a Smokeless World.
The key objective is to unlock
shareholder value by optimising access,
utilisation and return of capital resources.
The key initiatives include:
– maximise our cash generation;
– invest in the right opportunities;
– optimise the return on our
investments;
– reduce our debts; and
– generate sustainable returns.
Our active capital allocation framework
considers the continued investment
in our transformation, the macro-
environment, potential future litigation
and regulatory outcomes.
Our Board continues to review our
capital allocation priorities including
both internal and external opportunities
and stakeholders while considering the
uncertain macro-environment, foreign
exchange fluctuations and higher
interest rates.
@~£50bn
Cumulative Free
Cash Flow between
2024 and 2030
@
@Our record:
The acquisition of Reynolds American Inc.
impacted our capital base.
We have improved our adjusted return on
capital employed consistently from 8.3%
in 2018 to 10.9% in 2023, with a further
improvement to 12.1% in 2024, partly due to
the impairment recognised and discussed
on page 293.
@
Reducing debt
Total borrowings (which includes lease
liabilities) decreased to £36,950 million
in 2024 (2023: £39,730 million).
Total borrowings include £670 million
(31 December 2023: £700 million) in respect
of purchase price adjustments related to
the acquisition of Reynolds American Inc.
As discussed on page 55, the Group
remains confident about its ability to
access the debt capital markets
successfully and reviews its options
on a continuing basis.
We have a debt rating of Baa1 (stable
outlook), BBB+ (stable outlook), BBB+ (stable
outlook) by Moody's, S&P and Fitch.
@Our leverage target range is 2.0-2.5x
adjusted net debt to adjusted EBITDA
@.
Given current geopolitical and economic
challenges, the Group aims to:
– de-lever our gross debt levels (from
£37.0 billion in 2024); and
– moderate the annual Net Financing Cost
levels to support the overall strategy of
the Group.
This is expected to deliver a resilient
balance sheet, able to withstand future
uncertainties, while providing increased
flexibility for the Group to be able to invest
in future growth opportunities and
sustainably return excess cash to
shareholders.
This is expected to de-risk the future solvency
and liquidity risk as referred to on page 160,
whereby the Group's ability to refinance debt
as it matures will be enhanced.
Our commitment:
To retire debt in a sustainable manner,
reducing our risk of refinancing and net
finance cost exposures
@, while continuing
to target a solid investment-grade credit
rating of Baa1, BBB+ and BBB+ by Moody's/
S&P/Fitch
@
.
Our record:
Since the acquisition of Reynolds American
Inc. in 2017, we have consistently reduced
our borrowings from £49.1 billion to
£37.0 billion at 31 December 2024.
@Our leverage (as measured by the ratio
of adjusted net debt to adjusted EBITDA)
has also improved year on year. From a
high of 5.3x in 2017, in 2024, this was 2.44x,
representing a decrease from 2.57x
at the end of 2023. However, excluding the
provision recognised in respect of cash and
cash equivalents and investments held at
fair value, and adjusted EBITDA earned, in
Canada, this would have been 2.75x.
@
Generate sustainable returns
Generating shareholder value, via
sustainable returns, is an integral part
of our strategic ambition.
Over the past 25 years we have
consistently grown the dividend per
ordinary share on absolute terms.
On 13 February 2025, the Company
announced that the Board had declared
an interim dividend of 240.24p per ordinary
share, payable in four equal quarterly
instalments of 60.06p per ordinary share in
May 2025, August 2025, November 2025
and February 2026.
This represents an increase of 2.0% on
2023 (2023: 235.52p per share, up 2.0%).
The Board is committed to strengthening
the balance sheet to provide greater
business reliance during an uncertain
macro-economic environment, whilst
aiming to reduce leverage
@towards the
middle of our narrowed 2.0-2.5x adjusted
net debt to adjusted EBITDA corridor
@.
We strongly believe that share buy-backs
have an important role to play within our
capital allocation framework.
Accordingly, the Group undertook a £700
million share buy-back programme in 2024,
with a further £900 million to be executed
in 2025.
Our commitment:
Progressive dividend – in sterling terms, by
reference to the Group’s dividend policy
which is to pay dividends of 65% of long-
term sustainable earnings. Please refer to
the dividend policy on page 449.
To buy back shares in a sustainable
programme, with reference to our
narrowed target leverage range
@of
2.0-2.5x adjusted net debt to adjusted
EBITDA.
@
Our record:
In 2024, 2023 and 2022, we have returned:
– £5.2 billion (2023: £5.1 billion;
2022: £4.9 billion) via dividends; and
– £0.7 billion via share buy-backs in 2024.
– £2.0 billion via share buy-backs in 2022.
Since 2020, we have returned a total of
£27.5 billion to shareholders.
@Adjusted Net Debt to Adjusted
EBITDA
2.89
2.57
2.44
2022
2023
2024
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
Adjusted Net Debt to Adjusted EBITDA (times)
@Allocating free cash flow
to shareholders
£bn
2022
2023
2024
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Dividend (£m)
Share buy-back (£m)
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
41
6.9
5.1
5.9
2024 has been a year of
stabilisation as we build
stronger foundations. We
believe we have the right
capabilities and that our
investment approach is
strengthening our business
to create opportunities for
further growth.
David Waterfield
President and CEO
(Reynolds American Inc.)
2024 revenue by category
Revenue by category as % of total Region
2024
2023
New Categories
9.6
8.8
Traditional oral
9.4
9.4
Combustibles
80.6
81.2
Other
0.4
0.6
Top markets:
The U.S. is a top market for Cigarettes, Vapour, Modern Oral and Traditional Oral products
Volume (units)
2024
vs 2023
2023
vs 2022
2022
New Categories:
Vapour (units mn)
287
-3.7 %
298
-6.6 %
320
HP (sticks bn)
—
—
—
—
—
Modern Oral (pouches bn)
1.0
+234 %
0.3
-1.3 %
0.3
Traditional Oral (stick eq bn)
5.3
-8.9 %
5.8
-10.9 %
6.6
Cigarettes (bn sticks)
47
-10.1 %
52
-11.4 %
59
Other (bn sticks eq)*
—
-20.3 %
—
-5.6 %
—
Total Combustibles
47
-10.1 %
52
-11.3 %
59
Note:
*
Other includes MYO/RYO.
Revenue (£m)
2024
vs 2023
vs 2023
(adj at cc)
2023
vs 2022
vs 2022
(adj at cc)
New Categories:
Vapour
998
-3.5 %
-0.8 %
1,033
+13.1 %
+13.8 %
HP
—
—
—
—
— %
— %
Modern Oral
80
+223 %
+232 %
25
-32.2 %
-31.8 %
Total New
Categories
1,078
+1.8 %
+4.6 %
1,058
+11.3 %
+12.0 %
Traditional Oral
1,058
-6.1 %
-3.4 %
1,127
-4.0 %
-3.4 %
Total Smokeless
2,136
-2.2 %
+0.5 %
2,185
+2.9 %
+3.5 %
Combustibles
9,094
-6.7 %
-4.1 %
9,744
-6.9 %
-6.4 %
Other
48
-25.3 %
-22.7 %
65
+44.1 %
+45.2 %
Revenue
11,278
-6.0 %
-3.4 %
11,994
-5.1 %
-4.5 %
Profit from operations/operating margin
2024
vs 2023
vs 2023
(adj at cc)
2023
vs 2022
vs 2022
(adj at cc)
Profit/(loss) from
operations (£m)
4,087
n/m
-3.5 %
(20,781)
-435 %
+0.4 %
Operating margin (%)
+36.2 % 209.5 ppts
-10 bps
-173 % -222.4 ppts
2.8 ppts
Note:
n/m refers to movements that are not meaningful
-30 bps
18.9%
Cigarette value
share change
Smokeless revenue
as % of total revenue
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
U.S.
United States
42
Revenue and Profit from Operations
In 2024, reported revenue declined 6.0% to
£11,278 million, with 2023 down 5.1% to
£11,994 million. Excluding the impact of
translational foreign exchange, this was a
decline of 3.4% in 2024 (2023: down 4.5%).
Continued growth in New Categories and
pricing in combustibles in both years was
more than offset by lower combustibles
volume (down 10.1% in 2024 and 11.3% in
2023). Both years were negatively
impacted by the continued pressure of
macro-economic headwinds, squeezing
consumer affordability (which particularly
impacted the Group's premium skewed
portfolio) and, in 2023, the impact of the
flavour ban in California (which particularly
impacted Newport and Camel) and the
continued growth in illicit single-use
Vapour products which we estimate to be
almost 70% of the total U.S. Vapour market.
Reported profit from operations was
£4,087 million in 2024 compared to a loss
of £20,781 million in 2023, which was a
decline of 435% from a profit of
£6,205 million in 2022. The comparative
movements are largely due to
the £4.3 billion impairment of goodwill and
£23.0 billion impairment largely in respect
of the carrying value of some of the Group's
acquired U.S. combustibles brands recognised
in 2023 and not repeating in 2024. In 2024,
the Group impaired the carrying value of
Camel Snus, due to changing consumer
dynamics, by £646 million.
In 2024, the Group recognised net income
of £132 million in connection with the
settlement of historical litigation in respect
of the Fox River.
Also in 2023, an extreme weather event
caused the destruction of a warehouse and
stock of tobacco leaf, the impact of which
was a charge of £9 million.
Excluding the adjusting items and the
impact of translational foreign exchange
(which was a headwind in both years),
adjusted profit from operations declined
by 3.5% (2023: 0.4% increase) on a
constant currency basis as the impact
of lower combustibles volume and
commercial initiatives in 2024 more than
offset the growth of Modern Oral.
Following a review of the Group's
expectations from the U.S. combustibles
market reflecting continuing macro-
economic headwinds, from 1 January 2024,
the Group commenced amortising the
remaining U.S. combustible brands
(Newport, Camel, Natural American Spirit
and Pall Mall) over a period not exceeding
30 years. The non-cash charge was
£1.4 billion in 2024 and has been treated as
an adjusting item. Please refer to note 12
in the Notes on the Accounts.
New Categories
The U.S. is the world's largest Vapour market.
In 2024, the Group maintained leadership
in value share (of closed systems
consumables in tracked channels), down
by 2.0 ppts to 50.2%, (having increased
5.4 ppts to 52.1% in 2023).
Price/mix was positive in both years (2024:
+2.9%; 2023: +20.4%), yet in 2024 it was
insufficient to offset the decline in Vapour
consumable volume of 3.7% in 2024 (2023:
down 6.6%), driven by the growth of illicit
single-use nicotine products which we
estimate to be almost 70% of the total U.S.
Vapour market.
Accordingly, Vapour revenue was down
3.5% to £998 million (2023: up 13.1% to
£1,033 million) being a decline of 0.8% (2023:
increase of 13.8%) at constant rates of
exchange.
We welcome the FDA’s marketing
authorisation for our Vuse Alto device
and tobacco flavour consumables,
demonstrating that marketing these
products are appropriate for the
protection of public health.
We are also encouraged by the FDA's
actions, the implementation of vapour
directories and continued signs of illicit
products volume decline in Louisiana.
However, we believe much more effective
enforcement is needed to drive a
meaningful impact. This is why we have
taken the proactive step of filing two
complaints with the U.S. International
Trade Commission. One of those
complaints – based on patents – is ongoing
and under investigation. The other
complaint – based on unfair competition –
was strategically withdrawn so we can re-
file to introduce new evidence that would
increase likelihood of a favourable outcome.
Please refer to page 29 for further details
on our views regarding regulation in the U.S.
In Modern Oral, our volume share increased
by 2.1 ppts with volume up 234% to
1.0 billion pouches (2023: down 1.3%
to 0.3 billion pouches) driven by our
refreshed Velo brand expression and
Grizzly Modern Oral roll-out. While we
await the outcome of our PMTA
submission for our successful European
product, Velo 2.0, we are encouraged that
we have started to reinvigorate our
performance in 2024.
Modern Oral revenue increased in 2024
to £80 million, driven by the traction of our
refreshed Velo brand expression and
Grizzly Modern Oral roll-out. The Group
reinvested in trade activation in 2023,
leading to a decline in net pricing of 30.5%
and revenue down to £25 million in that year.
Combustibles
Combustibles revenue was 6.7% lower
in 2024 at £9,094 million (2023: down
6.9% to £9,744 million). Excluding a
translational foreign exchange headwind
of 2.6% in 2024 (2023: 0.5% marginal
headwind), this was a decrease of 4.1%
(2023: down 6.4%). The positive impact
from pricing continued in 2024 at +6.0%
(2023: +4.9%) but in both years was more
than offset by a reduction in volume of
10.1% to 47 billion sticks in 2024, having
declined 11.3% (to 52 billion) in 2023.
Both years were negatively impacted by
the continued pressure of macro-economic
headwinds, with growth in the deep-
discounted category (in which the Group is
not present), the growth of illicit single-use
Vapour products as consumers increased
polyusage, and in 2023 the impact of the
flavour ban in California (which particularly
impacted Newport and Camel). Accordingly,
industry volume was down 8.4% (2023: down
7.5%), with the Group underperforming the
market due to the premium skewed
portfolio and the higher exposure to the
menthol category.
While our premium volume share was up
50 bps, driven by the performance of
Newport soft-pack and Natural American
Spirit, total volume share was flat
(2023: 10 bps decrease). Value share of
cigarettes fell 30 bps (2023: down 60 bps).
See page 36 for a discussion on regulatory
developments during 2024 and 2023.
Also, as stated on page 36, based upon the
published science, we believe that a ban on
menthol cigarettes would negatively affect,
not benefit, public health. We believe a ban
on menthol is contrary to the FDA’s stated
goal of reducing the health effects of
tobacco use.
Traditional Oral
Traditional Oral revenue declined 6.1%
(2023: down 4.0%), being a decline of 3.4%
(2023: 3.4% lower) at constant rates of
exchange, as pricing in both years was more
than offset by the lower volume, down 8.9%
in 2024 and 10.9% in 2023. The decrease was
driven by the continued strong macro-
economic headwinds and the accelerated
cross-category use of Modern Oral category
and reduced consumption. 2023 was also
impacted by the normalisation of inventory
levels (being a drag of 1.7% on that year).
Value share of Traditional Oral was down
40 bps (2023: up 40 bps), while volume
share was down 40 bps (2023: down
20 bps). The decline in both 2024 and 2023
was driven by strong macro-economic
headwinds leading to consumers changing
behaviour, impacting our premium skewed
portfolio.
Note:
In 2024, the Group changed from Marlin to Retail Scan Data
(RSD) to provide market share data for the U.S. Vapour and
Oral categories resulting in a revised 2023 position of 52.1%
(2022: 45.6%) for Vapour value share and 4.5% (2022: 3.9%)
for Modern Oral volume share, while the 2023 movement in
Traditional Oral volume share was revised to a decline of
20 bps, with no change to value share.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
43
With nearly 20% of total revenue
now delivered by our Smokeless
products, we are demonstrating
the Group's ability to turn
aspiration into sustainable
economic reality. We have
overcome a number of challenges
in 2024 and 2023, but have a
strong portfolio to continue to
drive value into 2025 and beyond.
Fred Monteiro
Regional Director
2024 revenue by category
Revenue by category as % of total Region
2024
2023
New Categories
18.7
17.1
Traditional oral
0.4
0.4
Combustibles
76.2
77.8
Other
4.7
4.7
Top markets:
Cigarettes: Brazil, Germany, Mexico, Romania
HP: Germany, Greece, Hungary, Italy, Poland, Romania, the Czech Republic
Vapour: Canada, France, Germany, Poland, Spain, the UK
Modern Oral: Denmark, Norway, Poland, Sweden, Switzerland, the UK
Volume (units)
2024
vs 2023
2023
vs 2022
2022
New Categories:
Vapour (units mn)
276
-11.5 %
312
+19.4 %
261
HP (sticks bn)
8
-24.6 %
11
-7.5 %
12
Modern Oral (pouches bn)
6.3
+50.2 %
4.2
+36.5 %
3.1
Traditional Oral (stick eq bn)
0.8
-3.3 %
0.8
-5.2 %
0.8
Cigarettes (bn sticks)
238
-10.2 %
265
-5.3 %
280
Other (bn sticks eq)*
11
-11.6 %
13
-12.0 %
14
Total Combustibles
249
-10.2 %
278
-5.7 %
294
Note:
*
Other combustibles includes MYO/RYO.
Revenue(£m)
2024
vs 2023
vs 2023
(adj at cc)
2023
vs 2022
vs 2022
(adj at cc)
New Categories:
Vapour
611
-10.8 %
-8.8 %
686
+47.6 %
+46.9 %
HP
443
-12.2 %
-10.4 %
505
+2.3 %
+3.0 %
Modern Oral
676
+40.3 %
+44.4 %
482
+41.5 %
+44.6 %
Total New
Categories
1,730
+3.5 %
+6.1 %
1,673
+28.8 %
+29.6 %
Traditional Oral
34
-5.8 %
-3.6 %
36
+1.7 %
+7.9 %
Total Smokeless
1,764
+3.3 %
+5.9 %
1,709
+28.1 %
+29.0 %
Combustibles
7,039
-7.5 %
-1.7 %
7,614
+0.3 %
+2.9 %
Other
438
-6.7 %
+0.2 %
468
+28.2 %
+25.2 %
Revenue
9,241
-5.6 %
-0.3 %
9,791
+5.4 %
+7.6 %
Profit from operations/operating margin
2024
vs 2023
vs 2023
(adj at cc)
2023
vs 2022
vs 2022
(adj at cc)
(Loss)/Profit from
Operations (£m)
(3,464)
-208.5 %
+1.5 %
3,194
+9.2 %
+5.9 %
Operating Margin (%)
-37.5 %
-70.1 ppts
70 bps
+32.6 %
1.1 ppts
-50 bps
flat
19.1%
Cigarette value
share change
Smokeless revenue
as % of total revenue
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
AME
Americas and Europe
44
Revenue and Profit from Operations
Reported revenue in 2024 was 5.6% lower
than 2023 (2023: up 5.4%) despite the
continued growth in New Categories
revenue (2024: up 3.5%, 2023: up 29%). This
was offset by lower combustible volume
(down 10.2% in 2024 and 5.7% lower in 2023).
In both 2024 and 2023, revenue was
negatively impacted by the timing of the
sale of the Group's businesses in Russia
and Belarus partway through 2023. In 2024,
this was a negative drag of £479 million,
while it was a drag of £456 million in 2023,
against the comparable year's performance.
Translational foreign exchange was a
headwind in 2024 of 5.3%, compared to
a headwind of 2.2% in 2023.
Excluding the impact of currency, revenue
declined 0.3% on a constant rates basis
(2023: up 7.6%), with 2024 impacted by the
sale of the Group's businesses in Russia
and Belarus partway through 2023. The
growth in 2023 was driven by higher
revenue in Germany, Türkiye, Poland
and Brazil, more than offsetting the
impact of the sale of Russia and Belarus
in the period.
Reported profit from operations declined
by 208.5% to a loss of £3,464 million in
2024. This compares to a profit of £3,194
million in 2023 (up 9.2%). Both years were
affected by a number of adjusting items.
These were, in aggregate, charges of
£6,784 million in 2024 compared
to charges of £266 million in 2023.
In summary these were:
– total charges of £6,203 million in 2024
following the publication of a proposed
settlement of litigation in Canada (see
page 328);
– a charge of £449 million in 2024
in respect of an excise assessment
in Romania;
– impairment charges of £149 million in
2024 in respect of fixed assets, including
the Group's head office in London and
the intention to seek an orderly exit
from Cuba;
– charges of £353 million in 2023, including
the reclassification of foreign exchange
reserves, related to the sale of the
Group's businesses in Russia and Belarus
- please refer to note 6 in the Notes on
the Accounts; and
– non-repeating net income in 2023 of
£120 million in respect of the recognition
of credits regarding the calculation of
VAT and excise tax claims in prior periods.
Excluding the impact of currency and
adjusting items (described above), the
regional performance was driven by:
– Türkiye where the combustibles portfolio
performed well with higher volume and
pricing;
– Germany, driven by our HP portfolio;
– Romania, following continued strong
combustibles pricing and growth in New
Categories;
– the UK, driven by continued growth in our
New Categories portfolio; and
– the Nordics, Switzerland and Italy, which
all improved their New Categories
financial performance.
These factors were partly offset by:
– a decline in adjusted profit from
operations from Canada, driven by lower
combustibles volume and a lack of
enforcement of illegal single-use vapour
products following the flavour ban in the
province of Québec; and
– the timing of the sale, partway through
the year, of the Group's businesses in
Russia and Belarus, which was a negative
drag of £193 million in 2024 and
£126 million in 2023.
At constant rates of exchange, adjusted
profit from operations was up 1.5% in 2024
(2023: up 5.9%).
New Categories
Revenue from Vapour was down 10.8% in
2024, having grown 47.6% in 2023. Pricing
remained a positive contributor to
performance in both years, with price/mix
of +2.7% in 2024 and +27.5% in 2023.
However, Vapour consumables volume in
2024 was down 11.5%, having grown 19.4%
in 2023. The decline in 2024 was largely
due to Canada where a lack of enforcement
of illegal single-use products following the
flavour ban in the province of Québec has
impacted volume, down 32%, yet we
maintained our leadership position with
value share at 85.9% (down 6.7 ppts)
in 2024, having grown 2.1 ppts in 2023.
We continue to approach the growing
modern single-use product category in a
responsible way (through Underage Access
Prevention programmes and enhanced
product Take-Back schemes).
The rechargeable closed system device
segment began to return to growth at
industry level in Europe with Vuse Go
Reload, our new rechargeable closed
system, performing well. We believe we are
well-positioned to capitalise on this
momentum with global leadership in the
rechargeable closed segment, with value
share of 59.9%.
However, the growth of the single-use
segment in 2024 and 2023 has impacted
our value share of closed system
consumables across a number of markets.
For example, in the UK, our value share
declined 90 bps to 8.9%, with the UK
another example of where a lack of
enforcement of regulations (in respect of
the volume of liquids in Vapour products) is
negatively impacting the legitimate market.
Following the Mexican Government’s
decision to ban the sale of Vapour
products, Vuse will no longer be sold in
Mexico. We believe this decision runs
contrary to the Mexican Government’s goal
of reducing smoking rates, a goal we share.
Smokeless products, including vapour
devices, are an effective way of helping
smokers switch away from cigarettes.
In 2024, HP volume declined by 24.6%
(2023: down 7.5%), with revenue 12.2%
lower at £443 million (2023: up 2.3% to
£505 million). The region now represents
39.9% of our global HP volume. In 2024 and
2023, our HP performance was negatively
impacted by the timing of the sale of the
Group's businesses in Russia and Belarus,
which offset an improved performance in
Germany, Poland and Italy. Our aggregate
category volume share in top HP markets*,
was 17.1% in 2024, being flat against 2023.
In 2024, Modern Oral revenue grew 40.3%
(2023: up 41.5%), led by 50.2% volume
growth (2023: 36.5% increase).
Having increased our geographic footprint
with expansion of Modern Oral into Finland,
Italy and France during 2023, we remain
the clear market leaders (by volume share)
in 21 Modern Oral markets. From a high
base, volume share in our Top AME markets
was down 10 bps at 64.7%.
As the Modern Oral category continues
to grow and becomes more established in
Europe, we continue to see strong growth
in adult consumer numbers. In Sweden,
Velo is the largest (by volume share) of any
snus or Modern Oral nicotine pouch brand**.
Combustibles
In 2024, revenue was 7.5% lower, compared
to an increase of 0.3% in 2023. Favourable
price/mix in both years (of +5.7% in 2024
and 8.6% in 2023) was offset by the impact
of lower combustible volume, down 10.2%
in 2024 and 5.7% in 2023. Excluding the
impact of translational foreign exchange,
at constant rates of exchange, revenue
declined 1.7% (2023: 2.9%).
The decrease in combustible volume in
both 2024 and 2023 was largely driven by
the sale of the Group's businesses in Russia
and Belarus partway through 2023. In 2024,
our performance was also driven by lower
volume in Canada which more than offset
higher volume in Türkiye, the continued
improvement in volume in Brazil and higher
volume in Mexico. This compares to 2023,
when lower volume in Canada, Chile and
Romania was partly offset by Türkiye,
Germany, Brazil and Mexico.
Cigarette value share was flat in 2024.
2023 cigarette value share was flat as
increases in Mexico, Italy, Germany, Spain,
France and Colombia was offset by lower
value share in Brazil, the UK, Canada, the
Czech Republic and Denmark.
Cigarette volume share grew 20 bps
(2023: up 10 bps) with volume share up
in Brazil and Mexico partially offset by
Romania and Germany.
Notes:
*
The Top markets were revised in 2024, with a reduction
in volume share in respect of 2023 to 17.1% (for HP) and
64.7% (for Modern Oral).
** Source: Based on NielsenIQ volume share of Total Oral.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
45
I am extremely proud of our
performance in 2024, a year
where we have delivered
revenue growth, excluding
FX, across all products while
also driving an increase in
profit and margin.
Michael (Mihovil) Dijanosic
Regional Director
2024 revenue by category
Revenue by category as % of total Region
2024
2023
New Categories
11.7
11.2
Traditional oral
0.0
0.0
Combustibles
85.1
86.4
Other
3.2
2.4
Top markets:
Cigarettes: Bangladesh, Japan, Pakistan
HP: Japan, South Korea
Volume (units)
2024
vs 2023
2023
vs 2022
2022
New Categories:
Vapour (units mn)
53
+19.1 %
44
+43.1 %
31
HP (sticks bn)
13
-0.2 %
13
+4.9 %
12
Modern Oral (pouches bn)
1.0
+16.8 %
0.9
+36.2 %
0.6
Traditional Oral (stick eq bn)
—
—
—
—
—
Cigarettes (bn sticks)
220
-7.3 %
238
-10.6 %
266
Other (bn sticks eq)*
2
-7.2 %
2
-3.1 %
2
Total Combustibles
222
-7.3 %
240
-10.6 %
268
Note:
*
Other combustibles includes MYO/RYO.
Revenue (£m)
2024
vs 2023
vs 2023
(adj at cc)
2023
vs 2022
vs 2022
(adj at cc)
New Categories:
Vapour
112
+19.6 %
+23.7 %
93
+60.5 %
+74.6 %
HP
478
-2.8 %
+5.6 %
491
-13.2 %
-7.3 %
Modern Oral
34
+5.7 %
+10.0 %
32
+50.3 %
+70.8 %
Total New
Categories
624
+1.0 %
+8.6 %
616
-4.5 %
+2.6 %
Traditional Oral
—
—
—
—
—
—
Total Smokeless
624
+1.0 %
+8.6 %
616
-4.5 %
+2.6 %
Combustibles
4,552
-4.2 %
+3.5 %
4,750
-4.5 %
+5.2 %
Other
172
+31.1 %
+59.8 %
132
+18.9 %
+32.0 %
Revenue
5,348
-2.7 %
+5.4 %
5,498
-4.0 %
+5.5 %
Profit from operations/operating margin
2024
vs 2023
vs 2023
(adj at cc)
2023
vs 2022
vs 2022
(adj at cc)
Profit from
Operations (£m)
2,113
+15.1 %
+7.5 %
1,836
+31.9 %
+6.9 %
Operating Margin (%)
+39.5 %
6.1 ppts
80 bps
+33.4 %
9.1 ppts
60 bps
flat
11.7%
Cigarette value
share change
Smokeless revenue
as % of total revenue
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
APMEA
Asia-Pacific, Middle East and Africa
46
Revenue and Profit from Operations
Reported revenue declined 2.7% to
£5,348 million (2023: declined 4.0%
to £5,498 million).
Our reported performance is affected by
translational foreign exchange, which was
a headwind in both years. Excluding the
impact of this translational foreign
exchange, revenue was up 5.4% against
2023, itself an increase of 5.5% compared
to 2022, at constant rates.
The performance in both 2024 and 2023
was driven by the continued growth in
New Categories and favourable pricing in
combustibles (2024: 10.8%; 2023: 15.8%),
notably in Pakistan, New Zealand,
Bangladesh, Sri Lanka, Kenya, Nigeria and
Saudi Arabia in 2024.
These more than offset lower combustibles
volume (down 7.3% in 2024 and 10.6% in 2023).
Reported profit from operations increased
15.1% to £2,113 million, while 2023 was up
31.9% to £1,836 million.
The comparative performance in 2023
reflected a number of charges that
impacted 2022 and, because they did not
repeat to the same scale in 2023, led to a
commensurate increase in performance.
These included:
– charges related to the allegation of
historical breaches of sanctions (of which
£75 million was recognised in 2023,
compared to £450 million in 2022, as
described on page 50 and in note 6(h) in
the Notes on the Accounts on page 281);
– the exit from Egypt (£118 million,
recognised in 2022); and
– a charge of £79 million (related to the
conclusion of the investigation into
alleged violations of the Nigerian
Competition and Consumer Protection
Act and National Tobacco Control Act).
2023 was also negatively impacted by the
impairment of South African goodwill of
£291 million due to the continued negative
impact of illicit trade. In 2024, as a result of
the upcoming regulations that are
expected to impact the sale of tobacco and
Vapour products, goodwill associated with
Malaysia was impaired by £39 million.
Excluding adjusting items and the
translational foreign exchange headwind,
the performance in 2024 was driven by:
– Japan, following the volume growth and
improved financial performance of our
HP portfolio;
– Sri Lanka, largely due to pricing in
combustibles as the economy recovers
from the financial crisis;
– Saudi Arabia, driven by pricing of
combustibles;
– Indonesia, where combustibles volume
grew; and
– Asset sales, including in West Africa as
the Group exited Mali.
These more than offset a decline in
Australia (driven by lower industry volume)
and in Sudan, where the Group was
negatively impacted by the ongoing
conflict leading to supply chain disruptions.
Adjusted profit from operations at constant
rates of exchange increased 7.5% in 2024,
having increased 6.9% in 2023.
New Categories
Total revenue from New Categories
increased 1.0% to £624 million
(2023: declined 4.5% to £616 million), with
both years impacted by translational
foreign exchange headwinds. On a
constant currency basis, revenue from
New Categories increased 8.6% in 2024
and 2.6% in 2023.
Excluding translational foreign exchange,
which we believe reflects the operational
performance, this was driven by:
– Vapour, with revenue up 23.7% in 2024
(2023: up 74.6%) led by a combination of
higher volume (up 19.1% in 2024 and up
43.1% in 2023) and price/mix in 2024 of
+4.6% driven by South Korea and New
Zealand; and
– Modern Oral, as revenue grew 10.0% in
2024, led by higher volume (up 16.8%),
while price/mix was a negative drag of
6.8%. The revenue performance was
fuelled by robust growth from Global
Travel Retail and continued strong
Emerging Market volume performance
in Pakistan (up 27.3%). Our insights and
foresights in these markets give us
confidence in our ability to unlock the
Emerging Market opportunity for
Modern Oral going forward. In 2023,
revenue increased by 70.8%, driven by
volume (up 36.2%) and price/mix (up
34.6%); and
– HP revenue was higher by 5.6% in 2024
(2023: down 7.3%), driven by the strength
of our innovations and activation of our
commercial plans in Japan.
The decline in 2023 was despite a further
increase in consumable volume (up 4.9%
to 12.6 billion sticks), as this was more than
offset by the competitive pricing
environment in Japan in that year which
included the final step in the five-year
excise harmonisation programme, leading
to a decline in regional price/mix of 12.2%.
Combustibles
Revenue from combustibles declined by
4.2% to £4,552 million (2023: down 4.5% to
£4,750 million), with both years impacted
by the translational foreign exchange
headwind. At constant rates of exchange,
revenue increased 3.5% in 2024 and by
5.2% in 2023.
In 2024, this was driven by pricing in
Pakistan, New Zealand, Bangladesh, Sri
Lanka, Kenya, Nigeria and Saudi Arabia
more than offsetting lower volume in
Bangladesh and Australia and the negative
impact of the supply chain disruption in
Sudan.
In 2023, this was driven by combustibles
pricing of +15.8%, notably in Pakistan, which
more than offset a decrease in total
combustible volume of 10.6%, as lower
volume in Pakistan more than outweighed
higher volume in Bangladesh.
In 2024, value share was flat (2023: down
60 bps), with volume share up 40 bps
(2023: down 20 bps), as volume share gains
in Bangladesh and Pakistan were partly
offset by reductions in Japan.
In 2025, we expect significant combustible
headwinds to impact performance in
APMEA, particularly in Australia where new
tobacco regulations come into effect in
April 2025 and in Bangladesh following a
substantial increase in excise and VAT.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
47
Highlights
Revenue
-5.2%
New Categories revenue growth and pricing in
combustibles offset by the sale of our Russian
and Belarusian businesses partway through
2023, lower combustibles volume and
currency headwinds. Excluding currency,
revenue was down 0.5%
Profit from Operations
£2,736m
Profit from operations was £2,736 million
compared to a loss of £15,751 million in 2023.
On an adjusted, constant currency basis, profit
from operations declined 0.2%, with an
improvement in the financial performance of
New Categories offset by the impact of the
sale of our Russian and Belarusian businesses
partway through 2023.
Diluted EPS
136.0p
This compares to a loss of 646.6p in 2023.
Adjusted diluted EPS up 1.7% at constant rates
of exchange
@Leverage ratio
2.44x
Leverage ratio improved 0.13x to 2.44x,
driven
by strong cash generation
. Excluding a
provision for cash, cash equivalents and
investments held at fair value in Canada and
excluding adjusted EBITDA from Canada
(other than New categories), our leverage ratio
would be 2.75x
@
Dividend per share
240.24p
Dividend per share up 2.0% at 240.24p
Non-GAAP Measures
In the reporting of financial information, the
Group uses certain measures that are not
defined by IFRS, the Generally Accepted
Accounting Principles (GAAP) under which
the Group reports. The Group believes that
these additional measures, which are used
internally, are useful to users of the financial
information in helping them understand the
underlying business performance.
The principal non-GAAP measures which
the Group uses are adjusted profit from
operations, adjusted net finance costs,
adjusted taxation, adjusted diluted
earnings per share,
@adjusted EBITDA,
operating cash flow conversion ratio,
adjusted cash generated from operations,
free cash flow (before and after dividends
paid to shareholders) and adjusted return
on capital employed
@ which are before the
impact of adjusting items and are
reconciled from profit from operations, net
finance costs, taxation, diluted earnings per
share
@, profit for the year, cash conversion
ratio and net cash generated from
operating activities
@. The Group also uses
adjusted share of post-tax results of
associates and joint ventures, and
underlying tax rate.
Adjusting items are significant items in
profit from operations, net finance costs,
taxation, the Group’s share of the post-tax
results of associates and joint ventures
@and cash flow
@ which individually or, if of
a similar type, in aggregate, are relevant to
an understanding of the Group’s underlying
financial performance.
The Group also supplements its
presentation of revenue in accordance
with IFRS by presenting the non-GAAP
component breakdowns of revenues by
product category (including revenue
generated from Vapour, Heated Products,
Modern Oral, New Categories as a whole,
Combustibles and Traditional Oral),
including by geographic segment (including
revenue generated in the United States,
Americas and Europe and Asia-Pacific,
Middle East and Africa).
@The Group further supplements the
presentation of profit from operations in
accordance with IFRS by presenting the
non-GAAP measures referred to as
adjusted gross profit, adjusted gross
margin and Category Contribution.
Adjusted gross profit and adjusted gross
margin reflect the performance of the
categories after production and
distribution costs have been recognised.
Category Contribution reflects
the marginal contribution of the categories
to the Group’s financial performance. This
measure includes all attributable revenue
and costs.
@
As an additional measure to indicate the
results of the Group before the impact of
exchange rates on the Group’s results,
the movement in revenue,
@adjusted gross
profit, adjusted gross margin, Category
Contribution, Category Contribution
margin
@, adjusted profit from operations,
adjusted net finance costs and adjusted
diluted earnings per share are all shown at
constant rates of exchange.
@Adjusted
gross profit and adjusted gross margin are
new measures, introduced in 2024, with
comparative movements to 2023 only.
@
These non-GAAP measures are explained,
defined and reconciled from the most
comparable GAAP metric on pages 395
to 410 and note 2 in the Notes on
the Accounts.
Use of Organic Measures for
Remuneration Purposes
The sale of our businesses in Russia and
Belarus completed in September 2023.
The sale was not treated as a discontinued
operation as, in our judgement, this was
neither a sale of a business line (as the
Group continues to manufacture and sell
cigarettes and New Category products
elsewhere in the world) or a disposal of a
major geographic area of operations (as the
impact of the sale was 1.8% of Group
revenue and 1.5% of profit from operations,
excluding the impact of adjusting items
of the Group’s performance in 2023), as
discussed on page 337. However, due to the
scale of the businesses and the timing of
the transactions, this is a drag on our
comparative performance. Where
appropriate, the impact has been explained
in the following review of the Group's
financial results.
As shown on pages 229 to 230, the
Group's KPIs for the purposes of
remuneration have been revised to be
on an organic basis, excluding the results
of Russia and Belarus in the current and
comparator period. Full reconciliations
from the relevant IFRS measure have
been provided on pages 395 to 406.
The discussion of 2022 results that
are not necessary to an understanding
of the Group’s financial condition,
changes in financial condition and
results of operations is excluded from
this Financial Review in accordance
with applicable U.S. securities laws.
Discussion of such 2022 metrics is
contained in the Group’s Annual
Report on Form 20-F 2023, which
is available at bat.com/annualreport
and has been filed with the SEC.
Information contained in pages 30
to 38, pages 50 to the first column
on page 58 and from the heading
‘Retirement benefit schemes’ on page
58 to page 59 of the Annual Report on
Form 20-F 2023 are accordingly
incorporated by reference into this
Annual Report on Form 20-F 2024
only to the extent such information
pertains to the Group’s financial
condition and results of operations for
the fiscal year ended 31 December 2022.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
Financial Performance Summary
48
Revenue
In 2024, revenue was £25,867 million
(down 5.2%), with 2023 1.3% lower than
2022 at £27,283 million.
Translational foreign exchange impacted
both years (2024: 4.7% headwind; 2023:
2.9% headwind). Revenue at constant rates
of exchange declined 0.5% (2023: up 1.6%).
In both 2024 and 2023, our performance
was negatively impacted by the sale of our
Russian and Belarusian businesses, which
completed in September 2023.
A combination of the timing of the sale
and a lower performance from Russia was
a comparative drag on revenue by £479
million (in 2024) and £456 million (in 2023)
versus the respective prior period.
Our New Categories portfolio continued to
perform well with revenue up 6.1% in 2024
and 17.8% in 2023 (at constant rates).
@However, excluding the drag from the
sale of our businesses in Russia and
Belarus, this would have been a growth
of 8.9% in 2024 and 21.0% in 2023.
@
In combustibles, revenue declined 6.4%
to £20,685 million (2023: down 4.0% to
£22,108 million). Continued robust
combustibles price/mix (of 5.3% in 2024,
compared to 7.5% in 2023) was more than
offset by lower cigarette volume (down 8.9%
in 2024 at 505 billion sticks, having declined
8.2% in 2023 to 555 billion sticks) and the
impact of translational foreign exchange
movement (2024: 4.8% headwind; 2023:
3.2% headwind). Consequently, revenue
from combustibles declined 1.6% (at
constant rates of exchange) in 2024, having
declined 0.8% in 2023.
@Excluding the drag
from the sale of our businesses in Russia
and Belarus, this would have been largely
flat in 2024 (up 0.1%) and up 0.6% in 2023.
@
In the U.S., Group combustibles volume
was down 10.1% in 2024 and 11.3% in 2023,
as both years were negatively impacted by
the continued pressure of macro-economic
headwinds, with growth in the deep-
discounted category (in which the Group is
not present), the growth of illicit single-use
Vapour products as consumers increased
polyusage, and in 2023, the impact of the
flavour ban in California (which particularly
impacted Newport and Camel).
Accordingly, industry volume was down
8.4% (2023: down 7.5%) in the U.S. on a
sales to wholesaler basis.
Reconciliation of revenue to revenue at constant rates
2024
2023
2022
£m
Change %
(vs 2023)
£m
Change %
(vs 2022)
£m
Revenue
25,867
-5.2%
27,283
-1.3%
27,655
Impact of exchange
1,284
813
Revenue at constant rates
27,151
-0.5%
28,096
+1.6%
27,655
Profit From Operations
Profit from operations was £2,736 million
compared to a loss in 2023 of £15,751
million, which was a decline of 250% on
2022.
Our performance in 2023 was negatively
impacted by the impairment charge against
goodwill in the U.S. of £4.3 billion as a non-
cash adjusting charge. This reflects the
ongoing difficult macro-economic
environment and continued drag on our
legal Vapour business by the illicit single-
use products in that market. Also in 2023,
we recognised a non-cash adjusting
impairment charge of £23 billion largely
against our U.S. combustible brands
which have been previously recognised
as indefinite-lived. We commenced
amortisation of these brands from
1 January 2024 with an increase in
amortisation charges of £1,427 million
in 2024. In 2024, an impairment charge
of £646 million was recognised in respect
of Camel Snus, driven by the lower
performance of that brand as consumers
switch to Modern Oral products. Camel Snus
will be amortised as a definite lived brand,
effective 1 January 2025. Please refer to
note 12 for more details.
Our reported performance in both years
was also impacted by the sale of the
Group's businesses in Russia and Belarus
partway through 2023 and, in 2023, lower
comparative sales in Russia. This was a
headwind of £193 million in 2024 and
£126 million in 2023.
Our financial performance in 2024 was
also impacted by charges recognised in
respect of the ongoing litigation in Canada
(£6,203 million, discussed on page 328),
a £449 million charge in respect of an
excise assessment in Romania and
£149 million of fixed asset impairments
related to the Group’s London head office
and the intention to seek an orderly exit
from Cuba. This compares to 2023, which
was impacted by additional charges related
to the sale of the Group's businesses in
Russia and Belarus.
2024 was impacted by a translational
foreign exchange headwind
(2023: headwind).
Revenue
(£m)
£25,867m
-5.2%
2024
2023
25,867
27,283
-5.2%
-1.3%
Definition: Revenue recognised, net of duty,
excise and other taxes.
l IFRS GAAP l KPI l NON-GAAP
Change in revenue at constant rates
(%)
-0.5%
2024
2023
-0.5 %
+1.6%
Definition: Change in revenue before the impact of
fluctuations in foreign exchange rates.
l IFRS GAAP l KPI l NON-GAAP
Profit from operations
(£m)
£2,736m
2024
2023
2,736
-15,751
Definition: Profit for the year before the impact of
net finance costs/income, share of post-tax results
of associates and joint ventures and taxation on
ordinary activities.
l IFRS GAAP l KPI l NON-GAAP
Change in adjusted profit from
operations at constant rates
(%)
-0.2%
2024
2023
-0.2%
+3.1%
Definition: Change in profit from operations before
the impact of adjusting items and the impact of
fluctuations in foreign exchange rates.
l IFRS GAAP l KPI l NON-GAAP
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
49
Raw materials and other consumables
costs increased 0.4% to £4,565 million in
2024, following a decrease of 4.9% to
£4,545 million in 2023.
The results in both years are impacted by
translational foreign exchange (a tailwind
in 2024, and a tailwind in 2023).
Both years were negatively impacted by
the macro-economic headwinds, with
inflation of £387 million (or 6.5%) in 2024
(2023: £527 million (or 9.1%)) mainly due to
higher leaf prices (impacted by adverse
weather conditions) and manufacturing
costs (labour and utilities). Results will likely
continue to be impacted by inflationary
forces (particularly related to tobacco leaf).
Such pressures were offset by efficiency
initiatives which delivered £402 million in
2024 (2023: £471 million) in total savings.
@We have committed to deliver cost savings
of over £1.2 billion in the three years to 2025
(with over 70% delivered to date) and an
additional £2 billion from 2026 to 2030.
@
Transactional foreign exchange was also
a negative drag to our performance, at
£136 million in 2024 and £293 million in
2023, due to movement in our operating
currencies largely against the US dollar.
Employee benefit costs increased 6.3%
to £2,831 million (2023: down 10.4% to
£2,664 million). The increase in 2024
was despite lower average overall
headcount (2024: 48,209; 2023: 49,839) in
part due to the sale of the Group’s
businesses in Russia and Belarus in 2023.
However, salary inflation and an increased
headcount in the U.S. in line with
reinvestment in trade capabilities led to an
increase in expense.
Depreciation, amortisation and
impairment costs declined by
£25,513 million to £3,101 million in 2024
compared to an increase of £27,309 million
to £28,614 million in 2023. The aggregate
decrease was largely due to the decision to
commence amortisation of certain U.S.
combustible brands over a useful economic
life not exceeding 30 years, from 1 January
2024. That decision required, in 2023, the
Group to recognise an impairment charge
of £22,995 million as the brands were
reclassified from indefinite to definite lived.
While such an impairment charge did not
repeat, in 2024, the Group's annual
amortisation charge in respect of
trademarks and similar intangible was
higher at £1,652 million (2023: £237 million).
In 2024, the Group also recognised
an impairment charge of £646 million in
respect of Camel Snus reflecting the
ongoing market dynamics as consumers
of traditional snus products increasingly
adopt Modern Oral variants.
In 2024, the Group recognised a goodwill
impairment charge of £39 million in
respect of Malaysia following the change in
regulations regarding the sale of tobacco
and vapour products.
In 2023, goodwill impairment charges were
£4,614 million, largely due to ongoing
difficult U.S. macro-economic environment,
uncertainty regarding the impact of the
potential menthol ban and continued drag
on our legal Vapour business by the illicit
single-use products in that market.
These are described in notes 4, 6 and 7
in the Notes on the Accounts.
Expenditure on research and development
was £380 million in 2024 (2023: £408 million),
with a focus on products that could
potentially reduce the risk associated with
smoking conventional cigarettes.
Other operating income decreased
by £92 million to £340 million
(2023: £432 million), as income in 2024
included the settlement of historical
litigation in respect of the Fox River
(£132 million). However, this was lower
than 2023, which included income in
respect of the Brazilian VAT and excise on
social contributions claims of £167 million.
Other operating expenses increased
by £5,555 million to £13,093 million (2023:
decrease of £1,480 million to £7,538
million). The increase in 2024 was largely
due to the charges recognised in relation to
proposed settlement in Canada (£6,203
million) and a charge of £449 million related
to an excise assessment in Romania. The
movement in 2023 was largely due to
certain charges that arose in 2022
(including related to the DOJ/OFAC
investigation concluded in that year
and charges related to the decision
to dispose of the Group's businesses
in Russia and Belarus).
The Group continued to invest in
New Categories, maintaining the level
of investment (in marketing spend
and research and development) in line
with 2023.
As discussed in note 33 in the Notes on the
Accounts (page 367), the Group incurred
£66 million (2023: £27 million) of costs
related to recycling (Take-Back and waste
collection schemes). In both 2024 and
2023, extreme weather events led to
charges of £11 million (in 2024) related to
machinery damage and £9 million (in 2023)
in respect of the destruction of a
warehouse and stock of tobacco leaf.
These charges are described in note 33
in the Notes on the Accounts.
Adjusting items included within profit from
operations totalled £9,154 million in 2024
(2023: £28,216 million). These related to:
– trademark amortisation and impairment
(2024: £2,279 million; 2023: £23,202
million) with the higher charge in 2023
due to the impairment of certain of the
U.S. acquired brands as discussed on page
43 and within note 12 in the Notes on the
Accounts. 2024 also included an
adjustment for the impairment charge
in respect of Camel Snus of £646 million
and goodwill in Malaysia of £39 million;
– charges in respect of the potential
settlement in Canada of £6,203 million,
being in respect of:
– cash and cash equivalents and
investments held at fair value (totalling
£2,456 million) at the balance sheet date
that is expected to be included in any
future settlement; and
– a provision in respect of the Group's
estimate for the remaining liability
(£3,747 million) that will be settled
by payments made based upon
future performance;
– charges of £449 million in respect of an
excise assessment in Romania;
– other litigation costs of £157 million
(2023: £96 million) which, in both periods,
was mainly in respect of U.S. litigation costs
including Engle progeny and other health-
related claims. Included in 2024 is a credit
of £2 million recognised for the settlement
with the state of Idaho and a credit of
£18 million related to the Washington
portion of the 2004 Non-Participating
Manufacturer adjustment award;
– impairment charges in respect of fixed
assets (£149 million) including the Group's
head office in London and the intention to
seek an orderly exit from Cuba;
– a charge of £4 million (largely due to
foreign exchange) related to the final
payment made in respect of resolving the
investigations by the DOJ and OFAC into
historical breaches of sanctions
(2023: £75 million); and
– a credit as the Group settled the
historical litigation in respect of the Fox
River (£132 million).
In 2023, the Group also recognised:
– goodwill impairment of £4.6 billion largely
recognised in respect of the U.S. business
as discussed on page 43 and within note
12 in the Notes on the Accounts;
– a net credit of £120 million largely related
to the calculation of VAT and excise on
social contributions in Brazil; and
– charges of £353 million in respect of the
sale of the Group's businesses in Russia
and Belarus.
@Adjusted gross profit is the Group’s profit
earned after deducting the costs associated
with producing and distributing its products,
presented before adjusting items referred to
above and on a constant currency basis. It
excludes the impact of significant businesses
disposals or acquisitions for periods such
transactions would affect the users
understanding of performance.
Adjusted gross profit will be used by
management to assess the development of
the business from 2025 and will become a
measure used for remuneration purposes.
Adjusted gross profit was up 2.2% in 2024.
Adjusted gross margin (being adjusted
gross profit as a % of revenue) increased
to 67.2% in 2024 compared to 66.6%
in 2023.
@
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
Financial Performance Summary
Continued
50
Adjusted profit from operations is the
Group’s profit from operations before
adjusting items referred to above.
Adjusted profit from operations declined
4.6% to £11,890 million. On a constant
currency basis, this was a marginal decline
of 0.2%.
New Categories continued to improve their
financial performance
@with an increase in
contribution from £17 million to £251 million
(on a constant rate basis)
@, although this
was more than offset by the impact of the
sale of the Group's businesses in Russia and
Belarus partway through 2023, which was a
headwind on the 2024 performance by 1.6%
and 0.8% on 2023.
In 2023, adjusted profit from operations was
up 0.5% to £12,465 million, being an increase
of 3.1% on a constant currency basis.
@Excluding the drag from Russia and
Belarus, this would have been growth
of 1.4% in 2024 and 3.9% in 2023.
@
Operating Margin
Operating margin in 2024 was up
68.3 ppts to 10.6% having declined
-95.8 ppts to -57.7% in 2023. These
movements were largely due to the impact
of the impairment charges recognised
in 2023 related to the U.S. goodwill
and trademarks.
Operating margin
(%)
+10.6%
2024
2023
10.6%
-57.7 %
Definition: Profit from operations as a percentage
of revenue.
l IFRS GAAP l KPI l NON-GAAP
Adjusted operating margin
(bps)
46.0%
2024
2023
46.0%
45.7%
Definition: Adjusted profit from operations
as a percentage of revenue.
l IFRS GAAP l KPI l NON-GAAP
Excluding the adjusting items, in 2024,
adjusted operating margin increased
30 bps to 46.0%, compared to an increase
of 80 bps in 2023. The improvement in
both years was driven by the financial
performance of New Categories which
became profitable (on a category
contribution basis) in 2023.
Net Finance Costs
In 2024, net finance costs were
£1,098 million, a decline of £797 million
on 2023 which, at £1,895 million, were
£254 million higher than 2022.
2024 benefited from a net credit of
£590 million related to the capped cash
debt tender offers, which targeted series
of low-priced, long-dated GBP-, EUR- and
USD-denominated bonds, under which the
Group repurchased bonds prior to their
maturity in an aggregate principal amount
of £1.8 billion, including £15 million of
accrued interest, completed in May 2024
and, including other costs of £3 million,
treated as an adjusting item.
In 2023, the Group completed a tender offer
to repurchase sterling-equivalent £3.1 billion
of bonds, including £43 million of accrued
interest. Other costs directly associated
with the early repurchase of bonds,
including the premium paid, were treated
as adjusting items.
2024 and 2023 were impacted by a
translational foreign exchange, being a
tailwind of 1.5% in 2024 and a marginal
headwind in 2023, due to the movements
of sterling compared to the US dollar.
Interest expense was lower (2024:
£1,704 million; 2023: £1,786 million) driven
by a reduction in short term funding
requirements in the year.
The Group’s average cost of debt was 4.9%
in 2024, compared to 5.2% in 2023.
However, the prior year included a fair value
loss of £151 million. Excluding this, the
average cost of debt was an increase in
2024 to 4.9% from 4.8% in 2023.
Interest income was higher (2024:
£251 million; 2023: £186 million), which was
driven by higher cash balances resulting
from the sale of a part of the ordinary
shares held in the Group's main associate
ITC, higher interest rates on local deposits
and interest income of £110 million (2023:
£90 million) in Canada.
In 2021, the Group issued perpetual hybrid
bonds totalling €2 billion, recognised, in line
with IAS 32 Financial Instruments, as
equity. Interest on such instruments is
recognised in reserves rather than as a
charge to the income statement in net
finance costs. Accordingly, in 2024, in line
with IAS 33 Earnings Per Share, £42 million
(2023: £45 million) has been recognised as
a deduction from earnings similar to non-
controlling interests.
Before adjusting items described
above, interest related to the Franked
Investment Income Group Litigation Order
(FII GLO), as discussed on page 287
(£61 million; 2023: £60 million), a fair value
loss on derivatives related to associates
(£19 million), interest charges in respect of
tax provisions (described in note 8 in the
Notes on the Accounts), and the impact of
translational foreign exchange, adjusted net
finance costs were 10.2% lower in 2024
and 11.6% higher in 2023.
The Group has debt maturities of around
£3.3 billion annually in the next two years.
Due to higher interest rates, net finance
costs are expected to increase as debts are
refinanced.
Associates and Joint Ventures
Associates largely comprised the Group’s
shareholding in its Indian associate, ITC.
The Group’s share of post-tax results of
associates and joint ventures, included at
the pre-tax level under IFRS, increased
from £585 million to £1,900 million in 2024,
driven by a credit of £1,361 million
in respect of the sale by the Group of
436,851,457 ordinary shares held in ITC.
The sale represents 3.5% of ITC's ordinary
shares. The gain has been treated as an
adjusting item.
Included in the results for 2024 and 2023
are other adjusting items, which included
a deemed gain of £18 million in 2024
(2023: £40 million), arising on the deemed
disposal of part of the Group’s shareholding
in ITC (due to issuances of ordinary
shares under the ITC Employee Share
Option Scheme).
As a result of the above, the Group's
share of ITC has reduced from 29.02%
(31 December 2023) to 25.45% at
31 December 2024.
2023 was up 32.4% (from £442 million in
2022) largely due to the economic recovery
in India from COVID-19.
On 24 July 2023, ITC announced a
proposed demerger of its ‘Hotels Business’
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. In January 2025, ITC
Hotels Limited was listed and commenced
trading on the National Stock Exchange of
India (NSE) and Bombay Stock Exchange
(BSE). The Group's direct stake in ITC
Hotels Limited is 15%.
In 2023, due to the volatility in global
cannabis stock prices, the Group
recognised an impairment charge (net of
tax) of £34 million related to the Group's
investment in Organigram Holdings Inc. In
2024, no further impairment was required.
Excluding such adjusting items and the
impact of translational foreign exchange,
the Group’s share of associates and joint
ventures on an adjusted, constant currency
basis declined 6.2% in 2024 to £541 million,
driven by the reduction in the Group’s
shareholding in ITC. In 2023, this was an
increase of 14.5% on 2022 in line with ITC’s
improved performance in that year.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
51
Analysis of Profit from Operations, Net Finance Costs and Results from Associates and Joint Ventures - 2024
At constant rates
1
Reported
£m
Adjusting
items
£m
Adjusted
£m
Impact of
exchange
£m
Adjusted
at CC
1
£m
@Inorganic
adjustment
£m
@Organic
adjusted
£m
Profit from operations
U.S.
4,087
2,299
6,386
194
6,580
—
6,580
AME
(3,464)
6,784
3,320
192
3,512
—
3,512
APMEA
2,113
71
2,184
163
2,347
—
2,347
Total regions
2,736
9,154
11,890
549
12,439
—
12,439
Net finance costs
(1,098)
(491)
(1,589)
(27)
(1,616)
—
(1,616)
Associates and joint ventures
1,900
(1,379)
521
20
541
—
541
Profit before tax
3,538
7,284
10,822
542
11,364
—
11,364
Analysis of Profit from Operations, Net Finance Costs and results from Associates and Joint Ventures - 2023
At constant rates
2
Reported
£m
Adjusting
items
£m
Adjusted
£m
Impact of
exchange
£m
Adjusted
at CC
2
£m
@Inorganic
adjustment
£m
@Organic
adjusted
£m
(Loss)/profit from operations
U.S.
(20,781)
27,602
6,821
42
6,863
—
6,863
AME
3,194
266
3,460
87
3,547
(223)
3,324
APMEA
1,836
348
2,184
195
2,379
—
2,379
Total regions
(15,751)
28,216
12,465
324
12,789
(223)
12,566
Net finance (costs)/income
(1,895)
96
(1,799)
5
(1,794)
(25)
(1,819)
Associates and joint ventures
585
(8)
577
34
611
—
611
(Loss)/profit before tax
(17,061)
28,304
11,243
363
11,606
(248)
11,358
@Adjusted organic measures above are re-translated at constant (2022) rates. As such, the inorganic adjustment to profit from operations
above, at constant rates, was £223 million. At 2023 rates, this was £193 million, with adjusted organic profit from operations in 2023,
£12,272 million. The movement in adjusted organic profit from operations, at constant (2023) rates of exchange, in 2024 was an increase
of 1.4%.
@
Analysis of Profit from Operations, Net Finance Costs and results from Associates and Joint Ventures - 2022
3
Reported
£m
Adjusting
items
£m
Adjusted
£m
@Inorganic
adjustment
£m
@Organic
adjusted
£m
Profit from operations
U.S.
6,205
630
6,835
—
6,835
AME
2,926
422
3,348
(319)
3,029
APMEA
1,392
833
2,225
—
2,225
Total regions
10,523
1,885
12,408
(319)
12,089
Net finance (costs)/income
(1,641)
34
(1,607)
(5)
(1,612)
Associates and joint ventures
442
92
534
—
534
Profit before tax
9,324
2,011
11,335
(324)
11,011
Notes:
1. As translated in 2023 rates of exchange.
2. As translated in 2022 rates of exchange.
3. Effective 2023, the Group changed the regional management structure from four regions to three regions, with 2022 data revised to reflect the new structure.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
Financial Performance Summary
Continued
52
Tax
In 2024, the tax charge in the income
statement was £357 million, compared
to a credit of £2,872 million in 2023 and
a charge of £2,478 million in 2022.
The effective tax rates in the income
statement are therefore 10.1% in 2024,
16.8% in 2023 and 26.6% in 2022. These are
affected by the inclusion of adjusting items
described earlier and the associates and
joint ventures’ post-tax profit in the
Group’s pre-tax results.
Excluding these items, the underlying tax rate
for subsidiaries was 24.9% in 2024, 24.5%
in 2023 and 24.8% in 2022. The marginal
increase in the underlying tax rate in 2024
largely reflects the mix of profits and
changes in legislation (including the new
Pillar Two rules, described further below),
while the marginal decrease in 2023 largely
reflects the absence of one-off rate rises
and mix of profits.
See the section Non-GAAP measures
on page 404 for the computation
of underlying tax rates for the
periods presented.
During 2023 the Group recognised a further
£70 million charge in respect of the ongoing
tax disputes in the Netherlands, with a total
provision at 31 December 2024 of £144
million. Appeal hearings took place in 2024,
with the Court of Appeal judgment
expected in the first half of 2025. Please
refer to page 364, in note 31 of the Notes
to the Accounts for further information.
Tax strategy
The Group’s global tax strategy is reviewed
by the Board. The operation of the strategy
is managed by the Chief Financial Officer
and Group Head of Tax with the Group’s tax
position reported to the Audit Committee
on a regular basis. The Board considers tax
risks that may arise as a result of our
business operations. In summary,
the strategy includes:
– complying with all applicable laws
and regulations in countries in which
we operate;
– being open and transparent with tax
authorities and operating to build mature
professional relationships;
– supporting the business strategy of
the Group by undertaking efficient
management of our tax affairs in line
with the Group’s commercial activity;
– transacting on an arm’s-length basis
for exchanges of goods and services
between companies within the
Group; and
– engaging in pro-active discussions with
tax authorities on occasions of differing
legal interpretation.
Where resolution is not possible, tax
disputes may proceed to litigation. The
Group seeks to establish strong technical
tax positions.
Where legislative uncertainty exists,
resulting in differing interpretations, the
Group seeks to establish that its position
would be more likely than not to prevail.
Transactions between Group subsidiaries
are conducted on arm’s-length terms in
accordance with appropriate transfer
pricing rules and the Organisation for
Economic Co-operation and Development
(OECD) principles.
The tax strategy outlined above is
applicable to all Group companies, including
the UK Group companies. Reference to tax
authorities includes HMRC.
The publication of this strategy is
considered to constitute compliance with
the duty under paragraph 16(2) Schedule 19
Part 2 of the UK Finance Act 2016.
The Group is subject to the global
minimum corporate tax framework
applicable to multinational enterprise
groups with global revenues over
€750 million (Pillar Two rules) from
1 January 2024 and 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. Further information is
provided in note 10 in the Notes to
the Accounts.
The taxation on ordinary activities was a
charge of £0.4 billion in 2024, a credit of
£2.9 billion in 2023 and a charge of £2.5 billion
in 2022. Corporation Tax paid (due to the
timing of Corporation Tax instalment
payments which straddle different financial
years) was £1.9 billion in 2024, £2.6 billion
in 2023 and £2.5 billion in 2022.
Our tax footprint extends beyond
Corporation Tax, including significant
payment of employment taxes and other
indirect taxes, including customs and
import duties. The Group also collects
taxes on behalf of governments (including
tobacco excise, employee taxes, VAT and
other sales taxes).
The major taxes paid in 2024 of £35.7 billion
(2023: £39.1 billion, 2022: £40.4 billion)
therefore consist of both taxes borne
and taxes collected as shown in the table
provided.
Tobacco excise, net VAT and other sales
taxes collected was impacted by the sale
of the Group's businesses in Russia and
Belarus partway through 2023.
Major taxes paid 2024
(£bn)
£35.7bn
2024
£bn
2023
£bn
Tobacco excise, net VAT and
other sales taxes (collected)
32.7
35.3
Corporation Tax
(borne)
1.9
2.6
Customs and import duties
(borne)
0.4
0.4
Employment Taxes
(collected)
0.5
0.6
Employment taxes
(borne)
0.2
0.2
Total
35.7
39.1
In addition to the major taxes, there are
a host of other taxes the Group bears and
collects such as transport taxes, energy
and environmental taxes, and banking
and insurance taxes.
The movement in deferred tax shown
below for the year 2024 reflects the
Proposed Plans in Canada, described
further in notes 24 and 31 in the Notes to
the Accounts. For the year 2023, the
movement relates primarily to the
impairment of certain of the U.S. acquired
trademarks. Further details of deferred tax
movements are disclosed in note 16 in the
Notes to the Accounts.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
53
Deferred tax asset/(liability)
2024
£m
2023
£m
2022
£m
Opening balance
(11,281)
(17,746)
(15,851)
Difference on exchange
(232)
762
(2,007)
Credits to the income statement
2,176
5,577
174
Changes in tax rates
249
106
66
Other credits/(charges) to other
comprehensive income
(18)
12
(106)
Net reclassification as held-for-sale
—
8
(22)
Closing balance
(9,106)
(11,281)
(17,746)
Earnings Per Share
Profit for the year was a profit of
£3,181 million compared to a loss of
£14,189 million in 2023 (itself a decrease
of 307% from a profit of £6,846 million
in 2022).
The relative movement in both years was
largely driven by the impairment, in 2023,
of U.S. goodwill and some of the acquired
combustibles brands totalling £27.3 billion.
In 2024, the Group undertook a
£700 million share repurchase programme,
reducing the number of shares (for the
purposes of the EPS calculation) by 0.62%.
After accounting for the movement in
non-controlling interests in the year, basic
earnings per share were 136.7p (2023:
-646.6p; 2022: 293.3p).
In 2023, the Group reported a loss of
£14,189 million for the year. Following the
requirements of IAS 33, the impact of share
options would be antidilutive. Therefore,
they are excluded from the calculation of
diluted earnings per share in accordance
with IFRS in 2023, but are included in the
calculation in 2024 and 2022. As the impact
of share options on adjusted earnings per
share would be dilutive in 2023, share
options are included in adjusted diluted
earnings per share for 2023, as well as
2024 and 2022.
Diluted earnings per share
1 were 136.0p in
2024, compared to loss of 646.6p in 2023
(2022: 291.9p profit).
Earnings per share (EPS) are impacted
by the adjusting items discussed earlier.
Adjusted diluted EPS, as calculated in note
11 in the Notes on the Accounts, was 3.5%
lower in 2024 at 362.5p, with 2023 ahead
of 2022 by 1.1% at 375.6p.
Adjusted diluted EPS at constant rates
would have been 1.7% ahead of 2023 at
381.9p, with 2023 up 4.0% against 2022.
As mentioned earlier, the sale of our
businesses in Russia and Belarus was
completed in September 2023. Due to the
timing of the transactions, combined with
a lower underlying performance as we
reduced investment and focus on Russia in
2023, this was a drag on our comparative
performance by 2.0% in 2024, and 1.2% in
2023, at the respective constant rates
of exchange.
Dividends
The Group pays its dividends to
shareholders over four quarterly interim
dividends. Quarterly dividends provide
shareholders with a more regular flow of
dividend income and allow the Company
to spread its substantial dividend
payments more evenly over the year,
aligning better with the cash flow
generation of the Group and so enable
the Company to fund the payments more
efficiently. The Board seeks to reward
shareholders with a progressive dividend,
by reference to 65% of adjusted diluted
EPS over the long-term.
The Board has declared an interim dividend
of 240.24p per ordinary share of 25p,
payable in four equal quarterly instalments
of 60.06p per ordinary share in May 2025,
August 2025, November 2025 and February
2026. This represents an increase of 2.0%
on 2023 (2023: 235.52p per share, up 2.0%)
and a payout ratio, on 2024 adjusted diluted
earnings per share, of 66.3% (2023: 62.7%).
The quarterly dividends will be paid to
shareholders registered on either the UK
main register or the South Africa branch
register and to ADS holders, each on the
applicable record dates.
Under IFRS, the dividend is recognised in
the year that it is approved by shareholders
or, if declared as an interim dividend, by
Directors, in the period that it is paid.
The cash flow, prepared in accordance
with IFRS, reflects the total cash paid in the
period. Further details of the total amounts
of dividends paid in 2024 and 2023 (with
2022 comparatives) are given in note 22
in the Notes on the Accounts.
Dividends are declared and payable in
sterling except for those shareholders on
the branch register in South Africa, where
dividends are payable in rand. The
equivalent dividends receivable by holders
of ADSs in US dollars are calculated based
on the exchange rate on the applicable
payment date.
Further details of the quarterly dividends
and key dates are set out under Shareholder
Information on pages 449 and 450.
Diluted earnings per share
1
(p)
136.0p
2024
2023
136.0
-646.6
Definition: Profit attributable to owners of BAT
p.l.c. over weighted average number of shares
outstanding, including the effects of all dilutive
potential ordinary shares.
l IFRS GAAP
l KPI l NON-GAAP
Change in adjusted diluted EPS
(%)
-3.5%
2024
2023
-3.5%
+1.1%
Definition: Change in diluted earnings per share
before the impact of adjusting items.
l IFRS GAAP
l KPI l NON-GAAP
Change in adjusted diluted EPS
at constant rates
(%)
+1.7%
2024
2023
+1.7%
+4.0%
Definition: Change in diluted earnings per share
before the impact of adjusting items and the
impact of fluctuations in foreign exchange rates.
l IFRS GAAP
l KPI l NON-GAAP
Note:
1. Following the requirements of IAS 33, in 2023 the impact
of share options would be antidilutive. Therefore, they
are excluded from the calculation of diluted earnings
per share in respect of 2023, but are included in the
calculation in 2024 and 2022.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
Financial Performance Summary
Continued
54
Treasury, Liquidity
and Capital Structure
The Treasury Function is responsible for
raising finance for the Group and managing
the Group’s cash resources and the
financial risks arising from underlying
operations. Clear parameters have been
established, including levels of authority,
on the type and use of financial
instruments to manage the financial risks
facing the Group. Such instruments are
only used if they relate to an underlying
exposure; speculative transactions are
expressly forbidden under the Group’s
treasury policy. All these activities are
carried out under defined policies,
procedures and limits, reviewed and
approved by the Board, delegating
oversight to the Chief Financial Officer
and Treasury Function. See note 26 in the
Notes on the Accounts for further detail.
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 targets an average
centrally managed debt maturity of at least
five years of which no more than 20%
matures in a single rolling year. As at
31 December 2024, the average centrally
managed debt maturity was 9.5 years
(2023: 10.5 years) with the highest
proportion maturing in a single rolling
12-month period being 14.8% (2023: 15.7%).
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 (at least
50% fixed on a net basis in the short to
medium term). 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
2024, the relevant ratios of floating to fixed
rate borrowings after the impact of
derivatives were 22:78 (2023: 10:90). On a
net basis, after offsetting liquid assets and
excluding cash and other liquid assets
(including investments held at fair value)
in Canada, which are subject to certain
restrictions under Companies' Creditors
Arrangement Act (CCAA) protection, the
relevant ratio of floating to fixed rate
borrowings was 13:87 (2023: 2:98).
As part of the management of liquidity,
funding and interest rate risk, the Group
regularly evaluates market conditions and
may enter into transactions, from time
to time, to repurchase outstanding debt,
pursuant to open market purchases, tender
offers or other means.
The Group continues to maintain
investment‑grade credit ratings
*, with
ratings from Moody's, S&P and Fitch of
Baa1 (stable outlook), BBB+ (stable outlook),
BBB+ (stable outlook), respectively
@, and
continues to target a solid investment-
grade credit rating of Baa1, BBB+ and
BBB+
@. See Notes on the Accounts,
note 26.
The strength of the ratings has
underpinned debt issuance and the Group
is confident of its ability to successfully
access the debt capital markets.
Available facilities
The Group maintains a £25 billion Euro
Medium Term Note (EMTN) programme,
and U.S. (US$4 billion) and European
(£3 billion) commercial paper programmes
to accommodate the liquidity needs of the
Group. At 31 December 2024, no
commercial paper was outstanding
(2023: nil outstanding). Cash flows relating
to commercial paper that have maturity
periods of three months or less are
presented on a net basis in the Group’s
cash flow statement.
The Group’s main bank facility is a syndicated
£5.4 billion committed revolving credit facility.
This facility was undrawn at 31 December
2024 (31 December 2023: undrawn).
In March 2024, the Group exercised the
first of the one-year extension options on
the £2.5 billion 364-day tranche of the
revolving credit facility, with the second
one-year extension subsequently exercised
in February 2025. Effective March 2025,
therefore, the £2.5 billion 364-day tranche
will be extended to March 2026.
Additionally, £2.85 billion of the five-year
tranche remains available until March
2025, with £2.7 billion available to March
2026 and £2.5 billion available to March
2027.
Also in 2024, the Group refinanced or
extended short-term bilateral facilities
totalling £2.4 billion. As at 31 December
2024, £nil million was drawn on a short-term
basis with £2.4 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’s cash flow statement.
In January 2025, the Group entered into a
medium-term facility of £503 million
equivalent which was fully drawn.
Following the initial filing in 2019, the
Group's shelf registration statement on
Form F-3 was renewed with the SEC in
2022, pursuant to which B.A.T Capital
Corporation, BAT p.l.c. and B.A.T.
International Finance p.l.c. may issue debt
securities guaranteed by certain members
of the Group from time to time. This forms
part of the Group’s strategy to ensure
flexible and agile access to capital markets
and the registration statement is initially
valid for three years.
Use of facilities
These facilities ensure that the Group has
access to funding to supplement the cash
available or generated by the business in
the period to meet the operational
(including working capital) and general
corporate requirements including, but
not limited to, the timing of payments
in relation to:
– dividends (2024: £5.2 billion; 2023: £5.1 billion);
– net capital expenditure (2024: £0.4 billion;
2023: £0.5 billion);
– Franked Investment Income Group Litigation
Order (FII GLO) as described on page 287;
– the expected payments in Canada in
respect of the proposed settlement
arrangement, as discussed on page 328;
– Master Settlement Agreement in the U.S.
(2024: £2.0 billion; 2023: £2.3 billion);
– U.S. tax payments deferred from 2024 to
2025 of £700 million (US$895 million);
– refinancing obligations;
– share repurchase programme; and
– other corporate activity, such as litigation
or acquisitions, as relevant.
Management believes that the Group
has sufficient working capital for present
requirements, taking into account the
amounts of undrawn borrowing facilities
and levels of cash and cash equivalents,
and the ongoing ability to generate cash.
Issuance, drawdowns and
repayment in the period
– In February 2024, the Group accessed the
US dollar market under the SEC Shelf
Programme, raising a total of
US$1.7 billion across two tranches;
– In March 2024, the Group repaid a
£229 million bond at maturity;
– In April 2024, the Group accessed the
Euro market under its EMTN
Programme, raising a total of
€900 million;
– To optimise the Group’s debt capital
structure using available liquidity and to
reduce gross and net debt, the Group
completed capped cash debt tender
offers in May 2024, targeting series of
low-priced, long-dated GBP-, EUR- and
USD-denominated bonds, pursuant to
which the Group repurchased bonds prior
to their maturity in a principal amount of
£1.8 billion equivalent; and
– In August, September and October
2024, the Group repaid US$1.9 billion,
US$1 billion and €850 million of bonds at
maturity, respectively.
In 2023, the Group raised US$5 billion and
€800 million and repaid bonds totalling
€2.3 billion and US$598 million at maturity,
while also repaying £3.1 billion pursuant to
the tender offer targeting a series of GBP-,
EUR- and USD denominated bonds
maturing between 2024 and 2027.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Treasury and Cash Flow
55
Cash Flow
Net cash generated from
operating activities
Net cash generated from operating
activities decreased by £589 million to
£10,125 million in 2024, compared to an
increase of £320 million to £10,714 million
in 2023. In 2024, translational foreign
exchange was a headwind (2023: marginal
headwind) due to the relative movements
of sterling against the Group reporting
currencies, notably the US dollar, in those
periods.
In 2024, the decrease was driven by:
– The realisation, in 2023, of tax credits in
Brazil that did not repeat;
– Lower dividends received from the
Group's associates of £406 million (2023:
£506 million), mainly related to ITC,
largely reflecting the reduced
shareholding;
– A payment of £390 million in respect of
an excise assessment in Romania; and
– Decreases in tax paid of £1,854 million,
compared to £2,622 million in 2023 as
£700 million have been deferred in the
U.S. from 2024 until 2025.
During 2024, the Group made the final
payment in respect of the settlement
agreements with the DOJ and OFAC in the
amount of £267 million (2023: £262 million),
while also receiving £132 million following
the successful conclusion of litigation
concerning the Fox River.
In 2024, other litigation payments (mainly
related to Engle and other health-related
claims in the U.S.) were higher at £147
million (2023: £73 million).
In 2023, the Group paid a one time
payment of £59 million to settle the
investigation by the Nigerian Federal
Competition and Consumer Protection
Commission (FCCPC).
The Group made interim repayments to
HMRC of £50 million in both 2024 and
2023, and intends to make further interim
repayments in future periods in respect of
the Franked Investment Income Group
Litigation Order (FII GLO), as described
on page 287.
Summary Cash Flow
2024
£m
2023
£m
2022
£m
Cash generated from operating activities
11,573
12,830
12,537
Dividends received from associates
406
506
394
Tax paid
(1,854)
(2,622)
(2,537)
Net cash generated from operating activities
10,125
10,714
10,394
Net cash from/(used in) investing activities
1,375
(296)
(705)
Net cash used in financing activities
(10,632)
(9,314)
(8,878)
Transferred from/(to) to held-for-sale
—
368
(368)
Differences on exchange
(281)
(292)
431
Increase in net cash and cash equivalents in the year
587
1,180
874
Net cash from/used
in investing activities
In 2024, net cash from investing activities
increased to £1,375 million inflow
(2023: £296 million outflow), due to
£1,577 million net proceeds from the partial
monetisation of our investment in ITC. This
combined with a net inflow of £83 million
from short-term investment products,
including treasury bills, which compared to
a net outflow of £43 million in 2023.
As described earlier, the Group completed
the sale of its businesses in Russia and
Belarus in September 2023. Proceeds of
£425 million were received in 2023, net of
cash disposed of £266 million, being a net
cash inflow from the disposal of
£159 million, as shown in the cash flow
statement on page 268.
Purchases of property, plant and equipment
were higher than 2023, at £486 million
(2023: £460 million).
In 2024, the Group invested £581 million
in gross capital expenditure, an increase of
7.3% on the prior year (2023: £541 million).
This includes purchases of property, plant
and equipment and certain intangibles,
and the investment in the Group’s global
operational infrastructure (including, but not
limited to, the manufacturing network, trade
marketing software and IT systems and the
expansion of our New Categories portfolio).
The Group expects gross capital expenditure
in 2025 of approximately £650 million.
Net cash used in financing activities
Net cash used in financing activities
was an outflow of £10,632 million in 2024
(2023: £9,314 million outflow), with the
outflow in each year largely driven by:
– Dividend payments (2024: £5,213 million,
up 3.1%; 2023: £5,055 million, up 2.8%).
The movement in both years was
affected by the higher dividend per share.
The increase in 2024 was partially offset
by the reduction in the number of shares
due to the share buy-back programme
undertaken in 2024;
– The net repayment of borrowings
(2024: £2,422 million; 2023: £1,635 million net
repayment) as described on page 55; and
– An outflow of £128 million (2023: £480
million outflow) related to derivatives; and
– The purchases of shares under the 2024
share buy-back programme of
£698 million.
In 2024, interest paid increased by 1.2% to
£1,703 million (2023: £1,682 million).
In 2024, the Group repaid borrowings of
£4.8 billion and issued £2.4 billion of new
borrowings. The Group repaid borrowings
of £6.8 billion in 2023, and issued £5.1 billion
of new borrowings.
Please refer to note 26 in the Notes
on the Accounts for further details.
@Free cash flow (before and after
dividends paid to shareholders)
Free cash flow (before dividends paid to
shareholders), as defined on page 408,
was £7,901 million, down 5.5% on the prior
year (2023: up 3.9% to £8,360 million;
2022: £8,049 million). The decrease in 2024
was driven by the decline in net cash
generated from operating activities and
higher net interest paid (2024: £1,703
million; 2023: £1,682 million) partly offset by
lower net capital expenditure (2024: £434
million; 2023: £487 million).
After payment of dividends to
shareholders, free cash flow was
£2,688 million (2023: £3,305 million;
2022: £3,134 million).
@
Cash flow conversion
The conversion of profit from operations
to net cash generated from operating
activities may indicate the Group’s ability
to generate cash from the profits earned.
Based upon net cash generated from
operating activities, the Group’s conversion
rate was 370% compared to -68% in 2023,
impacted, in 2023 by the non-cash charges
in respect of goodwill and trademark
impairments described earlier.
@Operating cash flow conversion ratio
(based upon adjusted profit from
operations) was once again ahead of the
Group's target of 90%, being 101% in 2024
compared to 100% in 2023 and 100% in
2022. See page 406 for further information
on this measure.
@
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
Treasury and Cash Flow
Continued
56
@ Denotes phrase, paragraph or similar that does not form part of BAT's Annual Report on Form 20-F as filed with the SEC.
Restricted cash
Cash and cash equivalents include
restricted amounts of £2,072 million
(2023: £1,904 million) due to subsidiaries
in CCAA protection (note 32 in the Notes
on the Accounts) as well as £339 million
(2023: £392 million) principally due to
exchange control restrictions.
Investments held at fair value through
profit and loss include restricted amounts
of £437 million (31 December 2023: £446
million) due to investments held by
subsidiaries in CCAA protection, as well as
£60 million (31 December 2023: £89 million)
subject to potential exchange control
restrictions (note 18 in the Notes on the
Accounts).
Borrowings and Net Debt
Total borrowings (which includes lease
liabilities) decreased to £36,950 million in
2024 (2023: £39,730 million). In 2024,
translational foreign exchange, particularly
related to the relative movement of the US
dollar and Euro, was a headwind of £204
million (2023: £1,981 million tailwind).
The movement in borrowings is impacted
by the net repayment of bonds, as discussed
on page 55, driven by the cash generated
by the business after payment of dividends
to shareholders. In 2024, this included the
capped cash debt tender offers and
subsequent repayment prior to their maturity
in a principal amount of £1.8 billion of bonds.
Total borrowings include £670 million
(31 December 2023: £700 million) in respect of
the purchase price adjustments related to the
acquisition of Reynolds American Inc.
As discussed on page 55, the Group remains
confident about its ability to access the debt
capital markets successfully and reviews its
options on a continuing basis.
Net debt is a non-GAAP measure and
is defined as total borrowings (including
related derivatives and lease liabilities)
less cash and cash equivalents and current
investments held at fair value.
Net debt, at 31 December 2024, was
£31,253 million (2023: £34,640 million;
2022: £39,281 million), with the movement
partly due to a foreign exchange headwind
of £674 million in 2024 (2023: £1,338 million
tailwind) and the net repayment in
borrowings described on page 55.
Reconciliation of Total Borrowings to Adjusted Net Debt
@
2024
£m
2023
£m
2022
£m
Total borrowings (including lease liabilities)
(36,950)
(39,730)
(43,139)
Derivatives in respect of net debt
(113)
(170)
(167)
Cash and cash equivalents
5,297
4,659
3,446
Current investments held at fair value
513
601
579
Net debt
(31,253)
(34,640)
(39,281)
Purchase price adjustment (PPA) to Reynolds American Inc. debt
670
700
798
Net debt items in assets held-for-sale
—
—
352
Adjusted net debt
(30,583)
(33,940)
(38,131)
@The movement in net debt also includes
the free cash flow (after dividends)
generated in the year (2024: £2,688 million;
2023: £3,305 million) as described on page
56 and the partial monetisation, in 2024,
of the Group’s investment in ITC
(£1,577 million). This was partly offset
by the purchase of shares under the
share buy-back programme of £0.7 billion
(2023: nil).
@
@Leverage ratio – Adjusted
Net Debt to Adjusted EBITDA
The Group uses adjusted net debt to
adjusted EBITDA, as defined on page 409,
to assess its level of leverage by reference
to adjusted net debt in comparison to
the earnings generated by the Group.
This is deemed by Management to
reflect the Group’s ability to service
and repay borrowings.
In 2024, the ratio of adjusted net debt to
adjusted EBITDA was 2.44x, representing
a decrease from 2.57x at the end of 2023,
itself an improvement from 2.89x at the
end of 2022.
However, following the publication of the
Global settlement plan in respect of the
ongoing litigation in Canada, Management
recognises that this would lead to an
outflow of cash, cash equivalents and
investments held at fair value. At
31 December 2024, the value held for such
items on the balance sheet was £2.5 billion
and the payment of which will increase the
level of adjusted net debt. To aid the users
of the financial statements, after such a
payment and excluding adjusted EBITDA
from Canada (other than New Categories),
our leverage ratio would increase by 0.31x
to 2.75x. Please refer to page 409.
The Group’s adjusted net debt to adjusted
EBITDA ratio is subject to the fluctuations
in the foreign exchange markets. In 2024,
due to the relative movement in sterling,
the sterling value of adjusted net debt
increased by £947 million.
Refer to page 409 for a full reconciliation
from borrowings to adjusted net debt,
profit for the year to adjusted EBITDA and
the ratio of adjusted net debt to adjusted
EBITDA, at both current and constant rates
of exchange.
@
@Return on Capital Employed (ROCE)
The Group’s ROCE, calculated in
accordance with our reported numbers,
was 2.7% (2023: -13.2%), with the relative
movement in 2024 due to the impairment
of goodwill and trademarks referred to
earlier, impacting the Group's EBITDA
in 2023.
On an adjusted basis, as defined on page
410, including dividends from associates
and joint ventures (as a proxy to a return
in the period, given the inclusion of the
investment in associates and joint
ventures in the Group’s calculation
of capital employed), adjusted ROCE grew
from 9.9% in 2022 to 10.9% in 2023, and
grew to 12.1% in 2024. The movement in
2023 and 2024 was mainly driven by the
impairment of goodwill and trademarks
and increases in amortisation charges
referred to earlier, the impact of which has
been adjusted out of EBITDA but reduces
the value of average capital employed.
@
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
57
@ Denotes phrase, paragraph or similar that does not form part of BAT's Annual Report on Form 20-F as filed with the SEC.
Foreign Exchange Rates
The principal currency exchange rates used
to convert the results of the Group's
foreign operations to sterling, for the
purposes of inclusion and consolidation
within the Group's financial statements,
are indicated in the table below.
Where the Group has provided results
at constant rates of exchange, this refers
to the translation of the results from the
foreign operations at rates of exchange
prevailing in the prior period, thereby
eliminating the potentially distorting
impact of the movement in foreign
exchange on the reported results.
Accounting Policies
The application of the accounting
standards and the accounting policies
adopted by the Group are set out in the
Group Manual of Accounting Policies and
Procedures (GMAPP).
GMAPP includes the Group instructions
in respect of the accounting and reporting
of business activities, such as revenue
recognition, asset valuations and
impairment testing, adjusting items,
the accrual of obligations and the appraisal
of contingent liabilities, which include taxes
and litigation. Formal processes are in
place whereby central management and
End Market management confirm
adherence to the principles and the
procedures and to the completeness of
reporting. Central analyses and revision of
information are also performed to ensure
and confirm adherence.
In order to prepare the Group’s
consolidated financial information in
accordance with IFRS, Management has
used estimates and assumptions that
affect the reported amounts of revenue,
expenses and assets, and the disclosure
of contingent liabilities, at the date of the
financial statements.
Accounting Estimates
The critical accounting estimates are
described in note 1 in the Notes on the
Accounts and include:
– review of asset values, including
goodwill and impairment testing;
– estimation of provisions, including as
related to taxation and legal matters,
specifically in respect of the potential
settlement of the ongoing litigation in
Canada; and
– estimation and accounting for
retirement benefit cost.
Accounting Judgements
The critical accounting judgements are
described in note 1 in the Notes on the
Accounts and include:
– identification and quantification of
adjusting items;
– the determination as to whether the
disposal of a business or businesses is
significant enough to require disclosure
as discontinued operations;
– determination as to whether to recognise
provisions and the exposures to
contingent liabilities related to pending
litigation (including as related to Canada)
or other outstanding claims;
– determination as to whether control
(subsidiaries), joint control (joint
arrangements), or significant influence
(associates) exist in relation to
investments held by the Group;
– review of applicable exchange rates
for transactions with and translation
of entities in territories where there are
restrictions on the free access to foreign
currency or multiple exchange rates; and
– the determination as to whether
perpetual hybrid bonds should be
classified as equity instead of borrowings.
Foreign Exchange Rates
Average
Closing
2024
2023
2022
2024
2023
2022
Australian dollar
1.937
1.873
1.779
2.023
1.868
1.774
Bangladeshi taka
147.803
134.747
115.040
149.662
139.909
123.502
Brazilian real
6.893
6.208
6.384
7.737
6.192
6.351
Canadian dollar
1.751
1.678
1.607
1.801
1.681
1.630
Chilean peso
1,206.394
1,044.498
1,076.291
1,245.543
1,113.264
1,024.811
Euro
1.181
1.150
1.173
1.209
1.154
1.127
Indian rupee
106.952
102.707
97.030
107.223
106.081
99.516
Japanese yen
193.583
174.883
161.842
196.827
179.721
158.717
Romanian leu
5.877
5.688
5.783
6.018
5.741
5.577
Russian ruble
1
102.662
87.184
120.111
87.812
South African rand
23.423
22.962
20.176
23.633
23.313
20.467
Swiss franc
1.125
1.117
1.179
1.135
1.073
1.113
US dollar
1.278
1.244
1.236
1.252
1.275
1.203
Note:
1.
As a result of the disposal of the Russian businesses, the 2023 rates reflect the average for the period ended and as at 13 September 2023, respectively.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dynamic Business
Other Financial Information
58
Assessment as a Going Concern
In conjunction with the assessment of
viability, the Directors have also assessed
the short-term cash flow forecasts and
debt refinancing requirements.
The Group has, at the date of this report,
sufficient existing financing available for
its estimated requirements for at least the
next 12 months and beyond in respect of
general corporate purposes, including in
respect of the Master Settlement
Agreement due in the U.S. in 2025 and
other known liabilities or future payments
(including interim dividends).
The Group has £67 million of future
contractual commitments (2023:
£60 million) related to property, plant
and equipment, as discussed in note 13
in the Notes on the Accounts.
After reviewing the Group’s annual budget,
plans and financing arrangements,
including the availability of a £5.4 billion
revolving credit facility, 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‑F.
Off-balance Sheet Arrangements
and Contractual Obligations
Except for certain indemnities, the Group
has no significant off-balance sheet
arrangements other than in respect of
leaf purchase obligations. The Group has
contractual obligations to make future
payments on debt guarantees. In the
normal course of business, it enters into
contractual arrangements where the
Group commits to future purchases
of goods and services from unaffiliated
and related parties. See page 413 for a
summary of the contractual obligations
as at 31 December 2024.
Retirement Benefit Schemes
The Group’s subsidiary undertakings
operate defined benefit schemes, including
pension and post-retirement healthcare
schemes, and defined contribution
schemes. The most significant
arrangements are 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’s
defined benefit arrangements and over
70% of the current service cost. 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. Contributions to the defined benefit
schemes are determined after consultation
with the respective trustees and actuaries
of the individual externally funded schemes,
taking into account regulatory environments.
The present total value of funded scheme
liabilities as at 31 December 2024 was
£5,705 million (2023: £6,417 million), while
unfunded scheme liabilities amounted to
£734 million (2023: £785 million). The
schemes’ assets decreased to £6,612
million from £7,317 million in 2023, itself a
decrease from £7,424 million in 2022.
The overall position for all pension and
healthcare schemes in Group subsidiaries
amounted to a net asset of £117 million at
the end of 2024, compared to a net asset
of £75 million at the end of 2023.
Litigation and Settlements
As discussed in note 31 in the Notes on
the Accounts, various legal proceedings
or claims are pending or may be instituted
against the Group.
Government Activity
The marketing, sale, taxation and use
of tobacco products have been subject
to substantial regulation by government
and health officials for many years.
For information about the risks related
to regulation, see page 157 and pages
422 to 430.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
59
Sustainable Future
Building a Sustainable Future is about
seeking to actively encourage adult
consumers away from cigarettes and
to smokeless alternatives sustainably,
responsibly and with integrity.
Science will be a primary driver of
our efforts, supported by more active
external engagement and regulatory
focus, while embedding sustainability
across our organisation.
The key building blocks of the
Sustainable Future pillar are:
Tobacco Harm Reduction Acceptance
Shaping the Landscape
Leading in Sustainability and Integrity
Our commitments under
Sustainable Future:
Building a Smokeless World
Investing in the products, science
and engagement to make A Better
Tomorrow
TM a reality
Conducting our business responsibly
and with integrity
Tobacco Harm Reduction Acceptance
A Better Tomorrow™ through THR
Our ambition is to reduce the health impact of our business, and this is
front and centre of our corporate vision to create A Better Tomorrow™
by Building a Smokeless World. This approach is underpinned by
Tobacco Harm Reduction (THR), which we believe is one of the
greatest public health opportunities for global society today.
This is why, for several years now, we have been transforming.
Through the development of our portfolio of Smokeless products,
we have invested significant resources into THR. This has resulted
in Smokeless products becoming more acceptable to adult
consumers who would otherwise continue to smoke, and
commercially sustainable. Our engagement with regulators and
policy makers on THR is underpinned by our open and transparent
regulatory positions.
Ultimately, we believe that our THR ambition will be quantified by a
significant reduction in projected population level smoking-related
morbidity and mortality.
Why THR is important
We know combustible cigarettes pose serious health risks, and that
the only way to avoid those risks is not to start smoking or to quit.
The World Health Organization estimates that smoking-related
diseases cause over eight million deaths globally each year
1.
THR is a well-recognised public health strategy that aims to
minimise the harm caused by smoking. This is done by encouraging
adult smokers who would otherwise continue to smoke to switch
completely to reduced-risk
*†, Smokeless alternatives.
Our aim is to provide such consumers with a range of products
that deliver comparable satisfaction in nicotine delivery, use, and
sensorial aspects. For example, while we are clear that our
Smokeless products are not cessation products and are not
marketed as such, some independent studies suggest that Vapour
products are more successful than nicotine replacement therapy
in helping people stop smoking
2 by providing a satisfactory
alternative to cigarettes.
Over the past decade, significant progress has been made to
accelerate the global THR journey. Today, there are four global
categories of reduced-risk
*† products: Heated Products, Vapour
Products, Oral Tobacco Products and Oral Nicotine Pouches.
The global adoption of these Smokeless product categories over
the last 10 years is sizeable. It is estimated that there are now more
than 115 million consumers of Smokeless products
3. The latest
estimate of the global number of vapers alone is 82 million.
4
We know that stakeholders increasingly expect us to demonstrate
that we are a purpose-driven enterprise. We are working towards
a future where, ultimately, we move away from combustible
cigarettes.
World-class science
Demonstrating the reduced-risk
*† status, compared to smoking,
of Smokeless products can only be achieved through robust
science. This is why we invest significantly each year to find
innovative ways to contribute to THR.
We use various analytical and pre-clinical techniques, specialised
laboratory technology and expertise to test our products, and aim
to ensure they meet high quality standards.
This is complemented by collaborations with global external
researchers, and clinical research organisations, who bring
independent and specialist expertise that enhances our
internal capabilities.
We are always innovating, experimenting, and delivering new
Tobacco Harm Reduction solutions. This is why our Science and
Product Innovation are so important to the business, accelerating
pioneering approaches to our Smokeless products portfolio.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
Strategic Pillar Overview
60
THR substantiation: Our nine-step
risk assessment framework
As most Smokeless alternatives are
relatively new to the market, they lack the
long-term epidemiological data, observed
over many years, that could show their
overall impact on public health. That is why
it is necessary to take a 'weight of evidence'
approach, using the best available data to
draw conclusions.
Drawing on work by the U.S. Institute of
Medicine, we use our nine-step risk
assessment framework. This evaluates
the emissions, exposure and risk profile of our
New Category products and compares them
to smoking cigarettes or other comparators,
such as nicotine replacement therapy.
In terms of THR scientific substantiation,
our Heated Products, Vapour, and Modern
Oral products have been reported in
peer-reviewed pre-clinical, clinical, and
population level research publications
and journals, summarising significant
reductions in emissions, exposure and
risk levels versus smoking.
We aim to follow best practice and adhere
to high standards of governance and ethics
in all our scientific research. Regardless
of the results, we are committed to sharing
the outcomes. Our scientists have
published more than 270 scientific papers
to date about our New Category products.
For more information on Tobacco Harm
Reduction, see page 72 to 77
+
Shaping the Landscape
THR and nicotine
For adult smokers who would otherwise
continue to smoke, a choice of alternative
Smokeless products to completely switch
to is important.
Societal sentiment towards nicotine is also
crucial in THR. Particularly as a common
misconception is that nicotine, as a
substance, is the cause of smoking-related
diseases. However, the primary cause of
such diseases is not exposure to nicotine,
but the toxicants released by the burning
of tobacco.
This fact is recognised by several
regulators (including the U.S. FDA) and
public health stakeholders (including the
UK Royal College of Physicians).
However, currently more than 60% of
adults and 80% of doctors believe that
nicotine causes cancer.
5,7
With this level of misperception, and
nicotine being a highly politicised topic,
society's understanding of nicotine is one
of several key challenges that still needs to
be overcome to enable further THR progress.
Through our global science engagement
programme, we seek to progress our
science with external scientists via peer
review publications and conferences.
As well as publishing our own research, our
scientists also monitor and review external
publications to gain a holistic view of the
evidence base.
We work hard to make our science
accessible and understandable to a wider
audience. We have a dedicated website
www.bat-science.com. Most recently,
we launched Omni™, an evidence-based
manifesto for change, which captures
BAT’s commitment and progress towards
Building a Smokeless World to create
A Better Tomorrow™. Backed by over
a decade of evidence and experience,
Omni™ offers insights into our scientific
and real-world evidence of Tobacco Harm
Reduction (THR) in action.
Product innovation and choice
Adult consumer choice is an important
component of THR success. We recognise
that smokers are most likely to switch
to Smokeless alternatives when they
find a product that delivers convenience
and comparable satisfaction in the
sensorial experience.
That is why we offer a multi-category
portfolio of Smokeless alternatives tailored
to meet the varied preferences of different
adult smoker consumer segments. Importantly,
our products are supported by world-class
science and robust product safety and
quality standards.
Our New Categories product innovation
pipeline is based on data-driven foresights
to anticipate category and consumer
trends. Using consumer insights we
deliver new product propositions that
are consumer-centric in their design and
performance, to meet the most important
consumer preferences and opportunities.
Our approach to regulation
We recognise and support the objective
of governments to reduce smoking rates
and associated health impacts.
We have always been clear that we
support regulation which is based on
robust evidence, tailored to local
circumstances, and delivers on the
intended policy aims, while preventing
unintended consequences such as the
growth in illicit markets.
Although not risk-free, recent technological
and scientific advancements in Smokeless
products offer consumers the opportunity
to enjoy nicotine products, without the
need to burn tobacco.
Our experience shows that where risk-
proportionate regulation encourages
smokers to choose these Smokeless
alternatives instead of cigarettes, smoking
rates can be more effectively reduced
compared to relying on coercive policies
which are either not based on evidence
or which seek to prohibit products
or behaviours.
7
The success of THR will depend as much
on progressive regulation as it will on
changes in consumer behaviour. We
believe both are essential if countries
around the world are to achieve the accepted
‘smoke-free’ threshold of less than 5%
smoking incidence in the population.
Countries like Sweden have already started
to demonstrate the art of the possible with
THR. With the lowest smoking rates in
Europe - 5.3% relative to the EU average
of 23% in 2023, Sweden is on the verge
of achieving its ‘no smoking target’ years
ahead of the 2040 EU target. This is due
to the widespread awareness, availability
and usage of snus and other smokeless
alternatives.
Read more about our sustainability
strategy and progress on pages 64 to 154
+
Notes:
*
Based on the weight of evidence and assuming
a complete switch from cigarette smoking. These
products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo,
Grizzly, Kodiak, and Camel Snus, are subject to FDA
regulation and no reduced-risk claims will be made as
to these products without agency clearance.
1.
Word Health Organization, WHO report on the global
tobacco epidemic 2021: addressing new and emerging
products. 2021. Available at: https://iris.who.int/
handle/10665/343287
2. Lindson N, Butler AR, McRobbie H, Bullen C, Hajek P,
Begh R, Theodoulou A, Notley C, Rigotti NA, Turner T,
Livingstone-Banks J, Morris T, Hartmann-Boyce J.
Electronic cigarettes for smoking cessation. Cochrane
Database of Systematic Reviews 2024, Issue 1. Art.
No.: CD010216. DOI: 10.1002/14651858.CD010216.pub8.
3. Tobacco Intelligence, Regulatory & Market Intelligence
for Alternative Tobacco & Nicotine Products, Nicotine
Pouch Market Database, Quarter 1 Report. 2024.
4. Jerzyński, T. and Stimson, G.V. (2023), "Estimation of the
global number of vapers: 82 million worldwide in 2021",
Drugs, Habits and Social Policy, Vol. 24 No. 2, pp. 91-103.
Available at: www.doi.org/10.1108/DHS-07-2022-0028
5. World, F. for a S.-F. (n.d.). Nearly 80% of Doctors
Worldwide Mistakenly Believe Nicotine Causes Lung
Cancer, Thwarting Efforts to Help One Billion Smokers
Quit. [online] www.prnewswire.com. Available at:
www.prnewswire.com/news-releases/nearly-80-of-
doctors-worldwide-mistakenly-believe-nicotine-causes-
lung-cancer-thwarting-efforts-to-help-one-billion-
smokers-quit-301881655.html.
6. Fagerström, K. (2022). Can alternative nicotine products
put the final nail in the smoking coffin? Harm Reduction
Journal, 19(1). doi:doi.org/10.1186/s12954-022-00722-5.
7. Weiger C, Moran MB, Kennedy RD, Limaye R, Cohen J.
Beliefs and Characteristics Associated With Believing
Nicotine Causes Cancer: A Descriptive Analysis to
Inform Corrective Message Content and Priority
Audiences. Nicotine Tob Res. 2022;24(8):1264-1272.
doi:10.1093/ntr/ntac060.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
61
Our views on regulation of Smokeless
tobacco and nicotine products
We believe regulation should recognise
that Smokeless tobacco and nicotine
products are less risky than cigarettes and
support their use as an alternative for those
adult smokers who would otherwise
continue smoking combustible products.
There are four guiding principles that we
believe should be applied to the
development of any regulation of
Smokeless products:
– Based on science and evidence:
Regulation should be based on the best
available science and evidence for each
product category and be proportionate
to the risk of the product versus
combustible tobacco.
– Ensure product quality and consumer
relevance: Regulation should mandate
robust product quality and safety
standards to protect consumers and
allow access to products with satisfying
nicotine levels and adult-targeted flavours.
– Allow adult-only access: Regulation
should enable adults to access and gain
information about the availability of
reduced-risk
* products, while preventing
use by the underage.
– Enable effective enforcement:
Regulation should include an effective
regime for penalties, sanctions and
enforcement to drive compliance.
Regulation of New Category products
continues to evolve. Globally, there are
some regulators passing progressive laws
that encourage adult smokers who would
otherwise continue to smoke to switch
to New Category products, but there
are other regulators who view them
more cautiously.
As the science and evidence to
substantiate these products grows,
we hope to see more countries passing
progressive regulations, further
accelerating New Category growth and
accelerating a reduction in smoking rates.
We believe a stakeholder-inclusive,
whole-of-society, open and honest
dialogue is essential. That dialogue should
include regulators, policy-makers, public
health, consumers, and the industry.
It is key to align all stakeholders on the
positive public health potential and develop
effective policies and consumer behaviour
that can accelerate Tobacco Harm
Reduction as quickly as possible. Regulation
around New Category products should be
founded on evidence and science, not opinion.
Our views on a general regulatory
framework, to maximise Smokeless
products’ harm reduction potential, are
outlined on page 63.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
Strategic Pillar Overview
Continued
62
Note:
*
Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
Maximising the harm reduction potential of Smokeless products:
A regulatory framework
In all countries, whether such a framework is in place or not, we are guided by our Product
Stewardship approach – for quality and safety standards, and our Responsible Marketing
Principles and Responsible Marketing Code to ensure that we market our products responsibly.
– Regulations in all countries where cigarettes are sold should also
allow a wide range of Smokeless alternatives to smoking to
ensure that consumers can access these alternatives and make
informed choices.
– Nicotine levels should be established to ensure Smokeless
products are a satisfying alternative for adult smokers.
– A variety of adult-targeted flavours should be available, as
evidence shows that certain flavours help smokers transition
to reduced-risk
*† alternatives. Flavours, packaging designs and
descriptors that are particularly appealing to the underage
should be prohibited.
– Regulation should keep pace and be adaptable to new product
innovation. This would allow scientific and technological
advancements to deliver consumer-relevant new product
propositions and solutions, so that smokers can access even
better options to switch away from combustible cigarettes.
– Robust and properly enforced product quality and safety standards
should be at the heart of any regulation, to protect consumers.
– Products should be used as intended by consumers and
manufacturers should be required to ensure that all products are
tamper-evident to secure product integrity.
– The use and sale of smokeless tobacco and nicotine products
by and to the underage should be prohibited by law.
– Age-verification mechanisms should be mandated at point
of purchase and, where feasible, regulation should aim to
encourage the integration of underage access prevention
technologies.
– Communication is necessary to provide adult consumers
with accurate information about reduced-risk products
*†.
Communication with adults should be permitted in adult-
targeted touchpoints and display responsible content.
– Any communication with consumers should have a clear and
visible health warning and inform that nicotine-containing
products are for adults only.
– Regulation should provide enforcement authorities with the
necessary powers to apply penalties and sanctions to those
who fail to comply with regulations, particularly those who
supply non-compliant products and provide products to
those underage.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
63
Notes:
*
Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products
without agency clearance.
ACCESS TO CONSUMER
RELEVANT PRODUCTS
ADULT-ONLY
CONSUMERS
PRODUCT QUALITY
AND SAFETY
ROBUST
ENFORCEMENT
64
Tackling
global challenges
SUSTAINABILITY SECTION
Dear Stakeholders,
We are delighted to present an update on
the progress we have made towards our
sustainability commitments. While 2024
was marked by global political, economic
and environmental challenges, our
sustainability strategy remains focused
on our purpose-led transformation.
Our purpose – to create A Better Tomorrow™
by Building a Smokeless World – is anchored
in reducing the health impact of our
business. In doing so, maintaining a long-term
vision and resilience in the face of evolving
challenges remains of paramount importance.
Sustainability is a core part of our Group
transformation strategy.
As we work towards our vision of Building
a Smokeless World, we recognise that we
must transform responsibly.
We strive to reduce our use of natural
resources, enhance the communities in which
we operate, and deliver on our climate goals.
In 2024, we refined our sustainability
strategy, focusing on five impact areas:
– Tobacco Harm Reduction (THR)
– Climate
– Nature
– Circularity
– Communities
Deriving from our Double Materiality
Assessment (DMA)^, these impact areas
comprehensively capture our value chains
and the views of both our internal and
external stakeholders.
The following section of the Combined
Annual and Sustainability Report not only
demonstrates the progress we are making
towards our commitments through third-
party assured data, but also includes
featured stories from across our global
operations. These underline how our global
sustainability strategy is pursued and
executed at a local level.
We are proud to have received a Triple-A
rating from CDP for our 2024 disclosures
on Climate Change, Water Security and
Forest, reflecting our commitment to
environmental transparency and action.
We are encouraged by the progress we are
making towards building A Better Tomorrow™.
Kingsley Wheaton
Read more about our sustainability ratings
performance in our 'Sustainability
Performance Data Book' at bat.com/
reporting
+
Note:
^
Although financial materiality has been considered in
the development of our Double Materiality Assessment
(DMA), our DMA and any conclusions in this document
as to the materiality or significance of sustainability
matters do not imply that all topics discussed therein
are financially material to our business taken
as a whole, and such topics may not significantly alter
the total mix of information available about our securities.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Message from our
Chief Corporate Officer
65
As we transform our business,
we remain steadfast in our
purpose of building A Better
Tomorrow™.
Kingsley Wheaton
Chief Corporate Officer
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
Our Sustainability Strategy
66
We have refined our Group sustainability strategy
In order to better address our material
sustainability topics
^ and continue delivering
value to our stakeholders, we have refined
our Group sustainability strategy.
By engaging with a cross-section of
stakeholder groups, we have gained a
better understanding of our challenges
and opportunities, resulting in the
identification of the five strategic impact
areas, outlined below.
These areas are supported by external
reporting, stakeholder engagement
and responsible business practices,
guiding our future sustainability targets
and ambitions.
Our strategy reflects what's important to
our employees, consumers, communities,
investors, suppliers, and business partners.
In my career at BAT, one constant truth
has emerged: our markets serve as the
backbone of our business.
It is their collective effort that drives the
Group's achievements, and that is why
this year's sustainability report highlights
the global challenges businesses like ours
face, and the actions we are taking to
address them.
The following section evidences the local
actions shared by practitioners across our
markets, and provides an overview of our
ambitions, impact, and performance at
the Group level.
We hope this overview demonstrates
the Group’s efforts towards making a
meaningful impact.
Five strategic impact areas
We seek to take a leading role in tackling some
of the biggest global sustainability challenges.
We aim to do this by responsibly Building a Smokeless World,
reducing our use of natural resources and delivering our climate
goals as we transition to A Better Tomorrow™. We strive to create
a meaningful impact in the communities where we operate and
inspire all our people to drive change.
Discussing the Group’s sustainability strategy with
Donato Del Vecchio, Chief Sustainability Officer.
Note:
^
Although financial materiality has been considered in the development of our Double Materiality Assessment (DMA), our DMA and any conclusions in this document as to the materiality
or significance of sustainability matters do not imply that all topics discussed there in are financially material to our business taken as a whole, and such topics may not significantly alter
the total mix of information available about our securities.
Our sustainability
strategy is a
testament to
our dedication to
creating A Better
Tomorrow™.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
67
Over the past decade, we have transformed our business
and made significant progress on our goals. However, Building
a Smokeless World is not without its roadblocks.
We believe that progressive, evidence-based regulation – supported
by meaningful enforcement – is the key to reducing smoking rates.
We seek to engage with public health authorities and regulators,
to support the development of policies and strategies that balance
Tobacco Harm Reduction objectives with key concerns, such as
underage access, environmental impacts and product safety.
We continue to transition towards a low
carbon economy by reducing our Scope 1
and 2 GHG emissions through improving
energy efficiencies and increasing
renewable energy use where available.
We also continue to engage suppliers
through our supplier enablement programme
to tackle Scope 3 GHG emissions.
In line with our climate transition efforts,
we continue to focus on responsible
sourcing practices and innovative product
design to reduce our carbon footprint.
For many years, our Global Leaf Agronomy
Development (GLAD) centre has worked
with our directly contracted farmers and
Leaf suppliers to promote improved
agricultural technologies and practices.
Adoption of technology in agriculture
is a core part of our nature strategy.
We are investing in AI-driven tools to
accelerate the analysis of agricultural data,
to help farmers increase yields, reduce
costs and minimise their environmental
impact.
Transitioning to a portfolio of Smokeless
products presents challenges, particularly
in relation to plastic waste.
Our focus is on prioritising the use of
materials that are sustainably produced
and have a lower carbon footprint.
Our corporate venturing arm, Btomorrow
Ventures (BTV), actively scouts for and
collaborates with startups to identify
sustainable materials as well as solutions
for waste reduction and resource recovery.
We intend to design our product portfolio
with circularity in mind and educate our
consumers on its value.
Our global footprint covers multiple supply
chains, from agriculture to electronics and
manufacturing.
We support our farmers to enhance their
livelihoods and build resilience, while keeping
in mind our ambition to transition to a
Smokeless World.
We seek to responsibly source materials
and respect the rights of our communities.
Our direct employees are an integral part of
our communities. We continue to build on
our culture so that everyone feels welcome
and valued for their unique contribution
at work.
Read more about NATURE
on page 86
+
Read more about CIRCULARITY
on page 94
+
CLIMATE
NATURE
CIRCULARITY
COMMUNITIES
Read more about THR
on page 72
+
Read more about CLIMATE
on page 78
+
Read more about COMMUNITIES
on page 102
+
THR
www.asmokelessworld.com
Omni
™ is an evidence-based
manifesto for change, which
captures BAT’s commitment
and progress towards
Building a Smokeless World
to create A Better
Tomorrow
™.
Find out more:
Refer to the BAT 'Reporting Criteria' for an
overview of our sustainability performance
data at bat.com/reporting
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
2024 Sustainability Highlights
68
THR
Notes:
1.
bat.com/commitment-to-responsible-vaping-products
2. ‘Mass-balance' is a principle that matches inputs (such as plastic waste) with outputs from a recycling or production process, to determine the recycled content (source: zerowasteeurope.eu/
wp-content/uploads/2021/05/rpa_2021_mass_balance_booklet-2.pdf).
3. See note 3 on p.111 for the definitions of Ethnically Diverse and Non-ethnically Diverse for the purposes of our International Pay Equity Analysis.
CLIMATE
NATURE
CIRCULARITY
COMMUNITIES
Launched Omni™, our evidence-based manifesto for change,
which captures our commitment and progress towards creating
A Better Tomorrow™ by Building a Smokeless World.
Updated our Responsible Marketing Principles (RMP) to reflect regulatory
developments, our product portfolio and stakeholder expectations.
Underlined our position on underage access, product safety and regulatory
enforcement through the publication of our ‘Commitment to Responsible
Vaping Products’
1.
Progressed towards our Scope 1 and 2 emission reduction targets. Energy
reduction initiatives and increasing the use of renewable fuels resulted in a
42.6% reduction in these emissions versus our 2020 baseline.
Reduced our total Scope 3 GHG emissions by 11% year-on-year. 23.5%
of our suppliers of purchased goods and services by spend have now set
Science Based Targets, an 8.5 percentage points increase versus 2023.
Submitted our Net Zero Greenhouse Gas (GHG) emissions targets for
validation to the Science Based Targets initiative (SBTi), in line with our
climate transition efforts.
Introduced a satellite monitoring system in Brazil to detect potential
deforestation or conversion cases by tracking forest cover changes
over time.
Developed a regenerative agriculture framework which will be piloted
in 2025. The framework includes a methodology for assessing and
prioritising local risks and the monitoring of progress on the regeneration
of the farmland ecosystem.
Achieved our 2025 target for reduction in water withdrawn in 2023,
two years ahead of schedule. We continue to work on maintaining
this target, achieving a 47.4% reduction in 2024 (versus our 2017 baseline).
Introduced and began testing a set of ecodesign principles, which will
provide insights to support the reduction of our environmental impacts
across the product life cycle.
Launched in France, Ireland, Denmark, Sweden and the UK, two variants of
Velo cans that were certified by the International Sustainability and Carbon
Certification (ISCC), for using bio-plastic or Post-Consumer Resin (PCR)
plastic through a mass-balance approach
2.
Partnered with a waste management company to pilot a collection
and recycling programme in Nottinghamshire in the UK for used
vapour products.
Revised our living income methodology to better represent living costs in
rural areas and are in the process of co-creating action plans with suppliers
to target key income drivers for farmers.
In response to our growing electronics supply chain, we continue to work
with the Responsible Business Alliance (RBA) as a Supporter Member. This
gives us access to the Responsible Mineral Initiative and RBA-approved
auditors who conduct on-site labour audits of our suppliers.
Maintained our year-on-year consistency in compensating men
and women within 1% of one another, as well as Ethnically Diverse
3 and
Non-ethnically Diverse
3 groups within 1% of one another for performing
the same work or work of equal value.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Tracking Progress
69
50% absolute reduction in Scope 1 and 2
GHG emissions by 2030 versus 2020
baseline
2
% change in emissions relative to baseline
0
-50 %
2022
2023
2024
-18.4%
-27.1%
-42.6%
50% of our revenue from Smokeless
products by 2035
% of revenue from Smokeless products
0
20%
2022
2023
2024
14.8%
16.5%
17.5%
50 million Smokeless product
consumers by 2030
1
Number of consumers
‡ (millions)
excluding Russia and Belarus
0
50
2022
2023
2024
22.3
25.5
29.1
30.3% absolute reduction in Scope 3
Forest, Land and Agriculture (FLAG) GHG
emissions by 2030 versus 2020 baseline
2
% change in emissions relative to baseline
+50
0
-30%
2021
2022
2023
18%
6%
-22%
42% absolute reduction in Scope 3
Industrial (non-FLAG) GHG emissions by
2030 versus 2020 baseline
2
% change in emissions relative to baseline
+50
0
-42%
2021
2022
2023
4%
2%
-9.8%
Deforestation and Conversion Free
tobacco supply chain by 2025
% wood used in our Thrive Supply Chain
3
with Deforestation and Conversion Free
(DCF) Status
0
100%
2022
2023
2024
95.5%
96.5%
98.5%
Deforestation Free pulp and paper
supply chain by 2025
% of pulp and paper materials sourced
with low risk of deforestation
0
100%
2023
2024
69.3%
86.3%
35% reduction in water withdrawn
by 2025 versus 2017 baseline
% reduction in water withdrawal relative
to base year
0
50%
2022
2023
2024
33%
39.2%
47.4%
25% reduction in waste
generated in own operations
by 2025 versus 2017 baseline
% reduction in operational
waste generated
0
40%
2022
2023
2024
21.3%
28.2%
31.0%
100% packaging to be reusable,
recyclable or compostable where
facilities exist by 2025
% of packaging reusable, recyclable
or compostable
0
100%
2022
2023
2024
92%
94%
97%
Aiming for zero child labour incidents
in our tobacco supply chain by 2025
% of incidents of child labour identified
and reported as resolved by end of the
growing season
0
100%
2022
2023
2024
100%
100%
100%
100% of product materials and higher-
risk indirect suppliers having an independent
labour audit within a three-year cycle by 2025
% suppliers undergoing labour
audits during the last three years
0
100%
2022
2023
2024
36.6%
58.8%
90.6%
Increase the proportion of women
on Senior Leadership
teams
‡ to 40%
by 2025
% female representation on Senior
Leadership teams
0
40%
2022
2023
2024
31.0%
33.6%
36.5%
Less than 1% of our operational waste
going to landfill by 2025
% of operational waste going to landfill
0
6%
2022
2023
2024
4.9%
1.8%
1.3%
Full compliance with marketing
regulations
Number of incidents of non-compliance
with marketing regulations resulting in a
fine or penalty
0
5
2022
2023
2024
2
3
2
‡ Find out more: Refer to the BAT
'Reporting Criteria' for an overview
of our sustainability performance data
at bat.com/reporting
+
Notes: 1. In 2024, we enhanced our reporting methodology by increasing the use of data obtained from consumer panels compared to estimations. In the prior year (2023) we reported 23.9 million
consumers. The restated value is 25.5 million consumers. Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting. 2. Compared to a 2020 baseline. Our near-term 2030
science-based targets comprise a 50% reduction in Scope 1 and 2 GHG emissions. The Scope 3 Industrial (non-FLAG) GHG emissions target includes purchased goods and services, upstream
transportation and distribution, use of sold products, and end-of-life treatment of sold products. The Scope 3 FLAG GHG emissions target includes FLAG emissions and removals. Combined, these
targets comprised 77% of Scope 3 emissions in 2020. Due to the complexity of consolidating Scope 3 data from our suppliers and value chain, we report Scope 3 data one year behind other metrics.
Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting. 3. Our ambitions cover all tobacco we purchase for our products (‘tobacco supply chain’); which is used in our
combustibles, Traditional Oral and Heated Products. Our metrics, however, derive data from our annual Thrive assessment, which includes our directly contracted farmers and those of our third-
party suppliers, which represented over 93% of the tobacco we purchased by volume in 2024 (‘Thrive Supply Chain’).
We have assessed our impact and financial
materiality in line with the evolution
of sustainability reporting.
Overview
We conducted our first DMA
^ in 2022, and in 2023,
expanded our DMA in line with reporting best practices
at the time. This consisted of a nested approach, which
articulated three dimensions of impact:
Outward impact:
Our impact on environment, society and
governance-related topics;
Inward impact:
The impact of these topics on the Group; and
Financial materiality:
The understanding of risks and opportunities
posed by these topics on the Group's financial
position.
2023 Double Materiality Assessment
The results of our 2023 assessment identified that
11 topics are material^ to BAT. These are:
– Tobacco Harm Reduction
– Climate Change
– Circular Economy
– Human Rights
– Biodiversity and Ecosystems
– Water
– Employees, Diversity and Culture
– Farmer Livelihoods and Community
– Supplier Engagement
– Marketing and Communications
– Ethics and Integrity
The topics form the basis of our current reporting.
2024 Double Materiality Assessment
In 2024, we enhanced our DMA, to prepare for EU
Corporate Sustainability Reporting Directive (CSRD)
reporting in 2026, in relation to year-end 2025.
As part of the process, we mapped our value chain
components, including:
– Own operations;
– Upstream (Leaf and procurement of goods and
services); and
– Downstream (Warehousing and Trade Marketing
and Distribution).
These are the basis for identifying and assessing the
business impacts, risks and opportunities (IROs)
connected with our products, services and business
relationships.
A scoring framework was applied to determine the
IROs' materiality. These were validated with internal
and external stakeholders.
Our material IROs are the basis of the information we
intend to report on in our first CSRD Report.
We are in the process of identifying the relevant
disclosure requirements and data points under CSRD
and will continue to work towards compliance.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
Double Materiality Assessment
^
70
Our approach to sustainability reporting
In 2024 we further enhanced our Double Materiality Assessment (DMA)
with reference to the latest available European Sustainability Reporting
Standards (ESRS) at the time.
As we prepare for CSRD reporting we have continued to report with
reference to other relevant frameworks, such as:
– Global Reporting Initiative (GRI);
– Sustainability Accounting Standard Board (SASB);
– Sustainable Finance Disclosure Regulation (SFDR) Principal Adverse
Impacts (PAI);
– Task Force on Climate-related Financial Disclosures (TCFD); and
– Taskforce on Nature-related Financial Disclosures (TNFD).
@For the year ended 31 December, 2024 KPMG has conducted external
limited assurance of our key sustainability metrics in accordance with
international standards ISAE (UK) 3000 and ISAE 3410. Their
independent limited assurance report for these sustainability metrics
is available on page 154.@
Our sustainability
performance
highlights our
progress, including
both areas of
success and of
future strategic
impact.
Giulia Scanferla
Head of Sustainability Regulatory Reporting
Note:
^
Although financial materiality has been considered in the development of
our Double Materiality Assessment (DMA), our DMA and any conclusions
in this document as to the materiality or significance of sustainability
matters do not imply that all topics discussed therein are financially
material to our business taken as a whole, and such topics may not
significantly alter the total mix of information available about our securities.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
71
What is a Double Materiality
Assessment?
A sustainability materiality
assessment is a formal process
through which a company identifies,
assesses, and prioritises
sustainability topics.
Recently, various standard setters and
regulatory bodies have refined the
concept of sustainability materiality.
The International Sustainability
Standard Board (ISSB) applies a 'single
materiality' approach whereas CSRD
requires a 'double materiality'
approach.
Double materiality acknowledges that
businesses should assess both the
risks and opportunities linked to
sustainability topics that can influence
enterprise value creation and a
company’s impact on the environment
and society.
2023 DMA Material Topics
Double Materiality Matrix
Impact Areas
Harm Reduction
Marketing & Communications
Climate Change
Water
Biodiversity & Ecosystems
Circular Economy
Employees, Diversity & Culture
Human Rights
Supplier Engagement
Farmer Livelihoods & Communities
Note:
*
Ethics & Integrity is a core commitment under the
Sustainable Future pillar of our corporate strategy.
THR
CLIMATE
NATURE
CIRCULARITY
COMMUNITIES
2023 DMA Materiality Dimensions
Impact materiality
BAT’s impact on health,
environment, society and
governance-related topics
Financial materiality
Financial impact of health,
environment, society and
governance-related topics
on BAT
BAT Annual Report and Form 20-F 2024
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Other Information
72
IMPACT AREA
THR
GLOBAL CHALLENGE
Tobacco Harm Reduction
acceptance is not
without roadblocks.
Achieving our THR ambition requires changes in consumer
behaviour and in society itself, particularly regarding
regulations and public health policies.
This involves access to new markets that currently do not
allow for Smokeless products and working towards the
acceptance of THR.
Sweden: Soon to be Europe’s First
‘Smoke-free’ Country
The widespread adoption of oral nicotine products and
snus in Sweden has helped reduce smoking rates among
people over 16 from 15% in 2008 to 5.3% in 2024.
1
The World Health Organization (WHO) considers countries
to be smoke-free when smoking prevalence is less than 5% of
the population.
2 Making these products more widely available
could help achieve similar outcomes in other countries.
In 2024, we published the findings from a multi-year study
by our Research and Science teams. The results
contributed to the weight of evidence that our Velo nicotine
pouches should be considered as a reduced-risk
*†
alternative product compared to traditional cigarettes.
3
An additional study tested the toxicological impact of Velo
pouches containing different flavours and nicotine
strength, and showed no increase in the adverse impact on
cells further underscoring the reduced-risk profile of Velo
pouches relative to cigarettes.
4
A Global THR Leader
Following in the footsteps of Sweden,
New Zealand is also on the verge of
becoming smoke-free by 2025. This success
can be attributed to the government’s pragmatic
endorsement of Vapour products, alongside
regulations to prevent underage access.
In New Zealand, the introduction of Vapour
products is associated with a decrease in the daily
smoking rate, which dropped to 6.9% in 2023/24.
5
With smoking rates so low, ASH New Zealand
says the country remains on track to reach its
2025 smoke-free goal of less than 5%.
6
Investing in research
and development to
contribute to THR
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LOCAL ACTIONS
73
Sweden has
demonstrated that
Tobacco Harm
Reduction can be
accelerated
through providing
smokers access
to Smokeless
products.
Asli Ertonguc
Area Director,Western Europe
Go online to learn
more about our approach
to sustainability
bat.com/sustainability-
and-esg
Notes:
1.
Swedish Government Statistics. Available at: fohm-
app.folkhalsomyndigheten.se/Folkhalsodata/pxweb/sv/A_Folkhalsodata/
A_Folkhalsodata__B_HLV__aLevvanor__aagLevvanortobak/hlv1tobcfod.px/
2. World Health Organization, Tobacco-free generations: Protecting children
from tobacco in the WHO European Region. 2017. Available at:
www.who.int/europe/publications/m/item/tobacco-free-generations---
protecting-children-from-tobacco-in-the-who-european-region#
3. www.sciencedirect.com/science/article/pii/S1383571824000147?via%3Dihub
4. www.sciencedirect.com/science/article/pii/S2214750021000317?via%3Dihub
5. www.health.govt.nz/publications/annual-update-of-key-results-202324-
new-zealand-health-survey
6. www.ash.org.nz/
smoking_rate_continues_record_decline_to_only_6_8_daily_use_m_ori_an
d_pacific_rates_are_also_reduced
*
Based on the weight of evidence and assuming a complete switch from
cigarette smoking. These products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and
Camel Snus, are subject to FDA regulation and no reduced-risk claims
will be made as to these products without agency clearance.
<5%
WHO considers countries to be smoke-free
when smoking prevalence is less than 5%
2
New Zealand’s case
illustrates how regulation
can drive THR.
Peter Simmons
Area Director, APMEA South & GM Australia
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Sustainable Future
Our Tobacco Harm Reduction ambition
74
OUR AMBITION
Migrating adult
smokers from
cigarettes to
Smokeless products.
To begin with, we are very clear that Smokeless
products are not risk-free.
The best choice any adult smoker can make will always
be quitting combustible tobacco products completely.
Yet many do not.
We believe that progressive, evidence-based regulation
– supported by meaningful enforcement – is the key to
reducing smoking rates.
We seek to engage with public health authorities and
regulators, to support the development of policies and
strategies that balance THR objectives with key
concerns, such as underage access, environmental
impacts and product safety.
Scientific engagement
is vital now more than ever.
The science behind Smokeless
products is what
will guide regulation,
and support wider
acceptance of
Tobacco Harm
Reduction.
Dr Elaine Round
Group Head of Life Sciences
Migrating smokers to Smokeless products.
We invest more than £300 million a year in the research and development
of Smokeless products. We continue to enhance our capabilities while
collaborating with researchers around the globe.
Our multidisciplinary team of scientists make sure all our products meet high
quality standards in line with our Product Stewardship Framework and our
Group Quality Policy Statement, which set out our approach to developing
and manufacturing our products responsibly and formalise how we strive to
deliver high-quality products.
Our Global Toxicology team conducts in-depth toxicological and safety risk
assessments of the ingredients and materials we use to ensure that they
meet the standards required to bring our products to market.
Read more about our policies
and procedures on pages 116 to 117
+
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Other Information
How we’ll get there
75
Learn more about THR strategy
at asmokelessworld.com/gb/en
+
Ambitions:
50% of our revenue
from Smokeless
products by 2035
50m consumers
‡
of our Smokeless
products by 2030
Notes:
*
Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products
without agency clearance.
1.
Royal College of Physicians. E-cigarettes and harm reduction: An evidence review. RCP, 2024. Available at: www.rcp.ac.uk/policy-and-campaigns/policy-documents/e-cigarettes-and-
harm-reduction-an-evidence-review
‡ Find out more:
Refer to the BAT 'Reporting Criteria'
for a full description of key terms
and definitions at bat.com/reporting
+
An illustrative model of Tobacco Harm Reduction (THR) potential
The concept of THR aims to mitigate the adverse health effects associated with continued smoking by encouraging adult smokers who
will not otherwise quit to switch completely to reduced-risk
*† alternatives
1. It offers such smokers a method of using non-combustible
forms of tobacco and nicotine with the potential to lower an individual’s disease risk, resulting in a net public health benefit.
Making a Smokeless World a reality
In 2024, we set out our vision to Build a
Smokeless World by introducing Omni™,
a progress summary of our efforts to
create A Better Tomorrow™.
Omni™ openly addresses the big questions
facing our organisation and provides an
overview of the science supporting our
Smokeless products. It also summarises
the global THR evidence base compiled
over the last decade.
We published our 'Commitment to
Responsible Vaping Products', containing
new and ambitious goals to address
legitimate stakeholder concerns about
underage access, product safety and
environmental impact.
Backing the role of
appropriate regulation
Appropriate regulation, transparency, and
accountability are essential for Smokeless
products to reach their full potential.
A balanced approach that factors in views
of all stakeholders – including those of BAT –
and the latest body of evidence is key.
Scientific rigour and due diligence
Our research in Smokeless products
not only focuses on the compliance of our
products with all relevant regulations where
they are sold, it also contributes valuable
data to the scientific community.
Our studies follow standardised regulatory-
endorsed methodologies where those
exist, in line with requisite quality standards
and practices (e.g. good laboratory practice
and good clinical practice), and where
possible, are conducted through third-
party contract research organisations.
Putting our expertise to work
With consumer insights and significant
investments in science and R&D, we strive
to deliver innovations that anticipate and
satisfy consumer preferences.
We collaborate with external partners and
our corporate venturing arm, Btomorrow
Ventures (BTV), to gain access to emerging
technologies and trends.
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Sustainable Future
What we're doing
76
Case study
Commitment to responsible
vaping products
We have published a series of ambitions, supported by evidence-
based solutions for our Vapour devices.
Our efforts include the prevention of underage access and
appeal through our responsible approach to flavours and
marketing, as well as the introduction of device features.
We have set clear targets for the increased implementation of
age-gating technologies and accidental use restriction features.
By the end of 2026, we aim to offer at least one vapour system
with age verification technology in markets that collectively make
up at least 80% of our global net turnover for Vapour products.
Learn more at bat.com/content/dam/batcom/global/news-and-
features/2024/october/bat-publishes-new-industry-leading-
ambitions-for-responsible-vaping/bats-commitment-to-
responsible-vaping-products.pdf
+
Our commitment to THR through the development, scientific
assessment and commercialisation of our Smokeless products.
Summary of progress towards our ambitions
0
10
20
30
40
50
50% of revenue from Smokeless
products by 2035
2023
In 2024, revenue from our Smokeless
products accounted for 17.5% of Group
revenue.
2024
16.5%
17.5%
Target
0
10
20
30
40
50
50m consumers of Smokeless
products by 2030
2023
We continue to make progress towards
our target of 50 million adult consumers
of our Smokeless products by 2030,
adding another 3.6 million in 2024 to
a total of 29.1 million.
2024
25.5
29.1
Target
BTV has recently invested in a human
technology company, that develops
advanced systems to replicate disease
states and human responses to
therapeutics. Its technology is designed to
facilitate the acceleration of drug discovery
and reduce the need for animal studies.
In 2024, we attended more than
60 conferences, presenting on the science
behind our Smokeless products. These
conferences ranged from large general
conferences on toxicology to more
specialist events on nicotine and tobacco
science. We also ensure that the research
and content we share at conferences is
accessible to the public via our dedicated
website, bat-science.com.
More than 270 peer-reviewed papers have
been published in a range of global journals
about our Smokeless products.
Read more about our research and
scientific engagement in the Omni
TM
at asmokelessworld.com/gb/en
+
Our Responsible
Marketing Principles
Our International Marketing Principles
were updated and renamed Responsible
Marketing Principles (RMP).
Our approach to responsible marketing
is governed by our RMP and Responsible
Marketing Code (RMC). They apply to all
BAT entities and marketing suppliers as
appropriate to local conditions. These
principles emphasise responsible
marketing, which is accurate and adult-
targeted and may be stricter than local
law requires.
Our RMP, RMC and supporting guidelines
govern how we market our products,
with a particular focus on designing
products strictly for adult smokers
and nicotine consumers.
Topics included UAP, mandatory health
warnings and digital marketing content.
The RMP and RMC are underpinned by
detailed guidelines and toolkits to facilitate
their consistent application.
2
Processes are in place for reviewing
and approving marketing content to
facilitate compliance with both our
standards and local laws.
Reporting and resolving incidents
of non-compliance
Any allegations of non-compliance are
managed and escalated by the relevant
market. Regional Heads of Legal report any
relevant findings to the Regional Audit
Committee and remediation actions are
implemented, as appropriate.
In 2024, we identified two incidents of
non-compliance with local marketing
regulations resulting in a fine or penalty
and zero incidents of non-compliance with
local regulations resulting in a regulatory
warning.
3
Marketing in a digital age
We only use social media where the
audience is predominantly adult.
We do not use open social media for our
combustibles brands.
Where we use social media partnerships
to promote Smokeless products, we only
select third-parties whose audience is
predominately adult.
Our e-commerce and social media channels
must also adhere to the requirements set out
in the RMP and RMC.
Our Digital Confidence Unit (DCU) is
dedicated to monitoring social media
content 24/7 for compliance and
reputational management purposes.
To provide oversight, the team reviews our
social media posts to check for compliance
with the RMP and RMC.
The DCU engages with markets, as
appropriate, to swiftly remediate any
incidents identified.
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77
What’s Next
Expanding our Smokeless products
capabilities.
– Exploring innovative methods to
assess health risks and the harm
reduction potential of from
Smokeless products.
– Leveraging Omni™ to further
engage with stakeholders, including
scientists, public health authorities,
regulators, policy makers, and
investors.
– Continuing to collaborate with
stakeholders on the public health
opportunities of THR.
‡ Definitions:
Smokeless products: Refers to our Heated
Products, Modern Oral, Traditional Oral and Vapour
categories.
Notes:
1.
TruAge™, Available at: www.mytruage.org/
2. BAT, Responsible Marketing Principles and Code available here: www.bat.com/sustainability-and-esg/governance-and-
ethics/marketing-our-products-responsibly
3. Incidents of non-compliance with regulations that result in warning or in fine or penalty are dealt with at End Market
level. To collect the 'Incidents of non-compliance with regulations resulting in warning/fine or penalty' compliance data,
the local teams are asked to report any instances or potential instances of breach, which may include allegations of
inappropriate marketing, or investigations regarding marketing non-compliance that they are aware of in their market.
Incidents are only reported here when a fine or warning is issued.
Case study
Setting standards for retailers
We have Underage Access Prevention (UAP) programmes in place to help prevent our
products from being accessed by or sold, whether through BAT or any third-party
business entity with whom we have a customer relationship.
We engage with our third-party retail customers and distributors to adhere to the
Group’s responsible marketing standards.
For example, in the U.S., we support TruAge™, a digital ID check solution that enhances
current age-verification systems while protecting consumer privacy.
1 The TruAge™
programme is available free of charge to help retailers comply with our contractual
age-verification requirements.
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78
CLIMATE
GLOBAL CHALLENGE
Climate change is causing
unpredictable and
extreme weather events.
With unpredictable weather systems and rising sea levels
becoming a feature of our times, there is an urgent need
to address climate change.
Current pledges to meet the 1.5°C warming target, set as part
of the Paris Agreement in 2015, are significantly off course,
which could result in irreversible damage to our ecosystems.
IMPACT AREA
Collaborating
to decarbonise
our value chain.
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LOCAL ACTIONS
79
Supplier
collaboration
is critical for
achieving
our Scope 3
reduction
target.
Supplier Sustainability Summits
In 2024, our collaborative efforts expanded further to
a series of sustainability summits in China, South Africa,
and the U.S.
Each summit included panel discussions and interactive
workshops with external organisations, including
academia and industry specialists. Best practice
was shared and common commitments agreed to.
These summits strengthened collaboration and
capabilities to embed sustainable practices across
the value chain.
Specifically, the Asia Summit included more than
180 suppliers. An awards ceremony was held to
recognise individual suppliers’ commitment to, and
progress on, their sustainable practices.
The Supplier Sustainability Advisory Council was
established, and will be chaired by BAT. Meeting
quarterly, the council aims to facilitate the sharing
of common challenges and opportunities.
During the Bangladesh summit in 2023, suppliers signed
pledges aligned to our Group sustainability
commitments. They also received technical assistance
in the area of their energy management, which led to
the reduction of our Scope 3 emissions.
Decarbonising our operations
in Germany
During 2024, BAT Germany’s manufacturing
site continued to progress with its
decarbonisation roadmap, which included:
–Using SURE-certified fuel
1 from waste wood,
–Expanding on-site solar photovoltaics
(PV) system,
–Implementing ongoing energy efficiency
measures,
–Maintaining renewable electricity purchases; and
–Reducing use of natural gas by installing
an on-site biomass boiler.
Specifically, the biomass boiler has reduced
CO2e emissions by approximately 1,900 tonnes
per annum, a 41% reduction versus
2020 baseline.
52% of the site’s total energy consumption
now comes from renewable sources, and will
result in circa £0.7 million savings per annum
in fuel costs.
John O'Reilly
Group Head of Procurement Strategy
and Sustainability
Go online to learn
more about our approach
to sustainability at
bat.com/sustainability-
and-esg
Note:
1.
The certification system SURE (SUSTAINABLE RESOURCES Verification
Scheme) is a voluntary certification system and was developed for the
production, supply and processing chains of solid and gaseous biofuels
according to the requirements of the EU Renewable Energy Directive
recast (RED II).
BAT Germany’s energy consumption (GWh)
0
60
2020
2024
49.8
35.7
BAT Germany’s scope 1 and 2 (Market-based)
GHG emissions (tCO2e)
0
12,000
2020
2024
11,396
6,730
BAT Germany’s direct energy source in 2024
versus 2020
0%
100%
2020
2024
Renewable energy use
Non-renewable energy use
16%
52%
84%
48%
>180
suppliers included in the Asia Summit
to embed sustainable practices across
their value chain.
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Sustainable Future
Our Climate ambition
80
OUR AMBITION
Transitioning towards
a low carbon economy.
The transformation of our own operations and those
of our suppliers is a critical part of working towards
achieving our science-based emissions reduction
targets, in line with Paris Climate Agreement goals.
Across products and operations, we rely on natural
resources such as timber, soil and water.
That means we are affected by, and therefore dedicate
efforts to manage our impacts on climate change.
Investing
in sustainable
technologies
and fostering
partnerships are
essential to deliver
a low-carbon
economy.
Melissa Darby
Head of Environmental Policy
Our Group's climate change initiatives are guided
by our Low Carbon Transition Plan and Environment
Policy, supported by our Climate Change and
Energy Standard.
Our near-term 2030 Science-Based Targets (SBTs) are in line with a 1.5°C
warming pathway and supported by a range of commitments across energy,
waste, water and biodiversity.
In 2024, we submitted our Net Zero GHG emissions targets to the Science Based
Targets Initiative (SBTi).
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How we’ll get there
81
Targets:
50% absolute
reduction in Scope 1
and 2 GHG emissions
by 2030 (versus 2020
baseline)
1
– in line with a 1.5°C
warming pathway
30.3% absolute
reduction in Scope 3
Forest, Land and
Agriculture (FLAG)
GHG emissions by
2030 (versus 2020
baseline)
1
– submitted to SBTi for
validation as 1.5°C-aligned
in September 2024
42% absolute
reduction in Scope 3
Industrial (non-FLAG)
GHG emissions by
2030 (versus 2020
baseline)
1
– submitted to SBTi for
validation as 1.5°C-aligned
in September 2024
50% renewable
energy use by 2030
Note:
1.
Compared to a 2020 baseline. Our near-term 2030 science-based targets comprise a 50% reduction in Scope 1 and 2 GHG emissions. The Scope 3 Industrial (non-FLAG) GHG emissions
target includes purchased goods and services, upstream transportation and distribution, use of sold products, and end-of-life treatment of sold products. The Scope 3 FLAG GHG
emissions target includes FLAG emissions and removals. Combined, these targets comprised 77% of Scope 3 emissions in 2020. Due to the complexity of consolidating Scope 3 data
from our suppliers and value chain, we report Scope 3 data one year behind other metrics. Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting.
Reducing GHG emissions
in our operations (Scope 1 and 2)
Site-specific decarbonisation
roadmaps and investment in
energy-efficiency projects
Renewable energy sourcing
through power purchase
agreements and on-site
renewable energy generation
Roll-out of electric and hybrid
vehicles in our fleet
Reducing GHG emissions
in our value chain (Scope 3)
Implementing carbon-smart
farming and curing efficiency
Designing for end-of-life
Increasing use of less carbon
intensive materials
Working with direct and
indirect suppliers to reduce
their emissions
7
6
5
4
3
2
50%
reduction
in Scope 1&2
GHG emissions
1
30.3%
reduction in
Scope 3 FLAG
GHG emissions
1
42%
reduction in
Scope 3 Industrial
(Non-FLAG)
GHG emissions
1
50%
renewable
energy in
direct energy
use
Find out more:
Refer to the BAT 'Reporting Criteria'
for a full description of key terms
and definitions at bat.com/reporting
+
Working towards Net Zero across
our value chain by 2050.
2023 emissions footprint*
(000’s tonnes CO2e)
2023 Scope 3 breakdown
(000’s tonnes CO2e)
Scope 1
299
Scope 2
95
Scope 3
FLAG
481
Scope 3
Non-FLAG
4,997
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Sustainable Future
What we’re doing
82
(000’s tonnes CO2e)
a
Category 1: Purchased Goods
1,768
b
Category 1: Purchased Services
1,117
d
Category 1: Purchased Tobacco Leaf
678
j
Category 2: Capital Goods
81
g
Category 3: Fuel and Energy Related
Emissions
176
e
Category 4: Upstream
Transportation and Distribution
308
m Category 5: Waste Generated in
Operations
3
i
Category 6: Business Travel
87
k
Category 7: Employee Commuting
62
l
Category 9: Downstream transportation
and Distribution
16
f
Category 11: Use of Sold Products
225
h
Category 12: End-of-Life Treatment
of Sold Products
142
n
Category 14: Franchises
1
c
Category 15: Investments
815
000’s tonnes CO2e
70
140
210
280
350
420
490
Scope 1
2020
baseline
We continue to reduce our Scope 1
emissions through:
– Targeted energy efficiency investments
across our operations,
– Optimisation of our vehicle fleet routes;
and
– Replacing carbon intensive assets with
lower carbon alternatives.
2022
2023
2024
Scope 2
(market-
based)
2020
baseline
We continue to reduce Scope 2
emissions by:
– Lowering our energy consumption,
– Procuring renewable energy; and
– Increasing on-site renewable energy
generation.
2022
2023
2024
000’s tonnes CO2e
1,000
2,000
3,000
4,000
5,000
6,000
7,000
We continue to reduce our Scope 3
emissions and in 2024, we submitted two
new near-term Scope 3 targets to the
Science Based Targets Initiative (SBTi)
for validation:
– Forest, Land and Agricultural (FLAG)
target covering emissions related to the
land sector.
– Industrial (non-FLAG) target covering
all other relevant emissions. Prior year
numbers have been restated accordingly.
Scope 3
2020
baseline
2021
2022
2023
342
329
299
237
199
113
95
74
5,306
5,471
5,534
4,997
576
726
621
481
Scope 1
Scope 2
Scope 3
FLAG emissions
Industrial (Non-FLAG) emissions
a
e
f
h
k
b
c
d
g
j
i
mn
l
Note:
*
These are 2023 numbers. Due to the complexity of consolidating Scope 3 data from our suppliers and value chain,
we report Scope 3 data one year behind other metrics.
Delivering on Decarbonisation
In 2024, the Group discontinued its
carbon-neutral operations target, instead
focusing investments in absolute emission
reductions, and towards achieving Net Zero.
We invested a further £19 million in
emission and energy reduction initiatives
across 63% of our operations sites.
Once completed, we expect these
initiatives to reduce absolute Scope 1 and
Scope 2 emissions by approximately 27,000
tonnes of CO2e per annum.
After successfully installing biomass boilers
in South Korea and Germany in 2023,
similar installations have been completed
in 2024 at our facility in Croatia. We expect
this installation to reduce CO2e emissions
by 2,160 tonnes per annum.
We continue to deploy our 10 Golden Rules
Programme, which aims to standardise
energy efficiency practices across all
our sites.
In 2024, 32% of our manufacturing sites
implemented the programme, up from 20%
in 2023.
For example, the factory in Malang,
Indonesia fully adopted the Programme,
which resulted in a 76% reduction in Scope
1 and 2 emissions against its 2020 baseline.
Renewable Energy
We have a target across our direct
operations to use 50% renewable energy
by 2030.
1
In 2024, 45.1% of our direct energy usage
came from renewable sources such as
renewable electricity (both purchased and
generated on-site), sustainable biomass
and biogas. This represents an increase
of 7 percentage points from 2023. 36 of
our operations sites are now purchasing
100% renewable electricity.
On-site solar panels were installed in
Bangladesh, Papua New Guinea, Serbia, Fiji
and Solomon Islands, and are now in place
at 30 operations sites (51% out of all
operations sites).
BAT Türkiye switched to 100% renewable
electricity, with its large-scale 6.5 MWp
off-site solar power plant. The plant
provides energy for our local operations,
and contributes to the national grid.
In addition, BAT Poland entered into a
multi-year Power Purchase Agreement
(PPA) for solar energy. This will supply over
12GWh of renewable electricity annually,
equivalent to approximately 30% of the
factory’s electricity consumption in
the country.
Reducing Fleet Emissions
The Green Mobility Standard outlines
our strategy for reducing fleet-related
emissions. It sets out initiatives such as
optimising travel routes to enhance fuel
efficiency and switching to lower-
emissions vehicles.
In 2024, our vehicle fleet accounted for
roughly 22%
of our Scope 1 and 2
emissions.
2 Our combined absolute Scope 1
and 2 fleet emissions reduced year-on-year
by 9.4% and a further 26% versus our 2020
baseline.
45.1%
renewable energy use
across our own operations in 2024
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83
Case study
Trialling Sustainable Fuel
with Low-Carbon Innovations
One way of achieving emissions reductions in the transport
sector is to use sustainable fuels. These are synthetic or bio-
based alternatives to fossil fuels that are made from renewable
sources, for example waste cooking oils. Sustainable Aviation
Fuel (SAF) can reduce CO2e emissions by up to 80% compared
to conventional jet fuel.
3
In 2024, we launched our first-ever trial using SAF with Yusen
Logistics, one of our key freight forwarding companies, followed
by a trial with Kuehne+Nagel (KN). Throughout the year, we also
conducted trials on Marine Biofuel with our key Marine Carriers
including CMA CGM, Orient Overseas Container Line (OOCL)
and Ocean Network Express (ONE). Our first road trial using
hydrogenated vegetable oil (HVO) began in 2024 with H.Essers
and has been successful thus far.
Challenges remain around these innovative alternatives,
including the accounting of emissions reductions, limited
feedstock availability and high cost of production. However,
we intend to continue to explore sustainable fuel use cases
and conduct further assessments in 2025.
Sustainable fuel trial with Marine Carrier, OOCL.
Notes:
1.
Renewable energy includes: Energy generated from renewable fuels at our sites (e.g. wood fuel, biomass fuels) and in fleet vehicles, owned or leased (e.g. biodiesel); Purchased renewable
electricity, hot water and steam; and Renewable energy generated on site using non-fuel technology (e.g. with photovoltaic installations or solar water heaters).
2. In 2023, our vehicle fleet accounted for roughly 21% of our Scope and Scope 2 metrics.
3. www.iata.org/en/programs/sustainability/sustainable-aviation-fuels/
Collaborating with Tobacco Farmers
In 2021, the Group set a Scope 3 target to
reduce emissions by 50% by 2030, aligning
with the Paris Agreement and SBTi guidelines.
The SBTi's recent methodology change
now requires separate reporting for
Scope 3 FLAG and non-FLAG emissions,
prompting the Group to recalibrate its
targets while maintaining its 1.5°C
commitment.
As a result, in 2024, we submitted FLAG
emission targets to the SBTi for validation.
FLAG targets cover emissions that are
related to the land sector and complement
our industrial (Non-FLAG) emissions.
Find out more about our FLAG emissions
in our TCFD Report
+
Purchased tobacco accounted for around
12% of our total Scope 3 GHG emissions,
contributing 678 thousand tonnes of CO2e
in 2023.
In our tobacco supply chain, the majority of
FLAG emissions are attributed to fertiliser
use, while non-FLAG emissions primarily
arise from fuels used in the tobacco curing
process. We aim to increase the use of less
carbon intensive fuels in the tobacco curing
process by incorporating renewable
alternatives such as biomass.
To date, more than 87% of our leaf volume
is cured with renewable fuels and methods.
The Group's own Leaf Operations and its
directly contracted farmers have
eliminated the use of coal for tobacco
curing. The use of coal for tobacco curing
across our tobacco supply chain has also
reduced from 3.3% in 2023 to 2.3% in 2024,
representing supplier-purchased tobacco
volumes.
We seek to help farmers reduce
emissions by implementing regenerative
agriculture practices and ‘carbon-smart’
farming practices.
Carbon-smart farming is focused on both
reducing emissions from tobacco farming
and harnessing agriculture’s potential to
remove carbon from the atmosphere.
This can be accomplished through
conservation practices such as minimum
tillage that keep the soil covered to minimise
disturbance and reduce the possibility of
stored carbon from being released. These
practices are being implemented
throughout the Group’s own Leaf
Operations in Brazil, Bangladesh, Mexico,
and Pakistan, which account for our highest
volumes of directly contracted tobacco.
87%
of our Leaf volume is cured with
renewable fuels and methods
BAT Annual Report and Form 20-F 2024
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Sustainable Future
What we’re doing
Continued
84
Working with Direct and Indirect
Suppliers to Tackle Scope 3 Emissions
Our Supplier Code of Conduct (SCoC)
applies to all our suppliers and sets out
the actions that we expect them to take
regarding climate change and other
environmental topics.
We evaluate climate-related criteria during
procurement sourcing events, and as part
of our Supplier Climate Enablement
programme, assessing ongoing
performance against climate KPIs.
Performance updates are provided to the
Operations Sustainability Forum which has
oversight of our supplier emission
performance.
Emissions reduction is embedded
throughout each phase of our supplier life
cycle management and covers around
26,000 direct and indirect suppliers.
Their emissions account for around 50%
of our Scope 3 inventory, approximately
2,900,000 tonnes of CO2e in 2023.
Interactions with our suppliers include
sourcing events, the CDP Supply Chain
programme, and direct one-on-one
engagements via our supplier
enablement programme.
We also support suppliers to enhance their
standards by sharing data, and encourage
them to set Science-Based Targets (SBTs).
Response Rate for CDP
Supply Chain programme
BAT
CDP Global
Average
We invited 726 suppliers representing
74.5% of our purchased goods and services
emissions, to respond to the CDP Supply
Chain programme.
1
We recorded a 94% response rate,
2 which
is above the global average CDP response
rate of 40%.
Data collected through the programme
enables us to better understand our
suppliers’ progress on emissions reductions
and prioritise our own actions, informing
our Supplier Climate Enablement
programme.
In 2024, our Supplier Climate Enablement
Programme further extended its scope
from 60 of our top CO2e emitting suppliers
in 2023 to 150.
The Programme’s expansion was driven by
the training of procurement colleagues on
incorporating climate discussions into
regular supplier engagement.
Our target for 20% of our purchased goods
and services suppliers by spend to have set
SBTs by 2025, has been achieved one year
in advance.
By year-end 2024, 23.5% of suppliers had
SBTs in place, and an additional 17.3% have
committed to setting them.
We will continue to monitor and
report progress.
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85
Case study
Decarbonising our Operations in Vietnam
BAT Vietnam has focused on reducing
its carbon footprint in three areas:
Energy consumption is managed through
process automation and machine capacity
optimisation, including reconfiguring and
relocating equipment at its sites. This has
been complemented by switching to
renewables, including electric, biomass,
and solar energy sources, to power a
growing number of our activities such as
boilers, factory lighting, and car fleet.
2024 performance included a 61%
reduction in Scope 1 and 2 emissions
versus a 2020 baseline, sourcing 85%
renewable energy, with 100%
of electricity used for operational sites
from renewable sources.
Improving energy efficiency,
Increasing use of renewable energy; and
Investing in innovative technologies.
What’s Next
In 2025, we intend to update our
Low Carbon Transition Plan:
– Detailing mitigation targets,
actionable steps, and the approach
to embedding our climate ambition
into governance.
– Continuing to reduce our Scope 1
and 2 emissions by further
increasing renewable electricity
procurement where feasible.
– Improving our Scope 3 data through
supplier engagement and CDP
information.
94%
40%
Notes:
1.
This is a 21% increase compared to 2023.
2. Excluding Russia and Belarus. More details about changes to the Group related to Russia and Belarus are available on page 339
of this document.
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86
NATURE
GLOBAL CHALLENGE
Habitat destruction
accelerates the
extinction of species.
Biodiversity is critical for thriving ecosystems.
However, climate change and habitat destruction are
accelerating biodiversity loss, threatening ecosystems’
stability and resilience.
Protecting biodiversity is essential to maintaining the
health of our planet and ensuring the survival of species.
IMPACT AREA
Supporting local
communities
and nature
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LOCAL ACTIONS
87
Reforestation and water
security in Bangladesh
On World Environment Day, in 2024, BAT
Bangladesh distributed over 5 million saplings
nationwide as part of its “Bonayan” initiative.
Now, in its 44
th year, “Bonayan” is a reforestation
and afforestation initiative, aimed at addressing
deforestation, and enhancing biodiversity by
supporting the restoration of Bangladesh’s natural
heritage and promoting sustainable development
practices.
The initiative also provides local communities with
additional income sources and resources, fostering
economic development.
“Probaho”, established in 2009, is a private sector
initiative addressing critical water issues, including
contamination and scarcity. The initiative provides
more than 620,000 litres of water daily to
over 310,000 people across 25 districts in Bangladesh.
With an average depth of 50 metres, the water
is extracted, pumped, and filtered from over
120 water units.
Restoring landscapes in Kenya
‘Kijani’ (meaning leaf) is BAT Kenya’s
afforestation programme.
This work contributes to the conservation
of indigenous trees and the restoration of
degraded landscapes.
For example, in 2024, in collaboration with
local communities and national stakeholders,
approximately 300,000 saplings were
distributed in the Mount Elgon National Park
and 110,000 saplings in other conservation
sites across Kenya.
We must strive to
preserve natural resources
for future generations.
Harriet Rwanda
Manager, Leaf Sustainability
Go online to learn
more about our approach
to sustainability
bat.com/sustainability-
and-esg
The Bonayan
programme
has enabled
me to generate
additional
income that
has enriched
my livelihood.
Mr. Abdul Mannan
Beneficiary of the Bonayan programme
+5m
fuelwood, timber, fruits and
medicinal plant seedlings were
distributed across Bangladesh via
our Bonayan programme in 2024
300,000
saplings distributed in the Mount Elgon
National Park
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Sustainable Future
Our Nature ambition
88
OUR AMBITION
Contributing to a
Nature Positive
1 future.
We endeavour to manage our impacts on nature, and
to improve our resilience to environmental degradation.
We aim to mitigate nature loss and have made a series
of commitments to protect, restore and replenish nature.
Our business operations, including conventional
agricultural practices, rely on the use of natural resources,
such as timber, soil and water.
Activities such as raw material sourcing, tobacco farming,
and water withdrawals for agricultural activities and
manufacturing can negatively impact the environment.
As we rely on natural
resources such as
timber, land and water,
we endeavour to work
towards our nature
positive goals.
Jonathan Upward
Group Head Operations Sustainability
Note:
1.
According to The Nature Positive Initiative, 'Nature Positive' is a goal which refers
to measurable outcomes that contribute to halting and reversing nature loss with
significant benefits to society (www.naturepositive.org/about/the-initiative).
Our Group Environment Policy and Biodiversity
Statement outline our approach for mitigating
our environmental impacts.
We manage the impacts of our activities and sites by implementing
internal standards. These include our Soil and Groundwater Protection
Standard, which provides guidance for preventing and managing
contamination issues.
Our Water Security Standard provides water conservation guidance for
operational sites and sets out actions for sites located in water-stressed
regions. In our tobacco supply chain, our Biodiversity Operational Standard
for Tobacco Farming (BOS) provides guidance for our Leaf supply chain.
Guidance includes forest and biodiversity management, natural ecosystems
conversion, wood traceability, and integrated pest management, which
supports the growth of healthy crops while minimising disruption to
agricultural ecosystems.
To achieve our nature commitments, we have adopted the mitigation
hierarchy, in line with the Science Based Targets Network’s (SBTN) AR3T
framework
2. Implementing this approach supports targets of the
Kunming-Montreal Global Biodiversity Framework (GBF
3).
Read more about our policies and
procedures on pages 116 to 117
+
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How we’ll get there
89
Our approach in line with the SBTN's AR3T framework
Following the mitigation hierarchy
1. AVOID
– Deforestation and conversion
in our tobacco supply chain
– Deforestation in our pulp and
paper supply chain
– The use of highly hazardous
pesticides (HHPs)
2. REDUCE
– Use of agrochemicals where
possible
– Water use across our direct
operations and tobacco supply
chain
– Water risks in our tobacco
supply chain through active
stewardship
3. RESTORE AND REGENERATE
– Our ambition is to implement
regenerative agriculture
practices, and restore nature
through our Forest Positive
target
4. TRANSFORM
– Embed nature policies, target
plans and activities across our
operations and supply chain
Targets for 2025
1:
Deforestation and
Conversion Free
tobacco supply chain
Deforestation Free
pulp and paper
supply chain
Forest Positive in our
tobacco supply chain
35% reduction in
water withdrawn
(versus 2017
baseline) and 30%
of water recycled
100% operation sites
Alliance for Water
Stewardship certified
Notes:
1.
Our ambitions cover all tobacco we purchase for our products (‘tobacco supply chain’); which is used in our combustibles, Traditional Oral and Heated Products. Our metrics, however, derive data
from our annual Thrive assessment, which includes our directly contracted farmers and those of our third-party suppliers, which represented over 93% of the tobacco we purchased by volume in
2024 (‘Thrive Supply Chain’).
2. sciencebasedtargetsnetwork.org/companies/take-action/act.
3. www.cbd.int/doc/decisions/cop-15/cop-15-dec-04-en.pdf.
Find out more:
Refer to the BAT 'Reporting Criteria'
for a full description of key terms
and definitions at bat.com/reporting
+
In line with the SBTN’s mitigation hierarchy, addressing
our impact across five different categories: avoid, reduce,
regenerate, restore and transform.
Monitoring and managing
compliance in our tobacco
supply chain
In accordance with our Biodiversity
Operational Standard for Tobacco Farming
(BOS), our field technicians monitor directly
contracted farmers to confirm
that deforestation or conversion activities
are not present.
Field technicians also monitor compliance
by carrying out regular and unannounced
farm visits. Where deforestation or
conversion incidents are identified, we have
a process in place for establishing
remediation plans which involve restoring
the impacted area where possible.
We ask our third-party suppliers to take
equivalent steps.
In 2024, we monitored 100% of directly
contracted farmers (approximately 90,500)
for deforestation and natural ecosystem
conversion. We also trained our farmers
and field technicians on best practices for
resource preservation, such as the use of
sustainable wood for tobacco curing, forest
conservation biodiversity, integrated pest
management and soil and water
management.
In 2024, 648,669 attendees were reported
to have received training.2
Partnerships to tackle deforestation
and protect biodiversity
We support our directly contracted
farmers through training and provide them
with tree saplings as part of their
sustainable fuel sources for tobacco curing,
alongside biomass, sun and air curing. This
initiative aims to prevent the harvesting of
wood in a way that leads to deforestation
of natural ecosystems.
In 2024, 44% of our directly contracted
farmers used alternative biomass fuels for
tobacco curing and third-party suppliers
are asked to follow the same practices.
In 2023, we deployed Biodiversity
Management Plans (BMPs) to mitigate
risks on farms identified as 'priority' from
our Biodiversity Risk Assessment (BRA).
In 2024, our Field Technicians followed up
on 96% of the open BMPs to monitor their
implementation.
These plans involve protecting and
restoring natural forests and riverbank
ecosystems, as well as creating and
protecting habitats for pollinators and
specific species.
In 2024, an additional BRA was conducted
using the Biodiversity Risk Screening
(BRiSK) toolkit, which incorporates
15 nature indicators.
Farms identified as 'priority' within the
geospatial assessment will be locally
assessed during 2025, and where required,
further BMPs will be implemented.
Soil management approach
GLAD develops integrated pest
management strategies, focusing on
disease-resistant tobacco and biological
controls to reduce agrochemical use.
Only agrochemicals that are compliant
with local regulations and with the lowest
possible toxicity according to WHO
classification are used.
In 2024, 87% of tobacco hectares in our
Thrive Supply Chain
1 used best practice soil
and water management practices and 94%
of Thrive farmers
grew alternative crops
such as rice, corn, vegetables, wheat, and
soy alongside tobacco.
Crop rotation is a recognised best practice
approach to improving soil fertility and
conservation.
Responsible sourcing in our pulp
and paper supply chain
When sourcing materials, we aim to only
work with suppliers across our pulp and
paper supply chain who can demonstrate
low risk of deforestation.
Our Supplier Code of Conduct (SCoC)
applies to all our suppliers who are
expected to supply materials that are
Deforestation Free (DF).
Our approach is based on the
internationally recognised Accountability
Framework Initiative (AFi).
In 2024, we updated our approach to
determine DF status for our pulp and paper
supply chain, which consists of:
– Gathering information on suppliers,
management systems, their
performance, mill locations and volumes,
and deforestation compliance;
– Assessing suppliers against internal criteria
and international good practice; and
– Identifying improvement actions to
inform suppliers engagement scope
and action plans.
In 2024, we assessed all in-scope pulp and
paper materials and 86% were established
as sourced with low risk of deforestation
according to the following criteria:
– 7% of volume was classified as DF
through chain of custody schemes
providing full assurance.
– 28% of volume sourced from suppliers with
a CDP Forest disclosure rating of 'A/A-' and
100% of volume was disclosed as DF.
– 51% of volume was traceable to a low-risk
sourcing area.
– 0% of volume was traceable
to production units monitored as DF.
– 14% of volume could not be assessed or
did not have low risk of deforestation.
We continue to work with suppliers to
achieve our target of a Deforestation Free
pulp and paper supply chain by 2025.
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Sustainable Future
What we're doing
90
Deforestation and Conversion Free
tobacco supply chain by 2025
% of wood used in Thrive Supply
Chain
1 with deforestation and
conversion free (DCF) status
100
90
60
30
0
95.5%
96.5%
98.5%
2022
2023
2024
Notes:
1.
Our ambitions cover all tobacco we purchase for our products (‘tobacco supply chain’); which is used in our combustibles, Traditional Oral and Heated Products. Our metrics, however,
derive data from our annual Thrive assessment, which includes our directly contracted farmers and those of our third-party suppliers, which represented over 93% of the tobacco we
purchased by volume in 2024 (‘Thrive Supply Chain’).
2. 458,017 attendees were reported to have received this training in 2023.
Managing biodiversity in our direct
operations
We aim to have a Biodiversity Operating
Guide for our manufacturing sites in 2025.
The Guide will specify site-specific actions
and contain criteria to determine which
sites require a Biodiversity Action Plan.
For example, our Augustów site in Poland
was identified as a high priority in our 2023
Biodiversity Risk Assessment. Following an
evaluation of biodiversity risks, site-specific
biodiversity recommendations and action
plans were developed.
We also developed a biodiversity training
programme for managers in our
Operations function.
Taskforce on Nature-Related
Financial Disclosures (TNFD)
As part of this Combined Annual and
Sustainability Report, we have included
our TNFD disclosure with reference to
following disclosure pillars:
– Governance
– Strategy
– Risk and Impact management; and
– Metrics and Targets.
Read more about our TNFD Report
on pages 137 to 152
+
Assessing the water risks
in our direct operations
In 2024, 76% of total water consumption
was accounted for in our operations sites,
and 24% in our offices, retail, R&D and
other sites.
We use the WRI Aqueduct Water Atlas to
assess our operational exposure to water
risks, incorporating additional factors such
as flood risk, drought risk and water
depletion.
The Atlas identified that 23 of our
operations sites are in water stressed
areas,
1 accounting for 39% of our water
withdrawn in 2024. These assessments
guide our prioritisation of capital
expenditure and resources to improve
water management and recycling rates.
In 2024, we also identified and prioritised
our top 10 water basins, through a
prioritisation methodology that includes
both stress and marine risk factors.
Our priority basins will be used for action
planning, resource allocation and capital
expenditure prioritisation in the future.
More details including the methodology
can be found in our TNFD disclosure.
For example, the WaterHub
SM in the U.S.
(that will be operational in 2025), is located
on a water-stressed site.
The WaterHub
SM is a major water recycling
facility with a designed capacity of
200,000m
3.
For more performance metrics and
operational data, refer to our
Sustainability Performance Data
Book at bat.com/reporting
+
Assessing our water risks
in our tobacco supply chain
For our tobacco supply chain, our SCoC
is complemented by our Leaf Supplier
Manual (LSM), which includes guidelines
for water protection planning and water
extraction for irrigation.
Through the Atlas, we monitor our tobacco
sourcing locations that are in water-
stressed areas.
In 2024, 20 of our tobacco sourcing
locations – including Bangladesh,
U.S., India and Türkiye – were in water-
stressed areas. An estimated 21.9% of the
tobacco we purchased came from water
stressed areas.
In these areas, we support our directly
contracted farmers to grow the
appropriate tobacco variety, introduce
irrigation technology or optimise and
reduce crop water usage. This is explained
further on page 93.
Our third-party suppliers are also
encouraged to support their contracted
farmers with similar methods.
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Case study
Regenerative Practices
Our Global Leaf Agronomy Development (GLAD) Centre works with our Leaf
suppliers to promote agricultural practices such as the High Wide Ridge.
This method, involving high, wide trapezoidal ridges, reduces soil erosion,
increases water retention, and prevents waterlogging. It can increase yields by up
to 20%, improve crop quality, and reduce soil-borne diseases.
Nearly 90% of our directly contracted farmers in Brazil use this technique, which
is recognised as a conservation practice by Embrapa, the Brazilian Agricultural
Research Corporation.
In 2024, we developed a regenerative agriculture framework which includes a
methodology for assessing and prioritising local risks and the monitoring of progress
on the regeneration of the farmland ecosystem.
We plan to pilot this framework with key Leaf suppliers in 2025.
Agri-tech in practice
at our GLAD centre.
Note:
1.
In 2023, the Atlas identified 24 of our operations sites were in water stressed areas.
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Sustainable Future
What we’re doing
Continued
92
0
10
20
30
40
30% water recycling rate by 2025
% of total water recycled
2023
We invest in water treatment
technologies to increase water recycling.
In 2024, our water recycling rate increased
year-on-year by 3.1 percentage points to
27.5%.
2024
0
50
100
100% of operations sites to be
Alliance for Water Stewardship
(AWS) certified by 2025
% of operations sites that are
AWS certified
2023
In 2024, an additional eight sites in our
direct operations were successfully AWS
certified, bringing the total number of
certified sites to 51 or 91% of our
operations sites.
2024
Summary of progress towards our targets
0
10
20
30
40
50
35% reduction in water withdrawn
by 2025 (versus 2017 baseline)
% reduction of water withdrawn
vs 2017 baseline
2023
We achieved our 2025 target for reduction
in water withdrawn two years ahead of
schedule.
We continue to work on maintaining this
target, achieving a 47.4% reduction in 2024
(against our 2017 baseline).
2024
39.2%
47.4%
Case study
Pollinator Garden
to Support Monarch
Butterflies in the U.S.
Spanning 249 hectares, the Reynolds
Operations Center (ROC) is the
Group’s largest manufacturing facility.
Employee volunteers planted
54 species and 519 native seedlings,
creating a migratory habitat
for pollinators such as bees
and butterflies.
This is important due to the decline in
the local Monarch Butterfly population,
primarily caused by habitat loss.
The area is now a certified Monarch
Waystation.
In addition, the ROC plans to convert
its fields to meadows and landscaping
with native plants, and to conduct
ongoing biodiversity monitoring
to measure the increase in flora
and fauna.
Seeing colleagues
unite to create this
pollinator garden
to help support our
local ecosystem
was truly inspiring.
Tony Woods
Maintenance Analyst,
Reynolds American Companies
24.4%
27.5%
69%
91%
2.73 mn m
3
Total water withdrawn
From water utility supplies
64%
From fresh surface water sources
2%
From groundwater sources
34%
Target
Target
Where we source our water from
Target
Our water stewardship programmes
Direct Operations
Our water withdrawal and discharge
guidelines and our Water Roadmap provide
guidance for managing water use at our
manufacturing sites and help assess water
management systems in line with the
Alliance for Water Stewardship (AWS)
certification process.
In 2024, an additional eight sites in our
direct operations were successfully AWS
certified, bringing the total number of certified
sites to 51 or 91% of our operations sites.
Additionally, 78% of our operations sites
implemented both water efficiency and
recycling activities, investing £3.9 million
in capital expenditure.
We also achieved 27.5% of total water
recycled in 2024, driven by our top
performing sites in the U.S., Brazil, South
Korea and Bangladesh.
Our Brazil site became the first Group site
to achieve the AWS Standard certification
with platinum status. It is the highest of
three levels of certification available,
indicating conformity with AWS’s additional
Advanced Indicators.
Tobacco supply chain
We have developed a standardised
methodology and protocol to measure
water use on tobacco farms. The protocol
aims to enhance the accuracy of water
reporting and support a more accurate
performance assessment of drip irrigation
and other water-saving initiatives.
Approximately 70% of tobacco hectares
in our Thrive Supply Chain are grown
using rainfall. Where rainfall is insufficient,
farmers may use irrigation.
In 2024, around 30.7% of the tobacco
hectares in our Thrive Supply Chain used
some form of irrigation systems.
30.7%
of the tobacco hectares in our
Thrive Supply Chain benefited from
irrigation systems in 2024
At our GLAD centre in Brazil, research
is conducted to reduce water usage in
high-dependency regions and support
engagement with local communities.
Drip irrigation was introduced in eight
countries, saving up to 50% more
water in comparison to conventional
irrigation practices.
In 2024, land area using drip irrigation
increased by 50% in Vietnam and 29%
in Chile.
We have also adopted alternate furrow
irrigation in Pakistan and Bangladesh.
This practice saves up to an estimated
10% more water, compared to traditional
furrow irrigation without negatively
affecting the yield.
In Mexico we observed a 10% reduction
in water use compared to drip irrigation
by installing real-time temperature, water
and electric conductivity sensors.
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Case study
Technology to monitor deforestation
and biodiversity
In 2024, BAT Brazil introduced satellite monitoring to track forest cover changes.
Alongside regular monitoring conducted by Field Technicians, the system enhances
our monitoring of suspected conversion or deforestation. Following the identification
of potential deforestation, our field technicians conduct assessments to visually verify
whether deforestation has occurred, and where possible, the cause of the incident. If
confirmed, a remediation plan is implemented. Further details are available on page 89.
In Kenya, we initiated a pilot with a global network of ecological specialists to monitor
restoration efforts around Mount Elgon and Cherangany Hills. The objective is to
collect primary data through drones, audio sensors and artificial intelligence.
The plan is to monitor these areas to evaluate the effectiveness of nature restoration.
We continue to scout for state-of-the-art technologies to support our nature initiatives.
What’s Next
Creating a regenerative agriculture
framework.
– Developing methodologies to assess
local risks.
– Piloting initiatives with key suppliers
in 2025.
– Tracking progress through action
plans.
Definitions:
Conversion: Change of a natural ecosystem
to another land use or profound change in a natural
ecosystem’s species composition, structure, or
function.
Deforestation: Loss of natural forest as a result of
i) conversion to agriculture or other non-forest land
use; ii) conversion to a tree plantation; or iii) severe
and sustained degradation.
Forest Positive: To be considered 'Forest Positive',
among other things, a forest should be planted for
conservation purposes. Further, the area must be
monitored at least one year after the planting date,
to verify the survival rate quantification of the area
planted and the number of trees that have become
viable.
Colour coded map
by habitat-type.
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94
CIRCULARITY
GLOBAL CHALLENGE
The unsustainable use
of virgin raw materials
harms the environment.
Transforming the linear economy requires changing
how businesses design, manufacture, use, and dispose
of products.
Challenges include continuous demand for virgin raw
materials, unsustainable consumption patterns, and
endless waste. Circularity aims to address these issues
by minimising waste and optimising resources.
IMPACT AREA
Local partnerships to
reduce post-consumer
waste and recover
materials.
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LOCAL ACTIONS
95
Battery recycling in Kazakhstan
Battery recycling at scale faces challenges including
the lack of infrastructure, high costs, and the technical
complexities of recycling.
In 2024, BAT Kazakhstan entered into a collaboration
agreement with First Recycling to open the country’s
first lithium-ion battery recycling facility.
The facility recovers valuable materials from the
batteries in our glo devices, including lithium, aluminium,
and copper.
The recovered materials are subsequently sold by First
Recycling for onward use in battery production.
To date more than 95,000 batteries from our glo devices
have been recycled.
Ablay Turganbaev
Environment, Health, and Safety Manager, BAT Kazakhstan
We aim to
leverage local
partnerships to
decarbonise our
downstream
supply chain.
Repurposing cigarette butts
Over the past 15 years, Reynolds American
Companies have collaborated with
TerraCycle and Keep America Beautiful
to reduce cigarette butt litter.
TerraCycle, develops recycling solutions
for waste streams that are not usually
considered recyclable.
Cigarette butts collected through clean-ups
are sent to TerraCycle, where they are
repurposed into furniture items, including
garbage bins and public place seating.
Likewise, the partnership with Keep
America Beautiful funds the Cigarette
Litter Prevention Programme, educating
adult consumers, distributing portable
ashtrays, and organising clean-up
community activities.
Our partnership with
Keep America Beautiful
and TerraCycle is a
testament to the power
of collaboration.
Kara Calderon
Senior Director of Sustainability & Community
Engagement, Reynolds American Companies
Go online to learn
more about our approach
to sustainability
bat.com/sustainability-
and-esg
95,000
batteries from our glo devices
have been recycled
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Sustainable Future
Our Circularity ambition
96
OUR AMBITION
Reducing the use of
virgin raw materials.
We seek to reduce our material footprint across our value
chain and to understand and minimise the environmental
impact of virgin raw material use.
In the ‘make’ phase, we aim to use more sustainable
materials and increase resource efficiency.
In the ‘use’ phase, we encourage responsible consumption
and disposal.
In the ‘dispose’ phase, we collaborate with waste
management organisations to enhance material recovery.
Circular economy is more than
just limiting our environmental
impact. It’s a growth opportunity
for our business
– rethinking
our partnerships,
using innovation
to make our
supply chain
more resilient.
Neelam Melwani
Head of Circularity
Addressing circularity across product life cycles.
As we continue to strive towards reducing our use of virgin raw materials, we have
taken steps to deepen our understanding of the full extent of our material footprint.
Sustainable design
We aim to embed circularity into the early stages of product and packaging design.
In 2024, we introduced and began testing an initial set of ecodesign principles,
which will provide insights to support the reduction of our environmental impacts
across the product life cycle – spanning the 'make,' 'use,' and 'dispose' phases.
These principles include renewable and recycled materials, efficient
resource use, extending product life, and end-of-life product management.
In 2025, we will work to quantitatively assess the environmental impacts
of our Smokeless products as part of the ‘design’ phase.
By leveraging these insights, we aim to establish quantifiable design targets, including:
Using less CO2e intensive materials
Using more recycled materials
Using more renewable materials
Enhancing durability and product lifespan
Greater modularity, disassembly and recyclability
We also aim to understand the full extent of our virgin raw material use and its
environmental impact. In doing so, we continue to improve our data quality to
inform decisions across the 'make', 'use', and 'dispose' stages of our supply chain.
In 2024, we launched the Green Design Tool to support our product designers
and material scientists understand the environmental impact of current and
future materials.
Read more about our policies and
procedures on pages 116 to 117
+
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How we’ll get there
97
Rethinking design
How we think about using materials in a smarter and more efficient way
Design for:
– use of less carbon intensive
and virgin raw materials
– use of more secondary
and alternative materials
Reduce
Design for:
consumer upgradability
and repairability
Rethink
Design for:
extended lifespan
Reuse
Design for:
disassembly and material
recovery
Recover
Design for:
use of more widely technically
recyclable materials
Recycle
Find out more:
Refer to the BAT 'Reporting Criteria'
for a full description of key terms
and definitions at bat.com/reporting
+
Targets:
100% of our
packaging to be
reusable, recyclable
or compostable
where facilities
exist by 2025
90% recycling rate
of waste generated
across our
operations by 2025
25% reduction
in waste generated
across our operations
by 2025 (versus
2017 baseline)
Less than 1%
of our operational
waste going
to landfill by 2025
We have undertaken an initial analysis that allows us to understand
the full extent of our material use in order to establish a baseline
for future reductions.
The diagram below is a visualisation of
our material inflow – or the total amount
of raw materials that make up our
products and packaging.
Each bar represents the total weight
of materials used across our
combustibles, Smokeless products
and Other Tobacco Products.
We know that reducing our material
footprint is critical to reducing the impact
of our Scope 3 emissions.
Areas of focus are:
Paper, pulp and board: used across
our products and packaging at an
equivalent of 349,084 tonnes.
Plastics: used across our products
and packaging at an equivalent
of 60,733 tonnes.
Metals
1: used across our product
categories at an equivalent of
11,216 tonnes.
Critical Raw Materials
2: used
in our New Category products at
an equivalent of 3,050 tonnes.
Electronic components: primarily
used in our New Category products
at an equivalent of 544 tonnes.
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What we’re doing
98
The flow of raw materials into our product categories
3
Material categories
Product categories
Combustibles
Smokeless
products
Other Tobacco
Products
Key:
1
2
Paper, pulp and board
Leaf
3
4
Liquids
Other
5
6
Plastics
Metals
7
8
Battery and other critical raw materials
Electronic components
Notes:
1.
Excludes critical raw materials used in batteries.
2. While we continue to report on conflict minerals, we are looking to understand our impact across other critical raw materials beyond tin, tantalum, tungsten and gold (3TG), based on the list of
critical raw materials in the UK.
3. All numbers are based on 2023 procurement purchased volume data, using proxy data for some product components including batteries due to intellectual property restrictions. Mass
material data is extracted from our Life Cycle Assessments (LCAs). Packaging only refers to primary with the exception of combustibles which is available by bundle. Wellbeing and
Stimulation products have been excluded, as products were not available to purchase in 2023.
Vapour products
In 2024, we introduced Vuse Go 2.0, a new single-use Vapour product with a removable
battery to facilitate better recycling. We aim to include removable batteries for all our
single-use Vapour products, by the end of 2029.
We aim to have all rechargeable closed system devices to include removable batteries
by year-end 2026.
Modern Oral
In France, Ireland, Denmark, Sweden and the UK, we recently launched two variants
of Velo cans certified by the International Sustainability and Carbon Certification (ISCC),
for using bio-plastic or Post-Consumer Resin (PCR) plastic through a mass-balance
approach
1.
Used nicotine pouches are currently non-recyclable. We are working to address this
challenge and are analysing how to increase the material recyclability and recoverability
of our pouches.
Heated Products (HPs)
We have removed the polypropylene overwrap for our glo devices and starter kits and
replaced plastic inner trays with a pulp-based alternative.
In 2024, with each iteration of our glo Hyper devices, we have progressively increased
the proportion of recycled material in the packaging. Specifically, the recycled content
of the packaging has increased from 34% in the Hyper Air to 71% in the Hyper Pro.
For our HP consumables, we have introduced paper inner bundling to replace aluminium
and plastic laminates so that they can be recycled where facilities exist.
We also aim for new HP devices to feature removable and replaceable batteries.
Cigarettes
For our cigarettes, we have introduced paper inner bundling, where legally permitted, to
replace aluminium and plastic laminates so that they can be recycled where facilities exist.
Other Tobacco Products (OTP)
We are in the process of replacing all non-recyclable plastic laminate pouches with
technically recyclable materials.
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99
Case study
Collaborating to recycle plastic waste
BAT South Africa and Ocean Plastic Technologies are embracing recycling by using
shipping containers as recycling hubs. This initiative focuses on repurposing materials
from used vaping pods, giving them a second life.
In its first year of operation, the project has recycled 29 tonnes of waste and created
over 30 jobs. The Durban and Heidelberg hubs each processed approximately 12 tonnes
of material for recycling, while the Cape Town hub processed nearly five tonnes.
Note:
1.
'Mass-balance' is a principle that matches inputs (such as plastic waste) with outputs from a recycling or production process, to determine the recycled content (source: zerowasteeurope.eu/
wp-content/uploads/2021/05/rpa_2021_mass_balance_booklet-2.pdf).
See the ‘Consumer Education’ section on page 101
for more information on how we support consumers
to dispose of devices responsibly
+
Tackling operational waste
Our Global Waste Centre of Excellence
(CoE) uses an integrated work system to
prioritise actions that reduce waste.
1.3%
of our operational waste
sent to landfill in 2024
(versus <1% target by 2025)
110.6
thousand tonnes
of waste generated
Total waste disposed
(thousand tonnes)
13.2
Total waste recycled
(thousand tonnes)
97.3
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Sustainable Future
What we’re doing
Continued
100
0
25
35
Reduce the absolute volume
of waste generated in our own
operations by 25% versus 2017
baseline
% reduction in waste generated
in our own operations
2023
We have achieved our 2025 target two
years ahead of schedule.
In 2024, we have continued to make
progress, with a further 3.8% year-on-year
reduction versus 2023.
2024
Summary of progress towards our targets
0
1
2
Less than 1% of our operational
waste going to landfill by 2025
% of operational waste going
to landfill
2023
We are on track to meet our target.
In 2024, 1.3% of operational waste was
sent to landfill. Enhanced global waste
segregation contributed to 71% of our sites
sending zero operational waste to landfill.
2024
0
50
100
90% recycling rate of total waste
generated across our own operations
by 2025
% waste recycled
2023
We are on track to meet our target.
In 2024, our waste recycling rate reached
88.1% across our own operations, versus
87.6% in 2023.
2024
Case study
Consumer awareness campaigns
The ‘Small Actions, Big Crimes’ campaign which sets out to tackle cigarette butt
littering, was launched in Italy in collaboration with the non-profit organisation
Marevivo and supported by the Ministry of Environment.
Within three years of launch, the campaign was activated in more than 12 cities, and
resulted in an average reduction of 53% in butt littering.
In 2024, the campaign shifted focus to the disposal of small Waste Electrical and
Electronic Equipment (WEEE) through a fully digital campaign, which included launching
a dedicated website (piccoligesti.eu) to educate consumers about the issue.
Additionally, the campaign partnered with Logista to promote their RECYCLE-CIG
programme, which installed more than 30,000 disposal units for WEEE disposal in
Italian tobacconists.
The campaign was also rolled out in Greece, reducing cigarette butt litter by over 60% in
Rafina and Naxos, and led to the responsible disposal of more than 530,000 butts
between 2021 and 2024.
The campaign provides dedicated disposal units and consumer awareness initiatives.
1.8%
1.3%
28.2%
31%
Target
Target
Consumer awareness
campaign. Napoli, Italia.
Target
87.6%
88.1%
Operational Waste Footprint
Consumer education and awareness
Cigarette littering:
Although most consumers dispose of
their cigarette butts responsibly, too
many still end up as litter. Research
shows that education and awareness
campaigns can be effective in encouraging
responsible disposal.
However, to change consumer behaviour,
anti-littering awareness programmes and
initiatives need to inform consumers of
the negative environmental impacts of
cigarette butts.
We continue to support such campaigns
with NGOs and the public sector across
our markets, for example through the
‘Small Actions, Big Crimes’ initiative,
discussed on page 100.
Smokeless products:
Our ecodesign principles will quantify
the impact of the materials we use in
our products.
We know that continued partnerships
with waste management organisations
and consumer education campaigns
remain key to managing the end-of-life
of our products.
This global issue can only be addressed
through local interventions and a case-by-
case approach contingent on national
waste management infrastructure
and requirements.
In Nottinghamshire, UK, we have partnered
with a waste management company to
pilot a collection and recycling programme
for used vapour products.
With the aim of creating industry-wide
solutions, we have set up dedicated
recycling collection points in public spaces
for vapour products, including pods and
devices.
Shortage in key materials
While we have made progress with most of
our Circularity targets, the global shortage
in key materials, such as food-grade post-
consumer resin has meant that we have
withdrawn our target of 30% average
recycled content across all plastics
packaging.
Addressing this challenge requires
collaboration across industries, changes
in government policies and investments
in national infrastructure.
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Case study
Incentivising Pod Recycling
BAT New Zealand is rewarding consumers who participate in recycling.
Launched in 2022, the RePod scheme incentivises consumers to return used
Vapour devices and pods for recycling. Given the relatively limited options available,
BAT New Zealand collaborated with local suppliers to develop a recycling solution
that removes batteries and metals.
The recovered recyclable plastic components are then transformed into cleanstone
panels, which can be repurposed into items such as furniture.
To date, approximately 0.5 million pods have been recycled through this scheme
and a further 1.2 million pods have been shredded.
What’s Next
Reducing post-consumer waste
remains an area of focus.
– Continuing to improve design and
data to inform our decisions based
on ecodesign principles.
– Engaging with consumers
on responsible disposal.
– Collaborating with other sectors and
waste management organisations
to address challenges related to
recyclability, recycling and material
recovery.
Definitions:
Circular economy: The circular economy is an
economic model that is regenerative by design. The
aim is to allow for renewability, remanufacturing,
recycling and biodegradation.
Our packaging composition
1
97%
Share of reusable, recyclable
or compostable packaging
Reusable, recyclable or compostable
packaging
97%
Others
3%
Our target is for 100% of our total packaging to be reusable, recyclable or compostable
where facilities exist by 2025, which we remain on track to achieve.
We are moving from multi-material laminates to single-material packaging or laminates
where feasible.
Note:
1.
Our packaging's recyclability calculation excludes about 1.7% of the total material used in our packaging,
representing exclusions due to regulatory requirements in certain markets and adhesives used in packaging.
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102
COMMUNITIES
GLOBAL CHALLENGE
Inequality of opportunity
persists across various
dimensions.
Many people still face discrimination based on income,
sex, age, disability, sexuality, race, class, ethnicity or religion.
Businesses can positively influence both their own
workplaces and support broader society by promoting
equality, respecting human rights and empowering
communities.
IMPACT AREA
Impact starts at
the community level
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LOCAL ACTIONS
103
The programme has
empowered women
and fostered economic
development to support
their families.
Ms. Vo Thi Bich Thuy
Vice President of the Women’s Union
of Duc Hue District, Long An Province, Vietnam
Supporting food security in Malaysia
The Beyond Benih ‘Going Beyond Seeds’ regenerative
agriculture initiative in Malaysia has now been rolled out
to 12 cities, impacting over 80,000 beneficiaries to date.
Created by BAT Malaysia, the initiative sets out to
increase food security, improve nutrition and foster
community building.
In collaboration with the Malaysian Department of
Agriculture and Residents’ Associations, the initiative
restores and enhances Malaysian urban areas. Targeted
at low-income households, it fosters community
engagement, social cohesion, and shared responsibility
among residents.
Through educating the residents about sustainable
agricultural practices and healthy eating habits, while
providing opportunities for skills development, Beyond Benih
instils a sense of ownership and stewardship of the land.
By locally sharing the Group’s regenerative agriculture best
practices, Malaysian residents not only produce fresh,
healthy food, but also contribute to environmental
sustainability while enhancing urban resilience and
fostering community wellbeing.
Women Empowerment
in Vietnam
Since 2022, BAT Vietnam has been working in
partnership with local authorities to establish
Women’s Empowerment Programme.
The programme strives to enhance the
economic development of women by providing
them with interest-free loans to set up small
businesses and support animal husbandry.
Since its inception, more than 130 women
across local communities in Duc Hue and
Tan Thanh districts have benefited from
the programme.
Beyond Benih provides food
for local communities and
individual families with an
additional source of income.
Mr. Ayub
Head of Residents' Association
in a Beyond Benih community garden
Go online to learn
more about our approach
to sustainability
bat.com/sustainability-
and-esg
80,000
beneficiaries impacted across
12 cities in Malaysia
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Sustainable Future
Our Communities ambition
104
OUR AMBITION
Supporting
the livelihoods
and resilience
of our communities.
Our global operations include multiple supply chains,
from agriculture to electronics and manufacturing.
Across all these areas, there are human rights
considerations including workers’ rights, rural
poverty and the risk of child labour, in particular,
on small family farms.
We recognise our role to respect the human rights
of all workers and farmers in our value chain, as well as
members of the local communities in which we operate.
When it comes to our own employees, we believe we can
positively impact their lives by investing in their physical,
mental and financial wellbeing.
I am proud
of the enduring
relationships
we have built up for
generations with
the communities
in which we
operate.
Vladimir Moura
Head of Sustainability, Agriculture
Farming Communities
Our approach to managing human rights
is aligned to the UN Guiding Principles for
Business and Human Rights.
We manage our impact through our due diligence and remediation programmes,
underpinned by a number of policies, including those outlined in our Standards
of Business Conduct (SoBC) and Supplier Code of Conduct (SCoC). Our Thrive
programme collects data across a number of topics, including human rights.
Based on a framework covering the five 'capitals' outlined below, Thrive sets
out to address challenges in farming communities.
We participate in the Sustainable Tobacco Programme (STP) to promote
responsible tobacco growing practices.
We also conduct Human Rights Impact Assessments (HRIA) and In-depth
Assessments (IDAs) to identify potential issues.
Our suppliers develop remediation plans based on these findings. We support
farmers to enhance their livelihoods and tackle complex issues like child and
forced labour through various initiatives.
Read more about our policies and
procedures on pages 116 to 117
+
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How we’ll get there
105
Ambitions
1:
Support prosperous
livelihoods for all
farmers in our
tobacco supply chain
Zero child and
forced labour
incidents in our
tobacco supply chain
by 2025
The five 'capitals' of our Thrive programme
Capital
Descriptor
Financial
Economic livelihoods of
farmers, including access
to resources
Natural
The ecosystem necessary
to sustain agricultural
production and livelihoods
Human
Skills, knowledge, labour
and human rights
Social
Self-sufficient and resilient
communities
Physical
Infrastructure needed to
maintain viable places to
live and work
Note:
1.
These are our ambitions, which cover all tobacco we purchase for our products (‘tobacco supply chain’); which is used in our combustibles, Traditional Oral and Heated Products. Our metrics,
however, derive data from our annual Thrive assessment, which includes our directly contracted farmers and those of our third-party suppliers, which represented over 93% of the tobacco we
purchased by volume in 2024 (‘Thrive Supply Chain’).
Find out more:
Refer to the BAT 'Reporting Criteria'
for a full description of key terms
and definitions at bat.com/reporting
+
Supporting living income
We have been conducting an annual living
income analysis since 2022, based on the
Anker Methodology
1, a recognised gold
standard for estimating fair wages and
incomes for agricultural workers and small-
holder farmers.
In 2024, the methodology was adapted to
better represent the living costs of tobacco
farmers in rural areas. Our analysis was
applied to 97% of farmers in our Thrive
Supply Chain. The results support the
creation of action plans to target key
income drivers, such as reducing
production costs, increasing yield, and
diversifying crops. The farmers’ feedback
is provided to our Leaf suppliers, who
manage the action plans.
Enhancing productivity while
reducing costs
In Brazil, our Global Leaf Agronomy
Development (GLAD) centre designs
solutions with the support of agronomic
technologies. These solutions improve crop
management, optimise resource use and
address challenges such as climate change
and soil degradation. These are now being
applied in 12 countries. For example,
automated curing barns, reduce fuel use
by up to 30% and manual labour by 45%.
Promoting income diversification
We support crop diversification
programmes which are adapted to local
environmental and socio-economic realities.
In 2024, 94% of our farmers in the Thrive
Supply Chain were reported to have
diversified crops.
To date, more than 138,000 farmers, farm
labourers and local community members
have been trained on crop diversification.
In addition, several small-scale initiatives
are underway to identify potential crops
for additional income.
Building resilient communities
We have developed a range of community
initiatives on women's empowerment, rural
development, and access to healthcare,
clean water, and sanitation.
BAT Bangladesh’s Probaho, now in its
fifteenth year, provides safe and clean
drinking water to rural communities where
supplies have previously been scarce or
contaminated.
To date, the programme has installed
126 filtration units and provided more
than 620,000 litres of water a day to
over 310,000 people across 25 districts
in Bangladesh.
BAT Kenya, in 2023, introduced a women’s
development programme aligned with the
UN’s Women’s Empowerment Principles
2.
Both directly contracted female farmers
and women in the farming community
participated in the programme.
Through the two phases of the
programme, training was provided to
more than 600 participants on women's
rights, financial literacy, entrepreneurship
and agriculture.
In 2024, BAT Kenya also participated
in two further initiatives for income
diversification of directly contracted
female farmers.
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What we're doing
106
Farming Communities
Working with local stakeholders to
implement community-focused initiatives.
Notes:
1.
www.ankerresearchinstitute.org/anker-methodology
2. unglobalcompact.org/take-action/action/womens-
principles/
Assisting
with market
preparation
and crop
diversification
Providing
high-quality
crop inputs and
a fair tobacco
price
Farm monitoring,
prompt actions
and remediations
Training and
communications
Providing
harvesting
equipment
and curing
support
Providing
agrochemical
equipment
and
support
Supporting our farmers throughout the growing cycle
Our Field Technicians visit our directly contracted farmers once a month during
the growing season. The collaboration sets out to develop the skills of the farmers
in order to promote better yields and maintain standards as outlined in the
diagram below.
Group Code of Human Rights
in Tobacco Farming
In 2024, we introduced a new Group Code
of Human Rights in Tobacco Farming,
which applies to the Group's own Leaf
Operations. Aligned to the UNGPs and
other international standards, it
consolidates existing standards as well as
strengthens procedural requirements and
additional guidance on topics, such as
responsible contracting and management
of environmental impacts. All of BAT Leaf
employees in scope and directly contracted
farmers have received training on the Code.
In addition, more than 417,600 of the Group’s
own Leaf Operations and third-party suppliers
have conducted human rights training
focused on child labour and workers' rights.
In 2024, we also established our Leaf Social
Centre of Excellence to advance human
rights and community initiatives.
Maintaining standards through
grievance mechanisms and
assessments
We track access to grievance mechanisms
across our Thrive Supply Chain. In 2024,
97.96% of farmers and farm labourers
reported having access to at least one type
of grievance mechanism channel. Of the
307 grievances raised in 2024, 100% were
reported as resolved by the end of the
growing season.
We conduct HRIAs and IDAs using a risk-
based approach. These assessments are
carried out in line with the United Nations
Guiding Principles (UNGPs) and conducted
by independent human rights experts.
Since the first HRIA was conducted in 2019,
we have completed HRIAs in 10 tobacco
sourcing countries, engaging with over
5,239 rights-holders. The evaluation
included themes, such as the potential risk
of child labour, health and safety, workers'
rights and farmer livelihoods.
IDAs have a wider scope and cover other
social and environmental topics. By the end
of 2024, 16 suppliers in 12 countries
underwent IDAs.
We continue to take steps to address
issues identified in HRIAs and IDAs, and
track remediation actions, as appropriate.
Participation in the Sustainable Tobacco
Programme (STP) is a contractual
requirement for all our Leaf suppliers. The
STP mandates an annual self-assessment
covering key themes such as Human Rights.
All Leaf suppliers are expected to fully
adhere to the local laws and regulations,
as well as the STP's requirements. If a non-
compliance is identified, we take appropriate
actions, including the suspension or
termination of the supply agreement.
Managing child and
forced labour risks
We recognise that child and forced labour
are complex issues and incidents can be
hidden or under-reported.
Our digital platform, Farmer Sustainability
Management (FSM), is used by our Field
Technicians to record data during farm
visits of our directly contracted farmers.
Over 30% of the FSM criteria are related
to human rights. Technicians also conduct
unannounced visits, interviewing farmers
and farm workers to check for child and
forced labour incidents and upload the data
to FSM, which tracks any prompt actions
necessary for remediation identified.
We monitor 100% of our directly contracted
farmers on child labour risk and prevention.
In 2024, 117 incidents of child labour were
reported on 0.05% of farms in our Thrive
Supply Chain.
The majority of incidents were related to
stitching and/or stringing tobacco green
leaves. 100% of incidents were reported
as resolved during the growing season.
In cases of recurring incidents, a farmer’s
contract is not renewed for the next season.
There were zero recurring incidents this year.
In addition, zero incidents of forced labour
were reported in our Thrive Supply Chain.
Health and Safety of our farmers
Our Group Code of Human Rights in
Tobacco Farming as well as our
Operational Standard for Personal
Protective Equipment (PPE) include more
stringent requirements on the availability
and management of mandatory PPE.
The requirements apply to all our directly
contracted farmers and their workers.
We expect third-party suppliers to also
adopt similar standards.
In 2024, 98.99% of our farmers in our
Thrive Supply Chain reported to have
sufficient PPE for agrochemical use
and 94.27% for use when harvesting.
The introduction of more stringent
requirements have led to gaps, which
resulted in a decline of PPE availability.
Remediation actions have been
implemented.
Training sessions on the correct and safe
use, storage and disposal of agrochemicals
and Green Tobacco Sickness prevention
were attended by over 401,500 participants.
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Other Information
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Number of attendants engaged on
human rights training, with emphasis
on forced labour and child labour
500,000
400,000
300,000
200,000
100,000
0
348,257
418,584
417,628
2022
2023
2024
What’s Next
Supporting our farmers to enhance
livelihoods and build resilience.
– Focusing on living income action
plans, diversification and training.
– Implementing long-term solutions
and addressing root causes.
Definitions:
Attendants: includes farmers, as well as farm
labourers and local community members.
Child Labour: The definition of child labour used to
identify child labour incidents is aligned to the International
Labour Organization's definition of child labour
(www.ilo.org/topics/child-labour/what-child-labour)
Prompt Action: A prompt action refers to an issue
that’s been identified by a field technician which is
deemed to require an immediate response due to its
nature.
Read more about our policies and
procedures on pages 116 to 117
+
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Sustainable Future
How we’ll get there
108
Supplier Communities
Beyond tobacco leaf, we source product
materials such as paper and filters for cigarettes.
For our expanding New Category products, the supply chain includes
electronic components and liquids for our Vapour consumables.
Target:
100% of product
materials and higher-
risk indirect suppliers
to have undergone at
least one independent
labour audit within
a three-year cycle
by 2025
Due diligence process for product materials and higher-risk indirect suppliers
New suppliers
Existing suppliers
Independent
audit
Workplace
Conditions
Assessment
New
supplier
approved
Our suppliers
are required to
comply with the
Supplier Code of
Conduct (SCoC)
Risk-based
approach
Assessment
on existing
suppliers
based on their
category and
country
risk level
Product
material and
higher-risk
indirect
suppliers
Independent
on-site audits
All other
suppliers
Supplier self-
assessments
verified by a
third party
Screening process for product materials and higher-risk indirect suppliers
Baseline supplier
screening
2,239
Number
of product material
and higher-risk
indirect suppliers
undergoing initial
screening
Output of risk
screening
596
Number of product
material and higher-
risk indirect
suppliers undergoing
further social audits
Audited in 2024
321
suppliers audited
annually out of which:
156
First-time audits
165
Re-audits
On-site audit
outcomes
% of issues identified
relating to:
Health and Safety:
48.6%
Working Hours: 17.4%
Adequate Wages: 5.5%
Management
Systems: 13.8%
Other1: 14.7%
Find out more:
Refer to the BAT 'Reporting Criteria'
for a full description of key terms
and definitions at bat.com/reporting
+
Note:
1.
It includes environment, business ethics and living wages, amongst others issues.
Social due diligence
in our product material
supply chain
Our SCoC applies to all our suppliers
and sets the standards for responsible
business conduct.
In addition, we take a risk-based approach
to social due diligence in our product
material supply chain.
Scope of social due diligence
All product material and higher risk indirect
suppliers are in-scope for our labour audits.
Product materials suppliers are those who
supply non-leaf materials used in our
products, such as filters, paper, adhesives,
liquids, devices and batteries.
Higher-risk indirect suppliers are those who
supply machinery and point of sale
materials.
Our aim is for all such suppliers to have
undergone at least one independent labour
audit within a three-year cycle by the end
of 2025. By the end of 2024, this was
achieved for 91% of in-scope suppliers.
Triage Process
All in-scope suppliers are evaluated
through an independent risk assessment
platform, covering topics that are identified
as relevant for the Group, such as working
conditions and forced labour.
The outcome of the risk assessment
determines the type of the audit
assigned, which can be either a third-party
on-site audit or a third-party verified
self-assessment.
Breakdown of audits
Since 2022, 540 in-scope suppliers
in 59 countries have undergone at least
one labour audit:
– Tier 1 product materials suppliers: 388;
– Lower-tier product materials suppliers:
48; and
– Indirect suppliers: 104.
In 2024, 321 independent labour audits
were carried out. 156 were first time audits
and 165 were re-audits of existing suppliers
due to previous audit performance.
321
number of on-site or
self-assessment audits
conducted in 2024
Type of incidents identified
in third-party verified supplier
self-assessments (%)
Environment
33%
Labour and Human Rights
32%
Ethics and Sustainable Procurement
35%
Managing audit findings
If an in-scope supplier is identified to fall
below our minimum standards, we support
the supplier to develop an action plan and
monitor its progress.
If a supplier does not show necessary
improvements, we terminate the contract,
as appropriate.
Through this process, 23 suppliers made
sufficient improvements to meet our
standards and 10 were removed from our
supply chain in 2024.
Training and capability building
In 2024, procurement relationships
managers across all regions were trained
on leveraging our audit partners to
progress the Group’s social agenda.
The training provided guidance on how to
monitor supplier performance and manage
supplier relationships, based on the
findings of the labour audit.
In addition, over the course of the year, we
shared best practices and agreed common
commitments with our suppliers at the
suppliers’ summit.
Our in-scope suppliers also received a step-
by-step guide on our audit processes and
standards.
Read more about suppliers’ summits
on page 78
+
Responsible mineral sourcing
Our electronics supply chain includes
multiple layers of suppliers, which create
additional challenges for managing human
rights risks.
Our SCoC applies to all our suppliers and
outlines the actions we expect them to
take in relation to responsible mineral
sourcing.
In line with the OECD guidelines, we work
with our suppliers for them to exercise the
appropriate due diligence required for
identifying the origin of 'conflict minerals'.
Being supporter members of the
Responsible Business Alliance (RBA)
provides access to cross-industry
initiatives, such as the Responsible
Minerals Initiative, through which we have
visibility of smelters’ audits.
Findings are reported annually in our
Conflict Minerals Report.
Such data helps us improve the traceability
of our minerals supply chain in order to
identify areas of risk.
Read our Conflict Minerals Report on
bat.com/investors-and-reporting/reporting/
conflict-minerals-report
+
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Other Information
What we’re doing
109
What’s Next
Working with suppliers to help
manage their supply chain impacts.
– Advancing our efforts to manage
human rights risks.
– Engaging with our suppliers to
improve the traceability of the entire
supply chain.
– Preparing for new regulatory
requirements related to supply chain
due diligence.
Definitions:
Tier 1 suppliers: Directly contracted suppliers of final
products or product materials.
Lower-tier suppliers: Suppliers, with whom we have
a commercial relationship, who supply materials or
products to our Tier 1 Suppliers.
13%
87%
50%
50%
35%
65%
Employee breakdown by level
in 2024 (Management
‡ grade)
Women
6,321
Men
8,208
Employee breakdown by level
in 2024 (Senior Leadership teams
‡)
Women
600
Men
1,043
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Sustainable Future
How we’ll get there
110
Employee Communities
Our Employment Principles set out our
approach to workplace diversity and equality.
Our SoBC include a Respect in the Workplace chapter, outlining our
commitments to equality, diversity, anti-harassment,
anti-discrimination and employee wellbeing.
Our approach to Diversity and Inclusion (D&I) is built on fostering accountability,
diverse talent pipelines and an inclusive culture. Our Group Health and Safety
Policy Statement is based on local and international labour laws and standards,
and is designed to meet or exceed the requirements of applicable health
and safety laws and regulations in the countries in which we operate.
Targets
1,2
Increase the proportion
of women in Management
‡
roles to 45% by 2025
Increase the proportion
of women on Senior
Leadership teams
‡
to 40% by 2025
Increase the Ethnically
Diverse
4 proportion of our
Senior Leaders
‡ to 40%
by 2027
‡Find out more:
Refer to the BAT 'Reporting Criteria'
for a full description of key terms
and definitions bat.com/reporting
+
Read more about our policies and
procedures on pages 116 to 117
+
Notes:
1. These Group-wide targets do not represent quotas.
For each vacancy, the most suitable candidate,
regardless of their gender or ethnicity, should be hired.
We also recognise that there may be local requirements
or other circumstances that need to guide our hiring
practices in various locations where we operate.
2. While our nationalities target was achieved for 2023
and reported in 2024, we aim to replace this aspiration
in future years, in line with our evolving understanding
and the progression of the Diversity & Inclusion agenda.
3. Read more about the number of Women on our Board
of Directors on page 167.
4. See note 2 on page 111 for the definition of Ethnically
Diverse for the purposes of the ethnicity agenda.
Gender Diversity 2024
0
10
20
30
40
50
60
70
80
90
100
Women on our
Board of Directors
3
Women on our
Management Board
Female
Male
Ethnic Diversity 2024
0
10
20
30
40
50
60
70
80
90
100
Proportion of
Ethnically Diverse
4
Senior Leaders
‡
Ethnically Diverse
4 Senior Leaders
‡
Other
Target
For more performance metrics and operational data refer
to our Sustainability Performance Data Book on bat.com/reporting
+
Senior Managers:
Companies Act 2006
For the purposes of disclosure under
Section 414C(8) of the Companies
Act 2006, the Group had 172 male
and 64 female Senior Managers
as at 31 December 2024.
Senior Managers are defined here
as the members of the Management
Board (excluding the Executive
Directors) and the directors of the
Group’s principal subsidiary
undertakings.
The principal subsidiary undertakings,
as set out in the Financial Statements,
represented approximately 53% of
Group employees and contributed
approximately 91% of Group revenue
in 2024.
Championing Diversity and Inclusion
Our values are embedded in how we
operate and empower our people to strive
towards achieving our purpose of creating
A Better Tomorrow™.
Read more about our values
on pages 174 to 175
+
Inclusive capability building
While we do not operate under a quota and
are clear that the most suitable candidate
should be hired regardless of one’s gender
or ethnicity for each vacancy, we provide
training on inclusive hiring and require
gender-balanced longlists from
recruitment agencies.
Between 1 January 2019 and 31 December
2024, we have hired over 5,400 individuals,
46% of whom are women, bringing new
capabilities, such as data analytics, digital,
sustainability, innovation, IP and science.
We seek to enhance the leadership and
functional skills of our employees through
a range of Learning and Development
programmes.
In 2024, an average of 18 hours of training
were completed for over 14,500 of our
Management
‡ grade employees.
We are seeking to focus on in-person training
rather than virtual, which led to a reduction in
the number of training hours per employee.
We continued to increase the investment
in learning for all employees with an average
of £453 per employee, an increase on 2023.
Creating an inclusive work environment
We continue to promote positive outcomes
for employees with hidden or visible
disabilities and those with mental health
conditions.
We launched our Neurodiversity Employee
Community this summer, to support and
raise awareness for neurodivergent
employees and their allies.
Disability Confident Leader
We are proud to retain our UK
government-backed accreditation
Disability Confident Leader (Level 3) status
which remains valid until 2026.
This accolade acknowledges our efforts
in attracting, developing, and supporting
individuals with disabilities and long-term
conditions.
Listening to our workforce
We have established a range of
engagement channels to better understand
our employees’ perspectives. These include
market visits by our Directors and
Management Board members, town halls,
global, functional and regional webcasts,
Q&A sessions, and meetings with works
councils and trade unions.
In 2024, we introduced a new employee
listening framework to strengthen existing
engagement channels.
This includes our global Your Voice surveys,
which are now conducted annually and
engage approximately 40,000 employees
worldwide, offering opportunities for
employees to share their feedback.
Read more about workforce engagement
on pages 182 to 183
+
The results of our surveys are shared with
our Board and all employees. This year, we
achieved a 92% participation rate and an
engagement score of 84%, a year-on-year
increase of 4 percentage points, and ahead
of our global FMCG comparator group by
4 percentage points. Leadership and
Empowerment; Reward and Recognition; and
Talent Development were identified as areas
for improvement.
Engaging with Employee Resource Groups
(ERGs) is important to create an inclusive
and representative culture. By listening to
diverse perspectives we gain insights into
the unique challenges and needs of our
different employee communities.
Our D&I Group-wide ERGs are Women in
BAT and BUnited, our LGBT+ community.
Diversity of our workforce
In 2024, 36.5% of roles on Senior Leadership
teams
‡ and 43.5% of Management roles
were held by women. As of 31 December
2024, 16,667 of our employees were women
and 32,282 were men.
36.5%
of women on Senior
Leadership teams
‡ in 2024
In addition to increasing the number of
roles held by women, our aspirations focus
on the diversity of nationalities and
ethnicities within our workforce.
We collect voluntary ethnicity data
in 15 markets and have 68.5% Ethnically
Diverse
1 employees in those markets.
Globally, 40% of our Board and 34.9% of
our Management Board and their direct
reports are Ethnically Diverse
1.
We continue to make progress against our
target for 40% representation for Ethnically
Diverse
1 groups for the Management Board
and direct reports by 2027, taking into account
the UK Government Parker Review Report.
34.9%
of the Management Board
and their direct reports were
Ethnically Diverse
1 in 2024
Read more about Main Board Diversity
on page 167
+
Rewarding our employees
We aim to provide responsible and fair
remuneration and benefits globally.
In 2024, we retained our independent
accreditation from Fair Pay Workplace, for
providing equal pay for work of equal value
2.
We also maintained our global scope for
the equal pay for work of equal value
gender analysis, covering over
100 countries, and expanded our ethnicity
analysis to include approximately 17,000
Direct Employees
‡ across eight locations,
representing around 40% of our Direct
Employees
‡.
We are proud of the consistency we kept
year-on-year in paying men and women
within 1% of each other, and Ethnically
Diverse
3 and Non-Ethnically Diverse
3 groups
within 1% of one another for doing the
same work or work of equal value.
We were independently certified by the
Fair Wage Network (FWN) as a Global
Living Wage employer for the second
consecutive year in 2024, recognising our
efforts to pay all our direct employees the
applicable living wage
4, at minimum. This
review covered our direct employees in
more than 100 countries.
We offer our UK employees the opportunity
to share in our success through our
Sharesave Scheme, Partnership Share
Scheme and Share Reward Scheme, and
offer several similar schemes for employees
in other Group companies.
For more information about Diversity
and Inclusion at BAT see our D&I Report
bat.com/investors-and-reporting/
reporting/diversity-and-inclusion-report
+
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Other Information
What we’re doing
111
Notes:
1.
For the purposes of the ethnicity agenda, six global ‘Ethnically Diverse’ groups were determined considering BAT's global market footprint: Asian, Black, Hispanic/Latin American,
Indigenous, Mixed and Other Ethnic Groups. Individuals identified as White, those that have ‘Preferred not to Disclose’ and individuals that have ‘Not Disclosed’ i.e. their ethnicity field
remains blank, are not captured in the data set 'Ethnically Diverse’ groups.
2. Employees performing the same work or work of equal value are paid equitably and any differences in pay are for objective reasons and not influenced by factors such as gender and/or ethnicity.
3. For the purposes of our International Pay Equity Analysis, ‘Ethnically Diverse’ groups in the respective countries are defined as ethnic groups who, because of their physical or cultural
characteristics, are/were historically and systematically under-represented. Being a numerical minority is not a characteristic of being an Ethnically Diverse group; sometimes larger
groups can be considered Ethnically Diverse groups. ‘Non-ethnically Diverse’ groups in the respective countries are defined as ethnic groups who, because of their physical or cultural
characteristics, are/were historically and systematically represented.
4. Our definition of a 'living wage' is aligned with the UN Global Compact definition: "living wage is the local remuneration received for a standard work week that enables workers and their
families to meet their basic needs".
Striving to maintain safety in our
direct operations and beyond
Our Environment, Health and Safety
Management (EHS) System, which covers
100% of our operations and includes our
EHS Policy Manual, provides guidance and
procedures on implementing our Health
and Safety (H&S) commitments effectively.
In line with our Policy Statement and
Manual, we monitor H&S performance
across all our sites and a dedicated
team identifies high-risk areas that
require action.
More than half of the work accidents in our
business operations tend to occur outside
of BAT premises.
In Trade Marketing and Distribution
(TM&D), where there are high risks of road
traffic accidents, attacks and assaults, we
manage risks through driver safety and
security programmes.
In 2024, we implemented a ‘Control Tower’
model in our driver safety programme to
standardise the way we track and monitor
any unsafe driving behaviours. This led to
an approximate 41% reduction in vehicle-
related incidents compared to 2023.
In higher security-risk locations, we
continually assess threats and enhance our
safety protocols. This might involve limiting
load values, planning routes strategically
to avoid predictability, and offering
security escorts.
Our annual H&S compliance review
is an important part of our Corporate
Governance. During the review, H&S
representatives visit selected sites
to check compliance with our Global
H&S Standards.
These reviews help us identify gaps and
support continuous improvement.
The results are reported to the Corporate
Audit Committee and any non-compliance
results in corrective actions.
Preventing accidents
In 2024, we recorded the lowest Total
Recordable Incidents Rate since 2020.
In 2024, there was a 26% reduction in
reported incidents, bringing them down
from 99 in 2023 to 73 in 2024.
This data is supported by a 26% reduction
in Lost Time Injuries compared to the same
period last year, mainly driven by a
reduction in vehicle-related accidents
(41%); manual handling related incidents
(42%); and attacks and assaults (64%).
In 2024, 88% of our sites achieved zero
accidents.
Where accidents do occur, each one
is investigated and action plans are
implemented.
The reduction was driven by improvements
in H&S engagement and governance, such as:
– Increased cooperation across our
business functions;
– Increased sharing of best practices
across our markets; and
– Conducting more assessments for each
of our top four losses (vehicle-related,
slips and trips, manual handling and
attacks and assaults).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
What we’re doing
Continued
112
Our health and safety approach
Our ambition is for zero accidents across
the Group and to provide a safe working
environment for all employees and contractors.
Reducing incidents across
our business
0.12
Lost time incident rate
(LTIR) in 2024
Lost Time Incidents
LTIR
0.19
0.17
0.12
90
60
30
0
75
58
43
2022
2023
2024
Sadly, there were two fatalities in 2024, one
being a member of the public and one
being an independent contractor.
We deeply regret this loss of life and the
suffering it has caused to the families and
loved ones of the deceased.
For fatalities or serious incidents, we work
with the relevant authorities on their
investigations. Incidents are investigated
by local teams, to determine the cause,
identify lessons and develop an action plan.
In 2024, we launched a key EHS training
programme to eliminate health and safety
losses, encourage safe behaviours, and
manage BAT’s environmental impact.
The week-long, in-person training is for
Health & Safety and Sustainability
Managers and is hosted by the Global
Health and Safety CoE. Participants receive
a refresher on EHS expectations and
detailed knowledge of EHS components.
The aim is to create experts who will
champion compliance and safety at their
sites. We plan to conduct multiple
iterations of this programme across
the Group in the years ahead, updating
the programme with the latest EHS
best practices.
Promoting employee health
and wellbeing through LiveWell
At the core of our people strategy and
workplace is the Group’s commitment to
fostering health and wellbeing, supporting
our colleagues to thrive personally and
professionally.
This is embodied by LiveWell, our benefits
and wellbeing platform, which has now
been introduced globally.
This initiative builds upon our competitive
core benefits and global policies, such as
Parents@BAT, aligning with our refreshed
values and D&I agenda.
Our core offerings include medical, risk,
and pension benefits, complemented by
essential emotional and financial wellbeing
support.
To address the diverse needs of our global
workforce, we also encourage markets to
expand benefits into emerging areas such
as dependent care leave, wellbeing days,
neurodiversity support, women’s health,
and preventative care—where feasible.
To ensure markets remain competitive
and align to LiveWell, we have initiated
benchmarking reviews across all top markets.
We also use data insights from claims,
utilisation, and employee feedback to
optimise our benefits portfolio, and elevate
the overall employee experience. Clear and
engaging communication remains central
to these efforts.
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Other Information
113
Monitoring human rights in our direct operations
We use Verisk Maplecroft’s human rights
indices, including its Modern Slavery
Index, to assess the risk level faced by our
direct operations.
Assessment outcomes and resulting
action plans for higher risk direct
operations are considered by our
Board Committees.
In 2024, 22 countries where we have
direct operations were identified as
higher risk locations. Our direct
operations in these countries
underwent additional assessments to
evaluate their compliance with Group
policies and standards.
Human rights in the workplace
In 2024, we received 230
1 reports of
alleged SoBC breaches relating to our
Respect in the Workplace and Human
Rights Policy under the SoBC, which
were found to have occurred in
71
1 cases.
Actions were taken in response,
including disciplinary actions that
resulted in 42
1 people leaving the
organisation.
In 91
1 cases, no evidence of wrongdoing
was found, and the remaining cases are
still under investigation.
What’s Next
Evolving our initiatives to foster
impactful change.
– Focusing on diverse representation
and inclusion.
– Introducing workshops and surveys
to embed our corporate values
across the Group.
– Leveraging technology to support
skills development and safety
programmes.
‡Definitions:
For the purposes of our Unadjusted Global Gender
Pay Gap and Pay Equity analyses, 'Direct
Employees' are permanent employees employed
directly by BAT Group companies. It does not
include employees on a leave of absence, employees
on unpaid sick leave, interns, students, apprentices,
or fixed-term contractors employed by third-party
service providers. iNovine (our Retail businesses in
Croatia and Bosnia and Herzegovina) are not in the
scope of the analysis.
Management: Management level employees include
all employees at job grade 34 or above (excluding the
Management Board), as well as any global
graduates. The gender of each employee is typically
recorded at the point of hire.
Senior Leaders: referred to in the ethnicity agenda
includes the Management Board and direct reports
of a Management Board member (i.e. MB and MB-1).
Senior Leadership teams: defined as employees in
Management Grades 37-41.
Note:
1.
In 2023, we received 216 reports of alleged SoBC breaches relating to our Respect in the Workplace and Human Rights
Policy under the SoBC, which were found to have occurred in 68 cases. Actions were taken in response, including
disciplinary actions that resulted in 33 people leaving the organisation. In 73 cases, no evidence of wrongdoing was
found, and the remaining cases are still under investigation.
Overview of Board-led Group governance arrangements
that include oversight of sustainability matters
As we strive to reduce the health impacts of our products, we also seek to
manage the environmental and social impacts of our business responsibly.
Doing so necessitates careful and effective governance of our impacts, risks,
and opportunities. Our governance framework supports sustainable, long-term
decision-making.
BAT Annual Report and Form 20-F 2024
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Sustainable Future
Sustainability Governance
114
Board Level Oversight
Board of Directors
Audit Committee
Responsible for the long-term success of BAT and
the Group’s strategic direction, purpose, values and
governance – including sustainability, climate
and nature strategy.
Monitors and reviews the effectiveness of the Group’s internal
controls, auditing matters, and business risk and compliance
systems, and oversees the Group's sustainability reporting.
Management Board Oversight
Management Board
Group Risk Committee
Corporate Audit Committee (CAC)
and Regional Audit Committees
(RAC)
Responsible for overseeing the
implementation of Group strategy,
including sustainability and
environmental matters.
Oversees assessment and monitoring
of Group risks.
Reviews the effectiveness of the
accounting, internal control and
business risk identification and
management systems within the central
business functions and regions.
Leadership Team Oversight
Group Sustainability
Leadership Team
Operations
Sustainability Forum
Leaf Sustainability
Forum
Supply Chain Due
Diligence Committee
Oversees the Group’s
sustainability priorities,
development, strategy,
and reporting.
Has oversight of
environmental and social
performance, the Leaf
Sustainability Forum and
Supply Chain Due Diligence
Committee.
Reviews strategic direction
and environmental and social
performance across the Leaf
supply chain.
Reviews product material
supply chain performance
and supplier audit
escalations for our non-Leaf
supply chain.
HR Leadership
Teams
Business Integrity Panel
Regulation and Science
Committee
Responsible Marketing
Committee
Oversees Talent, Reward and
D&I strategic performance.
Oversees investigations of
alleged non-compliance with
our SoBC and the consistent
application of the SoBC
Assurance procedure.
Provides strategic oversight
on scientific matters.
Provides strategic guidance
and oversight on matters of
responsible marketing,
including underage access
prevention.
Departments, Functions, Regions and Markets
ÿ
ÿ
ÿ
ÿ
ÿ
ÿ
Integrating sustainability into
our governance practices
Regulatory requirements and stakeholder
expectations continue to evolve at speed.
Having appropriate governance is key to
delivering on our sustainability
commitments. The effective oversight and
management of sustainability-related risks
and opportunities are essential to BAT’s
ability to deliver A Better Tomorrow™.
Board oversight
The Board is collectively responsible for the
long-term success of the Company and the
Group’s strategic direction, purpose, values
and governance. This includes responsibility
for the Group's strategy and ensuring that
resources are allocated appropriately to
meet these objectives and to manage risks,
including through internal controls.
The Board has strategic oversight of our
sustainability matters and takes climate-
related considerations into account where
applicable when making strategic
decisions, including in relation to
budgeting, risk management and
overseeing capital expenditure.
The Audit Committee receives reports
from the Group’s Regional Audit
Committees and Corporate Audit
Committee, which monitor the
effectiveness of business risk management
and internal controls across our regions
and central functions. The Audit
Committee also has oversight of the
external assurance of sustainability-related
information. The Nomination Committee
considers sustainability experience when
reviewing Board composition.
Sustainability expertise
at the Board level
Our Board members have international
experience including a wide range of
leadership expertise in industries such as
fast-moving consumer goods,
infrastructure, food, beverage and tobacco,
among others. To varying degrees, their
experience includes the oversight of
companies impacted by a range
of environmental and social issues.
Non-Executive Directors receive regular
briefings on legal and regulatory
developments, including the evolving
sustainability landscape.
In 2024, the Audit Committee was briefed
on developments in sustainability reporting
regulations by the Chief Sustainability
Officer and KPMG as external auditor
@and in the context of their provision of
assurance in relation to sustainability
reporting@. Briefings covered continued
reporting in alignment with TCFD
recommendations, the European
Sustainability Reporting Standards
introducing future requirements for
disclosures in compliance with the EU
Corporate Sustainability Reporting
Directive (CSRD), development of the UK
Sustainability Disclosure Standards, and
the adoption of climate disclosure rules by
the U.S. SEC (although the SEC climate
disclosure rules are currently stayed).
Management’s role
The Management Board, chaired by
our Chief Executive, is responsible for
overseeing the implementation of the
Group’s strategy and policies set by
the Board, including those relating to
sustainability. It also creates the framework
for the day-to-day operation of the
Group’s subsidiaries.
Members of the Management Board are
responsible for delivery against targets
under their individual remit with respect to
sustainability, including those relating to
Harm Reduction. They are supported by
their respective teams who, in turn, work
with other functions and markets to make
progress towards the Group’s targets.
We continue to integrate the management
of sustainability impact areas across
relevant business areas at Group, regional
and local market levels. This allows for the
appropriate flow of information, monitoring
and oversight of issues across the Group.
Integrating sustainability
considerations into remuneration
Where relevant, the Management Board
(including the Director, Operations) have
individual performance objectives that
form part of their responsibilities and are
linked to their remuneration. These include
delivery against climate-related priorities
and metrics.
Performance against personal objectives
forms part of the consideration in
determining performance ratings of
relevant employees, which in turn are
reviewed as part of discussions to
determine compensation.
The Group retains the discretion to
make downward adjustments to
individual bonus payments in the event
of persistent underperformance against
performance objectives.
The Sustainability objectives within the
remuneration of Tadeu Marroco, Chief
Executive, and Soraya Benchikh, Chief
Financial Officer, are focused on the
Group’s progress in achieving its
Smokeless Future ambitions. From 2025,
a climate metric will be introduced into the
Group's Short-Term Incentive Plan, linking
compensation of Executive Directors and
wider employees with the decarbonisation
of our operations.
Governing our material impacts
To manage our material sustainability
impacts we have set up topic-specific
Centres of Excellence at the middle
management level. These include Climate
Change, Circular Economy, Nature and
Social Centres of Excellence. In addition,
individual business functions, such as
Legal, Corporate & Regulatory Affairs and
HR, manage material issues relevant to
their areas. The management of material
sustainability topics is also discussed in
various committees and forums, such as:
– Group Sustainability Leadership Team,
– Environmental Sustainability Committee,
– Operations Sustainability Committee,
– Leaf Sustainability Forum,
– Supply Chain Due Diligence Committee,
– Responsible Marketing Principles
Steering Committee,
– Regulation and Science Committee,
– Business Integrity Panel; and
– Talent Reward and D&I Leadership Teams.
Issues considered in these forums are
raised, where appropriate, at Management
Board level or with the Audit Committee or
the Board.
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
115
A clearly defined governance framework to
support management control and Board-level
oversight of sustainability matters. This provides
the policies, procedures and standards to
determine and guide how we operate our business
– from local markets and business units up to
Board level.
Our Group policies (indicated by* in the
table below) are approved by the Board and
are implemented for application by all
Group companies.
Our Group policies are underpinned by a
range of principles, statements, operating
procedures, standards and guidelines to
help support effective implementation of
our commitments.
Together, this framework supports the
effective identification, management and
control of risks and opportunities for our
business in these and other areas.
Policies, Procedures
and Standards
Summary of Areas Covered
Key Stakeholder
Groups
Standards of Business
Conduct (SoBC)*
Available at bat.com/principles
Sets out our policies for: Speak Up; respect in the workplace; human rights; health;
safety and welfare; environmental; lobbying and engagement; conflicts of interest;
anti-bribery and corruption; gifts and entertainment; political contributions;
community investment; protection of corporate assets and financial integrity;
competition and anti-trust; anti-money laundering and tax evasion; sanctions; anti-
illicit trade; data privacy; and cybersecurity, confidentiality and information security.
Our people
Governments
and wider society
Supplier Code
of Conduct*
Available at bat.com/principles
Covers compliance; human rights; environmental sustainability; trade
and marketing; business integrity; and cybersecurity, confidentiality and
information security.
Customers
Suppliers
Governments
and wider society
Group Environment
Policy*
Available at bat.com/principles
Commits to following standards of environmental protection, adhering to the
principles of sustainable development and protecting biodiversity in our direct
operations and supply chain. Includes an assessment of our value chain impacts,
Circular Economy principles, biodiversity commitments and metrics and targets.
Our people
Consumers
Suppliers
Customers
Governments
and wider society
Group Health
and Safety Policy
Statement*
Available at bat.com/principles
Covers health, safety and welfare of our employees, contractors, visitors and other
relevant stakeholders.
Our people
Governments
and wider society
Employment Principles*
Available at bat.com/principles
Sets out our commitments to workforce diversity, reasonable working hours,
family-friendly policies, employee wellbeing, talent, performance, equal
opportunities, and fair, clear and competitive remuneration and benefits and
responsible restructuring.
Our people
Responsible Marketing
Principles (RMP)*
Available at bat.com/principles
and bat.com/responsible-
marketing
Governs marketing of all our products and includes the requirement for all our
marketing to be targeted at adult consumers only. The RMP is supported by the
Responsible Marketing Code.
Consumers
Suppliers
Customers
Governments
and wider society
Group Quality Policy
Statement
Available at bat.com/principles
Formalises how we strive to deliver high-quality products through appropriate
processes, procedures, resources, and training.
Consumers
Product Stewardship
Framework*
Available at bat.com/principles
Sets out the steps we take for responsible product development and
manufacturing and reflects our commitment to meet high quality and safety
standards. Guides product development and testing, helping to promote a
rigorous and systematic approach.
Consumers
Suppliers
Customers
Governments
and wider society
Biodiversity Statement
Available at bat.com/principles
Sets out the principles we follow to manage our impact on biodiversity and the
wider environment.
Our people
Suppliers
Governments
and wider society
Biodiversity Operational
Standard on Tobacco
Farming
Sets out requirements that all of the Group's own Leaf Operations must adhere to for
the following tobacco crop activities: use of wood as fuel for tobacco curing and for the
construction of curing barns; new farmland development for growing tobacco; and
tobacco farming and associated agricultural practices. Third-party Leaf suppliers are
also required to follow this standard within their own practices and operations.
Our people
Suppliers
Governments
and wider society
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
Sustainable Future
Sustainability Policies,
Procedures and Standards
116
Policies and Procedures
Summary of Areas Covered
Key Stakeholder
Groups
Climate Change and
Energy Standard
Provides guidance for our employees who have responsibility for implementing
climate change-related initiatives.
Our people
Suppliers
Customers
Governments
and wider society
Green Mobility Standard
Outlines our strategy for reducing the environmental impact of our car fleet,
namely carbon dioxide equivalent emissions (CO2e), air pollution, and noise
reduction through the deployment of electric vehicles.
Our people
Suppliers
Governments
and wider society
Low Carbon Transition Plan Describes our Climate strategy and how we intend to transition our processes,
operations, and business models to meet our climate commitments.
Our people
Suppliers
Customers
Governments
and wider society
Environment and Health
and Safety (EHS) Policy
Manual
Sets out comprehensive guidance and procedures for Group companies
on the implementation of EHS policy commitments.
Our people
Governments
and wider society
Suppliers
Operational standard
for personal protective
equipment (PPE)
Requires all directly contracted farmers and their workers to have appropriate
access to PPE.
Our people
Suppliers
Governments
and wider society
Water Security Standard
Sets out guidance for Group companies on water conservation, managing
water-risk, and actions for our sites in water stressed areas.
Our people
Suppliers
Governments
and wider society
Soil and Groundwater
Protection Standard
Defines the controls and standards required for Group companies to prevent
and protect against spillages and leakages that could impact soil or groundwater.
Our people
Suppliers
Governments
and wider society
Group Code of Human
Rights in Tobacco
Farming
Outlines the core human rights standards that we expect all the Group’s own Leaf
Operations to implement. The Code complements our Global Supplier Code of
Conduct, Leaf Supplier Manual and Standards of Business Conduct, and applies
to all BAT employees and the Group’s own Leaf Operations.
Our people
Governments
and wider society
Leaf Supplier Manual
(LSM)
Sets out the detailed standards we expect our suppliers to adhere to. These
include a range of criteria relating to standards in agricultural practices, quality
specifications and processing, such as relating to agrochemicals compliance
and the prevention of child labour.
Suppliers
Governments
and wider society
Anti-illicit Trade (AIT)
Supply Chain Compliance
Procedures
Sets out guidance for all Group companies for complying with our AIT Policy
in the SoBC. It sets out procedures for maintaining robust supply chain controls
and taking appropriate action where there are risks that our tobacco and/or
products may be smuggled.
Our people
Suppliers
Customers
Governments
and wider society
Group SoBC Assurance
Procedure
Defines how all reports of alleged SoBC breaches should be investigated and
remediated fairly and objectively. This includes a four-step process, involving
an initial assessment, in line with data privacy and employment laws, followed
by an investigation plan, implementation, reporting of findings, and closure.
Our people
Sanctions Compliance
Procedure
Outlines our comprehensive sanctions compliance framework covering Group
companies, suppliers, third parties and financial transactions.
Our people
Suppliers
Customers
Governments
and wider society
Third-Party Anti-Financial
Crime Procedure
Sets out Group-wide minimum mandatory steps required for our dealings with
third parties. Designed to assess and mitigate third-party risks regarding: bribery
and corruption; money laundering; terrorist financing; illicit trade (supply chain
compliance); sanctions; and the facilitation of tax evasion.
Our people
Suppliers
Customers
Governments
and wider society
Mergers and Acquisitions
(M&A) Transactions
Compliance Procedure
Sets out mandatory steps, along with best-practice guidelines for M&A
transactions involving any Group company and one or more third parties covering
compliance risks, such as bribery, corruption and human rights.
Our people
Suppliers
Customers
Governments
and wider society
Counter Terrorist
Financing Procedure
Covers Group Companies, suppliers, customers and financial transactions.
The Procedure has been designed to identify, assess and mitigate the terrorist
financing risk.
Our people
Suppliers
Customers
Governments
and Wider Society
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
117
Our Standards of Business Conduct (SoBC) cover key compliance matters,
our approach to external stakeholders and cybersecurity matters.
Through our Delivery with Integrity programme, we aim to
increase awareness on business ethics and drive a consistent
approach to the application of our SoBC across the Group.
Our Supplier Code of Conduct (SCoC)
defines the minimum standards expected
of our suppliers in key areas, including
compliance, human rights and business
integrity and cyber-risk. The Anti-Illicit
Trade (AIT) chapter is integral to our SoBC
and sets out the controls all Group
companies must have in place to prevent
and deter illicit trade. Our Supply Chain
Compliance Procedures (SCCP) support
our customers in complying with our
AIT chapter. These requirements
are incorporated into our contractual
arrangements with suppliers
and customers.
Read more about our policies
and procedures on pages 116 to 117
+
We adjusted the review schedule of the
SoBC and SCoC from every two years to
every year from 2024, and this year we
reviewed and updated our SoBC and SCoC
(both effective as of 1 January 2024) as well
as other procedures such as our Sanctions
Compliance Procedure (effective 20 May
2024) to keep pace with the evolving
regulatory environment. We also
implemented a new Counter-Terrorist
Financing Procedure to support the
management and mitigation of Group anti-
financial crime risks in this area. The updates
to these three policies and procedures were
communicated to Group employees by our
senior Legal leadership team.
Enabling everyone to Speak Up
Our SoBC and SCoC make it clear that
our employees, business partners and
suppliers should Speak Up if they have
a concern about actual or suspected
wrongdoing. We do not tolerate
harassment, victimisation or reprisals of
any kind against anyone raising a concern,
as such conduct is itself a breach of our
SoBC. Anyone can use Speak Up, including
employees; contractors; contingent
workers; business partners; customers;
suppliers, and their workers. They can raise
concerns (anonymously if preferred)
through our confidential, independently
managed online and telephone 'Speak Up'
channels, available 24 hours a day in local
languages. They can also speak to Human
Resources, their line manager or a
Designated Officer.
Not all contacts involve breaches. Some
relate to questions regarding the SoBC.
For substantiated breaches, we take
appropriate disciplinary actions, ranging
from formal written warnings to the
termination of employment. Where
appropriate, we will report matters
to the relevant authorities.
Addressing non-compliance
with our SoBC
In 2024, 512 of all the 869
3 SoBC contacts
were assessed as alleged SoBC breaches
and reported to the Audit Committee in
accordance with Group reporting
procedures. In 50% of these alleged
breaches, the person raising the case
chose to remain anonymous. Our SoBC
Assurance Procedure, which was reviewed
and revised in 2024, defines how all reports
of alleged SoBC breaches should be
triaged, investigated and remediated fairly
and objectively. Our Business Integrity
Panel's role is to see that the procedure is
applied consistently. In 2024, figures for
detailed investigations conducted into all
reported cases were:
– No wrongdoing was found in 163
3 cases;
– Investigation ongoing at year-end for 185
3
cases; and
– 164
@1@,3 cases were established as
breaches and appropriate action taken
2.
In 2024, the established SoBC breaches
resulted in 81
@1@,3 people leaving BAT and
48
3 written warnings. If any weakness in
internal controls is identified, the
appropriate measures are taken to
strengthen them.
Alleged SoBC breaches in 2024
2
Policy areas
Breakdown (%)
Social and Environment
(Workplace and human rights)
47
Corporate Assets and Financial Integrity
29
Personal and Business Integrity
19
Others not relating to a specific
policy area
0
National and International Trade
4
External stakeholders
(Lobbying and public contributions)
0
Data does not add up to 100% due to rounding up
Promoting compliance
Our Sanctions Compliance Framework and
Third-Party Anti-Financial Crime Procedure
take a comprehensive approach to
promoting compliance with a range of legal
and regulatory requirements applicable to
the Group. In 2024, our sanctions training
programme has focused on specific
employees working in functions or markets
with elevated sanctions-sensitive risks. It is
designed to support them to build
confidence in identifying key sanctions
compliance risks.
In 2024, we delivered training across our
Group companies to enhance colleagues’
understanding of sanctions, anti-financial
crime, and supply chain controls, among
other topics.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
Creating a Culture of Integrity
Our approach to responsible business conduct
118
Notes:
1.
@Figures with independent limited assurance by KPMG.
@
2. Consistent with our reporting approach, cases are not included in the above if they were not resolved at the end of the previous reporting period. Refer to our Sustainability Performance
Data Book 'Reporting Criteria' for further information.
3. In 2023, 427 of 707 SoBC contacts were assessed as alleged SoBC breaches and reported to the Audit Committee in accordance with Group reporting procedures. In 2023, figures for
detailed investigations conducted into all reported cases were: No wrongdoing was found in 135 cases; Investigation ongoing at year-end for 169 cases, and 123 cases were established
as breaches and appropriate action taken In 2023, the established SoBC breaches resulted in 79 people leaving BAT and 53 written warnings.
The training was delivered to both Group-
wide and specific audiences, depending on
the need, to bolster internal competencies
in essential compliance areas, further
promoting a culture of integrity. We are
developing additional
risk-based training programmes for our
employees to enhance third-party risk
management of suppliers, with practical
tools to reinforce the tone from the top and
the middle, and to improve access to
relevant training.
We also introduced a compliance-related
business performance objective for all
relevant employees, including the
Management Board and all Legal
department employees. By attaching
measurable business deliverables for these
employees to ‘Do the Right Thing’, we
seek to further promote a culture of
integrity across the organisation.
As set out in our M&A Transactions
Compliance Procedure, our due diligence
procedures for mergers, acquisitions and
corporate ventures include human rights
and modern slavery checks. If risks are
identified, mitigation steps are taken
as appropriate.
Preventing and tackling illicit trade
in tobacco and nicotine products
Focusing and maintaining controls to
prevent diversion of genuine BAT products
is a key component in our fight against illicit
trade as set out in the AIT chapter of our
SoBC and SCCP.
We have a dedicated Forensic and
Compliance Team that analyses seized
products, determines counterfeits and
identifies illicit machinery used in their
production. They maintain supply chain
controls through a seizure management
process tailored to satisfy our contractual
and regulatory obligations.
The team is also instrumental in
conducting Empty Pack Survey, an AIT
research tool that provides insight into
incidences of illicit trade in specific markets
or geographies.
Among other supply chain controls,
in 2024, we rolled out an eLearning
programme to all relevant employees
(i.e. roles related to supply chain
interactions and monitoring). The focus
was on due diligence procedures, and the
completion rate for the 2024 SCCP
eLearning was 100% across the
approximately 10,000 in-scope employees.
Regulation and engagement
As key chapters of our SoBC, our 'Lobbying
and Engagement' and 'Political
Contributions' policies have been
implemented by all Group companies and
apply to all our employees.
These policies require all our engagement
activities with external stakeholders to be
conducted with transparency, openness
and integrity.
For global regulatory priorities, the views
we advocate are published on our website,
and we have long supported the OECD’s
Principles for Transparency and Integrity
in Lobbying.
We also respect the call for transparent
and accountable interaction between
governments and relevant stakeholders,
including the tobacco industry, established
in Article 5.3 of the World Health
Organization’s Framework Convention on
Tobacco Control. We are open about what
we think, and always try to offer
constructive solutions that will best meet
the objectives of regulation, while
managing any negative unintended
consequences. Regulatory engagement
by our businesses is monitored throughout
the year by our Regional Audit Committees.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
119
Case study
Globally developed, locally deployed
Maintaining a consistent ethical culture across the Group is a fundamental objective
of Delivery with Integrity, BAT’s compliance programme.
This goal is driven by the central compliance team, which designs the global
compliance framework, and it is executed by local teams across markets, who focus
on adapting the controls and communications to mitigate risk and strengthen
compliance in areas of local business relevance.
To do so, the local teams adopt various channels and approaches that fit their own
needs. These may include employee focus groups to identify challenges or identify
departmental champions to drive messages at grassroot level. Some local market
teams build compliance into Town Hall sessions so it is seen as an integral part of
‘Business As Usual’ (BAU) as well as running dedicated integrity-themed
communications campaigns tailored to the local context and focused on how
individuals contribute to the collective culture of integrity.
A summary of our response to the Task Force on Climate-related Financial Disclosures
(TCFD) recommendations is set out below.
Under the Financial Conduct Authority’s (FCA) UK Listing Rules, our reporting is consistent with the four TCFD recommendations
and 11 recommended disclosures set out in Figure 4 of Section C of the TCFD report “Recommendations of the Task Force on
Climate-related Financial Disclosures”, including the guidance set out within the 2021 TCFD annex.
We will continue to develop our climate-related disclosures. For more information see page 136.
TCFD at a glance: Summary of our response
1
Governance
Disclose the organisation's governance around climate-related issues and opportunities
a) Describe the board’s oversight of climate-
related risks and opportunities.
Our Board has oversight of our climate-related risks and opportunities. The Board approves
the Group’s environmental targets. It reviews the Group's environment strategy, targets and
performance twice a year and the Group risk register, which includes climate-related risks,
annually. The Audit Committee reviews the Group risk register twice a year and oversees the
Group's approach to TCFD reporting.
Read more
on pages 114
and 121
+
b) Describe management’s role in assessing
and managing climate-related risks and
opportunities.
Management is responsible for identifying and assessing risks including climate-related
impacts, risks and opportunities. Mitigation plans are required to be in place to manage
the risks identified and progress against those plans is monitored.
Read more
on pages 114
and 121
+
2
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation's businesses, strategy, and financial
planning where such information is material
a) Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium, and long term.
We have identified six climate-related risks and two opportunities. For each, the level of
likelihood and impact has been analysed up to 2050 with a particular focus on 2030 and
2050 to match the time frames of our key sustainability commitments.
Read more
on pages 122
to 129
+
b) Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy, and financial planning.
We have assessed the impact of these risks and opportunities on our strategy and financial
planning. The results show that, while there are financial risks that would need to be managed,
these are not substantive enough to require a material change to our business model.
Read more
on pages 122
to 129
+
c) Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario.
While there are climate-related challenges and uncertainties ahead, we believe that the
Group is well placed to manage the risks associated with all three of the scenarios modelled
(including a 2°C or lower scenario) given the mitigation activities we have established.
Read more
on pages 122
to 129
+
3
Risk management
Disclose how the organisation identifies, assesses, and manages climate-related risks
a) Describe the organisation’s processes
for identifying and assessing climate-
related risks.
We identify and evaluate risks and opportunities, including climate-related risks, which
are captured on risk registers and assessed against five risk impact levels. In financial
(quantitative) terms, Severe is deemed as in excess of £1bn, Significant £500m-£1bn,
Moderate £250m-£500m, Minor £120m-£250m and Insignificant £60m-£120m in any
12-month period, as defined by our risk management framework.
Read more
on pages 130
and 131
+
b) Describe the organisation’s processes for
managing climate-related risks.
Mitigation plans are required to be in place to manage the risks, including
climate-related risks identified, and progress against those plans is monitored. Decisions
on how to manage the risks are based on a variety of considerations, including risk score,
our ability to influence or control the risk and cost and effectiveness of mitigation.
Read more
on pages 130
and 131
+
c) Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the organisation’s
overall risk management.
Our processes for identifying, assessing, and managing risks, including climate-related risks,
are integrated across the Group as part of our Risk Management Framework. This includes
biannual reviews of the Group risk register by our Group Risk Management Committee,
chaired by the Chief Financial Officer. The Group risk register is also reviewed annually by
the Board and biannually by the Audit Committee.
Read more
on pages 130
and 131
+
4
Metrics and targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
a) Disclose the metrics used by the
organisation to assess climate-related risks
and opportunities in line with its strategy
and risk management process.
We have a set of metrics for each of our sustainability focus areas, including climate
change, against which we report on our performance and progress each year.
Read more
on pages 132
and 136
+
b) Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas (GHG)
emissions, and the related risks.
We disclose Scope 1, Scope 2 and Scope 3 GHG emissions and related risks in our reporting.
Read more
on pages 132
and 136
+
c) Describe the targets used by the
organisation to manage climate-related
risks and opportunities and performance
against targets.
Our targets to manage climate-related risks and opportunities include 50% reduction of
Scope 1 and 2 GHG emissions. We have also submitted to the SBTi for approval targets of a
30.3% reduction in Scope 3 FLAG GHG emissions and a 42% absolute reduction in Industrial
(non-FLAG) GHG emissions by 2030
1, and Net Zero value chain GHG emissions by 2050.
These are supported by a range of other environmental targets against which we report
our performance and progress each year.
Read more
on pages 132
and 136
+
Note:
1.
The Scope 3 Industrial (non-FLAG) GHG emissions target includes purchased goods and services, upstream transportation and distribution, use of sold products, and end of life
treatment of sold products. The Scope 3 FLAG GHG emissions target includes FLAG emissions and removals. Combined, these Scope 3 targets comprised 77% of Scope 3 emissions
in 2020. Due to the complexity of consolidating and assuring Scope 3 data from our suppliers and value chain, we report Scope 3 data one year behind other metrics. In 2024, we have
further enhanced our Scope 3 calculation methodology and data precision leading to the reporting periods 2021 to 2023 being restated accordingly. Refer to the BAT 'Reporting Criteria'
for our full methodology: bat.com/reporting.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
TCFD Reporting
120
Board oversight
The Board’s oversight of and
Management’s role in assessing and
managing our sustainability agenda is
outlined at page 115.
Our Board takes climate and nature-related
considerations into account where
applicable when making strategic
decisions, including in relation to
budgeting, risk management and
overseeing capital expenditure. The Board
has approved all Group environmental
targets (including for GHG emissions) and
receives an update on performance twice
a year from the Director, Operations.
The Board reviews the Group risk register,
which incorporates climate and nature-
related risks, on an annual basis. In addition,
the Board reviews the Group budget which
takes into account capital allocation to
deliver the Group’s sustainability agenda
and associated targets.
Read more about our Climate Change
and Circular Economy risk in the Group
Principal Risks on page 161 and in the
Group Risk Factors on page 415
+
In 2024, the Board assessed environmental
performance, including progress towards
achieving climate targets of 50% reduction
in Scope 1 and 2 GHG emissions (against
2020 baseline) and 50% renewable energy
use by 2030 as well as deforestation and
conversion free targets. In 2024, the Board
also received an in-depth briefing on
developments in sustainability regulations
including analysis from UK, European and
U.S. perspectives.
The Board has delegated certain
responsibilities to the Audit Committee,
including for review of the effectiveness of
the Group's risk management and internal
control systems, including those relating to
climate change. The Audit Committee
reviews the Group risk register twice a year
and reviews the Group's progress against
sustainability targets, including emission
targets that address climate-related issues
(see targets on page 133).
In 2024, the Audit Committee continued to
oversee developments in our approach
to reporting in alignment with the TCFD
and TNFD frameworks, including the
use of climate scenario analysis in our
risk assessments.
The Chair of the Audit Committee provides
a full briefing to the Board following each
Audit Committee meeting, including
decisions taken and key topics discussed
by the Audit Committee.
Management’s role
We seek to integrate the assessment and
management of climate-related risks
across relevant business areas at Group,
regional and local levels, with appropriate
management oversight at each level,
as shown on the chart on page 114.
Our approach provides a flexible channel
for the structured flow of information,
monitoring and oversight of climate-related
risks and environmental matters at the level
and format best suited to the context.
Our Management Board, chaired by
our Chief Executive, is responsible for
overseeing the implementation of Group
strategy and policies, and monitoring
Group operating performance, including
in relation to sustainability and climate.
Management Board members are regularly
updated on material risks and development
of strategic plans, including those relating
to climate change and nature, along with
associated risk mitigation plans, by risk
owners, risk managers and their respective
teams. This includes regular monitoring by
the Group Risk Management Committee,
chaired by the Chief Financial Officer.
The Chief Corporate Officer has overall
responsibility for the strategic delivery of
the Group sustainability agenda, supported
by the Sustainability team, including our
Chief Sustainability Officer, Head of
Sustainability Regulatory Reporting and
sustainability subject-matter specialists
across the Group.
The Director, Operations has overall
responsibility for the execution of the
Group’s climate and nature strategy and
environmental targets, supported by the
Group Head of Operations Development
and Sustainability, the Operations
Sustainability team, the Group
Sustainability team and regional
Sustainability managers.
Each reporting unit reports on a monthly
basis. Monitoring and reporting of
consolidated Group performance and
metrics is completed quarterly by the
Group Operations Sustainability team.
Each directly-reporting business unit has
an Environment, Health & Safety (EHS)
Steering Committee, with overall
responsibility to deliver environmental
targets at site level held by the General
Manager or site manager. EHS is also a
standing agenda item for management
meetings and governance committees
at area, regional and global levels.
These local management meetings and
committees report into the Operations
Sustainability Forum, chaired by the
Director, Operations. This acts as a conduit
to track delivery of environmental targets
and gain visibility of new and emerging
risks posed by climate change.
The Operations Sustainability Forum oversees
business plans to mitigate risks identified,
reviews performance and tracks progress
of our regions and business units in delivering
the Group’s environmental targets.
Read more about our Sustainability
Governance on pages 114 to 115 and about
our TNFD disclosure on pages 137 to 152
+
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Other Information
121
Key topics considered
in 2024 at Board level
that included climate
and nature-related
matters:
– Environmental performance
(in February and July 2024)
– Approval of the ARA and 20-F
(in February 2024)
– In-depth review of sustainability
reporting regulations in April 2024
– Approval of the revised Group
climate targets, including FLAG
and Non-FLAG emission reduction
targets in July 2024
– Group risk register (annually
in July 2024)
– Review of the Group's sustainability
Impacts, Risks and Opportunities
by the Audit Committee in
September 2024
– Review of business stakeholder
engagement in September 2024,
which included an update on the
refreshed Double Materiality
Assessment
– Budget Review (including
Operations sustainability budget)
in December 2024
– In depth review of approach
to sustainability reporting in
December 2024
1
Governance
Our purpose to build A Better Tomorrow™
and our Group strategy are set out on
page 12. We have also set out our strategic
sustainability focus areas, with climate
change as a key pillar, on page 66.
We rely heavily on natural resources to run
our business and our ability to secure these
resources is directly linked to the effects of
climate change. Not only does the climate
crisis impact society and the environment,
it also threatens our business growth. It is
therefore imperative that we develop
mitigation and adaptation strategies and
work together with the private and public
sector to take action.
In this context, BAT currently has a target
to reduce our Scope 1 and 2 GHG emissions
by 50% by 2030 (against a 2020 baseline).
In 2024, and in line with the Science Based
Targets Initiative (SBTi) Forest Land and
Agricultural (FLAG) guidance, which
requires companies in certain sectors like
ours to set FLAG targets, we submitted
new, near-term Scope 3 Forest, Land and
Agricultural (FLAG), industrial (non-FLAG)
and long-term Net Zero targets to the
Science Based Targets Initiative (SBTi) for
approval
1. In 2022, we published our Low
Carbon Transition Plan (LCTP), which
outlines how we intend to align our
business model with a world in which the
rise in global average temperature should
be limited to no more than 1.5°C above pre-
industrial levels and how we can contribute
to an economy that works for people and
the environment by addressing climate-
related risks and opportunities.
Read more about our approach to
Financial Planning in Decarbonisation
in our 2022 Low-Carbon Transition Plan
at bat.com/LCTP
+
Our climate strategy
To deliver on our climate goals, we have an
integrated climate strategy covering both
our own business operations and supply
chain. Key attributes of our climate
strategy include:
– Reducing the environmental impact of
our direct operations (see page 83);
– Building a climate-resilient supply chain
in partnership with our key direct and
indirect suppliers (see page 85) and
performing climate scenario analysis to
understand the resilience of our business
against a set of identified climate-related
risks and opportunities;
– Collaborating with our directly
contracted tobacco farmers to introduce
sustainable agricultural practices
(see page 84);
– Promoting a circular economy model
to reduce downstream emissions
(see page 96); and
– Managing our ecosystems, to enhance
the resilience of our internal supply chain
and wider supply chain (see page 89).
Read more about our approach to
managing our environmental impacts
within our sustainability material topics
on page 81
+
Financial planning in decarbonisation
The risks and opportunities posed by
climate change are addressed through our
financial planning and form a critical part of
our Net Zero GHG emissions strategy. We
have incorporated Internal Carbon Pricing
(ICP) in our financial planning and rolled out
a balanced scorecard for capital
investment activities across our Global
Operations, whereby the environmental
and social impacts of potential projects
are considered against our commitments
and targets. Through this approach, we are
able to enhance our decision-making and
governance processes to consider these
impacts, particularly where policy and
regulation do not yet exist and, therefore,
the effectiveness of conventional financial
appraisal tools such as Net Present Value
and payback analysis is reduced.
Financial planning elements that
have been influenced by risks
and opportunities
The Group’s climate change-related risks
and opportunities are considered in our
strategic and financial planning, our capital
allocation decisions and our operational
management. The impacts of risks and
opportunities arising from climate change
help inform our strategies and financial
planning to enhance the overall resilience
of our business.
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Other Information
Sustainable Future
TCFD Reporting
Continued
122
2
Strategy
Our climate strategy
Climate
scenario
analysis for
key tobacco-
growing areas
Invest in
energy
efficiency
projects and
management
systems
Increase
renewable
energy
sourcing
Build a
climate-resilient
supply chain
Enter into
longer-term
power-purchase
agreements
For our
Value Chain
For our
Operations
Life cycle
assessments
for our product
categories
Invest in on-site
renewable
energy
generation
projects
Help farmers
deploy innovative,
low-carbon
curing
technologies
and farming
techniques
Roll out
electric
and hybrid
vehicles in
our fleet
Note:
1. We plan to rescind our 2021 Scope 3 emissions targets following approval of our new Scope 3 targets by the SBTi which is expected during the first quarter of 2025.
The climate scenario analysis undertaken has
been performed against three time horizons:
(i) short term (2025-2030): this time period
is linked to our 2030 sustainability
commitments, (ii) medium term (2031-2040)
and (iii) long term (2041-2050), which aligns
to our LCTP across our value chain.
Our material climate-related risks and
opportunities are detailed on pages
124 to 129.
Revenue
Physical risks of climate change have
the potential to adversely impact revenue
through supply chain constraints. Our
business planning helps us to mitigate
these risks through detailed continuity
plans such as sufficient inventory durations
(with a trade-off on working capital and
funding costs) to mitigate short-term
supply risks and understanding the longer-
term risks on our supply chain.
In addition, sustainability is an increasing
factor in consumer purchasing decisions. That
is why we continuously seek insights that feed
into future product innovations and initiatives.
Read more about our approach
to end-of-life processes and product
circularity on page 97
+
Direct operating costs
Ways in which climate change
considerations can impact cost of sales
and, as such, are considered as part of our
financial planning include:
– Tobacco leaf cost increases due to
potential supply constraints caused
by chronic or extreme weather events;
– Raw materials and innovation cost
increases due to raw material shortages
and enhancements to our product
designs to reduce waste and increase
recyclability; and
– The potential cost of emerging
regulation, as well as taxes on carbon
emissions and increases to the cost of
energy impacting our direct operations
and wider value chain as we transition
to a low-carbon model.
Capital allocation
As part of our financial planning, we require
significant capital investments to include
carbon emissions impact calculations
which are priced into cash flow projections
using ICP, as well as marginal abatement
cost, and most recently, Balanced
Scorecard appraisal tools.
The level of ICP is reviewed annually and,
following a benchmarking of external
metrics, it was set at £75 tCO2e in 2024.
Capital investment
We fund a dedicated capital expenditure
budget that is used to progress the delivery
of our sustainability commitments.
In 2024, this amounted to £30 million with
investments in energy efficiency and
renewable energy generation, water
recycling and efficiency projects, waste
reduction, and product innovation-led
specification improvements to enhance
technical recyclability.
Assets and liabilities
The impact of climate change is considered
in the estimates of future cash flows used
in impairment assessments. Our 2024
assessment concluded that climate
change risks are not yet material, therefore
the impacts were not included in the
financial statements. The assessment is
detailed in note 12 of the financial
statements.
Read more about the impact of climate
change as part of our impairment
disclosure on page 293
+
Access to capital
Climate risks and opportunities may impact
BAT’s financing in multiple ways, for
example:
climate change may impact
the business financially through
potentially higher costs and/or our
consumers' ability to buy our
products which, if they materialised,
could impact our profitability and
credit ratings; and
perception of our investors towards
our sustainability progress which
could reduce their willingness to
invest in BAT or restrict our access to
capital, should BAT fail to achieve, or
be perceived as having failed to
achieve, sufficient progress.
By having clear visibility of climate-related
risks and opportunities and mitigating
these where possible, the Group expects
to have continued access to capital and to
be able to undertake acquisitions or
divestments, as needed.
The process of managing these risks is
embedded in our financing principles which
are reported on to the Board. Operationally,
funding is also discussed at the Corporate
Finance Committee (chaired by our Chief
Financial Officer).
We also have a Treasury Risk Committee
that meets monthly and monitors climate-
related risks in the context of the Group's
financing needs. In terms of metrics, we
have an established medium-term target
credit rating which seeks to achieve a
balance between balance sheet
requirements and access to capital as well
as various other metrics. In addition, the
Corporate Treasury team is embedded in
key discussions on sustainability, as well
as dialogues through debt investor
engagement to understand the dynamics
of sustainability impact on funding and
capital markets. The Corporate Treasury
team takes appropriate actions to mitigate
potential impacts on our access to capital
due to sustainability factors.
Climate scenario analysis
Identification
The selection of the risks and opportunities
in our TCFD report was reviewed in 2023 as
a result of our Double Materiality
Assessment^ process and sustainability
risk register, which captured risk
information gathered from the
identification and assessment of the Group
sustainability-related risks.
See more details on our DMA
on page 70 and our Sustainability Risk
Management process on page 130
+
The identification of risks and opportunities
is reviewed annually so that it remains
appropriate in the context of a dynamic
business and physical environment, and to
take account of improved data or modelling
which may become available.
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2
Strategy continued
Understanding material
risks and opportunities:
In our TCFD reporting, material risks
and opportunities are those that
could reasonably be expected to
affect financial position and
performance over the short,
medium or long term.
Note:
^
Although financial materiality has been considered in the development of our Double Materiality Assessment (DMA), our
DMA and any conclusions in this document as to the materiality or significance of sustainability matters do not imply
that all topics discussed therein are financially material to our business taken as a whole, and such topics may not
significantly alter the total mix of information available about our securities.
Likelihood Key
Strategy Resilience Key
■
Remote
Strong:
The targets and mitigation actions in place are providing BAT confidence in our business resilience
■■
Unlikely
Medium:
Targets and mitigation actions are in place, but external events may challenge our business resilience
■■■
Possible
Needs work:
Developing targets and/or mitigation actions to improve our business resilience
■■■■
Likely
■■■■■
Probable
Climate change-related risks and opportunities summary table
Risk/Opportunity
Estimated financial impact
on profit in a year*
Likelihood
Strategy resilience
1.5°C
2°C
3-4°C
Transition risks
Carbon Taxes
up to £390 million
■■■■
■■■
■■
Strong
Product Taxes
up to £180 million
■■■
■■■■
■■
Strong
Energy Costs
up to £200 million
■■■■
■■■
■■
Strong
Cost Capital/Insurance
up to £300 million
■■■
■■■■
■■■■■
Strong
Physical risks
Acute Weather - Value Chain
up to £150 million
■■
■■■
■■■■■
Strong
Chronic Weather - Leaf
up to £240 million
■■
■■■
■■■■■
Medium
Transition opportunities
Products and Services
up to £230 million
■■■
■■■
■
Medium
Energy Sourcing and Efficiency
up to £60 million
■■■
■■■
■
Strong
Note:
*
These estimated financial impacts represent sensitivities and are considered incremental costs compared to our current financial position.
Strategy Resilience Summary
As described on pages 124-129, while there
are climate-related challenges and
uncertainties ahead, we believe that the
Group is well placed to manage the risks
associated with all three of the scenarios
modelled due to our existing and planned
mitigation and adaptation initiatives.
Transition risks are most notable in relation
to carbon taxes, new regulation on
products, higher energy costs and
increased costs of capital and insurance.
The two physical risks are more significant
in the 3-4°C warming scenario and relate
to the impact of extreme weather events
and changes to precipitation patterns
principally affecting our tobacco
supply chain.
The majority of our risks and opportunities
are not expected to show significant
regional variations. The most notable
regional variations concern our two acute
and chronic weather physical risks given
they relate to the sourcing of tobacco,
particularly from South America, Sub-
Saharan Africa, South Asia and the U.S.
The climate-related opportunities are
modest and relate to the potential launch
of products with sustainability-related
features that consumers may value and
optimisation of our energy strategy.
Supported by our global reach, supply
chain flexibility, diverse product portfolio,
leading brands, and capital strength, we
believe that we have the resilience and
agility to transition and create new
growth opportunities.
The insights gained from the climate
modelling further strengthen the
importance and relevance of our climate
strategy and Net Zero GHG emissions
target to mitigate these risks. We will
continue to review each material climate-
related risk and opportunity and build
upon our existing mitigation strategies
to enhance the resilience of our climate
strategy and our business to climate change.
Read more about our climate scenario
analysis on pages 123 and 129
+
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Continued
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2
Strategy continued
Methodology and assumptions
In accordance with TCFD, we have
conducted our climate scenario analysis on
at least one scenario under 2°C or lower.
We have aligned our methodology to the
most recent Intergovernmental Panel on
Climate Change (IPCC) assessment
1, which
indicates that limiting global warming to
1.5°C is necessary to prevent the most
severe consequences of climate change.
As such, we have aligned our climate
scenario analysis to the IPCC methodology,
and GHG concentration trajectories known
as Representative Concentration Pathways
(RCP) 2.6 and 8.5, specifically considering
three climate scenarios:
– 1.5°C ‘Sustainable Transition’
– 2°C 'Delayed Transition'
– 3-4°C ‘Climate Inaction’
In 2024, we have refreshed our modelling
to reflect changes that occurred in the
current reporting year.
As in previous years, quantitative
assessments were performed to
understand how the potential impact and
likelihood of risks and opportunities may
change under each time horizon and
climate scenario.
The analysis considers the impact to the
business for both 2030 and 2050 using the
methodology defined in the Group Risk
Management Framework.
The modelling drew on external and
internal data sources. External sources
were used for carbon and energy pricing
projections using REMIND-MAgPIE 3.3-4.8
datasets while internal sources were used
for the timing of carbon and product-
related taxes; Group financial data; energy
consumption and costs by BAT site;
category growth projections; and
consumer trends.
Time horizons
2030
2050
We have modelled six climate-related risks
and two opportunities. For each, the level
of likelihood and impact has been analysed
across three time frames being short-term
up to 2030, medium-term up to 2040 and
long-term up to 2050. The 2030 and 2050
time frames have been selected as they
align to our external targets (further details
of which are shown in this table). 2040 was
selected for our medium-term time horizon,
given that it represents a suitable mid-point
between the other two periods.
This time frame reflects the end date of
our current targets in relation to 50%
reduction in Scope 1 and 2 emissions and
our SBTi submitted targets of 30.3%
reduction in Scope 3 FLAG GHG emissions
and 42% absolute reduction in Industrial
(non-FLAG) GHG emissions by 2030. The
analysis links our most recent business
plans, including glide-paths across our
operations to mitigate risks and maximise
opportunities that may arise to enable the
effective delivery of our business
objectives and external commitments.
This time frame aligns to our Low Carbon
Transition Plan across our value chain and
our commitment to Net Zero GHG
emissions, which incorporates an
awareness of the highly uncertain potential
risks and opportunities.
Three climate scenarios
Sustainable Transition
Delayed Transition
Climate Inaction
Description
To contain global warming
to 1.5°C, a wide-ranging
transition of our global
economy would be
required, encompassing
policy and regulation,
economic and societal
shifts, and the
development and
deployment of new
infrastructure and
technologies. In this
scenario, transition risks
are more significant than
the severity of physical
risks that may arise.
Significant action by
economic actors is delayed
to 2030, after which a rapid
transition of our global
economy would be
required, encompassing
policy and regulation,
economic and societal
shifts, and the development
and deployment of new
infrastructure and
technologies. In this
scenario, transition risks are
more significant although
physical risks are
considered higher than
under the Sustainable
Transition scenario.
Countries are unable to
meet pledges laid out
within the Paris
Agreement and global
warming reaches 3-4°C.
Transition risks are
considered to be much
lower, while physical risks
would be much higher
driven by significant
impact to biodiversity as a
result of acute and chronic
weather events.
Estimated 2100 warming
1.5°C
2°C
3-4°C
Note:
1.
AR6 Synthesis Report: Climate Change 2023
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2
Strategy continued
Risk impact scoring
In accordance with our Group Enterprise Risk Management approach, the scenarios and their impacts were assessed on a residual basis,
which means that mitigation actions were taken into consideration in the risk impact scoring assessment.
Climate change-related risks and opportunities
Transition risks associated with transitioning to a low carbon economy
Risk overview and assumptions
Impact
Mitigations
Carbon taxes
New carbon pricing mechanisms on
the emissions within our value chain
increase costs.
Financial impact
Carbon pricing mechanisms expose
the Group to additional costs in both
the Sustainable and Delayed Transition
scenarios. This year we updated our
model to more recent external data
which increased carbon price forecasts
for Sustainable Transition.
– Implementation of our Low Carbon
Transition Plan energy efficiency
initiatives
– R&D developing new products with
lower CO2e footprint - supported by
the Green Design Tool, which enables
product development teams to assess
materials and components based on their
CO2 impact in relation to our targets
– Engagement with suppliers to support
reduction in their value chain emissions
Related targets: 50% reduction
in Scope 1 and 2 GHG emissions
by 2030
1; our SBTi submitted
targets of 30.3% reduction in
Scope 3 FLAG GHG emissions
and 42% absolute reduction in
Industrial (non-FLAG) GHG
emissions by 2030
1; and Net
Zero GHG emissions across
our value chain by 2050.
2024
2030
2040
2050
1.5˚C
scenario
2˚C
scenario
3-4˚C
scenario
Geographical impact
Carbon pricing mechanisms will impact
all regions.
Product taxes
Governmental mandates on, and
regulation of, products and services
increase product taxes around
Extended Producer Responsibility
schemes, plastics and waste disposal.
Financial impact
Product regulations may expose the
Group to additional costs if product taxes
such as Extended Producer Responsibility
(EPR) schemes and taxes on plastics are
widely introduced around the world to
drive reductions in emissions and waste.
This year we have updated our model
to reflect the increased roll-out of EPR
schemes in the EU with a slower
transition to the rest of the world, which
is reflected both in the Sustainable and
Delayed scenarios.
– R&D developing new products with
lower CO2e footprint, supported by
the Green Design Tool, which enables
product development teams to assess
materials and components based on their
CO2e impact in relation to our targets
– Working with third parties to pilot
device and battery recycling solutions
– Expanding initiatives to accelerate
product circularity
Related targets: <1% waste
to landfill by 2025
2024
2030
2040
2050
1.5˚C
scenario
2˚C
scenario
3-4˚C
scenario
Geographical impact
Initially, product regulations will largely
emanate from European countries, but
they are likely to spread.
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2
Strategy continued
Risk Score / Financial Impact (p.a.)
Severe
In excess of £1 billion
Significant
£500m-£1bn
Moderate
£250m-£500m
Minor
£120m-£250m
Insignificant
£60m-£120m
Note:
1.
Compared to a 2020 baseline. Our near-term 2030 science-based targets comprise a 50% reduction in Scope 1 and 2 GHG emissions.The Scope 3 Industrial (non-FLAG) GHG emissions
target includes purchased goods and services, upstream transportation and distribution, use of sold products, and end-of-life treatment of sold products. The Scope 3 FLAG GHG
emissions target includes FLAG emissions and removals. Combined, these Scope 3 targets comprised 77% of Scope 3 emissions in 2020. Due to the complexity of consolidating Scope 3
data from our suppliers and value chain, we report Scope 3 data one year behind other metrics. Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting.
Transition risks associated with transitioning to a low carbon economy (continued)
Risk overview and assumptions
Impact
Mitigations
Direct and indirect energy costs
Increasing energy prices impacting
direct operating costs, as well as
the cost of buying raw materials
or manufactured goods from
our suppliers.
Financial impact
Energy pricing may expose the Group to
additional costs. This year we updated our
model to reflect updated external data
which forecast significantly lower
electricity prices across all scenarios.
– Decarbonising our operations through
energy efficiency measures
– Transitioning to lower emissions and
renewable sources
– Engagement with suppliers to support
them in running energy efficiency projects
2024
2030
2040
2050
Related targets: 50% reduction
in Scope 1 and 2 GHG emissions
by 2030
1; our SBTi submitted
targets of 30.3% reduction in
Scope 3 FLAG GHG emissions
and 42% absolute reduction
in Industrial (non-FLAG) GHG
emissions by 2030
1; and Net
Zero GHG emissions across
our value chain by 2050.
50% renewable energy use by
2030; and 20% of suppliers set
Science Based Targets by 2025.
1.5˚C
scenario
2˚C
scenario
3-4˚C
scenario
Geographical impact
Energy pricing impact will be felt
throughout most parts of the world.
Cost of capital/insurance
Contraction of financial services
markets arising from climate change
could result in increased cost of
capital and insurance or a reduction
in its availability.
Related targets: N/A
Financial impact
Potential 25 basis points impact for 1.5˚C
and 2˚C scenarios and 50 basis points for
3-4˚C scenario.
Full impact of credit adjustment felt over
time as c.50% of currently issued bonds
mature by 2030, with over 90% by 2050.
Assumed increase of 20-40% for
insurance costs across the three
scenarios.
– Ongoing risk engineering programme
to comply with internal guidance and
regulation
– Site and supply chain resilience through
business continuity plans
– Engaging with key insurance and capital
stakeholders on sustainability metrics
and risks
– Continuing to access diversified funding
sources
2024
2030
2040
2050
1.5˚C
scenario
2˚C
scenario
3-4˚C
scenario
Geographical impact Increases in cost of
capital/insurance will impact all regions.
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Strategy continued
Risk Score / Financial Impact (p.a.)
Severe
In excess of £1 billion
Significant
£500m-£1bn
Moderate
£250m-£500m
Minor
£120m-£250m
Insignificant
£60m-£120m
Note:
1.
Compared to a 2020 baseline. Our near-term 2030 science-based targets comprise a 50% reduction in Scope 1 and 2 GHG emissions.The Scope 3 Industrial (non-FLAG) GHG emissions
target includes purchased goods and services, upstream transportation and distribution, use of sold products, and end-of-life treatment of sold products. The Scope 3 FLAG GHG
emissions target includes FLAG emissions and removals. Combined, these Scope 3 targets comprised 77% of Scope 3 emissions in 2020. Due to the complexity of consolidating Scope 3
data from our suppliers and value chain, we report Scope 3 data one year behind other metrics. Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting.
Climate change-related risks and opportunities continued
Physical risks associated with physical impacts of climate change – either acute risks (relating to extreme weather
events) or chronic risks (such as relating to longer-term shifts in climate patterns and higher temperatures)
Risk overview and assumptions
Impact
Mitigations
Acute weather
Increased severity and frequency
of extreme weather events such as
cyclones, floods and heatwaves
leading to agricultural supply chain
disruption and / or reduced production
capacity resulting in increased costs.
Financial impact
Potential financial impact greatest under
Climate Inaction scenario due to increased
frequency and heightened severity.
– Leaf farmers adopt sustainable
agriculture practices to increase our
resilience to extreme weather under
agronomy management plans
– Business continuity plans across
the supply chain including leaf,
manufacturing, distribution and
key suppliers
– Loss prevention programme for
property risks
2023
2030
2040
2050
1.5˚C
scenario
2˚C
scenario
Related targets: 50% reduction
in Scope 1 and 2 GHG emissions
by 2030
1; our SBTi submitted
targets of 30.3% reduction in
Scope 3 FLAG GHG emissions
and 42% absolute reduction
in Industrial (non-FLAG) GHG
emissions by 2030
1; and Net
Zero GHG emissions across
our value chain by 2050.
3-4˚C
scenario
Geographical impact
Sourcing of tobacco, particularly from
South America, Sub-Saharan Africa,
South Asia and the U.S.
Chronic weather
Continued change in climate leading
to ongoing changes in precipitation
patterns and temperatures resulting
in increasing levels of water stress
in our agricultural supply chain and
lower yields.
Financial impact
Potential financial impact greatest under
the Climate Inaction scenario due to a
higher tobacco yield loss. This year we
updated our model to reflect our latest
outlook on forecasted leaf demand and
prices our analysis revealed that the
financial impact is consistent with our
2023 assessment.
– Water efficiency and stewardship
programmes
– Customised agronomy plans for each
sourcing country
– Carbon Smart Farming programme –
review of our inventory duration
policies to enhance the resilience
of our supply chain
– Expansion of Climate Diagnostic Model
to key suppliers
2023
2030
2040
2050
Related targets: 50% reduction
in Scope 1 and 2 GHG emissions
by 2030
1; our SBTi submitted
targets of 30.3% reduction in
Scope 3 FLAG GHG emissions
and 42% absolute reduction
in Industrial (non-FLAG) GHG
emissions by 2030
1; and Net
Zero GHG emissions across
our value chain by 2050.
1.5˚C
scenario
2˚C
scenario
3-4˚C
scenario
Geographical impact
Sourcing of tobacco, particularly from
South America, Sub-Saharan Africa,
South Asia and the U.S.
BAT Annual Report and Form 20-F 2024
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Other Information
Sustainable Future
TCFD Reporting
Continued
128
2
Strategy continued
Risk Score / Financial Impact (p.a.)
Severe
In excess of £1 billion
Significant
£500m-£1bn
Moderate
£250m-£500m
Minor
£120m-£250m
Insignificant
£60m-£120m
Note:
1.
Compared to a 2020 baseline. Our near-term 2030 science-based targets comprise a 50% reduction in Scope 1 and 2 GHG emissions.The Scope 3 Industrial (non-FLAG) GHG emissions
target includes purchased goods and services, upstream transportation and distribution, use of sold products, and end-of-life treatment of sold products. The Scope 3 FLAG GHG
emissions target includes FLAG emissions and removals. Combined, these Scope 3 targets comprised 77% of Scope 3 emissions in 2020. Due to the complexity of consolidating Scope 3
data from our suppliers and value chain, we report Scope 3 data one year behind other metrics. Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting.
Opportunity impact scoring
In accordance with our Group Enterprise Risk Management approach, the scenarios and their impacts were assessed on a residual basis
- which means that actions were taken into consideration in the opportunity impact scoring assessment.
Opportunities* associated with transitioning to low carbon economy
Opportunities overview and assumptions
Impact
Actions
Products and services
Developing more sustainable products
to meet consumers’ increasing
demands.
Financial impact
Consumer sensitivity to sustainability-
related features assumed to be higher
under the 1.5
oC scenario, with the greater
opportunity for additional growth in New
Categories compared to combustibles.
– Incorporation of end-of-life treatment
and increased technical recyclability
into product design
– Increasing access to product Take-Back
schemes to support responsible disposal
– Innovation to deliver more circular
products
Related targets: 100% of
our packaging to be reusable,
recyclable or compostable
by 2025.
2024
2030
2040
2050
1.5˚C
scenario
3-4˚C
scenario
Geographical impact
Opportunities envisaged across all
regions as New Categories products
continue to be rolled out globally.
Energy sourcing and efficiency
Investment in lower-emission sources
of energy or more efficient production
and distribution processes within our
direct operations.
Financial impact
Energy sourcing and efficiency is an
opportunity for the Group under both the
Sustainable Transition and Climate
Inaction scenarios through accelerated
decarbonisation of our value chain. Overall
additional savings are considered low due
to the absolute level of the Group’s energy
costs and the progress made over the last
few years.
– Decarbonising our operations through
energy efficient measures
– Transitioning to lower emission and
renewable sources
Related targets: Increase the
proportion of renewable energy
we source to 50% of total
energy consumption by 2030.
2024
2030
2040
2050
1.5˚C
scenario
3-4˚C
scenario
Geographical impact
All sites are focusing on reducing energy
costs.
Note:
*
A 2˚C scenario was not modelled for opportunities as the impact is considered to be materially similar to the 1.5˚C scenario.
BAT Annual Report and Form 20-F 2024
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Other Information
129
2
Strategy continued
Risk Score / Financial Impact (p.a.)
Severe
In excess of £1 billion
Significant
£500m-£1bn
Moderate
£250m-£500m
Minor
£120m-£250m
Insignificant
£60m-£120m
Introduction
The Group applies a consistent
methodology for assessing and quantifying
sustainability-related risks and
opportunities, utilising our risk management
framework. Climate-related risks remain a
key focus, especially as global temperatures
continue to rise. Climate change remains a
principal risk to the business and in 2024 we
enhanced our focus by separating the
previously combined Climate Change and
Circular Economy risk into two distinct risks.
The separation reflects the unique drivers,
impacts and challenges of each area,
recognising the need for tailored mitigation
strategies. By isolating these risks, we are
able to continuously improve our approach
to managing climate-related exposures, and
strengthen the resiliency of the business.
In 2024, we launched the Group’s
Sustainability Reporting Programme,
a cross-functional initiative, which includes
representatives from Operations,
Sustainability and ERM, designed to meet
evolving disclosure requirements and
ensure assurance on non-financial
sustainability related disclosures. This
programme leverages the Group’s risk
management framework, drawing on our
risk management system, methodology
and risk registers.
In 2024, we enhanced our Double
Materiality Assessment (DMA) to prepare
for EU CSRD reporting in 2026, in relation
to year-end 2025. This assessment built on
previous initiatives such as climate
scenario modelling (physical and transition
risk) and included a comprehensive review
of a wide range of Impacts, Risks, and
Opportunities (IROs) across BAT’s value
chain. These IROs were described and
assessed at a granular level, and evaluated
using a detailed, ERM-aligned scoring
framework to determine a materiality
threshold. Climate-related risks were
thoroughly incorporated throughout this
process, with associated risks and
opportunities scored in line with our Group
risk management framework.
The output from this exercise, which
involved consultation with over 40 BAT
subject matter specialists, will further
support the business to better understand,
assess and manage climate-related risks,
alongside closely related areas like
biodiversity loss and water scarcity,
supported by data from our sustainability
management platform and risk
management system.
Climate diagnostics tool
In parallel, we aim to continue to refine our
climate diagnostic tool, designed to identify
potential climate-related physical hazard
‘hotspots’ (both acute and chronic) and
analyse evolving patterns and trends under
various climate scenarios (1.5, 2, and 3-4 ˚C
global warming) projected for 2030 and
2050. Currently the tool provides valuable
insights into the potential impact of
climate change on our manufacturing
operations and other key sites. Working
with our partners, we are exploring ways to
expand this tool across wider areas of the
business and incorporate resilience data.
Sustainability risks and relationship
with our Group risk register
Sustainability risks identified and assessed
through the IROs exercise include both
physical and transition climate risks as well
as climate related effects on nature-related
risks (e.g. water scarcity). Sustainability
risks are aligned to relevant ESRS Topics
and Sub-topics and are then considered as
drivers or impacts to each relevant Group
risk (e.g. Supply Chain Disruption and
Supplies of Leaf & Agri-ingredients) as part
of the risk assessment process. This
approach is designed to ensure that every
risk fully reflects relevant sustainability
considerations. The climate change risk on
the Group risk register is an aggregation of
multiple physical (acute and chronic) and
transition risks identified through the IROs
exercise and includes clearly defined
mitigation activities. This provides
enhanced visibility of the risk profile to the
Group Risk Management Committee.
BAT Annual Report and Form 20-F 2024
Strategic Report
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Other Information
Sustainable Future
TCFD Reporting
Continued
130
Integration of climate-related risks
into the Group Risk Management Framework
"Direct and indirect adverse impacts associated with Climate
Change” is recognised as a principal risk to the Group; impact
and mitigation steps are set out on page 161.
Group relevant climate-related objectives, targets and metrics
are articulated and monitored.
Climate and other sustainability risks are captured as risk factors
within the individual Group risks.
Functions are required to identify and assess risks and
opportunities, including climate-related physical and
transitional risks.
Environmental, Social and Governance thresholds are set out
in the Group Risk Management Manual and are used by the
Group when assessing risks.
Functions are required to review all physical asset values
and associated business interruption impact across the Group
to understand the potential impact from climate change.
Directly-reporting business units (DRBUs) are required to
identify and assess risks and opportunities, including climate-
related physical risks.
3
Risk Management
Risk management process
In combination with the risk management
processes detailed above, we use
standardised risk registers at Group,
functional, and DRBU levels to identify,
assess, manage, and monitor both financial
and non-financial risks, including climate-
related risks. This four-step process,
outlined in the Group’s Risk Management
Manual, provides a consistent approach to
risk management, facilitating effective
understanding, management, recording,
monitoring, and communication of risks
across the Group. It also integrates
climate-related risks into the overall risk
management framework, ensuring they
receive appropriate specialist attention.
This year, the Group revised its risk
management framework to assess risks
on both an inherent and residual basis. This
two-stage assessment allows for a clearer
understanding of initial risks in their
unmanaged state and the effectiveness
of mitigation efforts (managed state).
Additionally, risks are now assessed and
prioritised at five levels based on their
impact and likelihood, enhancing
assessment accuracy and precision in risk
scoring and reporting. The Group Risk
Management Committee oversees these
processes and works to maintain ongoing
compliance with our ERM methodology.
Risk assessment methodology
There are various criteria, both qualitative
and quantitative, against which impact
may be measured. Impact ratings are
applied to risks across five levels (Severe,
Significant, Moderate, Minor, Insignificant).
In financial (quantitative) terms, Severe
impact is deemed as in excess of £1bn,
Significant £500m-£1bn, Moderate
£250m-£500m, Minor £120m-£250m
and Insignificant £60m-£120m per annum.
Risks below £60m are not included in the
Group risk register but are managed and
reported at regional and DRBU level. The
qualitative impact is assessed based upon
the scale of the detrimental effect of the
risk. Similarly, likelihood is assessed using
five categories: Remote, Unlikely, Possible,
Likely, and Probable. Following the
application of these standardised risk
assessment procedures, risks (including
climate-related risks) are prioritised based
on their relative significance to the Group
as a whole.
Risk monitoring methodology
Risk data, including assessment
information and risk scores, is collected
and recorded within the Group’s Risk
Management System. The system applies
an aggregation of risk impact/likelihood
scores and provides a standardised risk
reporting suite which supports the risk
tracking and monitoring process. The
Group risk register is reviewed biannually
by the Group Risk Management
Committee, chaired by the Chief Financial
Officer, and subsequently reviewed
biannually by the Audit Committee and
annually by the Board. In addition,
functional, regional and DRBU risk registers
(which also capture climate-related risk
factors) are reviewed on a biannual basis by
applicable Leadership Teams and reviewed
biannually by the Corporate Audit
Committee and Regional Audit
Committees, respectively.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
131
3
Risk Management continued
Our Risk Management Process
– Events, situations or circumstances that would
adversely affect the achievement of business
objectives, including the failure to capitalise on
opportunities, are considered.
– Climate-related risks and opportunities (including
existing and emerging regulatory requirements)
are identified through a combination of internal
stakeholder consultation, desktop research, external
consultation, and insights from our climate scenario
modelling and climate impact assessments.
– When a potential risk is identified, the causes are
examined thoroughly and any potential consequences,
time frame and mitigation activities are identified.
Identify
– The potential size, scope and duration of climate-
related risks are assessed in the same manner
as the Group's other risks and as part of BAT’s
standardised risk management practices.
– Risks are prioritised at five levels by reference to
their impact (Severe/Significant/Moderate/Minor/
Insignificant) and likelihood (Remote, Unlikely,
Possible, Likely, and Probable) as defined in our
Group Risk Management Manual.
– Risks are scored based on a combination of their
impact and likelihood ratings and captured within
associated risk matrices.
Assess
– Mitigation measures are devised and assigned
ownership along with implementation timelines.
– The effectiveness of current activities and the
allocation of further activities is agreed by relevant
Risk Managers and Leadership Teams.
– Decisions on how to manage the risks (including
how to mitigate, transfer, accept or control risks)
are based on a variety of considerations, including
risk score, the ability to influence or control the risk,
and cost and effectiveness of mitigation. Effective
mitigation activities can also be considered as cost
avoidance opportunities.
Manage
– Ongoing tracking, monitoring and reporting of
climate-related risks is promoted through our
ERM Framework.
– Risk mitigation activities are monitored by risk
managers to help ensure the actions remain
relevant and effective, and to confirm that
information captured remains accurate and
up to date.
– The effectiveness of mitigation activities and the status
of outstanding actions is tracked and reviewed by
Leadership Teams and at various Risk Committees.
Monitor
We measure and track a wide range of
sustainability metrics and targets which
help us assess and manage climate-related
risks and opportunities.
Read more about our sustainability
Metrics and Targets on page 69
+
Our THR metrics and targets link to the
opportunities we have identified
in products and services, while our climate
metrics and targets link both to the
opportunities identified in ‘Energy Sourcing
and Efficiency’ and to our transition and
physical risks. The latter are particularly
important to our climate targets, as outlined
in 'Our Path to Net Zero GHG emissions
by 2050' below, as inaction would result
in product shortfalls.
Read more about our climate-related
risks and opportunities on pages 124
to 129
+
Remuneration
From 2025, a climate metric will be
introduced into the Group's Short-Term
Incentive Plan, linking compensation of
Executive Directors and wider employees
with the decarbonisation of our operations.
Our Director, Operations, a member of the
Management Board, is responsible for the
delivery of our climate-related targets as
part of the overall sustainability agenda.
The most important targets are externally
communicated and linked to evaluation
of the Director, Operations' performance
and remuneration.
Read more about the inclusion of a new
climate metric in the Group's Short-term
Incentive Plan on page 216
+
The Director, Operations' performance
objectives contain environmental targets,
which are directly linked to their assessment
of performance alongside other non-
environmental performance objectives and
other factors. The Director, Operations'
eligibility for an annual bonus under the
Group’s International Executive Incentive
Scheme (IEIS) plan is based on their
performance assessment.
The Group’s GHG emissions and energy
reduction targets are examples of
environmental metrics contained within
the Director, Operations' performance
objectives. The threshold for success is
achieving or exceeding yearly targets,
as described by target glidepaths. For
example, by the end of 2024 a reduction
of 39.3% in BAT’s Scope 1 and 2 GHG
emissions (versus 2020 baseline) was
required and a reduction of (42.6)% (versus
2020 baseline) was achieved, exceeding
the target threshold for this year. The
Director, Operations met this performance
objective which contributed to their
eligibility for an annual bonus payment.
The value of the Company bonus plan is
tied to non-environmental metrics set out
in the current Remuneration Policy
described on page 227
+
Climate-related metrics and targets
We have set near-term 2030 1.5ºC-aligned,
absolute reduction targets that
accommodate Net Zero GHG criteria and
definitions. In 2022, the SBTi introduced the
first FLAG target-setting guidance to assist
companies in land-intensive sectors with
establishing science-based targets that
encompass land-based emissions and
removals. As a result, in 2024, we submitted
near-term 2030 Industrial / Non-FLAG and
FLAG Scope 3 emissions targets to the SBTi
alongside our long-term Net Zero target.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
TCFD Reporting
Continued
132
Breakdown of BAT's GHG Emissions
7.42
Total million tonnes of CO2e
0
1
2
3
4
5
6
7
8
9
(mn tCO2e)
Note:
1. 2023 numbers.
4
Metrics and Targets
Scope 1
Scope 2
Scope 3
Scope 3 biogenic
FY20
0.342
0.199
5.882
2.494
FY21
0.325
0.170
6.198
1.968
FY22
0.329
0.113
6.155
1.263
FY23
0.299
0.095
5.479
1.580
1
Understanding Scope 1, 2 and 3
emissions
Scope 1, 2 and 3 emissions are categories
of greenhouse gas (GHG) emissions an
organisation's activities create.
Scope 1 emissions:
Direct emissions occur from sources
owned or controlled by an organisation.
Scope 2 emissions:
Indirect emissions are generated from
purchased electricity, heat, steam or
cooling. These can be ‘location-based’ -
which uses a quantification method based
on average energy generation emission
factors for defined locations, including local,
subnational, or national boundaries;
or ‘market-based' - which uses a
quantification method based on GHG
emissions emitted by the generators from
which the reporter contractually purchases
electricity bundled with instruments, or
unbundled instruments on their own.
Scope 3 emissions:
Scope 3 emissions are all indirect
emissions (not included in Scope 2) that
occur in the value chain of the reporting
organisation, including both upstream and
downstream emissions and excluding
biogenic emissions.
Scope 3 biogenic emissions:
CO2 emissions from the combustion
or biodegradation of biomass.
Biomass:
Any material or fuel produced by
biological processes of living organisms,
including organic non-fossil material of
biological origin (e.g., plant material),
biofuels (e.g., liquid fuels produced from
biomass feedstocks), biogenic gas
(e.g. landfill gas), and biogenic waste
(e.g. municipal solid waste from
biogenic sources).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
133
4
Metrics and Targets continued
Our Path to Net Zero GHG Emissions by 2050
Our Climate Targets
50% reduction in Scope 1 and 2
GHG emissions by 2030
1
(versus 2020 baseline)
30.3% reduction in Scope 3
Flag GHG emissions and 42%
absolute reduction in Industrial
(non-FLAG) GHG emissions
by 2030
1 (submitted to SBTi
for validation as 1.5°C aligned
in September 2024)
Net Zero GHG emissions in our
value chain by 2050 (submitted
to SBTi for validation as 1.5°C
aligned in September 2024)
50% total renewable energy
use by 2030
20% of suppliers by spend
to set Science-Based Targets
by 2025
What are FLAG emissions?
FLAG emissions are greenhouse gas
emissions from activities in the forest,
land, and agriculture (FLAG) sector. They
include a wide range of emissions from
activities that occur on-farm and
upstream, such as the manufacture
of fertilisers. According to the SBTi,
they account for almost a quarter
of global emissions.
Since mid-2023, SBTi have required
companies to account for their land-
based emissions and set separate FLAG
targets if relevant to their activities. BAT
submitted FLAG emissions reduction
targets to SBTi in 2024 for validation.
Land Use Change
Land Management
FLAG
Forest, land
and agriculture
Carbon Removals
Carbon Storage
Note:
1.
Compared to a 2020 baseline. Our near-term 2030 science-based targets comprise a 50% reduction in Scope 1 and 2 GHG emissions.The Scope 3 Industrial (non-FLAG) GHG emissions
target includes purchased goods and services, upstream transportation and distribution, use of sold products, and end-of-life treatment of sold products. The Scope 3 FLAG GHG
emissions target includes FLAG emissions and removals. Combined, these Scope 3 targets comprised 77% of Scope 3 emissions in 2020. Due to the complexity of consolidating Scope 3
data from our suppliers and value chain, we report Scope 3 data one year behind other metrics. Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting.
How we intend to reduce
Scope 1 and 2 GHG emissions
1
Creating site-specific
decarbonisation roadmaps
and investing in energy
efficiency projects and
management systems.
Increasing renewable energy
use by entering into longer-
term power purchase
agreements and investing
in on-site renewable energy
generation projects.
Rolling out electric and hybrid
vehicles in our fleet.
How we intend to reduce
Scope 3 GHG emissions
1
Building a climate-resilient
supply chain with direct and
indirect suppliers.
Eliminating the remaining
use of coal for tobacco curing;
using sustainable curing fuels
(e.g. sustainable wood fuel,
agricultural waste).
Fostering circularity
in our value chain.
Designing for the reuse
and recycling of end-of-life
products.
Increasing the use of low
carbon materials.
Understanding different GHG
emissions-related terminology
Net Zero GHG emissions: This means
reducing greenhouse gas emissions to
as close to zero as possible, with any
remaining emissions re-absorbed from
the atmosphere, by, for example, oceans
and forests. Setting corporate Net Zero
targets aligned with meeting societal
climate goals means: (a) reducing
Scope 1, 2 and 3 emissions to zero or a
residual level consistent with reaching
Net Zero emissions at the global or
sector level in 1.5°C scenarios or sector
pathways; and (b) neutralising any
residual emissions by the Net Zero
target date – and continuing to
neutralise any GHG emissions released
into the atmosphere thereafter.
Near-term science based target:
GHG reduction targets in line with
what the latest climate science deems
necessary to limit warming to 1.5°C above
pre-industrial levels to be achieved within a
5-10 year time frame from the date of
submission to the SBTi.
Long-term science-based target:
GHG reduction targets in line with
what the latest climate science deems
is necessary to reach Net Zero at the
global or sector level in 1.5°C pathways
before 2050.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
TCFD Reporting
Continued
134
4
Metrics and Targets continued
BAT’s 1.5°C-aligned Emissions Pathway
Emissions (mn tCO2e)
7
6
5
4
3
2
1
0
Years
20
21
22
23
24
26
28
30
32
34
36
38
40
42
44
46
48
50
Neutralisation
Note:
1.
Compared to a 2020 baseline. Our near-term 2030 science-based targets comprise a 50% reduction in Scope 1 and 2 GHG emissions. The Scope 3 Industrial (non-FLAG) GHG emissions target
includes purchased goods and services, upstream transportation and distribution, use of sold products, and end of life treatment of sold products. The Scope 3 FLAG GHG emissions target
includes FLAG emissions and removals. Combined, these Scope 3 targets comprised 77% of Scope 3 emissions in 2020. Due to the complexity of consolidating and assuring Scope 3 data from
our suppliers and value chain, we report Scope 3 data one year behind other metrics. Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting.
Actual Scope 1 and 2 emissions
Actual Scope 3 non-FLAG emissions
Actual Scope 3 FLAG emissions
Projected Scope 1 and 2 emissions
Projected Scope 3 non-FLAG emissions
Projected Scope 3 FLAG emissions
Reporting methodology
for CO2e emissions
We use the World Business Council for
Sustainable Development GHG Protocol
Corporate Standard to guide our reporting
of carbon dioxide equivalent (CO2e)
emissions. We also use supporting
standards including:
– GHG Protocol Scope 2 Guidance, 2015
– GHG Protocol Corporate Value Chain
(Scope 3) Standard, 2011
Where we have operational control, we
include emissions from energy use, the Dry
Ice Expanded Tobacco (DIET) production
process, as well as fugitive emissions and
process emissions from on-site
wastewater and waste treatment in our
CO2e emissions reporting.
While we account for the contribution of
all seven GHG gases, carbon dioxide (CO2),
methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), sulphur
hexafluoride (SF6) and nitrogen trifluoride
(NF3), we do not disclose the breakdown
of CO2e data on an individual GHG basis.
Baseline
Currently, we use a 2020 baseline year
for emissions reporting, which comprises
a total of 6,422,791 tCO2e split as follows:
– Scope 1: 342,034 tCO2e
– Scope 2: 198,830 tCO2e market-based
(Scope 2: 417,572 tCO2e location-based)
– Scope 3: 5,881,927 tCO2e
Data collection and validation
GHG emissions data for Scope 1 and 2
is collected within our internal EHS
Reporting system; it includes 180 reporting
units located across 85 countries.
BAT’s Scope 3 GHG emissions reporting
process aligns with the GHG Protocol
Corporate Value Chain (Scope 3)
Accounting and Reporting Standard.
Read more about our Scope 3 Simplified
Methodology document at
www.bat.com/sustainabilityreport
+
A full breakdown of our GHG emissions is
presented below.
@The metrics subjected
to limited assurance from KPMG in
accordance with ISAE (UK) 3000 and ISAE
3410 which have been marked with ‘tʼ, are
those for 2024 for Total Scope 1 and Scope
2 and for 2023 for Total Scope 3. Please
refer to page 153 for the complete list of
assured metrics.
@
2024 BAT Group Greenhouse Gas Emissions
Total Emissions (Thousand Tonnes CO2e)
Emission Source
2024
2023
2022
2021
2020
Total Scope 1 CO2e
1,2
@♦@
237
299
329
325
342
Total Scope 2 CO2e Market-based
1@♦@
74
95
113
170
199
Total Scope 2 CO2e Location-based
@♦@
325
342
356
393
418
Total Scope 3 CO2e
3,4@♦@
N/A
5,479
6,155
6,198
5,882
Total Scope 3 Industrial (Non-FLAG) emissions
N/A
4,997
5,534
5,471
5,306
Total Scope 3 FLAG emissions
N/A
481
621
726
576
Category 1: Purchased Goods and Services (Total)
4
N/A
3,563
4,088
4,188
3,953
Category 1: Purchased Goods
N/A
1,768
1,981
1,973
1,970
Category 1: Purchased Services
N/A
1,117
1,212
1,143
1,091
Category 1: Purchased Tobacco Leaf
N/A
678
895
1,071
892
Category 2: Capital Goods
N/A
81
140
142
172
Category 3: Fuel and Energy Related Emissions
N/A
176
179
197
164
Category 4: Upstream Transportation and Distribution
N/A
308
377
373
348
Category 5: Waste Generated in Operations
N/A
3
5
8
9
Category 6: Business Travel
N/A
87
33
19
18
Category 7: Employee Commuting
N/A
62
71
75
67
Category 9: Downstream Transportation and Distribution
N/A
16
19
22
21
Category 11: Use of Sold Products
N/A
225
252
257
209
Category 12: End-of-Life Treatment of Sold Products
N/A
142
161
225
231
Category 14: Franchises
N/A
1
1
1
5
Category 15: Investments
N/A
815
828
691
685
Total Scope 3 Biogenic emissions
N/A
1,580
1,780
1,968
2,494
Total Category 1 Biogenic emissions
N/A
1,090
1,263
1,437
1,947
Total Category 11 Biogenic emissions
N/A
491
517
531
547
Notes: 1. In 2024, UK-based activities included 2,180 tonnes of Scope 1 CO2e emissions (2023: 2,245) and 1 tonne of our Scope 2 CO2e emissions (2023: 0). Scope 1 and 2 CO2e emissions
intensity (tonnes per £m revenue) is 11.5 (2023: 13.3; 2022: 15.2). Scope 1 direct greenhouse gas (GHG) fugitive emissions result from the direct release to the atmosphere of GHG
compounds from various types of equipment and processes. 2. A category of Scope 1 direct greenhouse gas (GHG) fugitive emissions result from the direct release to the atmosphere
of GHG compounds from various types of equipment and processes. Our 2020 and 2021 Total Scope 1 CO2e GHG emissions do not include fugitive emissions as this data is not available.
3. Compared to a 2020 baseline. Our near-term 2030 science-based targets comprise a 50% reduction in Scope 1 and 2 GHG emissions. The Scope 3 Industrial (non-FLAG) emissions target
includes purchased goods and services, upstream transportation and distribution, use of sold products, and end of life treatment of sold products. The Scope 3 FLAG emissions target
includes FLAG emissions and removals. Combined, these Scope 3 targets comprise 77% of Scope 3 emissions in 2020. Due to the target boundary, the FLAG / Non-FLAG GHG emissions
values in this table will not reconcile with Scope 3 target reporting. Due to the complexity of consolidating and assuring Scope 3 data from our suppliers and value chain, we report Scope 3
data one year behind other metrics. Refer to the BAT 'Reporting Criteria' for our full methodology: bat.com/reporting. 4. After submitting Scope 3 FLAG and Industrial (Non-FLAG) targets to
the SBTi for validation, we have restated our total Scope 3 GHG emissions and Scope 3 Category 1 Purchased Goods and Services for better comparability. Additionally, we have separated
reportable emissions from biogenic emissions and restated Category 11 Use of Sold Products. Methodology changes have led to adjustments in Category 4 Upstream Transportation and
Distribution, and Category 9 Downstream Transportation. This year, we have also reported Category 15 for the first time, including comparatives. For more details, please refer to BAT
'Reporting Criteria' at bat.com/reporting.
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Other Information
135
4
Metrics and Targets continued
2024 GHG emissions performance
Our combined Scope 1 and 2 (market-
based) GHG emissions
1 are decreasing year
on year. In 2024, we reduced our Scope 1
and 2 GHG emissions by 21.2% compared
to 2023 (42.6% versus 2020 baseline).
Scope 1 GHG emissions decreased by
20.8% compared to 2023 (30.7% versus
2020 baseline).
This is driven by energy efficiency activities,
a decrease in production output, an increase in
the use of renewable fuels and changes in
footprint in certain geographies.
Scope 2 GHG emissions decreased by
22.6% compared to 2023 (63.0% versus
2020 baseline).
This was driven by a decrease in total non-
renewable energy consumption, energy
efficiency activities and an increase in on-
site renewable electricity generation,
mostly from solar technologies.
While our targets cover Scope 2 market-
based emissions, we also measure and
report Scope 2 location-based emissions
as per the GHG Protocol Scope 2 Guidance.
Scope 2 location-based emissions
decreased by 5% compared to 2023 (22.3%
versus 2020 baseline).
Our total Scope 3
2 GHG emissions
decreased by 11% compared to 2022 (6.9%
versus 2020 baseline). This was driven by
continued optimisation of the tobacco
curing process, increasing the use of
renewable fuels in tobacco curing and
reducing the carbon intensity of other
materials.
Reporting methodology for energy
Energy consumption is reported in line with
GRI 302 Energy (2016): ‘Disclosure 302-1,
Energy consumption within the
organisation,’ which includes activities the
Group is responsible for as well as
purchased electricity, steam and hot water.
Energy consumption is calculated from
raw data of fuel, electricity, hot water and
steam consumption, which is submitted
by reporting units across the Group via our
Internal EHS Reporting system.
The data used in calculations are the same
as used for Scope 1 and 2 CO2e emissions.
2024 energy consumption performance
While details of the principal measures
taken for the purpose of increasing energy
efficiency across the Group are available
on pages 82-83, our energy consumption
performance is outlined as follows:
– Energy consumption
3 from activities for
which the Group is responsible (in million
kWh): 2024: 1,135; 2023: 1,292; 2022: 1,435.
Of the total figure reported for the Group
for 2024, 10 million kWh is from UK-
based activities (2023: 10 million kWh,
2022: 11 million kWh).
– Energy consumption resulting from the
purchase of energy by the Group for its
own use (in million kWh): 2024: 861;
2023: 890; 2022: 909. Of the total figure
reported for the Group for 2024, 13
million kWh is from UK-based activities
(2023: 13 million, 2022: 15 million).
Read more about our
sustainability metrics and targets
in our Sustainability Performance
Data Book at bat.com/reporting
+
Next steps
Through the adoption of the TCFD
recommendations and making the
recommended disclosures, we have
continued to analyse the resilience of
our strategy against three potential
climate scenarios and three time
horizons up to 2050. This has helped
us in mitigating risks, adapting to a
changing landscape, seeking new
opportunities and preparing for new
regulations.
We will continue to monitor the
evolving regulatory landscape,
including any changes to the UK
Listing Rules in relation to the
adoption of the International
Sustainability Standard Board (ISSB)
standards and the adoption of EU
CSRD in Europe. We will update our
approach to our climate-related
disclosures accordingly.
Notes:
@2024 (2023 for Scope 3) metrics with independent
limited assurance by KPMG, see page for a full list of
assured metrics
@
1.
Compared to a 2020 baseline. Our near-term
2030 science-based targets comprise a 50%
reduction in Scope 1 and 2 GHG emissions.
2. The Scope 3 Industrial (non-FLAG) emissions
target includes purchased goods and services,
upstream transportation and distribution, use of
sold products, and end-of-life treatment of sold
products. The Scope 3 FLAG emissions target
includes FLAG emissions and removals.
Combined, these Scope 3 targets comprise 77%
of Scope 3 emissions in 2020. Due to the
complexity of consolidating and assuring Scope 3
data from our suppliers and value chain, we report
Scope 3 data one year behind other metrics. Refer
to the BAT 'Reporting Criteria' for our full
methodology: bat.com/reporting.
3. Energy intensity (GWh per £ million of revenue):
2024: 0.077; 2023: 0.080: 2022: 0.085
BAT Annual Report and Form 20-F 2024
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TCFD Reporting
Continued
136
2024 energy consumption performance
2024
mkWh
2023
mkWh
2022
mkWh
Energy consumption
3 from activities
for which the Group is responsible
1,135
1,292
1,435
– from UK-based activities
10
10
11
Energy consumption resulting from
the purchase of energy by the Group
for its own use
861
890
909
– from UK-based activities
13
13
15
GHG emissions from UK-based activities
2024
2023
2022
Scope 1 (tonnes of CO2e emissions)
2,180
2,245
2,376
Scope 2 (tonnes of CO2e emissions)
1
0
10
Scope 1 and 2 CO2e emissions intensity
(tonnes per £m revenue)
11.5
13.3
15.2
A summary of our response to the Task Force on Nature-related Financial Disclosures
(TNFD) recommendations is set out below.
BAT is one of the Early Adopters of the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations, making this set of
voluntary disclosures. Below is a summary of our current progress towards the recommended TNFD disclosures that we consider the
most relevant at this stage. We will continue to build on our current reporting and develop how we disclose nature-related information.
TNFD at a glance: Summary of our response
1
Governance
Disclose the organisation’s governance of nature-related dependencies, impacts, risks and opportunities
a) Describe the board’s oversight of nature-related
dependencies, impacts, risks and opportunities.
Our Board has oversight of our nature-related dependencies, impacts, risks and
opportunities (DIROs) through the review of our environmental strategy, targets
and performance twice per year and the Group risk register, which includes nature-
related risks, on an annual basis. Our TCFD and TNFD governance disclosures are
combined and available in this report.
b) Describe management’s role in assessing and
managing nature-related dependencies, impacts,
risks and opportunities.
Management is responsible for identifying and assessing nature-related DIROs.
Mitigation plans are required to be in place to manage our DIROs and progress
against those plans is monitored.
c) Describe the organisation’s human rights policies
and engagement activities, and oversight by the
board and management, with respect to Indigenous
Peoples, Local Communities, affected and other
stakeholders, in the organisation’s assessment of,
and response to, nature-related dependencies,
impacts, risks and opportunities.
We manage our impacts through due diligence and remediation programmes,
underpinned by our policies, such as the SoBC and SCoC. We engage with
communities where we operate through Alliance for Water Stewardship (AWS)
and supplier footprint. However, we have not performed an analysis on indigenous
peoples yet. We have therefore chosen to exclude Recommended Disclosure
Governance C from the scope of this TNFD report and aim to enhance it in future
reporting cycles.
2
Strategy
Disclose the effects of nature-related dependencies, impacts, risks and opportunities on the organisation’s business model, strategy
and financial planning where such information is material
a) Describe the nature-related dependencies, impacts,
risks and opportunities the organisation has identified
over the short, medium and long term.
We estimate that 26% of the 91 different economic activities in our supply chain
are likely to be dependent on nature. Our largest potential impact on nature is our
footprint, the largest proportion of which is in our tobacco supply chain.
b) Describe the effect nature-related dependencies,
impacts, risks and opportunities have had on the
organisation’s business model, value chain, strategy
and financial planning, as well as any transition plans
or analysis in place.
As of today, we have not assessed the impact of our potential DIROs on our
strategy and financial planning. However, our approach to managing nature-related
impacts across our value chain is outlined in a set of Group policies, guidelines
and standards, which can be found in this report.
c) Describe the resilience of the organisation’s
strategy to nature-related risks and opportunities,
taking into consideration different scenarios.
As part of our climate scenario analysis outlined in our TCFD disclosure, we understand
the ways climate-related physical risks may also impact nature and our business.
As of today, we have not performed a specific financial nature scenario analysis.
d) Disclose the locations of assets and/or activities
in the organisation’s direct operations and, where
possible, upstream and downstream value chain(s)
that meet the criteria for priority locations.
We consider priority locations to be those areas that are “important for
biodiversity” or “of high-water priority”. Based on our Biodiversity Risk Assessment
3,483 farms (3.9%) in our tobacco supply chain, 17 sites in our own operations,
and 16 sites in our non-tobacco supply chain were identified as priority locations.
3
Risk and impact management
Describe the process used by the organisation to identify, assess, prioritise and monitor nature-related dependencies, impacts,
risk and opportunities
a i) Describe the organisation’s processes
for identifying, assessing and prioritising nature-
related dependencies, impacts, risks and
opportunities in its direct operations.
While we have not always explicitly used the terminology of TNFD’s Locate, Evaluate,
Assess and Prepare (LEAP), similar principles have informed our actions. In line with
the LEAP, we we have begun to locate our interfaces, evaluated our dependencies
and impacts on nature, and assessed our nature-related risks and opportunities
a ii) Describe the organisation’s processes for identifying,
assessing and prioritising nature-related
dependencies, impacts, risks and opportunities
in its upstream and downstream value chain(s).
We adopted the SBTN’s mitigation hierarchy methodology and other datasets to
identify, assess and prioritise potential nature-related dependencies, impacts, risks
and opportunities in our direct operations.
b) Describe the organisation’s processes
for monitoring nature-related dependencies,
impacts, risks and opportunities.
We identify and capture nature-related risks and opportunities on our risk
registers. We have a set of nature-related commitments that we track and report
against annually. We intend to revise our approach in the future.
c) Describe how processes for identifying, assessing,
prioritising and monitoring nature-related risks are
integrated into and inform the organisation’s overall
risk management processes.
Our processes are integrated across the Group as part of our Risk Management
Framework, including biannual reviews of the Group risk register by our Group Risk
Management Committee, chaired by the Chief Financial Officer. The Group risk
register is reviewed annually by the Board and twice per year by the Audit Committee.
4
Metrics and Targets
Disclose the metrics and targets used to assess and manage material nature-related dependencies, impacts, risks and opportunities
a) Disclose the metrics used by the organisation to
assess and manage material nature-related risks
and opportunities in line with its strategy and risk
management process.
We have a set of metrics for each of our sustainability focus areas, including
nature, against which we report on our performance and progress each year.
b) Disclose the metrics used by the organisation to assess
and manage dependencies and impacts on nature.
We have a set of metrics for each of our sustainability focus areas, including
nature, against which we report on our performance and progress each year.
c) Describe the targets and goals used by the
organisation to manage nature-related
dependencies, impacts, risks and opportunities
and its performance against these.
We have a range of existing targets which help us manage our potential DIROs.
These are: Deforestation and Conversion Free tobacco supply chain; Deforestation
Free pulp and paper supply chain; Forest Positive in our tobacco supply chain;
35% reduction in water withdrawn; and 100% operation sites AWS certified.
BAT Annual Report and Form 20-F 2024
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Other Information
TNFD Reporting
137
Read more
on pages 114
and 121
+
Read more
on pages 114
and 121
+
Read more
on page 139
+
Read more
on pages 140
to 146
+
Read more
on pages 116
and 117
+
Read more
on pages 147
to 148
+
Read more
on pages 124
and 141
+
Read more
on page 150
+
Read more
on page 150
+
Read more
on page 150
+
Read more
on page 150
+
Read more
on pages 151
to 152
+
Read more on
pages 151 to 152
+
Read more
on pages 89
+
Application of materiality
We acknowledge the impact that our
business has on nature as highlighted by
our 2023 Group-wide Double Materiality
Assessment
^. Based on our assessment of
our impact and financial materiality, we are
aware that the degradation of nature may
also impact the resilience of our value
chain. These impacts will be quantified
though our CSRD-aligned Double
Materiality Assessment for EU CSRD
reporting in 2026, in relation to year-end
2025.
See the Double Materiality Assessment
on pages 70 to 71 for further information
+
We used the TNFD’s Locate, Evaluate,
Assess and Prepare (LEAP) due diligence
approach to assess our nature-related
DIROs. This approach helps identify both
impact materiality (at the end of the
'Evaluate' phase of LEAP) and financial
materiality (at the end of the 'Assess' phase
of LEAP). The LEAP approach has informed
our Double Materiality Assessment (DMA).
Scope of disclosures
The information shared in this report covers
our own operations and upstream value
chain, the locations of which are represented
in the map on pages 138 and 139.
Own operations refers to all facilities within
BAT operational control that perform
manufacturing activities for commercial
purposes. These are cigarette
manufacturing factories, sites
manufacturing Other Tobacco Products,
snus, Modern Oral and flavoured e-liquids;
and green leaf threshing (GLT) tobacco
processing sites.
The upstream value chain includes both
our tobacco supply chain and non-tobacco
procured goods and services.
Our downstream value chain (warehousing
and distribution) has been excluded due to
the current lack of available data and
mature assessment methodologies.
Due to the data differences between value
chain components, we sought to
understand the nature-related DIROs
associated with each value chain
component using approaches best suited
to the available data.
Table 1 outlines the methods used to
conduct our value chain dependency and
impact assessments.
BAT Annual Report and Form 20-F 2024
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Other Information
Sustainable Future
TNFD Reporting
Continued
138
Map 1: Where our supply chain interacts with nature
Our value chain interacts with nature on a global scale. We highlight the locations
considered as part of our nature-related assessment under the Strategy section.
The TNFD framework consists of a set of general
requirements and recommended disclosures.
Table 1: Methods used to conduct dependency and impact assessments
for each value chain component
Assessment
Method
Value Chain Component
Dependency
assessment
ENCORE (2018)
Direct operations; Tobacco supply
chain; Non-tobacco procured goods
and services
Land occupancy
footprint
The Biodiversity
Consultancy’s (TBC)
Biodiversity, Extent,
Condition (BECs)
Direct operations;
Tobacco supply chain
Life Cycle
Assessment
EXIOBASE
Non-tobacco procured goods
and services
Geospatial risk
assessment
TBC’s Biodiversity Risk
Screening Kit (BRiSK)
Direct operations; Tobacco supply
chain; Non-tobacco procured goods
and services
Note:
^
Although financial materiality has been considered in
the development of our Double Materiality Assessment
(DMA), our DMA and any conclusions in this document
as to the materiality or significance of sustainability
matters do not imply that all topics discussed therein
are financially material to our business taken as a whole,
and such topics may not significantly alter the total mix
of information available about our securities.
Integration with other
sustainability-related disclosures
We recognise the importance of integrating
nature-related disclosures with other
financial and sustainability disclosures for
a holistic and integrated approach. That is
why our TNFD disclosure has been included
in our 2024 Combined Annual and
Sustainability Report and Accounts,
alongside our TCFD disclosure, covering our
climate-related governance, strategy, risks
management, metrics and targets.
Time horizons considered
The potential nature-related dependencies,
impacts, risks and opportunities (DIROs)
described in the TNFD section of this
Report have not been modelled against
any time horizons or scenario analysis.
However, three time horizons were
considered in our TCFD scenario analysis,
which analysed how climate-related
physical risks in different scenarios may
impact climate, nature and our business.
These are:
– Short-term (up to 2030);
– Medium-term (up to 2040); and
– Long-term (up to 2050).
Engagement with indigenous
peoples, local communities and
affected stakeholders
We engage with local communities and
other affected stakeholders to support
the assessment and management of our
nature-related DIROs.
Our approach to human rights
Our approach to managing human rights
is aligned to the UN Guiding Principles on
Business and Human Rights. Additionally,
we manage our impacts through due
diligence and remediation programmes,
underpinned by our policies, such as the
SoBC and SCoC.
Read more about our approach
to Human Rights on pages 102 to 107
+
Our water stewardship programmes
and engagement with local stakeholders
Our water withdrawal and discharge
guidelines and our Water Roadmap provide
strategic direction and guidance for
managing water use at our manufacturing
sites and help sites assess their water
management systems in line with the
Alliance for Water Stewardship (AWS)
certification process.
As part of our commitment to have 100%
of manufacturing sites certified against
the AWS standard, we consult with local
stakeholders to identify water-related
dependencies and impacts as well as
associated operational and supply chain
risks. This approach enables us to align
new water management and risk
mitigation actions with the interests of
residents within the local catchment area.
Read more about our water stewardship
programmes on pages 92 to 93
+
While we continue to engage with
communities where we operate, including
through the AWS, analysis on indigenous
peoples has not been carried out yet.
We have therefore chosen to exclude
Recommended Disclosure Governance C
from the scope of this TNFD report and
aim to enhance this section in future
reporting cycles.
Governance
Our Board and management’s oversight
of our nature-related DIROs is combined
within our TCFD disclosure.
Read more about our Sustainability
Governance on page 114
+
Read more about our
TCFD Governance on page 121
+
BAT Annual Report and Form 20-F 2024
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Other Information
139
Note:
The assessment is conducted in the highlighted countries within BAT’s value chain
locations, and does not cover the entire highlighted area.
Nature-related dependencies,
impacts, risks and opportunities
identified over the short, medium
and long term.
Our purpose to build A Better Tomorrow™,
our Group strategy as well as our
sustainability focus areas, including Nature,
are set out in this Report.
Read more about Group Strategy
on page 12 and Sustainability Strategy
on pages 66 and 67
+
Our business operations, including
conventional agricultural practices, rely on
the use of natural resources, such as forest
products, soil and water. Activities such as
raw material sourcing, tobacco farming,
and water withdrawals for agricultural
activities and manufacturing can negatively
impact the environment. Thus, we strive to
manage our nature-related DIROs to
preserve nature and improve our resilience.
While we have not explicitly used the
terminology of TNFD’s Locate, Evaluate,
Assess and Prepare (LEAP), similar
principles have informed our actions.
For instance, our initial Biodiversity Risk
Assessments (2022) focused on identifying
and assessing impacts in our tobacco
supply chain. Below, in line with the LEAP
framework, we explain how we have begun
to locate our interfaces with nature,
evaluated our dependencies and impacts
on nature, and assessed our nature-related
risks and opportunities.
L
Locate
Enables organisations to filter and prioritise
potential nature-related dependencies, impacts,
risks and opportunities.
Guided by:
– Span of the business model
and value chain
– Dependency and impact screening
– Interface with nature
We conducted location-specific land
footprint analyses (BECS), biodiversity
risk assessments (BRiSK) in order to
identify priority locations as well as
sectoral screening of economic activities
(ENCORE) to identify priority activities.
E
Evaluate
Enables organisations to develop an understanding
of their potentially material dependencies and impacts
on nature.
Guided by:
– Identification of environmental assets,
ecosystem services and impact drivers
– Identification and measurement of
dependencies and impacts
– Determination of impact materiality
We used ENCORE to identify possible
dependencies and related pathways.
We applied the BECS framework for
impacts in our Direct Operations and a
Life Cycle Assessment (LCA) approach
for our non-tobacco supply chain.
A
Assess
Enables organisations to understand which
nature-related risks and opportunities are material
and should be disclosed.
Guided by:
– Risk and opportunity identification
– Existing risk mitigation and
management
– Risk and opportunity prioritisation
– Determination of financial materiality
We assessed our impact and financial
materiality through our DMA and
conducted climate scenario modelling
as part of our TCFD disclosure.
P
Prepare
Enables organisations to decide on their response and
disclosure to the material nature-related interactions
identified in the LEAP approach.
Guided by:
– Strategy and resource allocation
– Target setting and performance
management
– Reporting
– Presentation
We have a set of nature-related
commitments that we track and report
against annually. As we define our
material nature-related DIROs, we will
revise our approach to manage them.
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Continued
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2
Strategy
Summary of our potential nature-related dependencies, impacts,
risks and opportunities
The table below summarises our potential DIROs, which have been identified by using the
methodology described in Table 1 on page 138 and in the Strategy section between pages
142 and 146 of our TNFD disclosure.
Table 2: Potential Nature-related dependencies, impacts risks
and opportunities summary table
Dependencies
Structural and biotic integrity
Land geomorphology
Soils and sediments
Species
Atmosphere
Water
Impact drivers
Land/sea use and land use change
Resource exploitation
Climate change
Pollution
Impacts
Biodiversity loss
Risks
Physical risks (chronic)
– Dependencies on provisioning services
– Dependencies on regulating and maintenance services
Physical risks (acute)
– Dependencies on the regulation of natural hazards
Transition risks
– Dependencies on nature-related legal liabilities
– Dependencies on the nature-related regulations
Opportunities
Resource efficiency
Ecosystem protection, restoration and regeneration
The effect nature-related
dependencies, impacts, risks
and opportunities have had
on the organisation’s business
model, value chain, strategy and
financial planning
We have not yet fully completed the
“Assess” phase of the LEAP approach to
determine the financial impact materiality
of our DIROs on our strategy and financial
planning. However, our approach to
managing nature-related impacts across
our value chain is outlined in a set of Group
policies, guidelines and standards, which can
be found on pages 116 and 117 of this report.
Strategy resilience on nature-
related risks and opportunities
We understand the importance of
managing nature-related DIROs to support
organisational decision-making and foster
resilience in our value chain.
As part of our TCFD report, we have
updated our scenario analysis and included
the ways in which physical risks may
impact nature and our business across
three of the scenarios (1.5°C, 2°C, 3-4°C).
We also describe the relevant mitigations
for identified risks. Page 124 of the TCFD
section describes the resilience of our
organisation’s strategy in relation to
climate and nature risks and opportunities.
While we acknowledge the importance
of understanding nature-related risks
and opportunities over the short, medium
and long-term, we have not conducted a
separate financial nature scenario analysis
to complement our current climate
scenario analysis to date. However, we plan
to do so in accordance with TNFD’s
guidance in the future.
Read more about our Climate scenario
analysis on pages 124 to 129
+
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Other Information
141
2
Strategy continued
Dependencies
As part of the Locate and Evaluate phase of
the LEAP approach, we used the ENCORE
1
(Exploring Natural Capital Opportunities,
Risks and Exposure) database (2018) to
conduct a sectoral-level screening of
91 economic activities (ISIC Level 4) in our
own operations, tobacco supply chain and
non-tobacco procured goods and services
to identify potential high dependencies
on nature.
As a result of this screening, we concluded
that our tobacco supply chain contains the
highest proportion of economic activities
that are highly dependent on at least one
Ecosystem Component due to its
association with agricultural activities
2.
This is followed by our pulp and paper
supply chain.
We have consolidated the identified
potential dependencies and summarised
them in Table 3.
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Continued
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Table 3: Sectoral level of screening of economic activities conducted using ENCORE
Value chain
component
Economic activity
ENCORE materiality score
per ecosystem component
Direct
operations
Tobacco
supply chain
Procured goods
and services
ISIC
3 level 4 description
Structural and
biotic integrity
Land
geomorphology
Soils and
sediments
Species
Atmosphere
Water
a
a
Support activities for crop production
n
n
n
n
n
n
a
Growing of tobacco
n
n
n
n
n
n
a
Logging
n
n
n
n
n
n
a
Post-harvest crop activities
n
n
n
n
n
n
a
Seed processing for propagation
n
n
n
n
n
n
a
a
Silviculture and other forestry activities
n
n
n
n
n
n
a
Support services to forestry
n
n
n
n
n
n
a
a
Electric power generation, transmission and distribution
n
n
n
n
n
n
a
a
Manufacture of tobacco products
n
n
n
n
n
n
a
Other transportation support activities
n
n
n
n
n
n
a
Real estate activities with own or leased property
n
n
n
n
n
n
a
Steam and air conditioning supply
n
n
n
n
n
n
a
Courier activities
n
n
n
n
n
n
a
Freight air transport
n
n
n
n
n
n
a
Freight rail transport
n
n
n
n
n
n
a
Manufacture of gas; distribution of gaseous fuels through mains
n
n
n
n
n
n
a
Manufacture of other chemical products not elsewhere classified
n
n
n
n
n
n
a
Manufacture of other food products not elsewhere classified
n
n
n
n
n
n
a
Manufacture of paints, varnishes and similar coatings, printing ink and mastics
n
n
n
n
n
n
a
Manufacture of plastics products
n
n
n
n
n
n
a
Manufacture of pulp, paper and paperboard
n
ND
n
n
n
n
a
Plant propagation
n
n
n
n
n
n
a
Sea and coastal freight water transport
n
ND
n
n
n
n
a
Travel agency activities
n
n
n
n
n
n
Very high
This table summarises only the economic activities associated with “High” or “Very
high” dependencies on at least one Ecosystem Component and associated value chain
component
1,4. Where there were multiple scores for an economic activity, the highest
score was used.
Low
High
Very low
Medium
ND: No data
Notes:
1.
ENCORE is used to evaluate the likely critical dependencies on natural capital assets which BAT depends on a five-point rating scale of Very high, High, Medium, Low and Very low.
Scores range from 0 (no impact/dependency) to 5 (very high impact or dependency). (encorenature.org)
2. Agriculture was found to be the second largest sector that is highly dependent on nature: WEF_New_Nature_Economy_Report_2020.pdf (weforum.org)
3. The International Standard Industrial Classification of All Economic Activities (ISIC) is a United Nations industry classification system.
4. Due to no high or very high dependencies being associated, minerals and ocean geomorphology ecosystem components have been excluded from our disclosure.
26% of the 91 economic activities
screened were associated with “High”
or “Very High” dependencies on nature
(Table 3).
“Water”, “Structural and Biotic
Integrity” and “Species” were the
natural Ecosystem components most
commonly scored as being dependent
upon across all economic activities by BAT.
2
Strategy continued
Our ENCORE sectoral-level screening also
highlighted the dependency pathways for
key ecosystem services upon our tobacco
supply chain and manufacturing (as well as
the cultivation of non-tobacco agricultural
products) as outlined in Table 4.
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Table 4: How our business activities depend on ecosystem services
Type of ecosystem
service
Ecosystem service
Dependency pathways for our business activities
Provisioning
services
Biomass
provisioning
Biomass provisioning services support the growth of crops and agricultural products.
We utilise these services for the cultivation of tobacco and other agricultural products,
such as wood for fuel, pulp, and paper used in cigarettes and packaging materials.
Water supply
While not as significant as our agricultural supply chain, water is used in a number of our
manufacturing and tobacco processing activities.
Regulating and
maintenance
services
Water
purification
Different species of plants and animals support the restoration and maintenance of surface
water and groundwater bodies by breaking down and removing potentially harmful nutrients
and pollutants, and facilitating a supply of clean water. Water is a necessary input for growing
crops as well as for manufacturing processes. Without a clean water supply, an additional water
treatment would be required which would increase the operating costs.
Rainfall pattern
regulation
Vegetation, particularly forests, plays a crucial role in sustaining rainfall patterns through
the process of evapotranspiration, which recycles moisture back into the atmosphere. This
mechanism is essential for providing freshwater necessary for the irrigation of tobacco and
other agricultural products, as well as for maintaining surface water bodies used by our facilities.
Local and
global climate
regulation
Healthy ecosystems are understood to help sequester carbon by regulating atmospheric
and ocean chemical compositions. The vegetation can also contribute to the regulation
of temperature, for example, cooling provided by urban trees. Local and global climate
regulation helps maintain suitable growing conditions for tobacco.
Soil and
sediment
retention
The stabilising effect of vegetation prevents soil loss, for example, by limiting the impacts
of severe weather events and agricultural activities. The retention of soil and sediments
helps maintain growing conditions for tobacco and other agricultural products.
Soil quality
regulation
Healthy ecosystems contribute to maintaining soil quality, specifically aiding the fertility
and living components of soil, which are important for tobacco yields. High-quality soil also
enables better water retention, which can reduce flooding or mitigate the adverse effects
of drought on crop yields.
Flood
mitigation
services
Coastal protection services, for instance coral reefs, sand banks, dunes or mangrove
ecosystems along the shore, mitigate the impacts of tidal surges or storms on local
communities. This is particularly important for eight of our factories located in areas with
coastal flood risk. River flood mitigation services, such as riparian vegetation, provide
structure and a physical barrier to high water levels and thus mitigates the impacts of
floods on local communities. River flood mitigation services will be supplied together with
peak flow mitigation services. This is particularly important for 24 of our factories located
in areas with high river flood risk.
2
Strategy continued
Ecosystem components: Specific elements within nature that provide the goods
and services upon which the economy depends, including atmosphere, land
geomorphology, minerals, ocean geomorphology, soils and sediments, species,
structural and biotic integrity, and water.
Structural and biotic integrity: The extent of physical structure and composition
of an ecosystem falling within its natural range of variation. These structural
characteristics, such as canopy height and vegetation density, underpin the
ecosystem services.
Species: Species includes plants, animals, fungi, algae and genetic resources, which
can be wild or domestic/commercial, for example livestock. Like habitats, species
underpin a wide range of ecosystem services.
Impacts
According to Intergovernmental Science-
Policy Platform on Biodiversity and
Ecosystem Service (ISPPBES), the five main
drivers of biodiversity loss globally are:
Land/sea use/change,
Resource exploitation,
Climate change,
Pollution, and
Invasive species.
Therefore, BAT’s contributions to these
impact drivers warrant consideration as
part of a holistic approach to
understanding our impacts.
Land use and land use changes due to
agriculture have been recognised as the
primary driver of biodiversity loss globally.
This is why we conducted BECS and LCA
assessments to understand possible land
use footprint impacts within our supply
chain. Water use (a type of resource
exploitation) can also threaten the healthy
functioning of aquatic ecosystems, while
pollution due to the use of pesticides,
herbicides and other agrochemicals can
degrade soils, cause direct mortality of
organisms due to ecotoxicity, and
contaminate downstream ecosystems
due to run-off.
We are currently collecting water use and
pollution data for our direct operations and
upstream supply chain in order to better
understand our impact on water discharge.
Climate change also contributes to
biodiversity loss; however, we address this
separately in our TCFD disclosure.
Table 5 is a summary of potential impacts
we have identified and assessed based on
the relationship between different impact
drivers and our business operations.
Table 5: Impact drivers that can lead to changes in natural capital
Land/Sea use and land use change
The cultivation of tobacco, the supply of pulp and paper, and our operations all affect
land use.
Resource exploitation
Consumption of water to grow tobacco in our tobacco supply chain and consumption
of water to manufacture our products in our direct operations.
Climate change
Climate change impacts are described separately in our TCFD disclosures on page 120
to 136 of this report.
Pollution
The application of fertiliser to agricultural crops in our tobacco supply chain and the discharge
of treated water from our manufacturing sites.
Tobacco supply chain
As part of the Locate and Evaluate phase
of the LEAP approach, in 2024, we
re-assessed the land occupancy footprint
of our tobacco supply chain using the
Biodiversity Extent, Condition and
Significance (BECS) framework, developed
by The Biodiversity Consultancy.
In line with the re-assessment, the land
occupancy footprint data has been
updated. It now covers tobacco specific
land occupancy, hence the decrease in the
footprint occupancy metric compared to
our TNFD disclosure in our 2023 Combined
Annual and Sustainability Report, in relation
to year-end 2024.
The assessment provides us with the
amount of land used for tobacco cultivation
and the estimated impact, using a metric
called ‘Mean Species Abundance
Hectares’ (Table 6).
BECS provides an estimate of the area of
land used for production (extent) and the
estimated amount of biodiversity lost on
that occupied land relative to a pristine
reference state (condition) due to the type
and intensity of land use.
The countries with the largest footprint are
Brazil, Bangladesh, Pakistan, India and U.S.
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2
Strategy continued
Figure 1: Biodiversity Extent, Condition, and Significance (BECS) framework
Extent
Condition
Significance
Biodiversity Land
Occupancy Footprint
The
geographical
area, or volume
of habitat
The quantity
or the amount
of biodiversity
present
The ‘value’ of the
biodiversity, represented by
‘types’ of biodiversity present
and how significant their
loss would be globally
Table 6: Direct and Third-Party Suppliers estimated land occupancy footprint
Area (ha)
Impact (MSA ha)
Direct Suppliers
128,000
115,000
Third-Party Suppliers
49,500
44,000
Total
177,500
159,000
Figure 2. Top 10 manufacturing sites by physical land footprint
20
15
10
5
0
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19%
10%
8%
7%
7%
6%
5%
3%
2%
2%
US - Tobaccoville
Brazil - Santa Cruz
Brazil - Uberlandia
Chile - Casablanc
US - Clarksville
South Africa - Heidelberg
Türkiye - Samson
Indonesia - Malang
Venezuela - Valencia
Nigeria - Ibadan
Figure 3. Estimated annual impacts on biodiversity per pressure
and procurement category expressed as species.year
Water
Consumption
Pollution
Climate
Change
Land
Use
0%
20%
40%
60%
Non-tobacco procured goods
and services
As footprint data is not available, we
estimated the impacts on nature in our
non-tobacco procured goods and services
using an LCA-based approach in 2023.
This approach estimates the extent
and severity of impacts by feeding BAT’s
estimated annual spend or volumes
purchased per sector and country into
EXIOBASE, which translates resource
extractions and emissions into
environmental impact scores using LCA
conversion factors.
The results are expressed in a standard
biodiversity impact metric called
‘species.years’, which allows us to compare
the magnitude of different pressures in a
common unit.
The analysis revealed that within our
non-tobacco procured goods and services,
land use is the primary impact driver for
biodiversity loss, accounting for 74% of
estimated impacts, followed by climate
change at 18% (Figure 3).
In this analysis, pulp and paper was
identified as a key supply chain, estimated
to account for 70% of the total non-tobacco
procured goods and services footprint.
Direct Operations
As part of the Locate and Evaluate phase
of the LEAP approach, we conducted a
BECS analysis of our own manufacturing
sites in 2022, using location data in the
form of point coordinates, total area of the
sites (hectares), and area radius around
each site (hectares).
The land occupancy footprint of our direct
operations is estimated as 1,073.5 MSA.ha
by using the BECS methodology.
The extent of physical land occupied by
our manufacturing sites was estimated
at 1,130 ha with the top 10 sites shown
in figure 2 representing 69%.
2
Strategy continued
Direct suppliers
Indirect suppliers
Purchased New Categories
The TNFD defines
1 nature-related risks
as all “potential threats posed to an
organisation linked to their and wider
society’s dependencies on nature and
nature impacts”.
Nature-related opportunities are defined
as
1 “activities that create positive
outcomes for organisations and nature
by creating positive impacts on nature or
mitigating negative impacts on nature.”
In line with TNFD definitions, we have
identified a number of potential risks
and opportunities, as part of the Assess
phase of the LEAP approach, which are
outlined below.
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Table 7: Summary of BAT’s potential nature-related risks
Risk category
Description of risk
Realm
Physical risks
(chronic)
Dependencies on provisioning services
We rely on ecosystems to provide the natural raw materials required for our production, known
as provisioning services. Changes in these ecosystems can adversely affect these provisioning
services. The deterioration of relevant ecosystems may heighten the risks associated with obtaining
natural inputs such as tobacco, fuel wood, paper and freshwater, potentially affecting our supply
chain and reducing production capacity.
Freshwater,
Terrestrial
Dependencies on regulating and maintenance services
Ecosystems provide regulating and maintenance services, supporting the availability of natural
resources necessary for production. When ecosystems and species deteriorate, it may increase
risks relating to the supply of natural inputs, for example, due to reduced pollination services or
reduced pest control.
Freshwater,
Terrestrial
Physical risks
(acute)
Dependencies on the regulation of natural hazards
Ecosystems play a role in the prevention and mitigation of natural hazards. Changes in these
ecosystems, including the species we depend upon for regulating ecosystem services, can result
in changes to the flow of these services. This can be a particular problem in tobacco growing areas
that are at risk of increased flooding and drought events.
Freshwater,
Marine,
Terrestrial
Transition risks
(liability)
Nature-related legal liabilities
As the connection between business activities and nature-related impacts is increasingly
documented, we could become further exposed to nature-related liability risks, including fines
and penalties.
N/A
Transition risks
(regulation)
Nature-related regulations
Failure to address the nature-related impacts of detrimental activities in our value chain may lead
to external scrutiny and increased regulatory oversight. For instance, deforestation is a critical
nature-related concern for EU regulators, such as under the European Union Deforestation
Regulation (EUDR). Failure to comply with deforestation legislation in timber sourcing may result
in penalties.
Freshwater,
Terrestrial
Table 8: BAT’s nature-related opportunities
Opportunity
category
Description of opportunity
Realm
Resource
efficiency
To support the resilience of our farmer base, we develop tailored best practice techniques through
our Global Leaf Agronomy Development centre in Brazil and various local and regional partnerships.
The centre focuses on several key areas: soil science and plant nutrition, water management,
emissions, pest management, leaf breeding, seed technology, seed production and industrialisation,
mechanisation and curing crop protection, agrochemicals, agriculture best practice, substrates,
botanicals, bioprocess and leaf chemistry. These solutions are aimed at improving crop yields while
minimising the use of water, fertilisers and other harmful agrochemicals.
Freshwater,
Terrestrial
Ecosystem
protection,
restoration and
regeneration
We can enhance our supply chain resilience by investing in the protection, conservation, restoration
or sustainable management of ecosystems and/or species they depend on. For example, we are
helping farmers to implement regenerative agriculture practices. We can also invest in
infrastructure to support our supply chain while supporting nature-positive outcomes, such as
maintaining connectivity between and within ecosystems near operational sites or tobacco farms.
We also sponsor restoration activities at our sites and within communities where we operate.
Terrestrial
2
Strategy continued
Note:
1.
For TNFD's definitions of nature-related risks and opportunities: tnfd.global/wp-content/uploads/2022/03/220321-TNFD-framework-beta-v0.1-FINAL.pdf.
Locations of assets and/or activities
in direct operations, and upstream
and downstream value chain(s)
that meet the criteria for priority
locations
As part of the Locate phase (with an
overlap to the Evaluate phase) of the LEAP
approach, we commissioned The
Biodiversity Consultancy to conduct
geospatial Biodiversity risk assessments of
our direct operations (manufacturing sites),
directly contracted and third-party
farmers, as well as 35 mills and five
chemical plants owned by suppliers in our
pulp and paper supply chain. We consider
these our potentially “Material Locations”.
The TNFD considers “Sensitive Locations”
to be locations where an organisation’s
value chain interfaces with ecologically
sensitive areas. We consider sensitive
locations to be those areas that are
“important for biodiversity” or “of high
water priority”.
Methodology - Areas important
for biodiversity
To identify “areas important for
biodiversity”, and therefore sites with
the highest priority for conservation and
sustainable management, we used the
following indicators:
The Species Threat Abatement and
Restoration (STAR) metric.
Areas of biodiversity importance
as described in TNFD suggested
datasets: proximity to World Heritage
Sites, Alliance for Zero Extinction
Sites, Protected Areas and Key
Biodiversity Areas.
Presence of threatened species – this
includes identifying whether priority
species are present at each location
and whether an area may qualify as a
Critical Habitat as determined by the
IFC Performance Standard 6
criterion 1 or criterion 2.
Priority locations in our tobacco
supply chain
In our tobacco supply chain, priority
locations were identified at farm level using
the following criteria. A 5 km buffer was
applied to each farm using the 2023 crop
farmer base. Priority locations were
identified as those less than 500 m from
Protected Areas or World Heritage Sites,
within Key Biodiversity Areas or the Alliance
for Zero Extinction; and/or with a STAR
score over 10. As a result, 3,483 farms
(3.9%) were identified as priority locations
and can be found on the map below
(Map 2).
Priority locations in our non-tobacco
supply chain
For our non-tobacco supply chain,
geolocation data was identified for 40
1 pulp
and paper processing locations.
A buffer of 10 km was applied to each site
and priority locations were identified based
on biodiversity importance. The sites less
than 500m from World Heritage Sites,
Alliance for Zero sites, sites within Key
Biodiversity Areas, Protected Areas, or
areas where there are priority species or
critical habitat present, or sites with a
greater STAR score were identified as
priority locations. As a result, around
15 supplier sites in more than 10 countries
were identified as priority locations.
Priority locations in our direct
operations
For direct operations, priority locations
were identified at manufacturing site level
2.
A 5km buffer was applied to each site’s
geo-coordinate and total site area
(hectares). 15 priority locations are
identified based on following criteria:
whether the location's buffer is located
within 5km from Alliance for Zero
Extinction or World Heritage sites, or
located within less than 500m from Key
biodiversity or Protected areas, or has a
STAR score greater than 10. In addition,
3 sites that were not identified as priority
locations based on the mentioned criteria
are identified for their possible restoration
potential due to their larger physical size as
shown in Map 3.
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2
Strategy continued
Notes:
1.
Risk assessment conducted based on 2023 supplier footprint.
2. Assessment conducted in 2023 based on 2023 direct operations footprint.
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Map 2: Geographical map of BAT’s directly contracted farmers identified as priority locations
America
Asia
Europe
South East Asia
Priority Farms
Map 3: Priority locations within direct operations and priority location criteria met
America
Africa
Asia
Europe
South East Asia
Areas of biodiversity importance
Physical Land Footprint
STAR Score
STAR Score & Areas of biodiversity importance
2
Strategy continued
Water basins of high priority for nature
Water is a vital input to our direct operations
and tobacco supply chain.
We endeavour to manage the impacts of
water-use in our direct operations and
tobacco supply chain on surrounding water
bodies and related ecosystems.
This is why we have adopted SBTN’s
methodology to understand which priority
basins in our value chain are most affected
by freshwater withdrawal and quality
impacts.
To assess freshwater withdrawals, we
used the following indicators:
Water withdrawal data from our
tobacco supply chain and
manufacturing sites and SBTN’s
Water availability data (Hogeboom
model) to understand which basins
are not operating within sustainable
withdrawal limits.
START (Amphibians) and threatened
freshwater species to understand
biodiversity significance.
We have factored in both water quantity
and freshwater biodiversity, which led us
to identify a number of priority basins for
further action in Mexico, Indonesia, South
Africa, Bangladesh and Uzbekistan.
To assess freshwater quality impacts we
used the following indicators:
Fertiliser use data collected by our
tobacco supply chain and SBTN’s
sustainable nutrient concentration
at the basin level (using McDowell's
Model)
START (Amphibians) and threatened
freshwater species
We are evaluating our next steps in this area.
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2
Strategy continued
Processes for identifying,
assessing and prioritising nature-
related dependencies, impacts
risks and opportunities in: (i) direct
operations and (ii) upstream and
downstream value chain(s)
Dependencies
As recommended in TNFD’s sector
guidance for food and agriculture, we used
the ENCORE database (2018) to identify
the ecosystem components most
dependent on economic activities across
our value chain. ENCORE’s database
provides a materiality score (“very low”
to “very high”) for each ecosystem
component based on the estimated degree
of financial loss and estimated production
loss incurred by disruptions to relevant
ecosystem services
1.
However, it is important to note that
ENCORE provides estimates on possible
dependencies on ecosystem components
by BAT, but does not provide insight on
likelihood or magnitude of risks on
degradation of those ecosystem
components.
Impacts in Direct Operations and
Tobacco Supply Chain
We estimated land occupancy across our
direct operations and tobacco supply chain
using the BECS framework (Figure 1).
Impacts in Non-tobacco procured
goods and services
We used an LCA-based approach to
estimate the overall impact on biodiversity
from our non-tobacco procured goods and
services. Internal procurement data
including annual spend, and volume per
sector and country, was fed into an
external database called EXIOBASE, from
TNFD’s tools catalogue. This enabled us to
estimate the environmental impacts
associated with our resource consumption.
Risks and Opportunities
Using the TNFD's risks and opportunities
repository and dependency pathways that
are identified through ENCORE, we have
determined several potential nature-
related risks and opportunities, namely:
– Physical and transition risks; and
– Resource efficiency and investment
in restoration and regeneration
opportunities.
These will be fed into our CSRD Double
Materiality Assessment, which we intend
to disclose in 2026, in relation to year-end
2025 (Tables 7 and 8).
Key results are expressed in the
following units of measurement:
– The resulting land occupancy
footprint is expressed in Mean
Species Abundance hectares
(MSA.ha).
– The significance of these losses for
global biodiversity conservation is
measured using IUCN’s STAR
metric.
– The STAR metric assesses how
specific actions at particular
locations can contribute to global
biodiversity sustainability goals. It
measures the potential impacts of
reducing threats and restoring
habitats to decrease the risk of
species extinction, aiding in the
identification of effective actions
and quantifying their contributions
to preventing biodiversity loss.
Processes for monitoring
nature-related dependencies,
impacts, risks and opportunities.
The Group applies a consistent
methodology for assessing sustainability-
related risks and opportunities, utilising
our Risk Management Framework.
This process, as well as our Risk
assessment methodology, are outlined
within our TCFD disclosure.
In addition, we have a set of nature-related
commitments that we track and report
against annually.
As we define our material nature-related
DIROs, we will revise our approach to
manage them.
Process for identifying, assessing,
managing and monitoring nature-
related risks into the organisation’s
overall risk management processes.
Identify
Our Centre of Excellence (CoEs)
work with the Group Risk and
Sustainability teams to identify
potential DIROs. Through
stakeholder consultations,
research, and assessments, they
document potential threats and
vulnerabilities that could adversely
impact nature or our objectives,
informing the Group’s DMA.
Assess
Nature-related risks are assessed
for their potential impact, with
scenarios generated and experts
consulted as appropriate.
Manage
Risk management activities and
responses are identified, with
mitigation measures assigned.
Internal specialists develop
processes, standards, and
policies, which are adopted by
sustainability teams globally for
local implementation.
Monitor
Targets, data points, and controls
are developed for monitoring. Risk
assessment scores are recorded
in the Group's Risk Management
System. The Group’s
sustainability risk register,
including nature-related risks, is
reviewed biannually by the Group
Risk Management Committee
and Audit Committee, and
annually by the Board.
Read more about our risk management
process in the TCFD section of this report
on page 130 and 131
+
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Note:
1.
ENCORE (encorenature.org)
3
Risk Management
Indicators and metrics help the identification and assessment
of nature-related dependencies, impacts, risks and opportunities (DIROs)
TNFD uses recommended metrics and targets to provide a standardised framework for
organisations to disclose their nature-related DIROs. The following section provides a selection
of key existing metrics which demonstrates how we currently assess, manage, and measure
our DIROs. The reporting methodology for these metrics is outlined on page 152.
Disclose the metrics used by the organisation to assess and manage dependencies and impacts on nature
Table 9: Our disclosures against TNFD’s core global dependency and impact metrics for direct operations, tobacco
supply chain and non-tobacco procured goods and services
Category
Indicator
Metric
Direct operations
Tobacco
supply chain
Non-tobacco
procured goods
and services
Land/
freshwater/
ocean-use
change
Total spatial footprint
Estimated total surface area
1
1,190 ha
177,500 ha
Extent of land/freshwater/
ocean ecosystem
conserved or restored
Total surface area of forests
planted and for conservation
and for Forest Positive
131.6 ha
Wastewater discharged
Total volume of water discharged
1.29 mn m
3
Volume of water discharged into
freshwater
0.18 mn m
3
Volume of water discharged into
brackish surface water/seawater
0.004 mn m
3
Volume of water discharged into
groundwater
0.016 mn m
3
Volume of water discharged into
third-party destinations
1.1 mn m
3
Resource use/
replenishment
Water withdrawal and
consumption from areas
of water stress
Total water withdrawn
2.73 mn m
3
Total water withdrawn from Water
Stress areas
1.06 mn m
3
Quantity of high-risk natural
commodities sourced from
land/ ocean/ freshwater
% of wood used in Thrive Supply
Chain
1 with deforestation and
conversion free (DCF) status
98.5%
% of wood used by our directly
contracted farmers for tobacco curing
to be from sustainable wood sources
100%
% of pulp and paper materials
sourced with low risk of deforestation
86.3%
State of nature
Ecosystem condition
Estimated land occupancy
footprint
1
1,073.5 MSA.ha
159,000 MSA.ha
Table 9 shows the Group’s disclosure indicators for land/freshwater/ocean-use change, resource use/replenishment and the state of
nature while connecting them with relevant metrics for direct operations, tobacco supply chain, and non-tobacco procured goods and
services. They are chosen for their relevance to our DIRO assessment process, and business strategy and targets.
The grey highlighted areas in Table 9 represent the value chain metrics that were not included in our TNFD report due to their not being
relevant or material at this stage.
Metrics used by the organisation to assess and manage material nature-related risks and opportunities
in line with strategy and risk management process
We have currently only identified potential nature-related risks and opportunities, therefore we are not in a position to report against this
disclosure. We aim to enhance our disclosure in line with our CSRD Reporting in 2026, in relation to year-end 2025.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
151
4
Metrics and Targets
Note:
1.
Direct operations metric is based on 2022 data and tobacco supply chain metric is based on 2023 data.
Reporting Methodology of key existing nature metrics
Biodiversity and ecosystems
% of wood used in Thrive supply chain
with deforestation and conversion
free (DCF) status
KPI Definition: As stated in the Biodiversity
Operational Standard on Tobacco Farming,
we follow the AFI (accountability-
framework.org) definitions of deforestation
and conversion as well as the CDP Forest
Guiding Criteria and the Proforest
Guidance for Deforestation and Conversion
Free (DCF) report. We combine different
levels of evidence and deforestation/
conversion monitoring methods to trace
and classify wood as DCF (with a cut-off
date of 31 December 2020). Wood should
be traceable to at least sub-national
jurisdiction level and should be from:
– Sources certified under an acceptable
scheme
– Wood production forests monitored for
deforestation and conversion or
authorised natural managed forests with
management plans
– A sourcing area classified as low risk for
deforestation and conversion based on
geospatial and/or local risk assessments
conducted by third parties
Methodology: This is an indicator reported
via our Thrive programme, covering 93% of
tobacco purchased in 2024 and includes on
the ground assessments for wood
traceability, volume, and the type of wood.
% of pulp and paper materials sourced
with low risk of deforestation
KPI Definition: Relates to the proportion
of volumes (in tonnes) of pulp and paper
products sourced, covering board and
paper used in primary and secondary
packaging for all products, fine paper for
cigarettes and Heated Products and
cellulose acetate tow for filters. We apply
a materiality threshold, resulting in more
than 98% of total pulp and paper volumes
sourced being in scope of our assessment.
Methodology: In line with the AFi, volumes
are assessed as deforestation free (DF)
when the suppliers of those volumes can
demonstrate that the base material is
sourced with low risk of deforestation (with
a cut-off date of 31 December 2020). Low
risk means the volume is either certified
through chain of custody schemes
providing full assurance, provided by a
supplier that has achieved an
“A/A-” rating in their CDP Forest disclosure
for the timber commodity and 100% of
volume was disclosed as DF, was traceable
to a low-risk sourcing area, or was
traceable to a high-risk sourcing area with
the production unit monitored as DF. We
enhanced this metric in 2024, to align to
the latest framework.
% of contracted farmers’ wood fuels
that are from sustainable wood sources
KPI Definition: Sustainable wood sources
are defined as: wood resources harvested
in such a way that does not cause
deforestation of natural ecosystems. This
may include wood sourced from existing
tree plantations or managed natural
forests, from identified invasive exotic
species that have not been planted and
timber by-products, such as sawdust,
branches and twigs.
Methodology: The data collected is based
on 100% (more than 90,500 of the directly
contracted farmers monitored in the
Group’s own Leaf Operations), of which
53% make use of wood for curing. The
percentage reported represents
sustainable wood used by those farmers.
This data excludes farmers that our third-
party suppliers source from. The Field
Technician is responsible for the data
collection from the farmer in each farm
visit. The Field Technician verifies the wood
quantity and species and / or evidence
given by the farmer, including documents,
as invoices or any other paper forms,
verifies the existence of forest plantation
on-farm, measures the wood pile as
applicable and perform a visual check.
Finally, data is signed off from farmers and
Field Technicians and logged into the
monitoring systems.
Total surface area of forests
planted and for conservation
and for Forest Positive
KPI Definition: To be considered 'Forest
Positive', a forest should be planted for
conservation purposes. Conversion is the
change of a natural ecosystem to another
land use or profound change in a natural
ecosystem’s species composition,
structure, or function.
To be considered 'Forest Positive, the area
must be monitored at least one year after
the planting date, to verify the survival rate
quantification of the area planted and the
number of trees that have become viable.
Water
Water withdrawn
KPI Definition: We use the GRI 303: Water
and Effluents 2018 Standard to guide our
water withdrawn definition and
methodology.
Water withdrawn includes all water
drawn from surface water, including
harvested rainwater, groundwater,
seawater, or third-party water for any use
within our direct operations. Water is used
in manufacturing processes, in utilities,
for social and horticultural needs if the
latter are limited to our companies’
premises, such as watering lawns and
nurseries in Leaf R&D. It does not include
irrigation in agriculture, e.g. in leaf growing.
Methodology: Water withdrawn data is
collected via the EHS reporting system.
Sites collect data for water withdrawn
based on invoices from suppliers and
internal metering, which at major sites
is performed in real time via building
management systems (BMS). Small offices
apply estimates based on area occupied or
headcount.
Our 2017 baseline figure for water
withdrawn is 5.20 million cubic meters.
Water discharge
KPI Definition: We use the GRI 303: Water
and Effluents 2018 Standard to guide our
water discharge definition.
Water discharge includes effluents, used
water, and unused water released to
surface water, groundwater, seawater,
or a third party. Water can be released into
the receiving waterbody either at a defined
discharge point or dispersed over land in an
undefined manner or transported in tanks.
Methodology: The data for water
discharge with breakdown by destination
(third party, fresh water, brackish water,
groundwater) is collected via the EHS
reporting system. Sites collect data for
water discharges based on internal
metering or invoices from services
suppliers. In the absence of metering,
estimates are applied based on water
withdrawn volumes and typical water
consumption of equipment and processes.
% of operations sites AWS certified
KPI Definition: AWS certification refers to
independent certification against Alliance
for Water Stewardship (AWS) Standard
2.0. All BAT operating sites that have gone
through the certification process and
successfully completed each of the five
steps of the AWS standard guidance:
1. Familiarisation with the AWS standard.
2.Register in the AWS standard system.
3.Register with AWS.
4.Implement the AWS standard.
5.Work with Water Stewardship
Assurance Services (WSAS) to complete
the certification process, including an on-
site audit.
Our sites are considered certified when the
AWS Certificate is available on the Alliance
for Water Stewardship website within the
reporting period.
Methodology: % of AWS certified
operations sites is calculated as number of
operations sites that hold AWS certificate
divided by total number of operations sites,
which excludes three sites that have been
granted exemption due to local
circumstances.
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
Sustainable Future
TNFD Reporting
Continued
152
4
Metrics and Targets continued
KPMG have conducted independent, limited assurance in accordance with ISAE (UK) 3000 and ISAE 3410 over the 2024 Sustainability
'Selected Information' listed below, as contained in this Annual Report. KPMG's Independent Limited Assurance Report is provided on
page 154.
Underlying Selected Information
Selected Information
Consumers of non-combustible products (also referred to as Smokeless products) (number of, in millions)
29.1
Incidents of non-compliance with regulations resulting in fine or penalty
2
Incidents of non-compliance with regulations resulting in a regulatory warning
0
Scope 1 CO2e emissions (thousand tonnes)
237
Scope 2 CO2e emissions (market based) (thousand tonnes)
74
Scope 2 CO2e emissions (location based) (thousand tonnes)
325
Scope 1 and Scope 2 CO2e emissions intensity ratio (tonnes per £m revenue)
11.5
Scope 1 and Scope 2 CO2e emissions intensity ratio (tonnes per EUR m revenue)
9.7
Total Scope 3 CO2e emissions (thousand tonnes) - for 2023, Scope 3 GHG emissions are reported one year later
5,479
Total energy consumption (GWh)
1,996
Energy consumption intensity (GWh per million £ revenue)
0.08
Energy consumption intensity (GWh per million EUR revenue)
0.07
Renewable energy consumption (GWh)
900
Non-Renewable energy consumption (GWh)
1,096
Total water withdrawn (million m
3)
2.73
Total water recycled (million m
3)
1.03
Total water discharged (million m
3)
1.29
Emissions to water:
– 12% operations sites measure phosphates in water discharged.
– 24% operations sites measure nitrates content in water discharged.
– 3% operations sites measure pesticides content in water discharged.
Number of operations sites in areas of high-water stress with and without water management policies
23/0
% of sources of wood used by our directly contracted farmers for curing fuels that are from sustainable sources
^
100
% of tobacco hectares reported to have appropriate best practice soil and water management plans implemented
^
87
Total waste generated (thousand tonnes)
110.58
Hazardous waste and radioactive waste generated (thousand tonnes)
1.20
Total waste recycled (thousand tonnes)
97.3
% of tobacco farmers reported to grow other crops for food or as additional sources of income
^
94.1
% of farms monitored for child labour
^
100
% of farms with incidents of child labour identified
^
0.05
Number of child labour incidents identified
^
117
% of child labour incidents reported as resolved by end of the growing season
^
100
% of farms monitored for grievance mechanisms
^
100
% of farms reported to have sufficient PPE for agrochemical use
^
98.99
% of farms reported to have sufficient PPE for tobacco harvesting
^
94.3
H&S - Lost Time Incident Rate (LTIR)
0.12
H&S - Number of serious injuries (employees)
8
H&S - Number of serious injuries (contractors)
13
H&S - Number of fatalities (employees)
0
H&S - Number of fatalities (contractors)
1
H&S - Number of fatalities to members of public involving BAT vehicles
1
% female representation in Management roles
44
% female representation on Senior Leadership teams
37
% of key leadership teams with at least a 50% spread of distinct nationalities
92
Global unadjusted gender pay gap (average %)
15
% of product materials and high-risk indirect service suppliers that have undergone at least one independent
labour audit within a three-year cycle
91
Number of established SoBC breaches
164
Number of disciplinary actions taken as a result of established SoBC breaches that resulted in people leaving BAT
81
Number of established SoBC breaches - relating to workplace and human rights
71
^ This information is the Leaf Data and Human Rights Selected Information as referred to in KPMG’s limited assurance opinion.
@
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
@Sustainability 2024 Assured Metrics
153
Independent Practitioner’s Limited Assurance Report
to British American Tobacco p.l.c.
Report on selected sustainability information included within British American Tobacco
p.l.c.’s Combined Annual and Sustainability Report for the year ended 31 December 2024.
Conclusion
We have performed a limited assurance engagement on whether selected
information in British American Tobacco p.l.c.’s (“BAT” or the “Company”)
Combined Annual and Sustainability Report (the “Report”) for the year ended 31
December 2024 has been properly prepared in accordance with BAT’s 2024
Reporting Criteria and BAT’s Scope 3 – Simplified Reporting Methodology as set
out at www.bat.com/investors-and-reporting/reporting/sustainability-reporting
(the “Reporting Criteria”). The information within the Report that was subject to
assurance is listed as the “Sustainability 2024 Assured Metrics” on page 153 and,
in some cases, is also on page 135 indicated with the symbol “♦”(the “Selected
Information”). The Selected Information for Total Scope 3 CO2e emissions is for
the year ended 31 December 2023.
Based on the procedures performed and evidence obtained, nothing has come to our
attention that causes us to believe that the Selected Information has not been properly
prepared, in all material respects, in accordance with the Reporting Criteria.
Our conclusion is to be read in the context of the remainder of this report,
in particular the “Inherent limitations in preparing the Selected Information”
and “Intended use of our report” sections below.
Our conclusion on the Selected Information does not extend to other information
that accompanies or contains the Selected Information and our assurance report
(hereafter referred to as “Other Information”). We have not performed any
procedures as part of this engagement with respect to such Other Information.
We audited the financial statements, and the part of the Directors’ Remuneration
Report to be audited, included within the Other Information and our report
thereon is included with the Other Information.
Basis for Conclusion
We conducted our engagement in accordance with International Standard on
Assurance Engagements (UK) 3000 Assurance Engagements Other Than Audits
or Reviews of Historical Financial Information (“ISAE (UK) 3000”) issued by the
Financial Reporting Council (“FRC”) and, in respect of the greenhouse gas
emissions information included within the Selected Information, in accordance
with International Standard on Assurance Engagements 3410 Assurance
Engagements on Greenhouse Gas Statements (“ISAE 3410”) issued by the
International Auditing and Assurance Standards Board (“IAASB”). Our
responsibilities under those standards are further described in the “Our
responsibilities” section of our report.
We have complied with the Institute of Chartered Accountants in England and
Wales (“ICAEW”) Code of Ethics, which includes independence and other ethical
requirements founded on fundamental principles of integrity, objectivity,
professional competence and due care, confidentiality and professional behaviour,
that are at least as demanding as the applicable provisions of the International
Ethics Standards Board for Accountants (“IESBA”) International Code of Ethics
for Professional Accountants (including International Independence Standards).
Our firm applies International Standard on Quality Management (UK) 1 Quality
Management for Firms that Perform Audits or Reviews of Financial Statements, or
Other Assurance or Related Services Engagements (“ISQM (UK) 1”), issued by
the FRC, which requires the firm to design, implement and operate a system
of quality management including policies or procedures regarding compliance
with ethical requirements, professional standards and applicable legal and
regulatory requirements. We believe that the evidence we have obtained is
sufficient and appropriate to provide a basis for our conclusion.
Inherent Limitations in Preparing the Selected Information
The nature of non-financial information; the absence of a significant body
of established practice on which to draw; and the methods and precision used
to determine non-financial information, allow for different, but acceptable,
evaluation and measurement techniques and can result in materially different
measurements, affecting comparability between entities and over time.
The greenhouse gas (“GHG”) emissions quantification process is subject to:
scientific uncertainty, which arises because of incomplete scientific knowledge
about the measurement of GHGs; and estimation (or measurement)
uncertainty resulting from the measurement and calculation processes used
to quantify emissions within the bounds of existing scientific knowledge.
For Scope 3 GHG emissions, there are also significant limitations in the
availability and quality of GHG emissions data from third parties, resulting in
BAT’s reliance on proxy data in determining estimated Scope 3 GHG emissions.
Over time better information may become available from third parties and the
principles and methodologies used to measure and report Scope 3 GHG
emissions may change based on market practice and regulation.
The Reporting Criteria has been developed to assist BAT in reporting
sustainability information selected by BAT as key metrics to measure its
progress against its sustainability strategy. As a result, the Selected
Information may not be suitable for another purpose.
Directors’ Responsibilities
The Board of Directors of BAT are responsible for:
– Designing, implementing and maintaining internal controls relevant to the
preparation and presentation of the Selected Information that is free from
material misstatement, whether due to fraud or error;
– selecting and developing suitable Reporting Criteria for preparing the
Selected Information;
– properly preparing the Selected Information in accordance with the
Reporting Criteria; and
– the contents and statements contained within the Report and the Reporting
Criteria.
Our Responsibilities
We are responsible for:
– Planning and performing the engagement to obtain limited assurance about
whether the Selected Information is free from material misstatement,
whether due to fraud or error;
– Forming an independent limited assurance conclusion, based on the
procedures we have performed and the evidence we have obtained; and
– Reporting our conclusion to BAT.
Summary of Work Performed as the Basis for Our Conclusion
We exercised professional judgment and maintained professional scepticism
throughout the engagement. We planned and performed our procedures to
obtain evidence that is sufficient and appropriate to obtain a meaningful level
of assurance over the Selected Information to provide a basis for our limited
assurance conclusion. Planning the engagement involves assessing whether
BAT’s Reporting Criteria are suitable for the purposes of our limited assurance
engagement. Our procedures selected depended on our judgement, on our
understanding of the Selected Information and other engagement
circumstances, and our consideration of areas where material misstatements
are likely to arise.
In carrying out our engagement, we performed procedures which included:
– Conducting interviews with BAT management to obtain an understanding
of the key processes, systems and controls in place over the preparation of
the Selected Information;
– Performing risk assessment procedures over the aggregated Selected
Information, including a comparison to the prior period’s amounts having due
regard to changes in business volume and the business portfolio;
– Performing limited substantive testing, including agreeing a selection of the
Selected Information to the corresponding supporting information;
– Considering the appropriateness of the carbon conversion factor calculations
and other unit conversion factor calculations used by reference to widely
recognised and established conversion factors;
– Reperforming a selection of the carbon conversion factor calculations and
other unit conversion factor calculations; and
– Reading the Report with regard to the Reporting Criteria, and for consistency
with our findings over the Selected Information.
However our procedures did not include:
– Physical visits to the farms which provided the source data for the “Leaf Data
and Human Rights” Selected Information (being that marked with a “^”
symbol on page 153);
– Physical visits to the operational sites which provided the source data for the
“Emissions to Water” Selected Information; and
– Testing the accuracy of the sales volumes in BAT’s Procurement IT system
which were used as an input in calculating Scope 3 Category 1 CO2e
emissions (part of Total Scope 3 CO2e emissions).
The procedures performed in a limited assurance engagement vary in nature
and timing from, and are less in extent than for, a reasonable assurance
engagement. Consequently, the level of assurance obtained in a limited
assurance engagement is substantially lower than the assurance that would
have been obtained had a reasonable assurance engagement been performed.
Intended Use of Our Report
Our report has been prepared for BAT solely in accordance with the terms of
our engagement. We have consented to the publication of our report within
BAT’s Report for the purpose of BAT showing that it has obtained an
independent assurance report in connection with the Selected Information.
Our report was designed to meet the agreed requirements of BAT determined by
BAT's needs at the time. Our report should not therefore be regarded as suitable to be
used or relied on by any party wishing to acquire rights against us other than BAT for
any purpose or in any context. Any party other than BAT who obtains access to our
report or a copy and chooses to rely on our report (or any part of it) will do so at its own
risk. To the fullest extent permitted by law, KPMG LLP will accept no responsibility or
liability in respect of our report to any other party.
George Richards
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
12 February 2025
The maintenance and integrity of BAT’s website is the responsibility of the
Directors of BAT; the work carried out by us does not involve consideration
of these matters and, accordingly, we accept no responsibility for any changes
that may have occurred to the reported Selected Information, Reporting
Criteria or Report presented on BAT’s website since the date of our report.
@
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Sustainable Future
@Sustainability Limited Assurance Report
154
Overview
The Principal Risks that may affect the
Group are set out on the following pages.
Each risk is considered in the context of the
Group’s strategy and business model, as
set out in this Strategic Report beginning
on page 2 and page 14. On the following
pages is a summary of each Principal Risk,
its potential impact
@and management by
the Group
@.
Principal Risks are those that have the
potential to materially impact the
achievement of the Group’s strategic
objectives. These are significant risks that
could affect BAT’s long-term financial
performance, reputation, or delivery of
sustainability goals.
@The Group has identified risks and is
actively monitoring and mitigating these
risks, including those related to climate
change and other sustainability matters.
@
This section focuses on those risks that the
Directors believe to be the Principal Risks to
the Group. Not all of these risks are within
the control of the Group and other risks
besides those listed may affect the Group’s
performance. Some risks may be unknown
at present. Other risks, currently regarded
as less material, could become material in
the future. Clear accountability is attached
to each risk through the risk owner.
During the year, the “Climate Change and
Circular Economy” risk has been split into
two, recognising the distinct nature of
each. The separation stems from the
understanding that each area
encompasses unique challenges and
requires tailored mitigation strategies.
The risks listed in this section
@and
the activities being undertaken to
manage them
@ should be considered
in the context of the Group’s internal
control framework. This process is
described in the section on risk
management and internal control in the
corporate governance statement from
page 194. This section should also be read
in the context of the cautionary statement
on page 447.
A summary of all the risk factors (including
the Principal Risks) which are monitored by
the Board through the Group’s risk register
is set out in the Additional Disclosures
section from page 414.
Assessment of Group Principal Risks
@
During the year, the Directors carried out
a robust assessment of the Principal Risks,
uncertainties and emerging risks facing
the Group, including those that could
impact reputation or delivery of its
strategic objectives, business model,
future performance, solvency or liquidity.
Leading in Sustainability is a core
component/key building block of our
corporate strategy and sustainability risk
factors are embedded across the Group's
risks in accordance with how risks are
managed within the Group.
Read more about our approach
on page 130
+
The viability statement on page 163
provides a broader assessment of long-
term solvency and liquidity. The Directors
considered a number of factors that may
affect the resilience of the Group. Except
for the risk “Injury, illness or death in the
workplace” which is not considered to be
sufficiently material to impact the Group's
overall viability assessment, the Directors
also assessed the potential impact of the
Principal Risks that may impact the
Group’s viability.
Time frame
Short-term
Medium-term
Long-term
Strategic impact
Quality Growth
Sustainable Future
Dynamic Business
Key Stakeholders
Consumers
Society
Our people
Shareholders & Investors
Considered in viability statement
Yes
No
@ Denotes phrase, paragraph or similar that does
not form part of BAT’s Annual Report on Form
20-F as filed with the SEC.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Group Principal Risks
155
Risks
Competition from illicit trade
Increased competition from illicit trade and illegal products – either local duty evaded, smuggled, counterfeits, or non-regulatory
compliant, including products diverted from one country to another.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-/long-term
Quality Growth/Sustainable
Future
Consumers, Society,
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Illicit trade often leads to more restrictions and regulations
imposed on the legitimate industry, including sales restrictions,
overly burdensome track and trace systems and display packaging
bans. This is often based on the erroneous assertion that the
legitimate industry makes up the bulk of illicit trade in tobacco
products.
Erosion of goodwill, with lower volumes and/or increased
operational costs (e.g. track and trace costs) and reduced profits.
Reduced ability to take price increases.
Investment in trade marketing and distribution is undermined
and the product is commoditised.
Illicit products (especially in New Categories) could harm
consumers, damaging goodwill, and/or the category (with lower
volumes and reduced profits), potentially leading to misplaced
claims against BAT, further regulation and a failure to deliver the
corporate harm reduction objective.
Breach of legislation, criminal offences, contract breaches under
the EU Cooperation Agreement, allegations of facilitating
smuggling and reputational damage, including negative
perceptions of our governance.
Existence of illicit trade reduces our ability to reduce the health
impact of our business, it undermines policies of state
governments with respect to underage tobacco users and creates
basis for inappropriate regulation.
Dedicated Anti-Illicit Trade (AIT) teams operating at regional
and country levels; internal cross-functional levels; compliance
procedures, toolkit and best practice shared.
Active engagement with key external stakeholders, international
governmental and non-governmental organisations to highlight
illicit trade challenges and build alignment around policy solutions.
Cross-industry and multi-sector cooperation on a range
of AIT issues.
Regional AIT strategy supported by a research programme to
further the understanding of the size and scope of the matter.
As illicit e-commerce becomes a larger threat to the business,
the Group determines the scale of illicit online sales to highlight
the threat to authorities and to enable them to take direct action
against websites selling illicit products.
AIT Engagement Teams (including a dedicated analytical
laboratory and a forensic and compliance team) work with
enforcement agencies as appropriate.
Geopolitical tensions
Geopolitical tensions, civil unrest, economic policy changes, global health crises, terrorism and organised crime have the potential
to disrupt the Group’s business in multiple markets.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-term
Quality Growth/Sustainable
Future
Society, Our people,
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Potential injury or loss of life, loss of assets and disruption to
supply chains and normal business processes.
Increased costs due to more complex supply chain and security
arrangements and/or the cost of building new facilities
or maintaining inefficient facilities.
Lower volumes as a result of not being able to trade in a country.
Higher taxes or other costs of doing business as a foreign
company or the loss of assets as a result of nationalisation.
Reputational damage, including negative perceptions of our
governance and protection of our people and our sustainability
credentials. Disruption to the supply chain impacts our ability to
reduce the health impact of our business.
Physical and procedural security controls are in place, and regularly
reviewed in accordance with our Security Risk Management
process, for all field force and supply chain operations, with an
emphasis on the protection of Group employees.
Globally integrated sourcing strategy and contingency
sourcing arrangements are in place.
Security risk modelling, including external risk assessments
and the monitoring of geopolitical and economic policy
developments worldwide.
Insurance coverage and business continuity planning, including
scenario planning and testing, and risk awareness training.
Geopolitical assessment and monitoring by the Group Security
Centre of Excellence and regions inform the Business Continuity
Management organisation plans and responses to geopolitical
risks, including readiness of Crisis Management Teams at all levels.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Group Principal Risks
Group Principal Risks
Continued
156
Tobacco, New Categories and other regulation interrupts growth strategy
The enactment of, proposals for, or rumours of, regulation that significantly impairs the Group’s ability to communicate,
differentiate, market or launch its products, and/or the lack of appropriate regulation for New Categories.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-/long-term
Quality Growth/Sustainable
Future
Consumers, Society,
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
A lack of acceptance or rejection of Tobacco Harm Reduction
as a tobacco control policy could prevent a balanced regulatory
framework for New Categories. Restricted ability to sell and
communicate New Categories could lead to failure of the harm
reduction objective and loss of confidence in the Group’s
sustainability performance.
Lack of appropriate regulation and its enforcement or
disproportionate regulations for New Categories, such as
questionable regulatory classifications or total bans, that may not
be science-based and/or risk-proportionate, may impact our
opportunity for quality growth and affect our ability to develop and
market a pipeline of new products. Reduced ability to make scientific
claims, compete in future product categories and make new market
entries. Inappropriate regulation may also increase the volume of
illicit trade activity.
Erosion of brand value through commoditisation and the inability
to launch innovations may negatively affect our ability to generate
value growth.
Regulation with respect to bans or severe restrictions on menthol
flavours, product design & features and nicotine levels may adversely
impact individual brand portfolios.
Reduced consumer acceptability of new product specifications,
leading to consumers seeking alternatives in illegal markets or
irresponsible operators exploiting regulatory loopholes.
Shocks to share price on rumours of, or the announcement or
enactment of, restrictive regulation (e.g. sales ban to future
generations).
Failure to deliver appropriate and proportionately costed Extended
Producer Responsibility (EPR) schemes.
Establishment of governance forums, the objectives of which
are to review the execution of the Group's regulatory, corporate,
and science strategies, monitor the regulatory and science
landscape, prioritize key regulatory and science initiatives and
resource allocation.
Engagement and alignment across the Group to drive a balanced
global policy framework for combustibles and New Categories.
Stakeholder mapping and prioritisation, developing robust
compelling advocacy materials (with supporting evidence and
data) and regulatory engagement programmes.
Regulatory risk assessment of marketing plans to ensure
decisions are informed by an understanding of the potential
regulatory environments.
Advocating the application of integrated regulatory proposals to
governments and public health regulators and practitioners based
on the harm reduction potential of New Categories.
Encourage dialogue with stakeholders across the wider scientific
and regulatory ecosystem in relation to tobacco and nicotine
products through the launch of Omni™.
Development of an integrated regulatory strategy that spans
conventional combustibles and New Categories.
Training and capability programmes for End Markets to upskill
Corporate and Regulatory Affairs managers on combustible
and New Categories regulatory engagement, including
product knowledge.
Direct access to online portal providing latest position and
advocacy material for End Market engagement on combustibles
and New Categories.
Working to define a sustainable EPR model and markets
negotiating to implement effective EPR schemes.
Please refer to the to the description of the tobacco and nicotine regulatory regimes under which the Group’s businesses operate set out from page 436
Supply chain disruption
Disruption to the global supply chain that may impact our ability to manufacture products or supply our consumers.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-term
Quality Growth/Sustainable
Future/Dynamic Business
Consumers, Our people,
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Disruption to the global supply chain may impact all aspects
of our business and impede our ability to manufacture products
and supply our consumers.
Disruption to supply chain can lead to volume shortfalls and
inability to supply markets, increased replacement or/and rebuild
costs consequently leading to reduced profit and reputational
damage. This may affect our ability to reinvest into New Categories
and deliver our Tobacco Harm Reduction commitment.
Loss of one or more key facilities or suppliers may cause loss of life
and injuries. It may also lead to societal dislocation resulting in
population migration and loss of key skills.
Our supply chain could be negatively impacted by events arising
from, but not limited to natural disasters, man-made accidents,
cyber incidents.
Group-wide business continuity plans (BCP) and contingency
sourcing plans (CSP) in compliance with the new Business
Continuity Management standard, are in place.
All factory CSPs are regularly updated, reviewed and desktop
simulations conducted to ensure compliance with the
Group’s policy.
BCPs and disaster recovery plans for logistics providers are in place.
Unrest and Evacuation plans are in place.
Existence of insurance cover for Property Damage and Business
Interruption.
Appropriate technical and organisational cyber security measures
are in place.
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157
Risks continued
Litigation
Product liability, regulatory or other significant cases (including investigations or class action litigations) may be lost or settled
resulting in a material loss or other consequence.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-/long-term
Quality Growth/Sustainable
future
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Damages and fines, negative impact on reputation (including
sustainability credentials), disruption and loss of focus on the
business.
Consolidated results of operations, cash flows and financial
position could be materially affected by an unfavourable outcome
or settlement of pending or future litigation, criminal prosecution or
other contentious action, or by the costs associated with bringing
proceedings or defending claims.
Inability to sell products as a result of an injunction arising out of a
patent infringement action against the Group may restrict growth
plans and competitiveness.
Potential share price impact.
Sustainability-related litigation could also result in a reduction in
the investor base due to sustainability and sustainability-related
concerns.
Consistent litigation and patent management strategy across
the Group.
Expertise and legal talent maintained both within the Group
and external partners, including for New Categories and
sustainability-related matters.
Ongoing monitoring of key legislative and case law developments
related to our business.
Delivery with Integrity compliance programme.
Litigation strategy developed in relation to key regulatory issues.
Central management of strategic litigation impacting key
regulatory processes.
Developing expert analysis on efficacy of various regulatory
proposals.
Please refer to note 31 on page 343 in the Notes on the Accounts for details of contingent liabilities applicable to the Group.
Significant increases or structural changes in tobacco, nicotine and New Categories related taxes
The Group is exposed to unexpected and/or significant increases or structural changes in tobacco, nicotine and New Categories
related taxes in top markets.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-/long-term
Quality Growth/Sustainable
Future
Consumers, Society,
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Consumers reject the Group’s legitimate tax-paid products for
products from illicit sources or cheaper alternatives.
Reduced legal industry volumes.
Reduced sales volume and/or portfolio erosion leading to inability
to invest in, develop, commercialise and deliver New Category
products.
Partial absorption of excise increases leading to lower profitability.
A disproportionate tax, which would be passed on to the consumer,
could discourage consumer switching from FMC to reduced-risk
products.
Formal pricing and excise strategies, including Revenue Growth
Management using a data science-led approach, with annual risk
assessments and contingency plans across all products.
Pricing, excise and trade margin committees in markets, with
global support.
Engagement with relevant local and international authorities
where appropriate, in particular in relation to the increased risk
to excise revenues from higher illicit trade.
Portfolio reviews to ensure appropriate balance and coverage
across price segments.
Monitoring of economic indicators, government revenues
and the political situation.
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Group Principal Risks
Group Principal Risks
Continued
158
Inability to develop, commercialise and deliver the New Categories strategy
Risk of not capitalising on the opportunities in developing and commercialising successful, safer and consumer-appealing
innovations, which are backed by science.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-/long-term
Quality Growth/Sustainable
Future/Dynamic Business
Consumers, Society,
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Inability to continue to deliver Group financial results in line with
shareholder and analyst expectations resulting in an adverse
external perception to the Group Strategy and reputation.
Potentially missed opportunities, unrecoverable costs and/or
erosion of brand, with lower volumes and reduced profits.
Reputational damage and recall costs may arise in the event
of defective product design or manufacture.
Loss of market share due to non-compliance of product
portfolio with regulatory requirements or inability to engage on
our science, leading to a negative shift in sentiment and confidence
in Group products.
Loss of investor confidence in sustainability performance.
Inability to convince regulators and policymakers regarding the
weight of scientific evidence assessment underpinning the harm
reduction potential of New Categories products which could result
in failure to deliver our corporate purpose of Building a Smokeless
World.
Focus on product stewardship to ensure high-quality standards
across the portfolio.
Brand Expression, which sets out how our brand expresses itself
(including through its logo, name, product, packaging, etc.) deployed to
lead End Markets via activation workshops and best practices shared.
Generating sufficient IP to develop competitive and sustainable products.
Accelerating digital and consumer analytics along with data
management platforms for enhanced methodologies, insight
generation and line of sight across the Group.
R&D is accredited to ISO9001 standard and laboratories are
accredited to ISO17025 for key methods.
Internal and external communications about BAT's science
through publications and engagement. Quality assurance reviews
undertaken with key science suppliers to ensure appropriate
standards in place.
Disputed taxes, interest and penalties
The Group may face significant financial penalties, including the payment of interest, in the event of an unfavourable ruling
by a tax authority in a disputed area.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-term
Quality Growth/Sustainable
Future
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Significant fines and potential legal penalties.
Disruption and loss of focus on the business due to diversion
of management time.
Impact on liquidity, cashflow, profit and dividend.
End Market tax committees.
Internal tax function provides dedicated advice and guidance,
and external advice sought where needed.
Engagement with tax authorities at Group, regional and
individual market level.
Injury, illness or death in the workplace
The risk of injury, death or ill health to employees and those who work with the business is a fundamental concern of the Group
and can have a significant effect on our operations.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-term
Quality Growth/Sustainable
Future/Dynamic Business
Our people
No
Impact
Mitigation activities across all categories
@
Serious injuries, ill health, disability or loss of life suffered by
employees and the people who work with the Group.
Exposure to civil and criminal liability and the risk of prosecution
from enforcement bodies and the cost of associated legal costs,
fines and/or penalties.
Interruption of Group operations if issues are not addressed
promptly.
High staff turnover or difficulty recruiting employees if perceived
to have a poor Environment, Health and Safety (EHS) record.
Reputational damage to the Group and negative impact on our
sustainability credentials.
Risk control systems in place to ensure equipment
and infrastructure are provided and maintained.
EHS strategy aims to ensure that employees at all levels receive
appropriate EHS training and information.
Exploration and deployment of leading technology solutions,
behavioural-based safety programme to drive operational safety
performance, and culture closer to zero accidents.
Analysis of incidents undertaken regionally and globally by a
dedicated team to identify increasing incident trends or high
potential risks that require coordinated action.
Global monthly Health & Safety (H&S) Committee established,
formed by senior members from the H&S and Operations
BAT Annual Report and Form 20-F 2024
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159
Risks continued
Solvency and liquidity
Liquidity (access to cash and sources of finance) is essential to maintaining the Group as a going concern in the short-term
(liquidity) and medium-term (solvency).
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-term
Quality Growth/Sustainable
Future/Dynamic Business
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Inability to access the Group’s cash resources and to fund the
business under the current capital structure resulting in missed
strategic opportunities or inability to respond to threats.
Decline in our creditworthiness and increased funding costs
for the Group.
Requirement to issue equity or seek new sources of capital.
Reputational risk of failure to manage the financial risk profile
of the business, resulting in an erosion of shareholder value
reflected in an underperforming share price.
Inability to mitigate accounting and economic exposures.
Economic loss as a result of devaluation/revaluation of assets
(including cash) valued or held in local currency, and additional
costs as a result of paying premiums to obtain hard currency.
Failure to appropriately engage with investors’ and lenders’
sustainability criteria and concerns may impact BAT’s counterparty
availability, credit ratings, access to funding, or may result in an
increase in the cost of funding.
Exposure to the cannabis sector may lead to regulatory and legal
risk, reputation and compliance issues restricting bank and/or
investor access.
Group policies include a set of financing principles and key
performance indicators, including the monitoring of credit ratings,
interest cover, solvency and liquidity with regular reporting to the
Corporate Finance Committee and the Board.
Controls in place to ensure full compliance with Sanctions regimes.
Plans implemented to manage the risk in key geographies.
The Group targets an 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.
At 31 December 2024, the Group had access to a £5.38 billion
revolving credit facility. In March 2024, the Group exercised the first
of the one-year extension options on the £2.5 billion 364-day
tranche of the revolving credit facility, with the second one-year
extension subsequently exercised in February 2025. Effective
March 2025, therefore, the £2.5 billion 364-day tranche will be
extended to March 2026. Additionally, £2.85 billion of the five-year
tranche remains available until March 2025, with £2.7 billion
extended to March 2026 and £2.5 billion extended to March 2027.
Liquidity pooling structures are in place to ensure that there
is maximum mobilisation of cash liquidity within the Group.
Going concern and viability support papers are presented
to the Board on a regular basis.
Continued review of UK money laundering legislation and cannabis
policy with financial partners.
Foreign exchange rates exposures
The Group faces translational and transactional foreign exchange (FX) rate exposure for earnings/cash flows from its
global businesses.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-term
Quality Growth/Dynamic
Business
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Fluctuations in FX rates of key currencies against sterling introduce
volatility in reported earnings per share (EPS), cash flow and the
balance sheet driven by translation into sterling of our financial
results and these exposures are not normally hedged.
The dividend may be impacted if the payout ratio is not adjusted.
Differences in translation between earnings and net debt may
affect key ratios used by credit rating agencies.
Volatility and/or increased costs in our business, due to
transactional FX, may adversely impact financial performance.
While translational FX exposure is not hedged, its impact
is identified in results presentations and financial disclosures;
earnings are restated at constant rates for comparability.
Debt and interest are matched to assets and cash flows to
mitigate volatility where possible and economic to do so.
Hedging strategy for transactional FX is defined
in the treasury policy, a global policy approved by the Board.
Illiquid currencies of many markets where hedging is either
not possible or uneconomic are reviewed on a regular basis.
BAT Annual Report and Form 20-F 2024
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Other Information
Group Principal Risks
Group Principal Risks
Continued
160
Climate Change
Direct and indirect adverse impacts associated with climate change.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-/long-term
Quality Growth/Sustainable
Future
Consumers, Society,
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Direct physical risks to BAT agricultural, manufacturing, operational
and logistic processes may lead to reduced production capability,
delays, volume shortfalls, disruption of energy supply (and other
utilities) and business interruption.
Extreme temperatures and weather events could be harmful for
employees, creating health and safety risks.
Failure to adequately manage supply chain risks associated with
climate change may cause increased volatility in supply volume,
quality or cost of raw materials and services necessary for the
effective and efficient operation of BAT's business across its value
chain.
GHG emissions can indirectly increase costs.
Failure to comply with evolving climate change-related regulations
could result in punitive actions or loss of market access.
Poor agency ratings associated with Climate Change risk,
performance, mitigation, or adaptation could lead to reduced
access to capital, increased cost of capital or impact the share price.
In both 2024 and 2023, extreme weather events led to charges of
£11 million (in 2024) related to machinery damage and £9 million
(in 2023) in respect of the destruction of a warehouse and stock
of tobacco leaf.
The Group has clear internal ownership and accountability
for sustainability issues.
Regular updates to the Board and Management Board facilitate
effective management of material sustainability issues.
Monitoring of climate change-related governmental policy
and regulations enables action plans to be implemented.
We have established a climate diagnosis tool established to
enable assessment of physical risks and formulation of necessary
actions.
Business Continuity Management Plans are in place to mitigate
supply chain disruptions resulting from weather events.
Measures taken in tobacco supply chain to mitigate climate
change-related risks such as Carbon Smart Farming and Farmer
Sustainability Management System.
Circular Economy
Direct and indirect adverse impacts associated with the move towards a circular economy.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-/long-term
Quality Growth/Sustainable
Future
Consumers, Society,
Shareholders & Investors
Yes
Impact
Mitigation activities across all categories
@
Punitive actions against the Group or inability to sell products in
the top markets, due to failure to comply with evolving regulations
and requirements relevant to business operations, products and
supply chain, and reporting.
Poor sustainability ratings by investors may lead to reduced access
to capital, increased cost of capital or impact the share price.
Reduction of market share and revenue, due to consumers having
a reduced or negative perception of BAT and its products in
comparison to its competitors, or of specific products/product
categories overall.
Inadequate waste management can increase negative public
opinion of BAT, damage brand value and increase waste
management costs.
Inability to source, design and manufacture products that require
sustainably sourced critical raw materials or materials that are
affected by increased duties or tariffs.
Increase in write-offs and early retirement of existing assets,
resulting in additional cost.
Negative impact upon the attraction, retention and motivation
of skilled employees and contractors.
Life Cycle Assessment is used in the development and approval
processes for new products to assess and improve their
circularity.
Corporate strategy drives innovations and initiatives in circularity
across all product categories.
Programs launched to enhance circularity of products and
packaging.
Optimise circular economy alignment across the value chain by
designing for the reuse and recycling of end-of-life products and
increasing the use of recycled and environmentally preferable
materials.
Periodic review of current and evolving sustainability policies and
regulations to inform the Group’s circular economy strategy.
Cross-functional and cross-industry engagement on sustainability
topics.
BAT Annual Report and Form 20-F 2024
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Other Information
161
Risks continued
Cyber Security
Inability of the organisation to defend against an intentional or unintentional action that results in loss of confidentiality,
availability or integrity of systems and data.
Time frame
Strategic impact
Key Stakeholders
Considered in viability statement
@
Short-/medium-/long-term
Quality Growth/Sustainable
Future/Dynamic Business
Consumers, Society, Our
People, Shareholders &
Investors
Yes
Impact
Mitigation activities across all categories
@
Loss or theft of confidential business information, when used alone
or in conjunction with any other available information reduces the
impact of BAT business strategy, investments and commercial
operations.
Personal data breach incidents that result in the disclosure of
personally identifiable data resulting in legal, reputational, and
regulatory compliance impacts.
Disruption to BAT’s business operations that impacts R&D
facilities, manufacturing, distribution or technology services
resulting in business interruption and/or impacts to health & safety.
Inappropriate use of technology systems, including the use of AI-
powered tools, to enable fraud, or theft of product, technology, or
monetary resources.
Loss of digital trust resulting in brand damage and a loss of
consumer trust.
A cyber incident experienced by a third-party partner or supplier
resulting in business interruption, supply chain disruption, loss of
company data or provides access or transmission of malicious
activity from the supplier to BAT.
Non-compliance with cybersecurity standards and system
vulnerabilities can precipitate other Group principal risks.
The Group implements physical, technical and administrative
safeguards to mitigate risks of a cyber security incident, including
security measures, such as defensive technologies, encryption,
authentication, backup and recovery systems, to protect the
confidentiality, integrity and availability of IDT systems and
networks.
The Group’s cyber security processes are regularly reviewed and
updated to ensure these remain effective and aligned with our
business objectives, regulatory obligations and industry standards.
Regular training and awareness programmes provided to Group
employees and contractors on cyber security best practices and
procedures and adherence to our SoBC.
Vendor management processes in place, including due diligence
and contractual obligations, to ensure that third-party service
providers adhere to BAT’s cyber security requirements and
standards.
Development of business continuity plans to ensure that the
Group can promptly respond to any potential or actual cyber
security incident and minimise their impact on the business.
Engagement with external assessors, consultants, auditors and
other third parties to provide independent assurance and
recommendations on cyber security matters.
Engagement with relevant stakeholders on cyber security matters
and being prepared to disclose any material cyber security risks or
incidents in a timely and transparent manner.
BAT Annual Report and Form 20-F 2024
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Other Information
Group Principal Risks
Group Principal Risks
Continued
162
The preparation of the long-term viability
statement and includes an assessment of
the Group’s ability to meet future
commitments and liabilities as they fall due.
Assessment of Long-Term Viability
Strong liquidity and access to facilities
The Directors noted that the Group has a
strong track record of cash flow delivery
and expects to generate in excess of
£50 billion of free cash flow before
dividends by 2030 – as discussed on
page 40.
Furthermore, the Group has net cash and
cash equivalents at 31 December 2024 of
£5.1 billion (of which £2.1 billion is
restricted), and access to a number of
facilities (as described in note 26), including:
– a syndicated £5.4 billion committed
revolving credit facility, that is currently
undrawn;
– a US$4 billion U.S. commercial paper
programme and a £3 billion euro
commercial paper programme; and
– short term bilateral facilities (£2.4 billion).
The Group continues to maintain
investment‑grade credit ratings
*, with
ratings from Moody's, S&P and Fitch of Baa1
(stable outlook), BBB+ (stable outlook), BBB+
(stable outlook), respectively, and continues
to target a solid investment-grade credit
rating of Baa1, BBB+ and BBB+.
The strength of the ratings has underpinned
debt issuance and the Group is confident in its
ability to access the debt capital markets.
Assessment and scenario planning
In making the assessment, the Directors
undertook a robust review of the Group’s
operational and financial processes (which
cover both short-term financial forecasts
and capacity plans) and how the Principal
Risks (as indicated on pages 156 to 162) may
impact the Group’s viability under various
scenarios. Notes 23 and 26 in the Notes on
the Accounts provide further detail on the
Group’s borrowings and management of
financial risks.
The Directors recognised that multiyear
cash flow forecasts are prepared to:
– assess impairment (as described in note 12)
for a number of the Group’s reporting
entities (or cash generating units); and
– input into the active capital allocation model,
including debt maturity planning.
The Group does not have any covenants
related to its current debt issued or available
facilities. In order to assess viability, a base
scenario was developed, which assessed
the Group’s notional headroom against a
theoretical interest cover of 5.0x, used on a
conservative basis that such a covenant may
be applied in the future. Each scenario then
assessed how the earnings of the Group may
be affected by the realisation of the risks and
then, if necessary, determined how many
times more severe that risk must be before
the theoretical interest cover was breached.
These scenarios were:
@Viability Scenario Planning
Operational
The Group does not deliver
on its financial growth
ambitions
The implementation of regulations (including the menthol
ban proposed in the U.S.), reduced pricing, increased
combustibles volume decline or a slower than expected
transformation to New Categories may impact the Group’s
ability to deliver growth in profit from operations. To breach
the theoretical interest cover, the impact of this scenario
would have to be at least 5.0x worse than a prudent annual
forecast (i.e. nil profit growth).
Financing
The Group is unable to
refinance its debts as they
fall due or is exposed to
higher interest rates
The Group has an annual debt maturity profile of a
maximum £4 billion per annum which is less than the
annual free cash flow generated – and via the capital
allocation model, the Group could prioritise debt
payments in the event of capital markets becoming
restricted. Further, the Group’s floating to fixed interest
rate ratio is 22:78 and is largely insulated from short-
term volatility.
One-off event
The Group experiences
supply chain disruption,
including climate-risk
related disruptions
The Group may be exposed to the loss of suppliers or
factories, impacting operational performance. The Group
has detailed contingency plans in place with insurance
mitigating the impact in the short-term.
Aggregation of risks
It was considered that, under a set of remote
circumstances, that the principal risks may arise in
combination or aggregation. There was no scenario
identified, based upon the assumptions applied, that
would impact viability within the defined period.
Reverse stress testing
A reverse stress test of the impact of the
individual Principal Risks was also
undertaken as part of the assessment. This
did not identify any individual risk, based
upon a prudent annual forecast that would,
if arising in isolation and without mitigation,
impact the Group's viability within the
three-year confirmation period.
Further, in order for the theoretical interest
cover to be breached, profit from
operations, excluding the adjusting items,
would have to decline by 13.5% per year, for
the interest cover to fall below 5x after
three years.
Other considerations - litigation
Due to the nature of the Group’s
operations, it is subject to inherent
uncertainties with regards to litigation, the
outcome of which is uncertain in terms of
timing or scale and may have a bearing on
the Group’s viability. The Group maintains,
as referred to in note 31 in the Notes on the
Accounts ‘Contingent Liabilities and
Financial Commitments’. Whilst it is
impossible to be certain of the outcome
of any particular case, the defences of the
Group’s companies to all the various claims
are meritorious on both law and the facts.
However, if an adverse judgment is entered
against any of the Group’s companies in
any case, an appeal may be made, the
duration of which can be reasonably
expected to last for a number of years.
Mitigating actions
Under the Group’s active capital allocation
mechanism (see page 40), the Group
intends to pay dividends of 65% of long-
term sustainable earnings (2024: £5.2
billion) with other discretionary capital
expenditure estimated at £650 million.
Both may be revised to redirect funds to
the settlement of other liabilities including
debt repayment.
Conclusion
The Board has assessed the prospects and
viability of the Group taking into account
the current position and Principal Risks, in
accordance with provision 31 of the UK
Corporate Governance Code 2018.
Whilst the Board believes the Group will be
able to continue in operation and meet its
liabilities as they fall due, over a longer
period, owing to the inherent uncertainty
arising due to ongoing litigation, the period
over which the Board considers it possible
to form a reasonable expectation as to the
Group’s longer-term viability (that it will
continue in operation and meet its liabilities
as they fall due) is three years, in line with
the Group's cash flow forecasting to
support debt refinancing plans.
@
Note:
*
A credit rating is not a recommendation to buy, sell
or hold securities. A credit rating may be subject to
withdrawal or revision at any time. Each rating should
be evaluated separately of any other rating.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
@Viability Statement
163
The Strategic Report was approved by the Board of Directors on 12 February 2025 and signed on its behalf by Caroline Ferland, Company Secretary.
This year, we have been
proactive in articulating the
Group's position on tobacco
harm reduction (THR) to make
a constructive and responsible
contribution to the global debate
on THR acceptance.
Luc Jobin
Chair
Dear Shareholder,
Our governance is geared to promoting
debate, engagement and informed
outcomes in several contexts; in the
Boardroom, across the Group, and with
our shareholders and other stakeholders.
Whether it is transformation metrics,
workplace perspectives, or scientific
insights, through our governance we
have sought to empower thoughtful
communication with our key
constituencies.
The environment we operate in
The Board has taken time to reflect on our
current operating environment, how we
expect this to evolve, and how we can
demonstrate progress against our A Better
Tomorrow
TM strategy and commitment to
Building a Smokeless World. To this end,
we launched new transformation metrics
in October to support our stakeholders'
understanding of the pace of our progress
(discussed on page 184).
Responsible capital allocation underpins
our ability to deliver transformation. The
Board actively oversaw the application of
our capital allocation framework during the
year, as highlighted on page 184. Within
this, we authorised a new share buy-back
programme, discussed on page 7, while
maintaining focus on deleveraging.
We continue to keep capital allocation
under review and to evaluate opportunities
to enhance financial flexibility, taking into
account the evolving trading and regulatory
environment.
Workforce perspectives
As a Board, we are keen to listen to the
views of our colleagues across the Group.
Of focus this year has been assessing how
well our values are being communicated
and embedded in our culture. As Directors,
connecting directly with people at different
levels across the organisation is a
rewarding way to gauge how they are
bringing our values to life.
I was pleased to meet with colleagues
across a number of markets and business
units this year. Holly Keller Koeppel and
Murray Kessler joined me at our U.S.
market briefings in March, and the Board
as a whole returned to the U.S. for our
annual strategy meeting in the autumn.
In May, I travelled to Poland with Karen
Guerra, Darrell Thomas and Serpil Timuray
to visit retail operations in Warsaw and our
Digital Business Services Hub.
Following this, Kandy Anand and Véronique
Laury joined Darrell and I in Japan for
several events with the local team,
including a marketing showcase on our
evolving digital consumer experience. As
part of all these market visits, Directors
appreciated opportunities to listen to the
perspectives of local colleagues, including
through townhall meetings.
I continue to be impressed by the people
driving innovation across the Group, and
their commitment to delivering our
purpose in line with our values.
You can read more about the Board's
programme of market and site visits on
page 174 and the Board's approach to
engaging with our people across the Group
on page 182.
Shaping the landscape
This year, we have been proactive in
articulating the Group's position on
tobacco harm reduction (THR) to make a
constructive and responsible contribution
to the global debate on THR acceptance.
This proactivity is well illustrated by two
key milestones. Firstly, the launch of a
science and evidential case for THR in the
form of ‘Omni™: Forward Thinking for a
Smokeless World', a compendium of
independent scientific studies, the Group's
own research into innovations and
examples of THR in action. This was
followed by publication of our
'Commitment to Responsible Vaping
Products', in which we communicate the
actions we are taking as a responsible
industry leader.
Turning to engagement with our
shareholders and investors, we conducted
a full programme of engagement during
the year, supplemented by focused
engagement with shareholders on
proposals for our new Directors'
Remuneration Policy, to be presented at
our upcoming Annual General Meeting.
I have valued the opportunity to meet with
a number of shareholders during the year
and look forward to further dialogue with
you ahead of our Annual General Meeting
in April 2025.
You can read more about how we engage
with our stakeholders and take their views
into account on pages 178 to 184.
Delivery with Integrity
Our Standards of Business Conduct (SoBC)
express the high standards of integrity we
are committed to upholding.
Compliance with our SoBC and our legal
obligations are mandatory requirements
that all of our people must uphold and
these are enshrined in our value of 'Do the
right thing'.
Ethical behaviour and rigorous adherence
to compliance standards continue to be a
core priority for the Group. We update our
SoBC on a regular basis to take into
account our stakeholders' expectations
and the current regulatory environment.
Our SoBC and Delivery with Integrity
programme are discussed on pages 118
to 119.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Governance
Chair’s Introduction on Governance
164
Board efficacy and diversity
Ensuring we have the right capabilities
in place to drive our strategy is a critical
responsibility of the Board and essential
to our sustainable success.
I was delighted to welcome Soraya
Benchikh to her role of Chief Financial
Officer from 1 May 2024, completing the
executive transition that commenced in
2023. With her extensive leadership and
financial experience, Soraya has already
proved herself a strong addition to our
executive management team.
I look forward to welcoming Uta
Kemmerich-Keil, who will join the Board
with effect from 17 February 2025 and I
thank Murray Kessler for his contributions
over his tenure, ahead of his retirement
from the Board with effect from 17
February 2025.
I also extend my thanks to Holly as our new
Senior Independent Director, Darrell as our
new Audit Committee Chair, and Kandy as
our new Remuneration Committee Chair,
for the speed at which they have taken up
the reins of their new roles since their
respective appointments to these positions
in April 2024.
Looking at the diversity of our Board overall,
which our Nominations Committee has
been mindful to develop, I am pleased to
report that women currently represent
50% of the Board, and that 40% of our
Directors are from an ethnic minority
background.
We continue our efforts to promote
diversity in our executive management
through active oversight of the development
of our senior management pipeline and this
will remain a key focus for the Nominations
Committee and the Board in 2025.
I have led an internal review of the
effectiveness of our Board, its principal
Committees and the Directors this year.
Our Board has considered the outcomes of
the annual review and we report on our
conclusions on page 188. We consider that
the Board continues to function effectively
and we identified a set of focused actions
for implementation in 2025 to continue to
enhance our effectiveness.
On behalf of the Board, I confirm that we
consider that this Annual Report and Form
20-F is fair, balanced and understandable,
and presents the information necessary to
assess the Company’s position, performance,
business model and strategy.
Luc Jobin
Chair
Throughout the year
ended 31 December
2024, we applied the
Principles of the 2018
UK Corporate
Governance Code
(2018 Code).
The Company was compliant
with all provisions of the 2018
Code during the year. The
Board considers that this
Annual Report and Form 20-F,
and notably this Governance
section, provides the information
shareholders need to evaluate
how we have complied with our
obligations under
the 2018 Code.
Pages noted opposite refer to particular
discussion on the application of
Principles of the 2018 Code in this
Annual Report and Form 20-F.
The 2018 Code is available at
frc.org.uk.
Disclosure guidance and
transparency rules
We comply with the Disclosure
Guidance and Transparency Rules
requirements for corporate governance
statements by virtue of the information
included in this section, together with
the information contained in the Other
Information section.
U.S. corporate governance
As a result of the listing of the
Company’s American Depositary
Shares (ADSs) on the NYSE, the
Company is required to meet certain
NYSE requirements relating to
corporate governance matters.
Certain exceptions to these
requirements apply to the Company
as a foreign private issuer. For details
of the significant differences between
the NYSE requirements and the
Company’s practices, please see
page 444.
Board Leadership and Company Purpose
Principle
A. Long-Term Sustainable Success
pages 2 to 152 and 164 to 188
B. Purpose, Values and Culture
pages 2 to 10, 11 to 13, 38 to 39, 60 to 63,
110 to 112, 164 to 165, 173 to 175, 182 to 183,
188, 226 and 232 to 235
C. Resources and Control Framework
pages 2 to 17, 155 to 163, 172 to 173, 177
and 194 to 204
D. Shareholder and Stakeholder Engagement
pages 18 to 19, 111, 164, 178 to 184, 205 to 215, 226
and 232 to 235
E. Workforce Engagement, Policies, Practices
pages 111, 116, 117 to 119, 173 to 175, 182 to 183,
226 and 232 to 235
Division of Responsibilities
Principle
F. Leadership of the Board
pages 164 to 188
G. Board Composition and Division of
Responsibilities
pages 166 to 169, 172 and 185 to 186
H. Role and Commitment of Non-Executive Directors
pages 166 to 169, 185 to 186 and 189 to 190
I. Board Support
pages 186 to 187
Composition, Succession, Evaluation
Principle
J. Board Appointments, Succession and Diversity
pages 166 to 169, 177 and 189 to 193
K. Board Skills and Experience
pages 166 to 169 and 189 to 190
L. Board Performance Review
pages 187 to 188
Audit, Risk, Internal Control
Principle
M. Internal and External Audit Functions
pages 201 to 204
N. Fair, Balanced and Understandable Assessment
pages 199 and 247
O. Risk Management and Internal Controls
pages 155 to 163, 177, 194 to 204 and 445
Remuneration
Principle
P. Remuneration Policies and Practices
pages 205 to 246
Q. Development of Policy on Remuneration
pages 205 to 226, 232 to 246
R. Judgement and Discretion
pages 205 to 246
For reference, we prepare a separate
voluntary annual compliance report by
reference to each Principle and Provision
of the 2018 Code, available at bat.com/
governance
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
165
Luc Jobin
Chair (65)
Nationality: Canadian
Appointed: Chair since April 2021; Non-
Executive Director since July 2017
Experience: Luc was President and Chief
Executive Officer of Canadian National
Railway Company from July 2016 until
March 2018, having served as Executive
Vice President and Chief Financial Officer
since 2009. Previously, he was Executive
Vice President of Power Corporation of
Canada (an international financial
services company) from 2005 to 2009.
Luc was Chief Executive Officer of
Imperial Tobacco Canada from 2003 to
2005 and Executive Vice President and
Chief Financial Officer from 1998 to 2003.
Luc previously served as an independent
Non-Executive Director of Reynolds
American Inc. from 2008 until its
acquisition by the Group
Relevant skills and contribution to the
Board: Luc brings significant financial,
regulatory and M&A experience to the
Board, together with extensive North
American knowledge and experience of
enterprise transformation and consumer
and customer businesses
External appointments: No external
appointments
Balance of Non-Executive Directors
and Executive Directors
Chair
1
Executive Directors
2
Independent Non-Executive Directors
7
Tadeu Marroco
Chief Executive (58)
Nationality: Brazilian
Appointed: Chief Executive since May
2023; Director since August 2019
Experience: Tadeu joined the Group in
1992 and joined the Management Board
as Director, Business Development in
2014. He later became Regional Director,
Western Europe in 2016, and Regional
Director, Europe and North Africa in
January 2018. He became Director, Group
Transformation in January 2019 and, in
addition to this role, he was appointed
Deputy Finance Director in March 2019
and joined the Main Board as Finance and
Transformation Director in August 2019.
He was appointed Chief Executive in
May 2023
Relevant skills and contribution to the
Board: Tadeu brings significant
management, innovation, and strategic
leadership to the Board gained in various
regional, global finance and general
leadership roles across the Group. This
enables him to effectively lead the Group
and deliver our ambition to build a
smokeless world and create A Better
Tomorrow
TM
External appointments: No external
appointments
Length of tenure of
Non-Executive Directors
0–3 Years
4
4–6 Years
2
7+ Years
2
Soraya Benchikh
Chief Financial Officer (55)
Nationality: French
Appointed: Chief Financial Officer;
Director since May 2024
Experience: Soraya joined the Board on
1 May 2024 as Chief Financial Officer. She
was previously with BAT from 1998 to
2020, where she held a variety of
executive roles including Finance Director
in France and CEO of the Eastern and
Southern Africa region. Immediately prior
to re-joining, Soraya had been President,
Europe at Diageo plc since January 2023,
having joined Diageo in July 2020
as Managing Director for Northern
Europe. Earlier in her career, Soraya
worked in finance roles at General Electric
and Gillette
Relevant skills and contribution to the
Board: Soraya brings extensive
experience gained in various regional,
global finance and general leadership
roles across the FMCG sector and within
the BAT Group
External appointments: No external
appointments
Nationality of Directors
American
4
Canadian
1
Brazilian
1
French
2
British
1
Turkish/British
1
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Governance
Board of Directors
As at 12 February 2025
166
Holly Keller Koeppel
Senior Independent Director (66)
Nationality: American
Appointed: Senior Independent Director
since April 2024; Non-Executive Director
since July 2017
Experience: Up until April 2018, Holly was a
Senior Advisor to Corsair Capital LLC, where
she had previously served as Managing
Partner and Co-Head of Infrastructure from
2015 until her retirement in 2017. From 2010
to 2015, she served as Co-Head of Citi
Infrastructure Investors. Prior to 2010, she
held financial and executive management
roles with Consolidated Natural Gas
Company and American Electric Power
Company, Inc. (AEP), ultimately serving as
Chief Financial Officer of AEP. Holly
previously served as an independent Non-
Executive Director of Reynolds American
Inc. from 2008 until its acquisition by the
Group, and as an independent Non-
Executive Director of Vesuvius plc
Relevant skills and contribution to the
Board: Holly’s extensive international
operational and financial management
experience in a range of industry sectors
enables her to make important
contributions to the Board
External appointments: Senior Independent
Director and Chair of Audit Committee of
Flutter Entertainment plc; Director and Chair
of the Financial Audit Committee of AES
Corporation; and Director and Chair of the
Governance and Sustainability Committee
of Arch Resources Inc.
Directors’
gender balance
Male
5
Female
5
Krishnan (Kandy) Anand
Non-Executive Director (67)
Nationality: American
Appointed: February 2022
Experience: Kandy previously held
several senior positions at Molson Coors
Brewing Company, including Chief
Growth Officer, CEO of Molson Coors
International and Head of Strategy, M&A
and Transformation. He also held senior
positions at the Coca-Cola Company,
including President, Coca-Cola
Philippines and Vice President, Global
Commercial Leadership. Prior to joining
Coca-Cola, Kandy held several senior
marketing leadership positions at
Unilever plc. Kandy previously served on
the boards of Popeyes Louisiana Kitchen
Inc. and Empower Acquisition Company
Relevant skills and contribution to the
Board: Kandy brings notable international
experience to the Board, particularly in
the marketing and consumer goods
sectors
External appointments: Director of
Wingstop Inc.; Chief Executive Officer of
Igniting Business Growth L.L.C.; and
Chairman and Chief Executive Officer of
Igniting Consumer Growth Acquisition Co.
Directors’
ethnicity balance
Ethnic minority background
1
4
White
6
Audit Committee
Nominations Committee
Remuneration Committee
Committee Chair
Executive Director
Non-Executive Director
Note:
1.
Applying UK Office for National Statistics ethnicity
categories of: Asian; Black; Mixed/Multiple Ethnic
Groups; Other Non-White Ethnic Group, in alignment
with the UK Listing Rules.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
167
Karen Guerra
Non-Executive Director (68)
Nationality: British
Appointed: September 2020
Experience: Karen has held a variety of
executive roles, including President and
Director General of Colgate Palmolive
France, and Chair and Managing Director
of Colgate Palmolive UK Limited. She was
formerly a Non-Executive Director of RS
Group plc (formerly Electrocomponents
p.l.c.), Davide Campari-Milano S.p.A.,
Paysafe PLC, Inchcape PLC, Samlerhuset
BV, Swedish Match AB and Amcor p.l.c.
(formerly Amcor Limited)
Relevant skills and contribution to the
Board: Karen brings valuable international
experience, particularly in marketing,
sales and consumer goods insight,
to the Board
External appointments: No external
appointments
Attendance at Board meetings in 2024
Notes:
1.
Number of meetings in 2024: The Board held eight
meetings in 2024, three of which were ad hoc, to
review: patents matters; the proposal to dispose of
part of the Group's investment held in ITC Limited and
initiate a share buy-back programme; and an update
on the status of certain litigation matters.
2. (a) Véronique Laury did not attend the ad hoc
meetings in January and June 2024 convened at short
notice due to prior commitments; (b) Sue Farr did not
attend the ad hoc meetings in January and March 2024
convened at short notice due to prior commitments; and
(c) Dimitri Panayotopoulos did not attend the ad hoc
meeting in March 2024 due to illness.
3. Composition: The Board of Directors is shown as at
the date of this Annual Report and Form 20-F; (a)
Soraya Benchikh joined the Board with effect from
1 May 2024 on her appointment as Chief Financial
Officer; (b) Sue Farr and Dimitri Panayotopoulos
stepped down from the Board with effect from the
conclusion of the AGM on 24 April 2024; (c) Murray
Kessler will step down from the Board with effect
from 17 February 2025.
4. Number of meetings in 2025: Five Board meetings are
scheduled for 2025, with ad hoc meetings convened
as may be required.
Attended/Eligible to
attend
1
Name
Director since
Meetings
4
Luc Jobin
2017
8/8
Tadeu Marroco
2019
8/8
Soraya Benchikh
3(a)
2024
4/4
Kandy Anand
2022
8/8
Karen Guerra
2020
8/8
Holly Keller Koeppel
2017
8/8
Murray S. Kessler
3(c)
2023
8/8
Véronique Laury
2(a)
2022
6/8
Darrell Thomas
2020
8/8
Serpil Timuray
2023
8/8
Sue Farr
2(b)3(b)
2015 - 2024
2/4
Dimitri Panayotopoulos
2(c)3(b)
2015 - 2024
3/4
Murray S. Kessler
Non-Executive Director (65)
Nationality: American
Appointed: November 2023
Experience: Murray previously held
several senior positions, including Chief
Executive, President and Board Member
of Perrigo plc, President, Chief Executive
Officer & Chairman of the Board of
Lorillard Tobacco Co., Vice Chair of Altria
Group, Inc. and President, Chief Executive
Officer & Chairman of the Board of
UST LLC. Prior to joining UST, Murray
had a twelve-year career with Campbell
Soup Company, having served as Vice
President of Sales and Marketing,
General Manager of the Swanson
Division of Campbell Soup and other
leadership roles
Relevant skills and contribution to the
Board: Murray utilises considerable
international experience in his
contributions to the Board, particularly
in growing consumer product companies
and managing regulated businesses
External appointments: Chief Executive
Officer of Wellington International LLC
Murray S. Kessler will step down from the
Board with effect from 17 February 2025
and will not be proposed for re-election
at the Company’s 2025 Annual General
Meeting
Véronique Laury
Non-Executive Director (59)
Nationality: French
Appointed: September 2022
Experience: Over the course of her
career, Véronique has held several
leadership roles. From September 2014 to
September 2019, she was Chief Executive
Officer of Kingfisher plc, an international
home improvement company across
Europe operating under several brands
including B&Q, Castorama, Brico Dépôt,
Screwfix and Koçtaş. She spent over
16 years at Kingfisher and during her
tenure she also served as Chief Executive
Officer and Commercial Director at both
B&Q and Castorama. Véronique
previously served on the Board of
WeWork Inc.
Relevant skills and contribution to the
Board: Véronique brings extensive
international consumer goods, strategic,
transformation and digital experience to
the Board
External appointments: Board member
of Sodexo SA; Inter IKEA Holding B.V.;
Eczacıbaşı Holding Company; and Société
Bic S.A.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Governance
Board of Directors
Continued
168
Darrell Thomas
Non-Executive Director (64)
Nationality: American
Appointed: December 2020
Experience: Most recently, Darrell served
as Vice President and Treasurer for
Harley-Davidson, Inc., a position which he
held from June 2010 to April 2022, having
previously held several senior finance
positions, including Interim Chief Financial
Officer for Harley-Davidson, Inc., Chief
Financial Officer for Harley Davidson
Financial Services, Inc. and Vice President
and Assistant Treasurer, PepsiCo, Inc..
Prior to joining PepsiCo, Inc. Darrell had
a 19-year career in banking with
Commerzbank Securities, Swiss Re New
Markets, ABN Amro Bank and Citicorp/
Citibank where he held various capital
markets and corporate finance roles.
Darrell was previously an Independent
Director of Pitney Bowes Inc.
Relevant skills and contribution to the
Board: Darrell brings valuable
international experience to the Board,
particularly in finance and treasury,
in addition to his extensive operational
and management skills and knowledge
of capital markets
External appointments: Non-Executive
Director of Vontier Corporation;
Independent Director of Dorman
Products Inc.; Non-Executive Director
of Scotia Holdings (US) Inc.; and Member
of the Finance Committee of Sojourner
Family Peace Center, Inc.
Serpil Timuray
Non-Executive Director (55)
Nationality: Turkish/British
Appointed: December 2023
Experience: Serpil has carried out a
number of executive roles, including her
current role as CEO of Vodafone
Investments and a member of Vodafone
Group's Executive Committee (Serpil will
leave Vodafone at the end of June 2025).
Serpil's former roles on Vodafone Group's
Executive Committee include CEO of
Europe Cluster, Group Chief Commercial
Operations and Strategy Officer, and
Regional CEO of AMAP (Africa, Middle
East, Asia-Pacific). She joined Vodafone
in 2009, as CEO of Vodafone Turkey. Prior
to joining Vodafone she spent 10 years at
Danone, latterly as the CEO of Danone
Dairy Turkey. She began her career in 1991
at Procter & Gamble, where she held
several marketing roles for eight years
and latterly as a member of the Executive
Committee in Türkiye. She was previously
an independent Non-Executive Director
of Danone Group Plc from 2015 to 2023
and the Chair of the Corporate Social
Responsibility Committee
Relevant skills and contribution to the
Board: Serpil brings extensive
operational, strategy and marketing
experience to the Board, drawn from
roles in large companies operating in the
technology and fast-moving consumer
goods sectors
External appointments: CEO of
Vodafone Investments; and Non-
Executive Director of TPG Telecom Plc
Audit Committee
Nominations Committee
Remuneration Committee
Committee Chair
Executive Director
Non-Executive Director
Note:
Effective 17 February 2025, Uta Kemmerich-Keil will
be appointed as an independent Non-Executive
Director and member of the Audit and Nominations
Committees, and Murray S. Kessler will step down
from the Board.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
169
Tadeu Marroco
Chief Executive (58)
Nationality: Brazilian
Tadeu joined the Group in 1992
and joined the Management
Board as Director, Business
Development in 2014. He later
became Regional Director,
Western Europe in 2016, and
Regional Director, Europe and
North Africa in January 2018.
He became Director, Group
Transformation in January
2019 and, in addition to this
role, he was appointed Deputy
Finance Director in March 2019
and joined the Main Board as
Finance and Transformation
Director in August 2019. He
was appointed Chief Executive
in May 2023
For full biographies for
Tadeu and Soraya are set
out on page 166
+
Soraya Benchikh
Chief Financial Officer (55)
Nationality: French
Soraya joined the Board on
1 May 2024 as Chief Financial
Officer. She was previously
with BAT from 1998 to 2020,
where she held a variety of
executive roles including
Finance Director in France
and CEO of the Eastern and
Southern Africa region.
Immediately prior to re-
joining, Soraya had been
President, Europe at Diageo
plc since January 2023, having
joined Diageo in July 2020
as Managing Director for
Northern Europe. Earlier
in her career, Soraya worked
in finance roles at General
Electric and Gillette
Luciano Comin
Chief Marketing Officer (55)
Nationality: Italian/Argentinian
Luciano became Chief Marketing
Officer in September 2024,
having previously held various
roles on the Management Board,
including Regional Director,
Americas and Sub-Saharan
Africa from January 2019 to
January 2023, Marketing
Director, Combustibles from
January 2023 to July 2023, and
Marketing Director,
Combustibles & New Categories
from July 2023 to September
2024. Luciano joined the Group
in 1992 and held various senior
marketing roles, including
Regional Marketing Manager
for Western Europe and Regional
Head of Marketing, Americas
and Sub-Saharan Africa
Jerome Abelman
Director, Legal and General
Counsel (61)
Nationality: American
Jerome was appointed
Director, Legal and General
Counsel in September 2023,
after joining the Management
Board as Director, Corporate
and Regulatory Affairs in
January 2015. In May 2015,
he became General Counsel
and Director, Legal & External
Affairs. He served as a
Director on the Board of
Reynolds American Inc. from
February 2016 until July 2017
Michael Dijanosic
Regional Director, Asia-Pacific,
Middle East and Africa (53)
Nationality: Australian
Michael became Regional
Director, Asia-Pacific, Middle
East and Africa in April 2023,
having joined the Management
Board on 1 September 2020 in
the role of Regional Director,
Asia-Pacific and Middle East.
Previously, he was Area
Director for Asia-Pacific and
Global Travel Retail. Michael
joined the Group in 1999 and
has held several senior roles in
the Group including General
Manager (Papua New Guinea
and Cambodia) and Regional
Manager, Asia-Pacific
James Barrett
Director, Business
Development (50)
Nationality: British
James joined the
Management Board as
Director, Business
Development in September
2023. He has been with BAT
since 1996, having joined as a
Management Trainee and has
taken various senior roles in
finance, including a number of
finance directorships globally,
Group Finance Controller,
Head of M&A and most
recently as Consumer
Director, Beyond Nicotine
Javed Iqbal
Director, Digital and Information
(52)
Nationality: Pakistani
Javed joined the
Management Board as
Director, Digital and
Information in April 2022.
He joined the Group as a
Management Trainee,
Finance in 1996 and has
previously held a number of
senior roles, most recently
Area Director for Middle East,
South Asia and North Africa.
Between May 2023 and April
2024, he also served as
Interim Finance Director
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
Governance
Management Board
As at 12 February 2025
170
Zafar Khan
Director, Operations (52)
Nationality: Pakistani
Zafar joined the Management
Board as Director, Operations
in February 2021. In July 2023,
New Categories R&D was
made part of operations with
teams based in multiple
geographies including China.
This brought the full product
life cycle management under
Zafar's responsibility.
Previously, he was Group Head
of New Categories Operations.
Zafar joined BAT in 1996 and
has held senior roles in the
Group, including Regional
Head of Operations Asia
Pacific & Middle East, Group
Head of Plan, Service &
Logistics, Regional Head of
Plan and Service for Western
Europe and Head of
Operations, Bangladesh
Dr James Murphy
Director, Research and
Science (49)
Nationality: Irish
James was appointed
Director, Research and
Science in March 2023, having
joined the Management
Board in February 2023. He
has been with the Group for
more than 19 years in various
senior roles in the Group,
including EVP U.S. Scientific
Research & Development
based in the U.S., as well as
Group Head of PRRP Science
and Regional Product
Manager for Americas and
Sub-Saharan Africa
Dr Cora Koppe-Stahrenberg
Chief People Officer (59)
Nationality: German
Cora joined the Management
Board as Chief People Officer
in November 2023.
Immediately prior to joining
BAT, she was Global Head
of Human Resources at
Fresenius Medical Care,
a publicly listed global
healthcare company.
Previously she held senior
HR leadership roles at various
multinational companies
across the financial services
sector
Johan Vandermeulen
Chief Operating Officer (57)
Nationality: Belgian
Johan was appointed as the
Group’s Chief Operating Officer
in July 2023. Johan joined the
Management Board in 2014 as
Regional Director for Eastern
Europe, Middle East and Africa,
then became Regional Director,
Asia-Pacific and Middle East in
January 2018. He has been with
the Group for more than 30
years and his previous roles
include General Manager in
Russia and Türkiye and Global
Brand Director for the Kent
brand
Paul McCrory
Director, Corporate and
Regulatory Affairs (52)
Nationality: Irish
Paul joined the Management
Board as Director, Corporate
and Regulatory Affairs in
September 2023. He has
been with BAT since 2006.
His previous roles include
Head of Commercial Legal
and Assistant General
Counsel Corporate and Group
Company Secretary
David Waterfield
President and CEO, Reynolds
American Inc. (52)
Nationality: British
David joined the Management
Board as President and CEO of
Reynolds American Inc. in July
2023. His previous roles include
being Area Director for
Western Europe and Head of
International Brand Group,
having joined the Group in 1998
Fred Monteiro
Regional Director, Americas &
Europe (58)
Nationality: Brazilian
Fred joined the Management
Board in April 2023 as
Regional Director for the
Americas & Europe. His
previous roles include being
Area Director for Central
Europe South and General
Manager of BAT Japan,
having initially joined the
Group in 1987
Kingsley Wheaton
Chief Corporate Officer (52)
Nationality: British
Kingsley was appointed Chief
Corporate Officer in
September 2024. He joined
the Management Board in
2012 and has held various
roles since then – most
recently as Chief Strategy &
Growth Officer. He joined the
Group in 1996 and has held
various senior marketing
positions, including Managing
Director, Next Generation
Products, Regional Director,
Americas and Sub-Saharan
Africa, Chief Marketing
Officer and Chief Growth
Officer
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171
Our Board
Primary Board responsibilities include:
– Group strategy (including
sustainability) and ensuring resources
are in place to meet objectives
– Setting Group performance objectives
and monitoring performance
– Group budget
– Effective risk management and internal
control framework
– Periodic financial reporting
– Annual Report & Accounts and Form
20-F approval
– Dividend policy (including declaration of
dividends) and returns to shareholders
– Significant investments, disposals,
corporate financing and other corporate
activities
– Board, Management Board and
Company Secretary appointments and
succession planning
– Establishing appropriate systems of
corporate governance within the Group
– Group policies
– Effective engagement with shareholders,
our workforce and wider stakeholders
– Assessing and monitoring culture and
its alignment with Group purpose, values
and strategy
– Ensuring workplace policies and practices
align with values and support sustainable
success
– Monitoring compliance with the
Standards of Business Conducts and
review of Speak Up channels and reports
arising
– Considering annual review of Board
performance and effectiveness
The statement of matters reserved for the
Board is available at bat.com/governance
Read more on our Board oversight of M&A transactions
on page 390
+
+
Board Committees
Audit Committee
Nominations Committee
Remuneration Committee
Monitors the integrity of financial
reporting and consistency of accounting
policies; risk management and internal
control framework; assurance
of sustainability metrics; independence
and effectiveness of the external
auditors; and effectiveness of the
internal audit function.
Reviews the structure, size and
composition of the Board, Board
Committees and Management Board;
recommends Board, its Committees and
Management Board appointments;
oversees development of the executive
talent pipeline; and implements the Board
Diversity & Inclusion Policy.
Establishes the Directors’ Remuneration
Policy; determines remuneration for the
Chair and Executive Directors; sets
remuneration for Management Board
members and the Company Secretary;
and sets and determines performance
against targets for incentive schemes.
See page 194 for role and activities
Terms of reference at bat.com/governance
See page 189 for role and activities Terms
of reference at bat.com/governance
See page 244 for role and activities
Terms of reference at bat.com/governance
+
+
+
The Board has three principal Board Committees to which it
has delegated certain responsibilities. The roles, memberships
and activities of these Committees are described in their
individual reports in this section.
Each Committee has its own terms of reference, available
at bat.com/governance. These are regularly reviewed and
updated where necessary, with revisions most recently
introduced in 2024 as discussed on page 173.
Following each Committee meeting, the Chair of each Committee
provides a full briefing to the Board, including on decisions made
and key matters discussed. Copies of the minutes of all
Committee meetings are circulated to all Board members
to the extent appropriate.
Directors that are unable to attend Board or Committee
meetings have the opportunity to provide their comments
to the Chair in advance of the meeting.
Management Board
Management Board structure, role and responsibilities are discussed on page 173.
Delegation of Authorities: The Board delegates certain authorities to
executive management through the Group Statement of Delegated
Authorities to enable effective delivery of Group strategy (see page 173)
+
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Other Information
Board Leadership and Purpose
Governance Framework
An overview of our governance framework is set out below.
There is a clear and effective division of responsibility established
between our Board, its Committees and operational management.
172
Board Leadership
The Board is collectively responsible to our shareholders for the
long-term sustainable success of the Company and for the
Group’s strategic direction, purpose, values and governance.
The Board provides the leadership necessary for the Group to
meet its business objectives within an appropriate framework for
risk management and internal control. The Board is also
responsible for ensuring the Group has an effective executive
leadership team in place to execute the Group's strategy.
The Board maintains oversight of the Group's operations,
performance, governance, internal controls and compliance with
regulatory obligations. The Board’s primary responsibilities are
summarised on page 172.
Matters reserved to the Board
bat.com/governance
+
Board activities
The Board has a comprehensive annual schedule of meetings
to review the Group’s strategy and monitor performance against
each strategic pillar and overall across the Group’s business
model. The Chair sets structured meeting agendas in consultation
with the Chief Executive and the Company Secretary.
The Board’s strategic priorities for 2024 are identified within the
key performance indicators set out on page 10. Its key activities
during the year are set out on pages 176 to 177.
As part of the Board meeting in September 2024 convened in the
U.S. over four days, the Board held strategy sessions with members
of executive management to assess the Group's strategy and long-
term growth opportunities, strategic priorities, the competitive
environment, progress on key initiatives, and key challenges, risks
and mitigation plans.
The Board's consideration of stakeholder interests and
sustainability (including environmental and social matters) is
embedded across Board decision-making, strategy development
and risk assessment on an ongoing basis.
Examples of principal decisions made by the Board during the year,
and consideration given to the long-term consequences of
decisions, stakeholder interests, the impact of operations on the
environment and corporate reputation in those contexts, are
discussed on page 184.
Luc Jobin attending a discussion forum with colleagues at a U.S. market
briefing held in March 2024 in North Carolina, U.S.
How our governance framework supports our strategy
An overview of our governance framework, including the structure
of the Board and its principal Committees, is set out on page 172.
Certain key decisions and matters are reserved for the Board and
are not delegated to any Committees or executive management.
In 2024, the Board adopted an updated corporate governance
framework, including revised terms of reference for its
Committees, ahead of the introduction of the 2024 UK Corporate
Governance Code (2024 Code) as it applies to the Company from
January 2025.
As part of our internal control framework, the Board has delegated
certain oversight authorities to executive management through
the Group Statement of Delegated Authorities (SoDA) to enable
effective delivery of our strategy. Our SoDA is designed to
empower management at the right level of our organisation and
promote accountability and ownership.
Overseeing the implementation of the Group strategy through
our SoDA is one of the ways that the Board promotes robust
corporate governance, risk management and internal controls
across the Group. Our SoDA also supports our Board members
in managing their responsibility for promoting the success of the
Company, in accordance with their directors’ duties. Our SoDA
was revised in 2024, including to reflect changes to the structure
of the Management Board and facilitate oversight of Group
position statements.
Holly Keller Koeppel speaking with colleagues at a discussion forum with
colleagues at a U.S. market briefing held in March 2024 in North Carolina, U.S.
Management Board
The Management Board is responsible for overseeing the
implementation of Group strategy and policies set by the
Board, and creating the framework for Group subsidiaries’
day-to-day operations.
Primary responsibilities of the Management Board include:
– Monitoring Group operating performance and ensuring Group,
regional and functional strategies and resources are effective
and aligned.
– Developing Group strategy for the Group’s product portfolio
for approval by the Board.
– Promoting our values and their effective embedment across the
organisation.
– Managing the central functions and overseeing the
management and development of Group talent.
Management Board structure
The Management Board is chaired by the Chief Executive and
comprises the Executive Directors and 13 senior executives whose
names and roles are described on pages 170 to 171.
On 1 May 2024, Soraya Benchikh joined the Management Board
as Chief Financial Officer. On 17 September 2024, Kingsley Wheaton
was appointed to the new role of Chief Corporate Officer with
responsibility for the strategy and execution of the Group’s
Sustainable Future strategic pillar and Luciano Comin was appointed
to the role of Chief Marketing Officer as we continue to grow our
Smokeless New Categories products.
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Board Leadership
173
Our Purpose and Values
Our values act as a clear and authentic guide to shape our culture
and behaviours. They underpin our purpose for A Better Tomorrow™
and our ambition to build a Smokeless World.
Through our values, we strive to empower our people and foster
an exciting, rewarding workplace. All our people have a
responsibility to live our values through their behaviour, decision
making and everyday interactions with each other.
Our values have a clear connection with our strategy and purpose,
emphasising diversity and inclusion; empowerment and collaboration;
and organisational agility, to deliver sustainable growth. The
refreshed statement of our values was endorsed by the Board in
2023 in the context of evolution of the Group's strategy. It was
created taking into account insights shared by our people across
the Group.
An overview of the Board's approach to assessing the culture of the
organisation and how our values are embedded follows below.
Read more about our
values on page 38
+
Read more about our
purpose on page 12
+
Delivering with integrity
How we execute our strategy is as important as its delivery.
Our values emphasise doing the right thing, which encompasses
acting with integrity, considering our impact on society and
thoughtfulness in decision making.
It is critical to the Group’s long-term success that all our people
act with high standards of integrity. We articulate this through our
Group Standards of Business Conduct (SoBC). Compliance with
our SoBC, in letter and spirit, is mandatory for all our people
worldwide.
Our SoBC is regularly reviewed and updated. A revised edition of
our SoBC was introduced in January 2024 (discussed on page 116),
supported by an awareness campaign across the organisation.
SoBC compliance was reinforced at the end of the year through
training wrapped into our SoBC sign-off process across the Group,
with a focus on promoting an inclusive and respectful workplace.
Our SoBC includes our Lobbying and Engagement policy, which
makes clear that all our engagement activities with governments,
regulators and other external stakeholders must be conducted in a
principled manner, with transparency and integrity. It also includes
our Speak Up policy, reflecting the Speak Up channels we make
available for raising any concerns in confidence (anonymously if
preferred) and without fear of reprisal.
The Audit Committee monitors SoBC allegations reported during
the year, and it reports to the Board to enable Board oversight of any
behaviour falling short of our standards and corrective actions taken.
Read more about our commitment to delivery with integrity and our
Group Standards of Business Conduct on pages 118 to 119
+
Shaping and Overseeing Culture
The Board oversees and monitors our culture to enable the Board
to be satisfied that it aligns with the Group's purpose, values and
strategy, and is reflected consistently in our workplace policies and
practices. The Board supports our executive management team in
promoting our values in every area of our business.
The Board assessed the Group’s culture in a range of contexts
throughout the year, including through workforce engagement.
Primary indicators used by the Board to gauge organisational
culture and examples of the Board’s oversight in 2024 are set out
below. The effectiveness of the Board's oversight of culture is
considered as part of the annual review of Board effectiveness and
performance (see pages 187 to 188).
Connecting directly with our people
Our Directors participate in visits to markets and operational sites
during the year. These opportunities provide an important lens
through which Directors can assess organisational culture in
context. Directors' visits are structured to allow for informal
opportunities for them to hear directly from colleagues at different
levels of the business and take an on-the-ground pulse check of
our corporate culture.
In March 2024, Luc Jobin, Murray Kessler and Holly Keller Koeppel
attended a market briefing in North Carolina, U.S. to hear first hand
from business colleagues about the growth of New Categories in
the U.S., digital strategy and consumer engagement, operations
initiatives, regulatory developments, and how the U.S. business is
fostering talent and embedding our values.
Karen Guerra, Darrell Thomas and Serpil Timuray joined Luc to tour
Group operations in Poland in May 2024. Their trip included a visit
to retail locations to see local trade marketing operations in
Warsaw, a town hall session with colleagues from our Central
Europe business unit, and a showcase of key capabilities at our
Digital Business Services Hub in Warsaw with frontline teams
delivering digital transformation initiatives.
Luc Jobin with Karen Guerra, Darrell Thomas and colleagues on a market visit to
Warsaw, Poland in May 2024
In September 2024, Kandy Anand and Véronique Laury with Luc
and Darrell attended a market visit in Japan to learn more about
the APMEA North business unit, the consumer landscape and how
colleagues apply our values. Their visit also included a marketing
digital showcase and a fireside chat with local team members.
Our Chief Executive, Tadeu Marroco, and our Chief Financial
Officer, Soraya Benchikh, attended a series of market and site
visits during the year to engage with colleagues across the regions,
discussing topics including strategic objectives, business
performance and embedding our values. Tadeu's agenda included
visits to Italy, Croatia, Brazil, South Africa, Japan, the U.S., and our
Innovation Centres in Shenzhen, China and Southampton, UK.
Soraya's agenda included visits to Japan, South Korea, the U.S.,
Canada, China and France.
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Board Leadership and Purpose
Values and Culture
174
Understanding workforce feedback and perspectives
Insights from a range of engagement channels, including direct
interaction and through our employee listening framework
(including employee surveys and employee focus group feedback)
support the Directors' understanding of the views and sentiments
of our people and oversight of organisational culture.
Through our new employee listening framework, our Your Voice
Engagement survey is now conducted on an annual basis. It
includes questions to gather feedback on employees' commitment
to achieving goals, their sense of energy and motivation and their
views on opportunities for improvement. In December 2024, the
Board considered the findings of the Your Voice Engagement
survey and action areas identified, reviewed on pages 182 to 183.
Further discussion of how our Board engages with our people
through our workforce engagement channels, and is kept informed
of their interests and perspectives, is set out on pages 182 to 183
and 235.
Kandy Anand participating in a marketing digital showcase with colleagues in
Tokyo, Japan in September 2024
Oversight of Group reward frameworks
In 2024, the Remuneration Committee reviewed the design
principles and operation of elements of executive management
and wider workforce performance and reward frameworks, and
their alignment with the Group's strategy and values.
In this context, the Committee developed proposals for the 2025
Directors' Remuneration Policy (set out at pages 205 to 226) and
also considered initiatives to enhance the alignment of the reward
framework for senior management with the strategic ambitions of
our people strategy and delivery in line with our values through
updates to incentive schemes (discussed at page 245).
Oversight of business integrity and compliance
During the year, the Audit Committee received regular reports
from the Group Head of Internal Audit on the outcomes of internal
audits conducted in 2024 and action plans agreed with
management where areas for improvement were identified.
The Audit Committee also reviewed regular reports from the
Group Head of Business Integrity & Compliance on the Group's
Delivery with Integrity programme, compliance with the SoBC
and reports from Speak Up channels, and reported to the Board
on these topics.
Note:
1.
Score is benchmarked against our global comparator group for Fast Moving Consumer
Goods (FMCG) companies.
Staying informed
During the year, the Board regularly discussed organisational
culture with the Chief Executive and executive management,
including through reports from the Chief Executive and the Chief
People Officer provided at Board meetings.
Additionally, the Director, Operations, reported to the Board twice
during the year on workforce health and safety standards and
performance, including progress towards zero accident site
targets and solutions adopted to enhance vehicle and driver safety
standards and reinforce a safe driving culture.
In 2024, the Board endorsed the introduction of our new people
strategy and reviewed progress of key initiatives mapped to the
strategic intentions of that strategy, including values activation
through comprehensive 'Embedding our Values' activities across
the Group and the introduction of an employee listening
framework to augment the effectiveness of existing workforce
engagement channels across the Group (discussed at pages 182
to 183).
Acting on culture insights
As part of the Board's consideration of culture across the
organisation, in October 2024, the Board reviewed the outcomes
of the values activation survey conducted during 2024. This survey
was designed to act as a 'pulse-check' of awareness of our values
across the Group, how these are currently demonstrated by
people across our organisation and the depth of commitment
to embodying them in future. Over 6,000 of our people across
a balanced cross-section of the Group's regions and functions
participated in this survey.
Findings overall indicated a high awareness of our values and that
there is strong and consistent belief in bringing our values to life
across all levels of the organisation. For example, 94% of
participants indicated their full support of our values (+3ppt
compared to FMCG comparator
1). Findings also indicated
opportunities to better embed our value of 'Empowered
through trust'.
Taking into account the outcomes of the values activation survey
and input from employee focus groups to discuss pressure points,
the Board discussed opportunities identified to further promote
appropriate empowerment of management at the right levels
within the organisation to enhance organisational effectiveness.
As an outcome, several action areas were identified for
implementation, facilitated by the Chief People Officer and
through further consultation with employee focus groups. The
Board will continue to assess the effectiveness with which our
values are embedded through 2025.
Luc Jobin with colleagues visiting trade marketing operations in Warsaw,
Poland in May 2024
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Board Activities in 2024
176
Quality Growth
Focus areas for the Board included:
– Oversight of the marketing strategic
leadership agenda for the Group's
product portfolios, deployment through
market archetypes and approach to
consumer and customer engagement.
– Oversight of a global settlement with
Philip Morris International Inc. that
resolved all ongoing patent
infringement litigation with the
Group related to Heated Products
and Vapour products.
Managed Combustible Transition
– Reviewing combustibles performance
at Group, regional and top market
levels against strategy and key
performance indicators, including
revenue and value share growth.
– Reviewing combustibles industry
outlook, trading environment and
competitor landscape from global
and regional perspectives.
– Reviewing the approach to driving
value from combustibles to fund New
Categories investment, including
through portfolio complexity
reduction, revenue growth
management and marketing
spend efficiency.
– Reviewing developments in regulation
of combustible products, with focus
on the regulation of menthol and
flavours in the U.S. and plastic waste.
Beyond Nicotine Foundations
– Oversight of strategy to develop
future sustainable growth
opportunities for the Group beyond
nicotine in the Wellbeing and
Stimulation category.
– Reviewing progress of the Ryde:
functional shots pilots in Australia and
Canada and the U.S. commercial test.
Sustainable Future
Focus areas for the Board included:
Tobacco Harm Reduction
Acceptance
– Oversight of the Group's approach to
accelerating tobacco harm reduction
(THR) acceptance through scientific
research and advocacy, including launch
of Omni™ (discussed on page 180)
and embedding THR understanding
through the organisation.
– Monitoring engagement with
scientific and public health
stakeholders on THR science
and awareness.
– Reviewing the Group's approach
to scientific stewardship of New
Categories and Beyond Nicotine
products underpinning the
development of our product portfolios.
Shaping the Landscape
– Reviewing the strategic agenda for
the Corporate & Regulatory Affairs
function and approach to proactive
narrative, purpose-driven advocacy
to support a level regulatory playing
field, and engagement with
regulators and other external
stakeholders.
– Oversight of progress of initiatives
to demonstrate the Group as a
responsible industry leader in New
Categories, including publication of
our 'Commitment to Responsible
Vaping Products'.
– Reviewing the regulatory landscape
applicable to New Categories across
top markets, including status of the
Vuse PMTA in the U.S. and
developments in regulation of single-
use vapour products, flavours in New
Categories products, and other
regulatory developments.
– Monitoring insights on the impact of
growth in illicit products and regulatory
enforcement activities to combat illicit
trade, in the context of combustible
products and New Categories.
– Reviewing excise tax developments
applicable to the Group's product
portfolio in various markets.
Sustainability & Integrity
– Oversight of the Group's approach to
Leading in Sustainability & Integrity and
progress of key initiatives.
– Introduction of transformation metrics
to enhance investors' understanding of
how the Group is delivering against
strategic objectives.
– Oversight of the Group's glidepath
towards the ambition for 50% of
revenue from Smokeless products
by 2035.
– Oversight of the Group's sustainability
strategy, including climate-related
issues, opportunities and risks for
the Group.
– Assessing Group sustainability
performance for the year against
applicable targets, including
environmental performance and
progress towards achieving climate
targets for 50% reduction in Scope 1
and 2 emissions by 2030, renewable
energy, water stewardship, waste and
recycling, and priorities for the Group's
sustainability agenda.
– Reviewing plans for the development
of sustainability metrics and targets
for 2025 and beyond.
– Reviewing perspectives of the Group’s
key stakeholders, the Group’s response
to those perspectives, and the
effectiveness of engagement
mechanisms.
– Approving the annual Modern Slavery
Statement and annual Conflict
Minerals Statement.
– Reviewing updates on compliance
matters, including allegations of
misconduct, reports from Speak Up
channels and investigations, and the
Group’s Delivery with Integrity
programme initiatives.
Inspiring New Categories
Innovations & Brands
– Reviewing New Categories
performance at Group, regional and
top market levels against strategy
and key performance indicators,
including New Categories revenue,
contribution and market share.
– Reviewing the outlook for New
Categories performance for the
Group, regions and the wider
industry, consumer product
adoption and developments
in the competitor landscape.
– Reviewing the approach to
investment in New Categories and
developments in the innovation
pipeline across the Vuse, glo and Velo
product portfolios driven by
consumer insights and foresights.
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Dynamic Business
Focus areas for the Board included:
Exciting, Winning Company
– Approving the appointment of Holly
Keller Koeppel as Senior Independent
Director, Darrell Thomas as Audit
Committee Chair and Kandy Anand
as Remuneration Committee Chair.
– Oversight of Non-Executive Director
succession planning activities.
– Approving changes to the structure
and composition of the Management
Board on the recommendation of the
Nominations Committee.
– Determining independence of Non-
Executive Directors prior to
proposing them for appointment or
re-appointment (as applicable) at the
Company’s AGM.
– Approving revisions to Non-Executive
Director fees.
– Reviewing outcomes of the internal
review of the performance and
effectiveness of the Board, its
Committees and Directors in 2024.
– Monitoring and assessing
organisational culture, its alignment
with the Group’s purpose, values and
strategy and the outcomes of the
values activation survey.
– Endorsing the introduction of the
Group's new people strategy and
oversight of progress against
strategic ambitions.
– Reviewing the introduction of the
employee listening framework to
enhance effectiveness of Group
workforce engagement and
understanding feedback from
workforce engagement channels.
– Reviewing health and safety
performance for the preceding year,
targets for the coming year and
action plans.
– Reviewing the funding positions
relating to the Group’s post-
employment benefit schemes.
Operational Excellence
– Reviewing U.S. business operations
and progress of the U.S. business,
including macro-economic challenges,
portfolio management, and route-to-
market and digital execution.
– Reviewing the Group risk register and
risk appetite in the context of strategic
objectives and emerging risks, with
focus on risks relating to climate
change, circular economy, cyber
resilience and AI, and identification of
the Group's sustainability impacts, risks
and opportunities (IROs).
– Reviewing development of the Group's
strategic market footprint and market
archetypes framework to further drive
effective resource allocation and
progress in reduction of geographic,
supply chain and product complexities.
– Monitoring resilience of the Group's
New Category supplier sourcing
strategy and approach to developing
innovation through strategic partners
to maintain a resilient New Categories
supply chain.
– Reviewing development of strategic
partnerships to optimise the Group's
sourcing network and asset footprint.
– Oversight of the Group's Digital
Business Solutions (DBS) strategy to
drive productivity through enhanced
use of technology and responsible use
of AI, build resilience, and to simplify the
Group's technology architecture.
– Reviewing opportunities for the
Group's Global Business Solutions
organisation to embed end-to-end
process excellence.
– Approving revisions to the Group's
corporate governance framework and
Statement of Delegated Authorities.
Capital Effectiveness
– Reviewing Group financial
performance against key
performance metrics, current outlook,
challenges and opportunities for
growth in each region, and FX
impacts.
– Reviewing Group half-year results,
trading updates, year-end results and
the Annual Report and Form 20-F.
– Approving interim dividend proposals
and assessing distributable reserves
prior to authorising dividend
payments.
– Determining Group viability, taking
into account current position and
Principal Risks.
– Approving the Group budget,
reviewing application of the Group's
capital allocation strategy, and
oversight of resource allocation to
enable strategy execution.
– Assessing capital efficiency in the
context of cash generation and cash
flow performance, financing capacity,
cost of debt and investments.
– Oversight of the Group's disposal of a
portion of its shareholding in ITC
Limited, announced in March 2024.
– Authorising a share buy-back
programme for 2024 and 2025.
– Reviewing compliance with Group
financing principles, including liquidity
and net debt/EBITDA.
– Reviewing investments in associates
of the Group and their financial
performance.
– Reviewing the Group's revolving
credit facilities, refinancings, and debt
issuance programmes.
– Reviewing share price performance
and investor and broker perspectives.
– Reviewing the Group's insurance
coverage.
– Reviewing the status of litigation
involving Group companies, including
updates on the Companies' Creditors
Arrangement Act (CCAA) settlement
process in relation to Imperial Tobacco
Canada (discussed at page 352).
Shareholder and
Investor Engagement
Our Board is committed to open and
transparent dialogue with shareholders
and investors to ensure their views are
understood and considered.
The Chair, the Chief Executive and the
Chief Financial Officer’s annual
engagement programme is discussed
below. The Senior Independent Director
and other Non-Executive Directors are also
available to meet with major shareholders
as appropriate.
Annual investor relations programme
A global engagement programme is
conducted annually with shareholders,
other investors, potential investors and
analysts. The investor relations (IR)
programme is led by our Chair, Chief
Executive and Chief Financial Officer,
supported by the IR team.
In total we hosted 621 investor meetings
in 2024, covering 78% of our shareholder
base with broad geographic coverage.
Utilising both physical and virtual event
formats, our IR programme included
attendance at five global investor
conferences, nine investor roadshows and
two salesforce briefings.
Our Chief Executive and Interim Finance
Director presented our Full-Year results to
investors in February 2024, and our Chief
Executive and Chief Financial Officer
presented our Half-Year results in July 2024
and our pre-close trading updates in June
and December 2024. These events all
included investor Q&A calls and the
presentations and transcripts are
published on bat.com.
In March 2024, our Chief Executive hosted a
fireside chat at the UBS Global Consumer and
Retail Conference in New York, U.S., watched
by 250 viewers online, alongside a series of
meetings held at the conference with
international investors.
In June 2024, our Chief Executive and Chief
Financial Officer hosted investor meetings at
the Deutsche Bank Global Consumer
Conference in Paris, France, engaging with
over 100 international investors and providing
updates on how our strategic discipline and
focused investment are driving positive
momentum.
A series of investor roadshows hosted by
our Chief Executive and Chief Financial
Officer was held during 2024, including
meetings with investors from the UK, North
America, South Africa, Europe and Asia. We
also hosted a Capital Markets Day event in
October 2024 at our Innovation Centre in
Southampton, UK, discussed on page 179.
Remuneration Policy Engagement
In October and November 2024, our Chair,
Remuneration Committee Chair, Chief
People Officer, Group Head of Reward and
Group Head of Investor Relations hosted a
remuneration policy roadshow. Feedback
from participating shareholders indicated
broad support for our remuneration
approach and how this is intended to drive
shareholder value. Feedback also indicated
appreciation for the opportunity to engage
on the rationale for proposed revisions to
incentive scheme metrics. Perspectives
received through this engagement
programme have been taken into account
to refine policy proposals and enable them
to be focused and relevant to shareholders.
Details of how the Remuneration
Committee has taken shareholder
perspectives into account in shaping the
proposed new remuneration policy are set
out on pages 205 to 226.
Shareholder communications
We continued to innovate our shareholder
communications approach in 2024, which
included the introduction of new IR
materials and digital tools. Our investor
website enhances our digital interaction
with investors. It includes our investment
case, our approach to sustainability,
shareholder FAQ and regular
consensus sharing.
Our Investor News hub collates our press
releases, news and features together in
one place for investors, with an automated
news alerts service available to keep
investors up to date on developments. Our
investor website covers live broadcasts of
events, including results, conferences and
our Capital Markets Day, with playback
slides and transcripts available online.
To complement our investor website, our
new IR app was launched in 2024. The app
provides increased accessibility to our
financial data and reports, share price
information, and investor relations materials
by our stakeholders. Our new IR factsheet,
which provides a snapshot of our investment
case, was also launched, and is featured on
both our website and the IR app.
Investor meetings 2024
Geographic scope (%)
United Kingdom
49
United States
31
South Africa
9
Europe (ex UK)
4
Rest of world
7
Investor meetings 2024
Investor type (%)
Existing shareholders
78
Prospects
22
621
Meetings in 2024
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Board Leadership and Purpose
Board Engagement with Stakeholders
We understand the strategic importance of stakeholders
to our business. Our Directors value engagement with our
shareholders and wider stakeholders to understand their
views and inform the Board’s decision-making, strategy
development and risk assessment.
178
How the Board considers shareholder
and investor views
The Chair, the Chief Executive, Chief
Financial Officer and Remuneration
Committee Chair regularly update the
Board on their dialogue with shareholders
and investors. The Board also receives
updates from the Group Head of Investor
Relations and our brokers on stock
performance and on our shareholders' key
issues, perspectives and expectations.
Shareholder and investor perspectives
considered by the Board in 2024 included
the Group's ongoing transformation
journey, U.S. market dynamics and outlook,
New Categories strategy and performance,
capital allocation, changes to the structure
of the Management Board, regulatory
developments and enforcement, and our
sustainability strategy.
The Board takes shareholder feedback into
account in its decision-making and when
developing the Group strategy. This is
discussed further on page 184, including in
relation to capital allocation and
development of new transformation
metrics to enhance understanding of our
progress against strategic objectives, and
on pages 205 to 226 in relation to the
Directors' Remuneration Policy and
executive remuneration.
Annual General Meeting (AGM)
Our AGM is an opportunity for further
shareholder engagement, for the Chair
to set out progress, and for the Board to
answer questions.
Shareholders were welcomed in person to
attend our AGM in 2024, at which the Chair
reflected on business performance in 2023
and discussed the outlook for 2024. The
Chair and other Directors also responded
to shareholder questions. Shareholders
were also given the opportunity to submit
questions about AGM business in advance
of the meeting and responses to the
queries received were published at
bat.com/agm.
Voting on resolutions presented to the
AGM was carried out by way of a poll in
accordance with the Company's Articles of
Association and all resolutions as set out in
the Notice of Meeting were passed with no
significant vote against any resolution. All
Directors attended our 2024 AGM other
than Dimitri Panayotopoulos due to illness.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
179
Spotlight: Capital Markets Day 2024
Building a Smokeless World
On 16 October 2024, our Chief Executive and
Chief Financial Officer hosted a Capital Markets
Day event at our Innovation Centre in
Southampton, UK.
This event included keynote speeches from our
Management Board members and other senior
leaders, laboratory tours and interactive
category exhibitions. Over 80 attendees
representing shareholders, potential investors
and analysts joined the event in person, with 370
further attendees from the UK, Europe, North
America, South Africa, Asia and the Middle East
joining virtually via webcast.
A variety of topics were reviewed at our Capital
Markets Day event. Our Chief Executive outlined
our vision to Build a Smokeless World and to
deliver a profitable transformation and our Chief
Financial Officer presented our capital allocation
strategy and growth algorithm. Other topics
reviewed included our R&D and innovations
development ecosystem, multi-category
insights, New Categories brand building,
managing combustibles value, U.S. market
opportunities, Tobacco Harm Reduction and
Omni™, and our organisational culture.
Feedback from our Capital Markets Day
indicated that the event was well received and
that attendees appreciated the opportunity to
engage with our Management Board and
experience how the Group's science, innovation
and breadth of our people's capabilities can
combine to deliver our purpose and strategy.
I’m confident
that we have
the right strategy,
that we have the
capabilities to
deliver, and that
we have the
right people to
deliver profitable
transformation.
Tadeu Marroco
Chief Executive
Capital Markets Day event materials available at
bat.com/ir and via the new Investor Relations app
+
Wider Stakeholder
Engagement
A broad range of stakeholders are important
to the Group at local, regional and functional
levels. Key stakeholders are strategically
important to our business and essential
to our ability to generate long-term,
sustainable value.
We identify them by applying an
established stakeholder engagement
framework, which takes into account
strategic objectives and risks to the Group.
The Board's assessment of key stakeholders
is further informed by the assessment of
the Group's material sustainability impacts,
risks and opportunities (IROs) (discussed
further on pages 70 to 71).
Our key stakeholders are referenced in our
business model on pages 14 to 17, with an
overview of their importance, what matters
to them, and how we engage and respond
to them on pages 18 to 19.
The imperative of transparency of
engagement is built into relevant Group
policies, including our SoBC and specific
frameworks for stakeholder engagement.
There is well-established and effective
engagement with the Group’s key
stakeholders, enabling the Board to
understand their perspectives. The Board
reviewed the approach to engagement with
the Group's key stakeholders in 2024,
including how engagement is carried out
across the Group, stakeholders’
perspectives, and how the Board is kept
informed of those perspectives where
engagement is not at Board level. The Board
will continue to monitor the ongoing
effectiveness of stakeholder engagement.
Where the Board does not engage directly
with our stakeholders, it is kept updated by
reports from management so Directors
maintain an effective understanding of
what matters to them and can draw on
these perspectives, including in Board
decision-making and strategy development.
An overview of how the Board engaged
with wider stakeholders and maintained its
understanding of their interests during the
year is set out below.
Consumers
'Love our Consumer' is one of our values
and consumers are the core of everything
we do. Consumer-led product innovation
is central to achieving our purpose and
we believe that our multi-category
approach is the most effective way to
appeal to the diverse preferences of
adult nicotine consumers worldwide.
We engage with our consumers through
extensive market research activities and
sales interactions, led by our marketing
teams.
During the year, the Board was briefed by
the Chief Executive, Chief Marketing
Officer and other senior managers on our
innovations pipeline across all portfolio
categories, how these focus on satisfying
adult consumer preferences and are
driven by consumer insights and
foresights. The Board was also updated
on consumer engagement initiatives and
use of future-fit marketing technology to
execute an integrated marketing mix
across the retail landscape.
In addition, the Board was briefed on key
consumer perspectives and how we
respond, including how we respond to
consumer concerns about the
environmental impact of plastic
products; consumer perspectives on
THR and feedback for more information
on the role of New Categories products
in THR to help consumers make
informed product choices; and consumer
expectations in respect of preventing
underage access to tobacco and nicotine
products.
The Board has overseen the introduction
of our updated Responsible Marketing
Principles, applicable to our nicotine
products and brands, implemented
across the Group in 2024. Our
Responsible Marketing Principles take
account of consumer expectations
for responsible marketing practices and
underage access prevention. The Board
also oversaw the introduction of our
'Commitment to Responsible Vaping
Products', which communicates the
actions we are taking to demonstrate
the Group as a responsible industry
leader in New Categories.
Read our Responsible Marketing
Principles at bat.com/sustainability-
and-esg/governance-and-ethics/
marketing-our-products-responsibly
+
Read our Commitment to Responsible
Vaping Products at bat.com/
responsible-vaping-products
+
Read more about our approach
to engaging with consumers on
pages 18, 60 to 63 and 76 to 77
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Board Leadership and Purpose
Board Engagement with Stakeholders
Continued
180
Spotlight
Omni
TM: Forward Thinking for a Smokeless World
An important step was taken in the
Group's journey to encourage Tobacco
Harm Reduction (THR) acceptance in
September 2024, with the launch of a
science and evidential case for THR in
the form of ‘Omni™: Forward Thinking
for a Smokeless World’. Our Board
oversaw the development of Omni™,
an evidence-based, accessible and
dynamic resource that sets out the
Group's commitment to Building a
Smokeless World and offers insights
into our scientific and real-world
evidence of THR in action. Omni™
brings together independent scientific
studies, the Group's own research into
innovations and examples of THR in
action. It also looks to answer some of
the most challenging questions facing
our industry and society.
The launch of Omni™ was held in London
with more than 150 external attendees,
including representatives from our
investors, suppliers, the scientific
research community and other
stakeholders.
This was followed by a launch event for
our people across the Group, both in
person with our Chief Executive and
through a live webcast, attended by over
2,500 colleagues.
Omni
TM is intended to foster societal
dialogue and offer a dynamic resource to
be developed over time with feedback
from our stakeholders. Looking ahead,
we intend to measure its impact on
perceptions across our stakeholders.
Learn more about Omni
TM
at asmokelessworld.com
+
Customers
Retailer, wholesaler and distributor
relationships are essential for driving
growth and embedding responsible
marketing practices across our routes
to market. Our customer relationships
and engagement programmes are
managed at local market and business
unit levels.
During the year, the Board was updated
by the Chief Executive, the Chief
Marketing Officer and other senior
managers on the global retail
environment, customer engagement
and the promotion of responsible
marketing practices through our route
to market distribution channels.
The Board was briefed on the roll-out of
underage access prevention training to
employees across the Group, our
marketing agencies and retailer
representatives across multiple
markets; and on customer engagement
initiatives including developments in
multi-category merchandising and
digital marketing technologies to
enhance customer experience and age
verification procedures. The Board was
also updated on engagement with
trade customers in the U.S. to support
environmental management initiatives
and combating illicit trade.
In 2024, several of the Directors had the
opportunity to hear first hand from U.S.
business representatives about the
approach to developing trade customer
partnerships as part of the U.S. market
briefing in March 2024 and to visit trade
marketing operations in Warsaw,
Poland in May 2024 (discussed further
on page 174).
As part of its annual agenda, the Audit
Committee oversees compliance with
the Group’s responsible marketing
framework and underage access
prevention procedures.
Read more about our approach
to customer engagement
Pages 19, 76 to 77 and 118 to 119
+
UK Companies Act:
Business relationships
This section summarises how the
Directors have regard to the need to
foster business relationships with
customers, suppliers and other
external stakeholders. Further
information is provided on pages 18 to
19 and 184, including information
about the effect that regard from the
Directors had on Board discussions
and decision-making.
Suppliers
Effective relationships with leaf
suppliers, contracted farmers and
suppliers of direct materials and
indirect services are essential for a
resilient and efficient supply chain.
These relationships are managed day-
to-day by the Group’s Operations
function and at local market level.
The Board oversees the Group’s supply
chain and leaf sourcing strategies, and
is updated on progress in sustainable
agriculture and farmer livelihoods
programmes through briefings and
strategic reviews provided by the
Director, Operations and other
members of senior management.
In the context of leaf supply, the Board
was briefed on perspectives of
suppliers and contracted farmers and
how we respond to feedback, including
how we address the risk of child labour
in our supply chains and the impact
assessments we undertake in leaf
sourcing countries to identify and
address root causes; how we support
suppliers to reduce Scope 3 supply
chain carbon emissions; and the steps
we take to assess deforestation and
other biodiversity risks.
In the context of direct materials
suppliers, in 2024 the Board reviewed
the strategic leadership agenda for
delivering innovation, including
development and integration of
strategic supplier capabilities into our
New Categories sourcing strategy and
development of strategic partnerships
beyond nicotine.
The Board was also updated on
supplier perspectives and how we
respond. Examples include our
approach to driving innovation and
collaborative working through our 'Be
Supplier' programme and supplier
workshops at our Innovations Centre in
Shenzhen, China; and how we address
supply chain carbon emissions and
conduct responsible water
stewardship.
The Board reviewed our annual Modern
Slavery Statement and annual Conflict
Minerals Statement, and the measures
implemented with our suppliers during
the year to mitigate supply chain risks.
Read our Modern Slavery Statement
at bat.com/msa
+
Read more about our approach
to engaging with suppliers on Pages
19, 39, 66 to 69, 79 to 84, 105 to 109 and
118 to 119
+
Society
We recognise our responsibility to wider
society to reduce the health, environmental
and social impacts of our business. We
seek to meaningfully contribute to
debate on tobacco harm reduction and
the regulatory environment in which we
operate. Across the Group, we engage
with stakeholders in scientific and public
health communities, governments and
regulators, non-governmental
organisations (NGOs) and local
communities, with engagement
managed by local market, business
unit and functional teams.
The Board is briefed on engagement
with, and perspectives held by,
scientific communities, regulators,
public health bodies and other
stakeholders. During the year, this
included briefings on engagement
conducted to accelerate THR
understanding and acceptance and
updates on our contribution to external
roundtable events, such as the Global
Forum on Nicotine and the Global
Tobacco and Nicotine Forum.
The Board also considered how the
Group responds to stakeholder
feedback on environmental impact of
our operations and how we address
sustainability challenges, such as
through implementation of more
sustainable packaging for New
Categories products in Europe and
progress against science-based
emissions reduction targets.
The Board reviews updates from the
legal and corporate and regulatory
affairs teams, covering engagement
with governments, regulators and anti-
illicit trade collaborations. The Board is
also kept informed on engagement
with local communities, for example,
community investment projects in
relation to afforestation programmes
and child labour prevention projects in
collaboration with the industry, local
governments and NGOs.
Non-Executive Directors regularly
attend the Corporate Audit Committee
and Regional Audit Committees, where
societal and community perspectives at
regional and local levels are discussed,
and the Audit Committee reviews
feedback from these Committees. The
Audit Committee is also updated on our
engagement with tax authorities on
material tax matters and has oversight
of political contributions made in the U.S.
Read more about our engagement
with governments and wider society
Pages 19 and 60 to 115
+
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
181
Our People
We recognise that our people are critical to
our success. Fostering an exciting, winning
organisation is a core part of the Dynamic
Business pillar of our strategy and the
Board is committed to regular and
meaningful engagement with our
workforce and to taking their perspectives
into account in decision-making and
strategy development.
Our approach to workforce engagement
Our Board is kept informed of the views
and perspectives of our people across the
Group through a combination of well-
established engagement methods in place
across multiple channels and at different
levels of our organisation.
These channels, highlighted to the right,
include direct engagement through
Directors’ market and site visits, including
participation in town hall and Q&A sessions
(see page 174); the Executive Directors'
programme of regional and market visits
across our regions to connect with local
employees; our Chief Executive's 'Let's Talk'
live Q&A forum series open to all our
workforce across the Group; and live
webcasts presented by our Chief Executive
and Chief Financial Officer to talk about our
performance, results, strategic objectives,
business outlook and embedding our
culture, including Q&A.
Overall, there were 44 market visits or
other engagement forums attended by one
or more of our Directors in 2024,
comprising 4 in the U.S., 14 in the Americas
and Europe region, 7 in the Asia-Pacific,
Middle East and Africa region and 19 with
global functions.
In addition to direct engagement activities,
our Directors are kept informed of the
views and perspectives of our people
arising from engagement at different levels
of the organisation (for example, town halls,
employee focus groups, works councils,
and regional, function and local webcasts),
including through reports from the Chief
People Officer, and from the Group Head of
Business Integrity & Compliance in relation
to Speak Up channels.
Employee listening framework
In 2024, our approach to engagement with
our people was enhanced through the
introduction of our employee listening
framework, summarised to the right. This
framework facilitates more frequent
opportunities for employees to share their
feedback and also empowers line
managers to drive actions at their team
level in response to feedback.
As part of this enhanced approach, the
Board reviews an annual summary of the
feedback received through the framework,
with outcomes and actions provided back
to employees across the Group.
BAT Annual Report and Form 20-F 2024
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Other Information
Board Leadership and Purpose
Board Engagement with Stakeholders
Continued
182
Holistic approach to engagement with our people
Directors' market
and site visits
Our Directors participate in market
and site visits and local town hall
sessions during the year, allowing
them to hear directly from
colleagues at different levels across
the organisation and discuss their
perspectives (see page 175).
Chief Executive’s Let’s
Talk live Q&A forum
Our Chief Executive hosted three live
Let's Talk forums in webcast format,
open to all colleagues across the
Group to ask him any questions. Our
Chief Executive also hosted further
Q&A sessions in town hall forums as
part of his programme of regional
and market visits through the year.
Global, Functional and
Regional webcasts
and town hall sessions
Briefings and townhall sessions, in
person and by webcast with Q&A,
are held at a global, functional and
regional level through the year,
including 'A Better Tomorrow - Live'
with our Chief Executive and Chief
Financial Officer to discuss strategic
priorities and performance.
Global Leadership
Meeting (GLM)
Our Chief Executive hosts the annual
GLM for around 120 of the Group's
senior leaders to engage on the
Group's strategic priorities. Our GLM
in 2024 was held in Athens, Greece.
Works Councils and
European Employee
Council meetings
Works Councils and European
Employee Council meetings provide
structured engagement forums
in various markets across Europe,
in accordance with applicable
regulations.
Speak Up channels
Our independently-managed Speak
Up channels are available online and
by telephone 24 hours a day in a
range of local languages to allow
anyone working for or with the
Group to raise any concern on a
confidential basis and anonymously
if they prefer (see page 118).
Enhanced in 2024 through introduction of our
employee listening framework
Our new employee listening
framework was introduced
across the Group in 2024, and
will be further deployed in 2025,
to enhance existing engagement
channels and enable more
frequent opportunities for
employees to share their
feedback.
It includes our global Your Voice
Engagement survey as an annual
core index survey, along with
more frequent pulse surveys to
track progress, topic surveys for
deeper insight, employee life-
cycle surveys and other tools to
support a more holistic
understanding of the sentiments
and perspectives of our people.
Effectiveness of workforce
engagement channels
The Board continues to assess the
effectiveness of channels for engagement
with our people and how engagement
informs Board decision-making and
strategy development.
Given the spread, scale and diversity of the
Group’s workforce, the Board continues to
consider it effective to use the combination
of established channels discussed on page
182, augmented in 2024 with the
introduction of the employee listening
framework and reporting to the Board on
the views of the workforce during the year.
All Group company employees, including
individuals undertaking permanent roles
on fixed-term contracts, are offered
the opportunity to engage and provide
their feedback through a combination
of these channels.
This approach enables the Board as a
whole to understand the perspectives of
our workforce received through the full
breadth of engagement channels at levels
across the organisation.
Examples of key themes and priorities from
workforce feedback considered by the
Board, and how that feedback has been
responded to during the year, are
discussed on this page.
Read more about our Your Voice
Engagement survey on page 111
+
2024 global listening initiatives
Global listening initiatives conducted
across the Group in 2024 included:
– Our annual Your Voice Engagement
survey, open to all employees across the
Group and focused on employee
engagement. 92% of employees across
the Group participated in this survey.
– A values activation survey, to review
awareness of our values across the
Group, how these are currently
demonstrated by people across our
organisation and depth of commitment
to embodying them in future. Feedback
was received from over 6,000 employees
from a balanced cross-section across the
Group's regions and functions.
– A Tobacco Harm Reduction survey to
gauge understanding of the Group's
position on THR, conducted across 3,000
employees focused on this topic across
the Group.
The Board reviewed the outcomes of
these listening initiatives and discussed
actions identified.
Examples of key themes arising from
listening initiatives and how we respond
– How we develop talent: In view of
feedback from colleagues across the
Group, an integrated talent management
framework was launched in 2024,
supported by refreshed professional
capability frameworks for Group
functions available to colleagues in digital
format, alongside mentoring
programmes for women in senior
management roles.
– How we focus on driving innovation:
Taking into account feedback from
colleagues, particularly from our
operations and marketing functions, we
have embedded an enhanced approach
to developing consumer insights and
management of intellectual property
during the year.
– How we maintain a competitive reward
framework: In 2024, we reviewed design
principles and operational elements of
the Group's reward framework for our
management population and the
alignment of the reward framework with
our strategy and values, overseen by the
Remuneration Committee, and taking
into account feedback from colleagues
across our management population.
Through this review, updates were
introduced to our management reward
framework to maintain competitiveness
of reward and to enhance alignment with
our strategy and values (discussed at
page 245).
– How we bring our 'Empowered through
trust' value to life: The values activation
survey identified empowerment as a key
priority given feedback from colleagues.
Building on insights gained from focus
groups conducted with senior
management, a review was conducted to
understand specific challenges and
actionable solutions. This has led to the
development of targeted actions to be
implemented from 2025 to enhance
empowerment at the right levels across
the organisation, including review of
governance procedures and
development of focused agendas for the
top market briefings and other regional
forums.
BAT Annual Report and Form 20-F 2024
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Other Information
183
UK Companies Act:
Employee engagement
This section summarises the Directors'
approach to engaging with the Group's
workforce, including employees of UK
Group companies, and how the
Directors have regard to their interests.
Further information is provided on pages
18 and 111, and pages 232 to 235 in
relation to remuneration matters,
including information about the effect
that regard from Directors had on Board
discussions and decision-making.
Tadeu Marroco leading a Q&A session with colleagues from our South Eastern Europe business unit in
Rome and Trieste, Italy in May 2024
Balanced capital allocation
Through the Board's review of capital allocation during the year and approval of the 2025 budget,
consideration was given to the resources required to deliver the Group's growth algorithm. The
Board's review took account of the focus areas of driving quality revenue and sustainable profit
growth, acceleration of New Categories contribution, and cash generation, supported by targeted
investment and portfolio optimisation. The Board also took account of the importance of continued
de-leveraging in line with our guidance and enabling returns to our shareholders, including through
a share buy-back programme applying the proceeds of the Group's sale of a portion of its
shareholding in ITC Limited, and through progressive dividends.
The 2025 budget also takes account of the resources needed to deliver our sustainability targets,
including those aimed at reducing the environmental impacts of our operations, continue
investment in scientific research and product stewardship, maintain competitive remuneration for
our people and develop effective partnerships with our suppliers and customers.
Key stakeholder perspectives
taken into account
Shareholders and Investors
Consumers
Customers
Suppliers
Our people
Governments and wider society
Introduction of our transformation metrics
At our Capital Markets Day event in 2024, we launched a focused set of new transformation
metrics to concisely articulate the Group's progress against our strategic objectives.
The Board worked closely with the executive management team during 2024 to develop these
transformation metrics to respond to perspectives raised by our shareholders and other investors.
For example, how is the Group transforming (indicated through Smokeless product revenue as a
proportion of total revenue) and what is the impact of capital allocation decisions on shareholders
and debt investors
@(indicated through return on capital employed, free cash flow before dividends
and ratio of net debt to EBITDA)
@. We plan to continue to report on our performance against the
transformation scorecard to enhance our stakeholders' understanding of our year-on-year progress.
Key stakeholder perspectives
taken into account
Shareholders and Investors
Our people
Governments and wider society
Accelerating Tobacco Harm Reduction acceptance
In 2024, the Board oversaw the Group's approach to accelerating THR understanding and
acceptance, underpinned by scientific research and proactive stakeholder engagement. Our aim is
to make constructive and evidence-based contributions to inform dialogue with our stakeholders,
including scientific and public health communities, governments and regulators, and our consumers.
The Board's oversight during the year included development and launch of ‘Omni™: Forward
Thinking for a Smokeless World', a science and evidential case for THR that collates independent
scientific studies, the Group's own research and case studies of THR in action. Omni™ is presented
as an open invitation for ongoing dialogue with our stakeholders on some of the key challenges
facing the industry and wider society. The Board also reviewed future focus areas for enabling THR
understanding and acceptance, including next steps in THR scientific research.
Key stakeholder perspectives
taken into account
Shareholders and Investors
Our people
Consumers
Customers
Suppliers
Governments and wider society
Developing the 2025 Directors' Remuneration Policy
In preparation for the Board's recommendation of the 2025 Directors' Remuneration Policy to
shareholders at the 2025 AGM, the Remuneration Committee conducted an extensive review of
the policy arrangements during 2024 and continuing into 2025, overseen by the Board and
developed through engagement with major shareholders and governance advisory bodies
(discussed further at pages 205 to 226).
As part of the review, consideration was given to maintaining alignment between our strategic
objectives and executive remuneration outcomes, with particular focus on Smokeless products
growth, stewardship of the Group's transformation and financial performance, while supporting
the ability to attract and retain talent in the international market. The review was also informed by
evolving market practice and corporate governance regulations, shareholder and governance
advisory body guidelines and independent advice from the Remuneration Committee's UK and U.S.
remuneration consultants.
Key stakeholder perspectives
taken into account
Shareholders and Investors
Our people
Governments and wider society
We define principal decisions as those decisions and discussions by the Board that are strategic or material to the Group and those of significance to any
of our key stakeholders.
BAT Annual Report and Form 20-F 2024
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Other Information
Board Leadership and Purpose
Principal Decisions
Made by the Board
Outlined below are examples of principal decisions made by the Board over
the year, highlighting how the Board considered relevant factors, including
key stakeholder perspectives, the environment, reputation for high
standards of business conduct, and the long-term impact of decisions.
Our key stakeholders and how the Board engages with them are discussed further on pages 18
to 19. Board activities in 2024 are set out in pages 176 to 177.
184
The Board comprises the Non-Executive Chair, two Executive
Directors and seven independent Non-Executive Directors.
The roles and division of responsibilities between the Chair, Executive Directors
and Non-Executive Directors are summarised below.
Roles and Division of Responsibilities
Role
Responsibilities
Chair
– Leadership of the Board and its overall
effectiveness
– Promotes culture of openness, constructive
debate and effective decision-making
– Sets the Board agenda
– Facilitates constructive board relations
– Interfaces with shareholders
– Ensures effective shareholder engagement
– Representational duties on behalf of the
Company
Chief Executive
– Overall responsibility for Group
performance
– Leadership of the Group
– Enables planning and execution of Group
objectives and strategies
– Stewardship of Group assets
– Drives the cultural tone of the organisation
Chief Financial
Officer
– Leadership of the Group in respect
of financial matters
– Enables planning and execution of Group
financial objectives and strategies
– Provision of accurate, timely and clear
information to the Board on the Group's
financial performance
Senior
Independent
Director
– Leads review of the Chair’s performance
– Presides at Board meetings in the Chair’s
absence
– Chairs the Nominations Committee when
Chair succession considered
– Sounding board for the Chair
– Intermediary for other Directors
– Available to meet with shareholders
Non-Executive
Directors
– Oversee Group strategy and resource
allocation
– Monitor Group performance and monitor
delivery of Group strategy
– Oversee the risk management and internal
control framework
– Review management proposals and provide
strategic guidance
– Scrutinise and hold to account
performance against objectives
– Bring external judgement, perspective
and effective challenge to management
The responsibilities of the Chair, Executive Directors and Senior
Independent Director are available at bat.com/governance
+
Board Efficacy
The Chair facilitates constructive Board relations, supporting
effective contribution from Non-Executive Directors and
promoting a culture of openness and debate. The Chair seeks
a consensus at Board meetings but, if necessary, decisions are
taken by majority decision. If any Director has concerns about any
issues that cannot be resolved, such concerns are noted in the
Board minutes. No such concerns arose in 2024.
Scheduled Board meetings during the year were convened in
person. The Board held its strategy sessions in September 2024
in the U.S. Feedback from the annual Board evaluation confirmed
that Board meetings continued to operate well and are considered
to be chaired effectively.
Non-Executive Director Meetings
Meetings of the Non-Executive Directors, led by the Chair and
without any Executive Director present, are scheduled in the Board
calendar. These meetings are usually held following scheduled
Board meetings, with additional Non-Executive Director meetings
convened where required.
The Executive and the Non-Executive Directors also meet annually,
led by the Senior Independent Director and without the Chair
present, to discuss the Chair’s performance.
Independence
The Board considers all Non-Executive Directors to be independent,
as they are free from any business or other relationships that
could interfere materially with, or appear to affect, their judgement.
Luc Jobin was determined by the Board to be independent on his
appointment as Chair, as reported in the Company’s Annual
Report and Form 20-F for 2020.
The Board has determined Holly Keller Koeppel to be independent,
having taken into account her service on the board of Reynolds
American Inc. (Reynolds American) as an independent, non-
executive director.
Luc and Holly were originally appointed to the Board in 2017
following the acquisition of Reynolds American and pursuant
to the Agreement and Plan of Merger with Reynolds American.
The Board has also considered the independence requirements
outlined in the NYSE’s listing standards and has determined
that these are met by the Chair and all the Non-Executive
Directors. The Board considers that it currently includes an
appropriate combination of Executive and Non-Executive
Directors.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Division of Responsibilities
Our Approach to Division
of Responsibilities
185
Commitment
Before appointing new Directors, the Board takes into account
their other commitments and significant time commitments are
disclosed and considered prior to appointment. The letters of
appointment for the Chair and Non-Executive Directors set out
their expected time commitment to the Company (see page 191).
Any additional external appointments following appointment to
the Board require prior approval by the Board in accordance with
the 2018 Code. The Board assesses the significance of any
additional external appointment notified by a Director, supported
by the Company Secretary.
During 2024, the Board considered Darrell Thomas' appointment
to the Board of Directors of Vontier Corporation, a company listed
on the New York Stock Exchange, effective from 4 June 2024. This
additional appointment was considered by the Board to be
significant in accordance with the 2018 Code, however the Board
concluded that the appointment would not impair Darrell's ability
to serve as a Non-Executive Director in view of the anticipated
time commitment and taking into account his resignation as non-
executive director of Pitney Bowes, Inc. on 6 May 2024.
The Board also considered the appointment of Serpil Timuray as
CEO Vodafone Investments effective from 1 April 2024 (previously
Serpil held the role of CEO, Europe Cluster) and concluded that the
change in Serpil's executive role at Vodafone would not be an
additional demand on her time and would not impair her ability to
serve as a Non-Executive Director.
Conflicts of Interests
The Board has formal procedures for managing conflicts of
interest. Directors are required to give advance notice of any
conflict issues to the Company Secretary. These are considered
either at the next Board meeting or, if timing requires, at a meeting
of the Board’s Conflicts Committee.
Each year, the Board considers afresh all previously authorised
situational conflicts. Directors are excluded from the quorum and
vote in respect of any matters in which they have an interest.
There were no new potential situational conflicts identified for the
Board's consideration during 2024.
Information and Advice
Directors receive effective support to assist them in meeting
their responsibilities under the 2018 Code and discharging their
directors’ duties, both individually and collectively, including the
following:
– Directors receive papers for review in good time ahead of each
Board and Committee meeting.
– Papers and presentations to the Board and its Committees
include discussion of specific stakeholder considerations
as applicable.
– The Company Secretary ensures effective information flow
within and between the Board and its Committees, and between
the Non-Executive Directors and senior management. The
Company Secretary, in conjunction with external advisers where
appropriate, advises the Board on all governance matters.
– All Directors have access to the advice and services of the
Company Secretary. The appointment and replacement of the
Company Secretary is a matter for the Board.
– A procedure is in place for all Directors to take independent
professional advice at the Company’s expense if required.
– Each Board Committee may obtain independent legal or other
professional advice, at the Company’s expense, and secure
attendance at meetings of external participants if needed.
Board Induction
All Directors receive a comprehensive and personalised induction
on joining the Board, tailored to their skills, experience, background,
committee membership and requirements of their role.
Murray Kessler and Serpil Timuray completed their Non-Executive
Director induction in 2024, following their appointment to the Board
in 2023. The scope of their induction is discussed in the Company's
Annual Report and Form 20-F for 2023.
Soraya Benchikh completed her Executive Director induction
following her appointment to the Board in May 2024, as
highlighted below.
Spotlight
Executive Director's Induction
Soraya Benchikh
Soraya completed her Executive Director induction following
her appointment to the Board in May 2024.
Her induction included in-depth briefings from the Chief
Executive, other Management Board members and senior
management personnel covering a range of topics across the
Group's strategic pillars, including the Group's strategy,
purpose, values and culture; business regions; product
portfolios and scientific research programmes; the Group's
sustainability agenda; shareholder and wider stakeholder
engagement; the Group's risk management and internal control
framework; corporate governance, integrity and compliance;
directors' duties; and treasury, risk, legal and regulatory matters.
Soraya's induction also included meetings with the Chair and
each of the Directors to understand the role of the PLC Board
and its Committees, and with the External Audit Partner.
Professional Development
The Chair meets with each Non-Executive Director individually
towards the end of the year to discuss their individual training
and development plans.
More broadly, Non-Executive Directors participate in a full
programme of briefings during the year across the Group’s
activities provided by the Chief Executive, members of the
Management Board, the Company Secretary, other senior
executives and outside advisors.
During 2024, key briefings for the Board included an in-depth
review of developments in sustainability regulation led by the Chief
Sustainability Officer and external legal advisors. The review
included analysis from UK, European and U.S. perspectives with a
deep dive review of rules adopted (then stayed) by the U.S. SEC in
relation to climate change disclosures. During the year, the Board
was also briefed on reform of the UK Listing Regime and on the
2024 UK Corporate Governance Code, to be introduced through
staged implementation from 2025.
Luc Jobin with Darrell Thomas and Karen Guerra attending a discussion forum
with colleagues from our DBS Hub in Warsaw, Poland in May 2024
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Division of Responsibilities
Directors’ Commitment
and Board Support
186
Professional Development
Non-Executive Directors regularly attend meetings of the Group’s
Regional Audit Committees and Corporate Audit Committee to
gain a better understanding of the Group’s regions and central
functions and the risks faced by the business at market, regional
and functional levels.
Committees of the Board are kept updated on developments
within their respective remits. All Board members attended the
meetings of the Audit and Remuneration Committees held in
September 2024 to promote a deeper understanding of the work
of the Committees of which they are not members.
All Directors were briefed on developments in the cyber risk
landscape and emerging threats, including perspectives reported
from external advisers as to the risks organisations should
evaluate in their Enterprise Risk Governance programmes,
alongside of an assessment of the Group's internal cyber risk
landscape, provided by the Director, Digital & Information and the
Chief Information Security Officer.
In 2024, the Audit Committee was briefed on developments
in sustainability reporting regulations by the Chief Sustainability
Officer and KPMG as external auditor
@and in the context of their
provision of assurance in relation to sustainability reporting
@.
Briefings covered continued reporting in alignment with TCFD
recommendations, the European Sustainability Reporting
Standards introducing future requirements for disclosures in
compliance with the EU Corporate Sustainability Reporting
Directive (CSRD), development of the UK Sustainability Disclosure
Standards, and the adoption of climate disclosure rules by the U.S.
SEC. The Audit Committee's understanding of developments in
the complex sustainability regulation landscape continues to
inform its oversight of the Group's sustainability reporting
framework and its future development.
The Audit Committee was also briefed on the introduction of the
2024 UK Corporate Governance Code and approach to compliance
through a phased approach from January 2025, and on
developments in UK financial reporting requirements.
The Remuneration Committee is briefed by its external
consultants on UK and U.S. corporate governance developments
impacting executive and wider workforce remuneration. Briefings
provided to the Committee during the year included updates on
the UK Investment Association's Principles of Remuneration,
updates on market developments in the use of sustainability
metrics in incentive schemes and other key developments in
executive remuneration to inform development of proposals for
the 2025 Directors' Remuneration Policy.
Darrell Thomas attending a marketing digital showcase with colleagues
in Tokyo, Japan in September 2024
Board Review Process
Annually, the Board undertakes a rigorous review of its
effectiveness and performance, and that of its Committees and
individual Directors. The Chair is responsible for the overall review
process and each Committee Chair is responsible for the review
of the performance and effectiveness of their Committee.
The effectiveness and performance of the Board, its Committees
and the Directors were reviewed internally in 2024, led by the Chair
and facilitated by the Company Secretary. An externally-facilitated
review of the performance and effectiveness of the Board, its
Committees, and each of the Directors was conducted in 2022
@by Dr Tracy Long of Boardroom Review Limited
@.
For the 2024 internal review, all Directors (in role in October 2024)
participated fully in the review. As part of the internal review
process, a series of questionnaires were completed by
participating Directors, through which they were requested to
assess the effectiveness and performance of the Board, the
Committees of which they were a member or regularly attended
during the year, and each of the Directors. Several members of
senior management also participated in aspects of the review
process relevant to their remit.
Feedback was collated on an anonymised basis and reports on the
outcomes of the review process and action areas for consideration
were prepared for the Board and each Committee. The Board and
the Committees then reviewed and discussed their respective
reports and identified action areas for 2025, taking into account
the review findings. The Committee Chairs also reported back to
the Board on the outcomes of their Committee evaluations.
The Chair received reports from the Company Secretary on the
performance and effectiveness of the Directors (other than
himself) and he provided individual feedback to each Director. The
Senior Independent Director received a report from the Company
Secretary on the Chair’s performance and effectiveness, and led
a discussion reviewing the Chair’s effectiveness with the other
Directors (without the Chair present). The Senior Independent
Director then provided feedback to the Chair.
2024: Internal Board review process
Plan and Evaluate
– The Chair and Company Secretary reviewed the
scope and focus areas for the review and defined
the series of questionnaires to be used to support
the review process.
– Participants submitted their assessment of the
performance and effectiveness of the Board, its
Committees and the Directors.
Reporting
– Participant feedback was collated on an anonymised
basis and reports were prepared for the Board, its
Committees and the Directors.
Review and Action
– Board Committees reviewed and discussed the review
outcomes related to their performance, identified
actions arising and provided feedback to the Board.
– The Board then discussed the review outcomes
and identified action areas for 2025.
– The Chair provided feedback to the other Directors.
– The Senior Independent Director provided feedback
to the Chair.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Composition, Succession, Evaluation
Board Effectiveness
187
1
2
3
Spotlight
2024 Board review
Overview of Outcomes
The internal review conducted for 2024 concluded that the
Board performs effectively and has a sound working relationship
with its Committees.
The review found the Board to be productive and diverse,
with an appropriate balance of experience and a high degree
of engagement demonstrated across all members of the
Board. The dynamics of the Board are well regarded, with
collaborative working relationships between the Non-Executive
Directors, Executive Directors and the wider management
team supporting openness and transparency in the
Board’s discussions.
The effectiveness of the Board’s approach to decision-making
was identified as a strength, with boardroom dynamics
encouraging constructive discussion and opportunities to share
perspectives. Feedback indicated that the Board maintains
appropriate focus on oversight of Group strategy and risk
management, controls and compliance matters, alongside of
monitoring external developments, the macroeconomic and
geopolitical environment and the evolving regulatory landscape.
The Board’s oversight of people, culture and how our values are
embedded was highlighted, with feedback indicating that the
enhanced approach to employee listening was well received and
that valuable insights were obtained through various channels,
including town hall sessions as part of Directors’ market visits.
More broadly, feedback indicated the continued importance of
the Directors’ programme of market and site visits to
understand how our values are embedded and strategic
capabilities are deployed.
The Board and the Audit, Remuneration and Nominations
Committees are considered to be effectively chaired, managed
and supported to enable their decision-making and that
Committee Chairs provide appropriate reporting on the activities
of their Committees back to the Board.
Progress against key action areas identified for 2024:
Strategy: The Board’s agenda for the year maintained due focus
on oversight of Group strategy and its execution, including in
relation to sustainability. During the year, the Board also worked
closely with the executive management team to develop a
focused set of new transformation metrics to articulate
progress against the Group’s strategic objectives.
Board leadership: In 2024, the Nominations Committee
reviewed the profiles, skills and experience required of future
Non-Executive Directors, taking into account the Group’s
strategic objectives, which supported development of candidate
role requirements for Non-Executive Director succession
planning. The Directors also gained insights from their
programme of market and operational site visits during the year
that enabled opportunities for informal workforce engagement.
Risk management: Appropriate time was allowed on the board
agenda for consideration of Principal Risks and mitigation
activities, including evolving risks relating to cyber security and
supply chain resilience. The Audit Committee has also
maintained its focus on the operation of business controls and
sustainability reporting.
People and culture: The Nominations Committee continued its
oversight of initiatives to develop a diverse pipeline of senior
management talent, supported by an in-depth review of longer-
term succession planning for Management Board roles. Soraya
Benchikh also completed her induction programme following her
appointment as Chief Financial Officer in May 2024.
The Remuneration Committee completed its review of the
Directors’ Remuneration Policy, discussed on pages 205 to 226.
Key Actions for 2025
Following the internal review conducted in 2024, the Board
and its Committees plan to focus on the following key areas:
Non-Executive succession planning
– Continued focus on succession planning for Non-Executive
Directors in view of anticipated retirements to maintain the
breadth of the Board’s skills and expertise, including financial
expertise, and with particular emphasis on succession planning
for the Chair of the Board and the Senior Independent Director.
– While the outcomes of the Board review for 2024 are not
anticipated to immediately influence the composition of the
Board, feedback received in relation to skills and experience
that may be beneficial for future Non-Executive Directors will
continue to be taken into account by the Nominations
Committee as part of ongoing Non-Executive Director
succession planning activities.
Strategic oversight
– Maintain focus on monitoring the progress of strategic
implementation and oversight of capital allocation,
underpinned by regular review of progress against the Group's
new transformation metrics and continued support for the
executive management team to stay focused on key priorities.
Risk management
– For the Audit Committee, continued oversight of development
of risk management and controls procedures to facilitate
enhanced reporting on material controls effectiveness from
2026, and focus on sustainability reporting developments to
ensure readiness for future requirements for enhanced
assurance of sustainability reporting.
– Keep abreast of emerging and evolving risks to the Group and
appropriate approaches to mitigation.
Oversight of culture, people and wider stakeholders
– Maintain focus on employee engagement and oversight of
cultural transformation, particularly to understand how our
values including ‘Empowered through trust’ are emphasised
consistently.
– Continue to allow time on the Board agenda for oversight of
diversity in the senior management succession pipeline and
the broader talent development to support the Group's
strategic objectives.
– For the Remuneration Committee, fine-tune development of
the new Directors’ Remuneration Policy to take account of
feedback from shareholder engagement, in readiness for
presentation of the new policy to shareholders in April 2025.
– Develop the Board's programme of market and site visits for
2025, building on the programme conducted in 2024, to enable
a range of opportunities for the Directors to engage with
colleagues across the Group, and with wider stakeholders
including suppliers, customers and consumers.
Professional development
– Develop the Board’s professional education programme for
2025 across various key topics, including sustainability, cyber
security, responsible use of AI, and evolving regulation
impacting the Group, supported by external perspectives.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Composition, Succession, Evaluation
Board Effectiveness
Continued
188
Nominations Committee
current members
Luc Jobin (Chair)
Kandy Anand
Karen Guerra
Holly Keller Koeppel
Murray S. Kessler
Véronique Laury
Darrell Thomas
Serpil Timuray
Luc Jobin
Chair of the Nominations Committee
Role
As set out in the Terms of Reference, the Nominations Committee is responsible for:
– reviewing the structure, size and composition of the Board, its Committees and the
Management Board on a regular basis to ensure they have an appropriate balance
of skills, experience, knowledge and, in relation to the Board, independence;
– oversight of plans and processes for orderly succession for appointments to the Board, its
Committees, the Management Board and Company Secretary to maintain a
combination of skills and experience and to ensure progressive refreshing of both Boards;
– making recommendations to the Board on suitable candidates for appointments
to the Board, its Committees, the Management Board and Company Secretary,
ensuring that the procedure for those appointments is rigorous, made on merit
against objective criteria, and has due regard for the promotion of diversity,
inclusion and equal opportunity;
– assessing the time needed to fulfil the roles of Chair, Senior Independent Director
and Non-Executive Director, and ensuring Non-Executive Directors have sufficient
time to fulfil their duties;
– overseeing the development of a pipeline of diverse, high-performing potential
Executive Directors, Management Board members and other senior managers; and
– implementing the Board Diversity & Inclusion Policy and monitoring progress
towards the achievement of its objectives, summarised on page 192.
Key Activities in 2024
– Succession planning for the role of Senior
Independent Director and the Chairs of
the Audit and Remuneration Committees.
– Making recommendations to the Board
for the appointment of Holly Keller
Koeppel as Senior Independent Director,
Darrell Thomas as Audit Committee
Chair and Kandy Anand as Remuneration
Committee Chair, which took effect from
conclusion of the Company's 2024 AGM.
– Assessing plans for Management Board
restructuring and making
recommendations to the Board to revise
elements of the Management Board's
structure, roles and composition, as set
out on page 173.
– Ongoing assessment of the profile,
capabilities and experience required of
future Non-Executive Directors in the
context of the Group’s strategy, to
support Non-Executive Director
succession planning activities, referred to
at page 190.
– Making recommendations to the Board in
relation to Directors’ annual appointment
and election/re-election at the AGM,
discussed further on page 190.
– Reviewing Executive Directors' and
Management Board members’ annual
performance assessments and assessing
development of candidates for
Management Board roles.
– Making recommendations to the Board
to introduce revisions to the Board
Diversity & Inclusion Policy, including to
reflect our values.
– Oversight of the Group’s diversity and
inclusion agenda, its role in promoting
an inclusive and high-performing culture
as part of the Group’s talent strategy,
and progress in building diverse talent
pipelines and creating enablers across
the organisation.
Board Diversity and Inclusion
The Board strives to promote diversity and
inclusion, within its own membership and
more broadly at all levels across our
organisation. Our Non-Executive Directors
come from a wide range of industry and
professional backgrounds, with varied
experience and expertise aligned to the
Group’s strategic objectives.
Biographies of the Directors, including a
summary of their skills, experience and
contribution to the Board, and details of the
representation of key diversity attributes
on our Board are set out on pages 166 to 169.
Our Board Diversity & Inclusion Policy and
revisions implemented in 2024 are
discussed on page 192. We report Board
and executive management diversity data
on page 193 in accordance with the UK
Listing Rules requirements. Currently, 50%
of our Directors are women and 40% from
an ethnic minority background (as defined
by the UK Office of National Statistics).
Nominations Committee terms of reference
Revised terms of reference for the Committee were introduced with effect from
1 August 2024 to reflect the introduction of the 2024 UK Corporate Governance Code,
as it applies to the Company from 1 January 2025.
For the Committee’s terms of reference see
www.bat.com/governance
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Nominations Committee
189
Board Succession Planning
The Board considers the length of service
of Directors holistically and the importance
of refreshing Board membership
progressively over time. The Committee
is responsible for regularly reviewing the
composition of the Board and the
Management Board to ensure both have
an appropriate combination of skills,
experience and knowledge.
The Committee is also responsible for
identifying candidates for appointment to
the Board and ensuring that all
appointments are made on merit, against
objective criteria, and with due regard for
the promotion of diversity, inclusion and
equal opportunity, taking into account our
Board Diversity & Inclusion Policy. This
process includes interviews with a range
of candidates and full evaluation of
candidates’ experience and attributes and
how these would augment the Board’s mix
of skills, experience and knowledge.
Executive Director succession
Following appointment of Tadeu Marroco
as Chief Executive and Javed Iqbal as
Interim Finance Director in May 2023, the
Committee oversaw a comprehensive and
international search process during 2023
to identify a new Chief Financial Officer,
leading to the appointment of Soraya
Benchikh in May 2024.
At the start of the selection process, a full
set of objective criteria was defined to
specify a range of key competencies and
experience required to fulfil the role,
including of transformational leadership,
depth of financial, capital markets and M&A
experience, and familiarity with complex
and highly regulated industries. The role
criteria also emphasised the importance of
attributes such as a collaborative and
inclusive leadership style, personal integrity
and ability to empower and mentor teams
and facilitate boardroom and leadership
team dynamics.
Through the initial stages of the search
process, the outcomes of a candidate
mapping exercise were assessed to
identify a potential long list of candidates.
Attendance at meetings in 2024
4(a), 5(a)
Meeting attendance
6
Name
Member since
Attended/Eligible to attend
Luc Jobin
2017
4/4
Kandy Anand
2022
4/4
Karen Guerra
2020
4/4
Holly Keller Koeppel
4(b)
2017
3/4
Murray Kessler
5(c)
2023
4/4
Véronique Laury
2022
4/4
Darrell Thomas
2020
4/4
Serpil Timuray
2023
4/4
Sue Farr
5(b)
2015 - 2024
1/1
Dimitri Panayotopoulos
5(b)
2015 - 2024
1/1
A shortlist of potential candidates was then
defined, supported by individual briefing
reports against the role criteria. Thorough
consideration was given to the capabilities,
experience and personal attributes of
shortlisted candidates.
Soraya was identified as the preferred
candidate for the role of Chief Financial
Officer through benchmarking of her skills,
experience and personal attributes against
the other shortlisted candidates and the role
criteria, an interview and assessment process
and input from members of the Committee.
In connection with this search process,
Savannah Group Limited
1 supported with
an initial candidate mapping exercise and
Odgers Berndtson
2 supported with
candidate benchmarking and assessment.
Following the Board's acceptance of the
Nominations Committee's
recommendation, Soraya's appointment
as Chief Financial Officer was announced
in November 2023 and took effect on
1 May 2024.
Soraya brings to the Board her extensive
senior leadership and financial experience
gained from a range of international fast
moving consumer goods companies and
her biography is set out on page 166.
Non-Executive Director succession
The process for the identification and
recommendation of a candidate for
appointment as a Non-Executive Director
is led by the Committee.
The process generally includes interviews
with a range of candidates and full
evaluation of candidates’ experience and
attributes and how these would augment
the Board’s competencies and diversity.
In 2024, the Committee reviewed the
profiles, skills and experience required of
future Non-Executive Directors, taking into
account the Group's strategic objectives,
overlaid with an assessment of the skills
matrix contributed by current Non-
Executive Directors and anticipated tenure.
Based on this review, the Committee has
overseen the development of specific
candidate profile requirements.
The Committee’s Non-Executive Director
succession planning activities during the
year were supported by Egon Zehnder
3, an
executive search consultancy. The process
leading to the appointment of Uta
Kemmerich-Keil as a Non-Executive
Director with effect from 17 February 2025
will be reported in the Company’s Annual
Report and Form 20-F for 2025.
Board Retirements
Sue Farr and Dimitri Panayotopoulos
stepped down from the Board with effect
from the conclusion of the Company’s
AGM on 24 April 2024.
Annual General Meeting 2025
Murray Kessler will step down from the
Board with effect from 17 February 2025 and
will not be proposed for re-election at the
Company’s 2025 AGM. The Company will
submit all other eligible Directors for re-
election, or election for the first time in the
case of Soraya Benchikh and Uta
Kemmerich-Keil (Uta will be appointed to the
Board with effect from 17 February 2025).
Prior to making recommendations to the
Board in respect of Directors proposed for
re-election or election for the first time (as
applicable), the Committee carried out an
assessment of each Director, including
their performance, contribution to the
long-term sustainable success of the
Company and, in respect of each of the
Non-Executive Directors, their continued
independence and ability to devote
sufficient time to their role (discussed
on pages 185 and 186).
The Chair’s letter accompanying the 2025
AGM Notice confirms that all Non-Executive
Directors being proposed for re-election (or
election for the first time, as applicable) are
effective and that they continue to
demonstrate commitment to their roles.
Notes:
1.
Savannah Group Limited is an independent executive search
firm, which applies the Standard and Enhanced Codes of
Conduct for Executive Search Firms. The firm has no
connections with the Company or its Directors other than in
respect of the provision of executive search services.
2. Odgers Berndtson (trading name of IRG Advisors LLP) is
an independent executive search firm, which applies the
Standard and Enhanced Codes of Conduct for Executive
Search Firms. The firm has no connections with the
Company or its Directors other than in respect of the
provision of executive search services.
3. Egon Zehnder Limited is an independent executive
search firm, which applies the Standard and Enhanced
Codes of Conduct for Executive Search Firms. The firm
has no connections with the Company or its Directors
other than in respect of the provision of executive
search and consultancy services.
4. Number of meetings in 2024: (a) the Committee held
four meetings in 2024, one of which was ad hoc. Three
meetings of the Committee are scheduled for 2025; and
(b) Holly Keller Koeppel did not attend the scheduled
meeting in July 2024 due to prior commitments.
5. Membership: (a) all members of the Committee are
independent Non-Executive Directors in accordance with
the UK Corporate Governance Code 2018 Provisions 10 and
17, applicable U.S. federal securities laws and NYSE listing
standards; and (b) Sue Farr and Dimitri Panayotopoulos
ceased to be members of the Committee on stepping
down from the Board at the conclusion of the AGM on
24 April 2024; (c) Murray Kessler will cease to be a member
of the Committee on stepping down from the Board with
effect from 17 February 2025.
6. Other attendees: the Chief Executive and the Chief
People Officer attend meetings by invitation but not
as members.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Composition, Succession, Evaluation
Nominations Committee
Continued
190
Terms of Appointment to the Board
Details of the Directors’ terms of
appointment to the Board and the
Company’s policy on payments for loss
of office are contained in the current
Directors’ Remuneration Policy, which is
set out in full in the Remuneration Report
in the Company’s Annual Report and
Form 20-F for 2021 available on bat.com.
The Executive Directors have rolling
one-year contracts. Non-Executive
Directors do not have service contracts with
the Company but instead have letters of
appointment for one year, with an expected
time commitment of 25 to 30 days per year.
Oversight of our People Strategy
The Board oversees our people strategy as
a key element and enabler of the Group
strategy as a whole. In 2024 and in the
context of the Dynamic Business pillar of
our Strategic Navigator, the Board
endorsed the introduction of our new
people strategy, designed to foster an
exciting, winning organisation to be
implemented through defined initiatives
and measured through core indices.
Our people strategy and its strategic
ambitions are discussed further at pages
38 to 39 and 110 to 112.
Senior Management
succession planning
As part of the Committee’s responsibility
to oversee the development of a pipeline
of diverse, high-performing senior
management, it reviews succession plans
and talent pools at short-term, mid-term
and long-term time horizons for the
Executive Directors, other Management
Board members, and certain other
members of senior management.
The Committee takes into account the
importance of growing a diverse executive
talent pipeline to support broader
executive management diversity in the
longer term and develop strategic and
functional capabilities, including progress
towards our ambition for 40%
representation of Ethnically Diverse
Groups
1 for the Management Board and
direct reports by 2027, in line with the
recommendation made by the UK Parker
Review. An update on our progress against
this ambition is discussed at page 111.
Progress against our objective to develop
a pipeline of diverse, high-performing
senior managers is set out on page 192.
Talent pipeline development
The strategic intentions of our people
strategy that underpin development of
a diverse talent pipeline include:
– Shaping a performance-driven &
dynamic organisation: enable a
progressive and results-focused mindset
and enhance access to talent;
– Nurturing relevant capabilities:
meaningful development paths to drive
skills development and talent retention,
supported by clear leadership
expectations and a culture of
personalised learning; and
– Creating a purposeful & energising
environment: our values are embedded
in all we do, promote our diversity and
inclusion agenda, reward performance
and recognise progress.
During the year, the Board reviewed
progress of key initiatives mapped to the
strategic ambitions of our people strategy
across a rolling two-year roadmap,
including:
– Leadership Capabilities: Launch of
defined capabilities, driven by the Group's
strategic objectives which, taken
together with our values, describe how
everyday leadership should look at every
level of the organisation.
– Talent model: Activation of a new,
employee lifecycle-focused talent model,
designed to build a diverse and future-
ready talent pipeline aligned to the
Group's strategy, including career
pathways and resources to develop key
skills and identify best-fit talent to inform
succession planning and focused
development actions.
– Employer value proposition: Progress
in the development of our employer
value proposition and its resonance
with candidates, to enable the Group
to attract and retain talent with relevant
capabilities through engaging brand
expression and activation.
– Group Diversity & Inclusion agenda:
Reviewing progress against the Group’s
diversity and inclusion ambitions through
to 2025, including to have women in 40%
of senior team roles and 45% of
management level roles
1.
Our Strategic Report discusses our people
strategy and progress of key initiatives
further, and provides details
on the diversity of our workforce and our
senior management population.
Read more on pages 38 to 39
and 110 to 112
+
Executive Management Balance
as at 31 December 2024
Management Board:
Nationality
American
1
Australian
1
Belgian
1
Brazilian
2
British
3
French
1
German
1
Irish
2
Italian/Argentinian
1
Pakistani
2
Senior Management
2
and their direct reports:
Gender balance
Male
69
65%
Female
37
35%
Notes:
Management Board ethnicity and gender
balance is reported on page 193 as part of
our diversity reporting for executive
management as at 31 December 2024.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
191
1. Refer to page 393. Refer to BAT 'Reporting Criteria'
for a full description of key definitions at bat.com/
reporting.
2. Senior Management comprises the Management
Board and the Company Secretary, in accordance
with the 2018 Code.
Spotlight
Our Board Diversity & Inclusion Policy
A revised Board Diversity & Inclusion Policy was approved by the Board and took effect in 2024,
reflecting our values and the introduction of the 2024 UK Corporate Governance Code.
At BAT, we are proud to be a diverse and inclusive global organisation that
encourages our people to value their differences and bring their authentic
selves to work.
Our ongoing commitment to fostering a progressive culture is underpinned
clearly by our value: 'Truly Inclusive'. Our commitment to diversity and
inclusion across BAT is also embedded through our Group Standards of
Business Conduct, applicable to all employees of the Group.
Our Board Diversity & Inclusion Policy sets out our approach to diversity
and inclusion applicable to the Board, its Committees
1 and the
Management Board
2. This policy is intended to support the Board, through
the activities of its Nominations Committee, in maintaining the
effectiveness and balance of the Board, its Committees and the
Management Board.
Diversity and inclusion are key principles of our values. We think of diversity
in its widest sense, as those attributes that make each of us unique. These
include our race, ethnicity, cultural and social backgrounds, geographical
origin, nationality, gender, age, any disability, sexual orientation, religion,
skills, experience, education, socio-economic and professional background,
perspectives and thinking styles.
We recognise that diversity is a critical component of board effectiveness
and we are committed to promoting diversity in the composition of the
Board, its Committees and the Management Board.
The Nominations Committee is responsible for regularly reviewing the
composition of the Board, its Committees and the Management Board to
ensure these have an appropriate balance of skills, expertise and knowledge,
and for ensuring that all appointments are made on merit against objective
criteria and with due regard for the promotion of diversity and inclusion. This
includes consideration of our Board Diversity & Inclusion Policy objectives
set out below.
The Nominations Committee is responsible for implementing this policy and
monitoring progress against its objectives. This policy and progress against
its objectives is reviewed annually by the Nominations Committee, in addition
to other BAT initiatives that promote diversity in all its forms across BAT.
As part of the annual review of the effectiveness and performance of the
Board, consideration is given to the balance of experience, skills, knowledge,
independence and all attributes of diversity of the Board.
Board Diversity & Inclusion Objectives and Progress Updates
The objectives of our Board Diversity & Inclusion Policy and progress against these objectives in the year are set out below.
Fostering an inclusive culture
within the Group and leading
by example
During the year, the Board reviewed the definition of our refreshed leadership capabilities for application across
the Group's management population. These leadership capabilities, together with our values, describe how
everyday leadership should look at every level of the organisation and highlight fostering an inclusive culture as
a core leadership capability,
Considering all aspects of diversity
when reviewing the composition
of, and succession planning for,
the Board, its Committees
1 and the
Management Board
2
The Nominations Committee has regard to diversity in its widest sense, including attributes such as gender,
race, ethnicity, cultural and social backgrounds, and other personal attributes referred to in our Board Diversity &
Inclusion Policy above, when undertaking these activities.
Considering a wide and gender-
balanced pool of candidates
for appointment to the Board
Executive search firms are engaged to support Board and Management Board succession planning where
applicable and are required to provide gender-balanced shortlists of candidates. Succession planning for
Executive Directors and Management Board members takes into account potential internal candidates from
across the Group and potential external candidates.
Maintain at least 40%
representation of women
on the Board
The representation of women on the Board was 50% as at 31 December 2024 (2023: 45%). At the close of the
2025 AGM, it is anticipated that women will represent 60% of the Board.
At least one of the following senior
positions on the Board
to be held by a woman:
Chair; Senior Independent
Director; Chief Executive;
Chief Financial Officer
The role of Senior Independent Director is held by Holly Keller Koeppel. Holly was appointed as Senior Independent
Director with effect from the conclusion of the 2024 AGM. The role of Chief Financial Officer is held by Soraya
Benchikh. Soraya was appointed to the Board on 1 May 2024.
Other senior positions on the Board are held by Luc Jobin (Chair) and Tadeu Marroco (Chief Executive).
At least one Director of a
minority ethnic background on
the Board
3
As at 31 December 2024, the representation of ethnic minority backgrounds on the Board was 40% (2023: 27%).
At the close of the 2025 AGM, it is anticipated that the representation of ethnic minority backgrounds on the
Board will be 40%. The Board complies with the recommendations on ethnic diversity made by the UK Parker
Review.
Giving preference, where
appropriate, to engagement of
executive search firms accredited
under the Standard and Enhanced
Code of Conduct for Executive
Search Firms
Where executive search firms are engaged to provide executive search services to support Board succession
planning, preference is given to those that are accredited under the Standard and Enhanced Code of Conduct for
Executive Search Firms.
Oversight of the development
of a pipeline of diverse, high-
performing potential Executive
Directors, Management Board
members and other senior
managers.
The representation of women on the Management Board was 13% as at 31 December 2024 (2023: 7%).
Promotion of diversity and inclusion is embedded in our approach to Management Board succession planning
to support progress towards improved gender diversity at Management Board level. Emphasis is placed on
developing diverse talent pools at all levels of the organisation through recruitment, development and retention
of diverse and high-performing talent. In 2024, 54% of the Group’s external management recruits were women
(2023: 50%) and women comprised 63% of our new graduate intake in 2024 (2023: 62%).
Further information about the Group’s diversity and inclusion agenda is set out on pages 110 to 112.
Notes on Board Diversity & Inclusion Policy Objectives:
1. The principal committees of the Board comprise the Audit, Remuneration and Nominations Committees.
2. The Management Board is the executive level committee of the Group.
3. Applying UK Office for National Statistics ethnicity categories of: Asian; Black; Mixed/Multiple Ethnic Groups; Other Ethnic Group, in alignment with the UK Listing Rules.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Composition, Succession, Evaluation
Nominations Committee
Continued
192
Reporting in alignment with UK Listing Rules provisions on diversity and inclusion
We report our Board and executive management diversity data and our progress in meeting the UK Listing Rules board diversity targets
as at 31 December 2024 in accordance with the UK Listing Rules disclosure requirements.
As at 31 December 2024, two of the four senior positions on the Board were held by women, Directors from an ethnic minority
background represented 40% of the Board and the representation of women on the Board was 50% (this remains the case as at the date
of this Annual Report and Form 20-F).
The Board is committed to continued enhancement of its diversity, supported by the succession planning activities conducted by the
Nominations Committee, discussed on pages 189 to 192.
Gender Representation: Board & Executive Management as at 31 December 2024
Number of Board
members
Percentage of
the Board
Number of senior positions
on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
1
Percentage
of executive
management
1
Men
5
50 %
2
13
81 %
Women
5
50 %
2
3
19 %
Not specified/prefer not to say
—
—
—
—
—
Ethnic Background: Board & Executive Management as at 31 December 2024
Number of Board
members
Percentage of
the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
1
Percentage
of executive
management
1
White British or other White (including
minority-white groups)
6
60 %
2
11
69 %
Mixed/Multiple Ethnic Groups
—
—
—
—
— %
Asian/Asian British
2
20 %
1
3
19 %
Black/African/Caribbean/Black British
1
10 %
—
—
— %
Other ethnic group
1
10 %
1
2
12 %
Not specified/prefer not to say
—
—
—
—
—
Note:
1.
Executive management includes the Management Board (most senior executive body below the Board) and the Company Secretary, excluding administrative and support staff,
as defined by the UK Listing Rules.
Approach to data collection
Gender and ethnicity data relating to the Board, Management Board and
Company Secretary is collected on an annual basis applying a standardised
process managed by the Company Secretary.
Each Board member, Management Board member and the Company Secretary
is requested to complete a standard form questionnaire on a strictly confidential
and voluntary basis, through which the individual self-reports their ethnicity and
gender identity (or specifies they do not wish to report such data).
Consent is provided for data collection and processing of that data in
accordance with the applicable privacy notice set out in the questionnaire and
in accordance with the Group Data Privacy Procedure.
The criteria of the standard form questionnaire are fully aligned to the definitions
specified in the UK Listing Rules, with individuals requested to specify:
(1) Self-reported gender identity. Selection from [a] male; [b] female; [c] other
category/please specify; [d] not specified (due to local data privacy laws); or
[e] prefer not to say.
(2) Self-reported ethnic background (classifications as designated by the UK
Office of National Statistics). Selection from: [a] White British or other White
(including minority white groups); [b] Mixed or Multiple Ethnic Groups;
[c] Asian or Asian British; [d] Black or African or Caribbean or Black British;
[e] Other Ethnic Group (including Arab, Hispanic or Latin American) (please
specify); [f] not specified (due to local data privacy laws); or [g] prefer not
to say.
The standard form questionnaire includes further guidance to participants
in respect of the category 'Other Ethnic Group' following publication of the
2021 census ethnicity data by the UK Office of National Statistics.
This approach to data collection is consistently applied across all members
of the Board, Management Board and Company Secretary in relation to the
collection and reporting of their gender and ethnicity data in this Annual
Report and Form 20-F.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
193
Audit Committee
Current Members
Darrell Thomas (Chair)
Holly Keller Koeppel
Véronique Laury
Darrell Thomas
Chair of the Audit Committee
Introduction
On behalf of the Audit Committee, I would
like to introduce our report on the
Committee's role and activities during
2024. I was appointed as Chair of the
Committee in April 2024, taking over the
role from Holly Keller Koeppel who was
appointed as Senior Independent Director.
Holly continues to contribute her valuable
experience as a member of the Committee
and I thank her for her work as Chair of the
Committee since 2019. Karen Guerra
transitioned to her new role on the
Remuneration Committee on 10 February 2025
and I extend my thanks for her contributions
to the Committee. I look forward to
welcoming Uta Kemmerich-Keil to the
Committee with effect from 17 February 2025.
Following the competitive tender process
conducted in 2023, the recommendation to
appoint KPMG LLP as external auditor for
financial year 2025 will be presented to
shareholders at our next Annual General
Meeting. You can refer back to the
Committee's full report on the tender
process and the selection criteria applied
in our Annual Report and 20-F for 2023.
We assessed a range of accounting
judgements during the year, including
the accounting treatment applicable to
Imperial Tobacco Canada, in the context
of ongoing Canadian Companies’ Creditors
Arrangement Act (CCAA) proceedings and
developments in the litigation, assessment
of the carrying value of U.S. business
goodwill and intangible assets, and the
accounting treatment applicable to the
disposal of part of the Group's investment
in ITC Limited. These and other significant
judgements are reviewed from page 196.
Our agenda through the year has emphasised
ongoing attention to the effectiveness of the
Group's risk management and internal control
framework. Our work has included a thorough
review of principal and emerging risks to the
Group and we have recognised climate
change and circular economy as distinct
Principal Risks, considering the varying
challenges and mitigation strategies in each
context. We also monitored developments
in the Group’s business integrity and
compliance programme over the year.
The Committee is responsible for oversight
of the Internal Audit function and we have
endorsed a refreshed internal audit strategy
which takes account of the evolving assurance
needs of the Group. We reviewed progress
of internal audit assignments conducted
across the business in 2024, including those
focused on cyber security resilience and
responsible marketing controls, and we
approved the internal audit plan for 2025
reflecting the refreshed internal audit
strategy. Our assessment of effectiveness
of the Internal Audit function for the year
was supported by an external quality
assessment and the outcomes of
this review are discussed at page 201.
Looking ahead to future reporting years
and readiness to meet new regulatory
requirements, our work plan in 2025 will
include continued oversight of the Group's
sustainability data and reporting
programme as preparations for CSRD
implementation continue at pace, and
development of our procedures to facilitate
enhanced reporting on material controls
effectiveness from financial year 2026.
Role
As set out in its terms of reference, the Audit Committee monitors and reviews:
– integrity of the Group’s financial statements and any formal announcements
relating to the Company’s performance, considering any significant financial
reporting issues, significant judgements and estimates reflected in them, before
their submission to the Board;
– consistency of the Group’s accounting policies;
– effectiveness of, and makes recommendations to the Board on, the Group’s risk
management and internal control framework, including accounting, financial
controls and other material controls, auditing matters and business risk
management systems;
– effectiveness of the Group’s internal audit function;
– independence, performance, effectiveness and objectivity of the Company’s
external auditors, makes recommendations to the Board as to their reappointment
(or for a tender of audit services where appropriate), and approves their terms of
engagement and the level of audit, audit-related and non-audit fees; and
– assurance activities conducted by the external assurance provider in relation to
Group reporting and scope of assurance activities, makes recommendations for
their appointment, and approves their terms of engagement and fees.
Audit Committee terms of reference
Revised terms of reference for the Committee were introduced with effect from
1 August 2024 to reflect the introduction of the 2024 UK Corporate Governance Code
as it applies to the Company from 1 January 2025.
For the Committee’s terms of reference see
www.bat.com/governance
+
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Audit, Risk, Internal Control
Audit Committee
194
Key Activities in 2024
Regular work programme includes reviewing:
– the Group’s annual results, half-year results, the application of
accounting standards and the external auditors’ reports where
results are audited;
– the basis of preparation and accounting judgements, including
application of segmental reporting;
– adjusting items, applicable accounting treatments and the use
of alternative performance measures;
– the annual programme of assessment of goodwill and
intangibles impairment;
– the steps taken to validate the Group’s ‘going concern’
assessment at half-year and year-end and agreeing on the
process and steps taken to determine the Group’s viability
statement at year-end;
– the Group’s liquidity position, including current facilities
and financing needs;
– the assessment of Group viability, taking into account the
Group's current position and Principal Risks and associated
stress-testing analysis, prior to review by the Board;
– significant tax matters for the Group, including rate of taxation
and external developments that may impact the Group's
tax position;
– the accounting applicable to post-employment benefits
liabilities and assets;
– the internal processes followed for the preparation of the
Annual Report and Form 20-F and confirming that the
processes appropriately facilitated the preparation of an
Annual Report and Form 20-F that is ‘fair, balanced and
understandable’;
– the Group’s external auditors’ year-end audit, including the key
audit matters, critical audit matters, assessments of
materiality and the Group’s control environment, and
confirming the independence of the Group’s external auditors;
– the Group's risk management and internal control framework,
including the effectiveness of accounting and other material
controls, including financial, operational, reporting and
compliance controls (discussed on page 198);
– risks to the Group, including the Group risk register,
prioritisation and categorisation of Group risks, relevant
mitigating factors and emerging risks to the Group (discussed
on pages 155 to 162 and 414 to 435);
– oversight of management’s activities to ensure ongoing
compliance with the U.S. Sarbanes-Oxley Act of 2002 (SOx)
(discussed on page 199);
– the Company’s status as a Foreign Private Issuer for the
purposes of U.S. securities laws;
– regular reports from the Group Head of Internal Audit on
the internal audits of markets, business units, processes,
operations and major change initiatives, management
responses to internal audit findings and action plans put
in place to address any issues raised;
– progress against the internal audit plan for 2024 and design
of the 2025 internal audit plan;
– the Group’s sustainability performance on an annual basis,
including performance against the Group’s sustainability
targets, the Group’s responsible marketing framework and
under-age access prevention activities (discussed on pages 76
and 77);
– external assurance activities conducted in respect of defined
sustainability metrics and related information conducted by
the external assurance provider and assessing the outcomes
of assurance with the external provider;
– annual and interim reports on the Group’s Delivery with
Integrity compliance programme (discussed on pages 118 to
119), monitoring compliance with the SoBC, and monitoring
SoBC incident reporting and the effectiveness of Speak Up
channels prior to review by the Board;
– the outcomes of human rights assessments for countries in
which Group companies operate that are identified to have
a higher degree of exposure to human rights risks in 2024,
including local compliance with Group policies, standards and
controls and local measures in place to enhance human rights
risk management;
– periodic reports from the Group’s Corporate Audit Committee and
Regional Audit Committees;
– the annual report from the Group Head of Security on security
risks, losses and fraud arising during the preceding year;
– half-year and year-end reports on the Group’s political
contributions (discussed on page 204); and
– the Committee's effectiveness, following the annual review of
the Committee's performance (discussed on pages 187 to 188).
Attendance at meetings in 2024
1
Meeting attendance
3,4
Name
Member since
Attended/Eligible to attend
Darrell Thomas
2(a),(b),(c)
2020
6/6
Karen Guerra
2(a),(d)
2021
6/6
Holly Keller Koeppel
2(a),(b)
2017
6/6
Véronique Laury
2(a)
2022
6/6
Notes:
1.
Meetings: the Committee held six meetings in 2024. Five meetings of the Committee are scheduled for 2025. Additional meetings are convened on an ad hoc basis as required during
the year. In January 2024, there was one ad hoc meeting of the Committee to consider accounting and taxation matters.
2. Membership: (a) all members of the Committee are independent Non-Executive Directors in accordance with the UK Corporate Governance Code 2018 Provisions 10 and 24 and
applicable U.S. federal securities laws and NYSE listing standards. The Board has determined each Committee member to meet the financial literacy requirements applicable under
NYSE listing standards. Each member of the Committee has recent and relevant financial experience in accordance with the UK Corporate Governance Code 2018. The Committee has
competence in accounting and Committee members as a whole have competence relevant to the sectors the Group operates in as required by the UK Disclosure Guidance and
Transparency Rules; (b) Darrell Thomas and Holly Keller Koeppel are each designated as an audit committee financial expert in accordance with applicable U.S. federal securities laws
and NYSE listing standards; (c) Darrell Thomas was appointed as Chair of the Committee with effect from conclusion of the Company's AGM on 24 April 2024, succeeding Holly Keller
Koeppel who stepped down as Chair at that time but remains a member of the Committee; (d) Karen Guerra ceased to be a member of the Committee with effect from 10 February
2025 when she joined the Remuneration Committee.
3. The Chief Financial Officer attends all Committee meetings but is not a member. Other Directors may attend by invitation. The Director, Legal & General Counsel, the Group Head of
Internal Audit and the external auditors generally attend all meetings of the Committee.
4. The Committee met alone with the external auditors, and, separately with the Group Head of Internal Audit, at the end of every Committee meeting. The Committee also meets
periodically with management.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
195
Further specific matters considered by the Committee
in relation to the financial statements:
– New metrics and non-GAAP assessment: New non-GAAP
measures of adjusted gross profit and adjusted gross margin
have been introduced. The Committee assessed these
measures, noting that they demonstrate the Group's
profitability (before adjusting items and translational foreign
exchange) from the principal product categories, illustrating
the category profitability development as the Group realises
the transition from Combustibles to Smokeless products in line
with the Group's strategy to Build a Smokeless World.
– Revision to Group accounting policy to reflect amendment
to IAS 7 (Cash Flow Statements): In view of an amendment to
IAS 7 (Cash Flow Statements) in respect of disclosures of
supplier finance arrangements (reverse factoring
arrangements), the Committee approved management's
approach to enhance disclosure of applicable finance
arrangements (see note 25 in the Notes on the Accounts).
Significant accounting judgements and estimates
considered in relation to the 2024 financial statements:
The significant accounting judgements and estimates
considered by the Committee in relation to the financial
statements for the year ended 31 December 2024 are
summarised below.
– Goodwill and intangibles impairment review: The
Committee reviewed management’s assessments of the
carrying value of intangibles including goodwill (see note 12
in the Notes on the Accounts), with continued focus on:
U.S. Business: Following a full impairment assessment
covering overall U.S. business goodwill, identified indefinite-
lived and definite-lived brands, and taking into account
continued macro-economic headwinds and latest forecasts,
the Committee concluded that it was appropriate to recognise
an impairment of £646 million in respect of the Camel Snus
trademark due to the changing consumer behaviour towards
the Modern Oral category; and
Imperial Tobacco Canada (ITCAN): In respect of Group
subsidiary ITCAN, the Committee determined that it was
appropriate to not recognise an impairment charge in respect
of goodwill, taking into account the developments in the
Canadian Companies’ Creditors Arrangement Act (CCAA)
proceedings during the year, following the publication of the
proposed settlement plan in October 2024.
– Contingent liabilities, provisions and deposits in connection
with ongoing litigation:
Imperial Tobacco Canada (ITCAN): The Committee continued
to monitor the status of the CCAA proceedings under which
Group subsidiary ITCAN filed for protection in 2019 following
the judgment of the Québec Court of Appeal in the Québec
Class Action lawsuits, with stays currently in place until 3
March 2025. The Committee determined it remained
appropriate to consolidate ITCAN’s financial results in the
Group financial statements whilst ITCAN continues to be
subject to the CCAA proceedings. The Committee also
determined it was appropriate to recognise a provision related
to the Group's best estimate of the potential liability in respect
of the proposed settlement plan published in October 2024
(see note 24 in the Notes on the Accounts).
Fox and Kalamazoo Rivers: In relation to Fox River, the
Committee reassessed the provision in respect of the Fox
River clean-up costs and related legal expenses and confirmed
that the provision would continue to be retained at the prior
year level, noting that inherent uncertainties remain (see note
24 in the Notes on the Accounts). The Committee also
assessed the accounting treatment applicable to a settlement
concluded with a former adviser to a third party involved in the
litigation and concluded it was appropriate to recognise the
settlement as an adjusting item impacting on profit from
operations (see note 5(c) in the Notes on the Accounts). In
relation to Kalamazoo River, the Committee reviewed the
position in respect of the claim and assessed that no provision
should be recognised on the basis set out at note 31 in the
Notes on the Accounts.
Reynolds American Companies: The Committee concurred
with management’s approach to accounting for the Master
Settlement Agreement and the Engle class-action and progeny
cases as consistent with the prior year (see note 31 in the
Notes on the Accounts).
– Impact of disposal of part of the Group's investment in ITC
Limited (ITC): In relation to the Group's disposal of shares
representing approximately 3.5% of ITC's issued ordinary share
capital announced in March 2024, the Committee assessed
the accounting treatment applicable to the disposal and
concluded it was appropriate to recognise the gain as an
adjusting item within share of post-tax results of associates
and joint ventures (see note 9(a) in the Notes on the Accounts).
– Repayment of existing portion of Group debt: Following
a tender offer in April 2024, the Group completed the early
redemption of £1.8 billion of bonds, including £15 million of
accrued interest, in respect of which the Committee
determined the accounting treatment applicable to the
transaction, including to recognise a net credit of
£590 million to be treated as an adjusting item impacting net
finance costs (see note 8(b) in the Notes on the Accounts).
– Significant tax exposures for the Group: The Committee
reviewed updates on corporate tax matters and reports from
the Group Head of Tax on developments in various markets,
including tax disputes in Brazil and the Netherlands, and the
status of the Franked Investment Income Group Litigation
Order (FII GLO). The Committee concurred with
management’s assessments and disclosures in respect of
these tax exposures (see notes 10 and 31, respectively, in the
Notes on the Accounts).
– Adjusting items: The Committee undertook a review of all
adjusting items, including those impacting profit from
operations (primarily amortisation of certain brands, provisions
in respect of ITCAN and the CCAA proposed settlement,
charges in respect of an excise assessment in Romania,
impairment of certain intangible assets, litigation charges and
income from a settlement arrangement in connection with Fox
River); impacting net finance costs (primarily in relation to a
gain on repurchase of a portion of Group debt); and impacting
on associates (in relation to a gain on the disposal of a portion
of the Group's investment in ITC) (see notes 4, 5, 6 7, 8(b), 9(a)
in the Notes on the Accounts).
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– Segmental reporting assessment: The Committee
reassessed the Group reporting requirements and concluded
that the most appropriate segmentation, in line with IFRS 8
Operating Segments, remains geographic. Consideration was
made to the Group’s management structure and information
provided to the chief operating decision maker (see note 2 in
the Notes on the Accounts). While additional information on a
category basis is provided, this is to assist the users of the
financial statements in understanding the Group’s performance
alongside the performance on a geographic (regional) basis.
– Investments in Associates - Organigram Holdings, Inc.
(OGI): Following recognition of impairment charges against the
carrying value of the Group's investment in OGI in 2022 and
2023, the Committee reviewed management's assessment of
the current carrying value of the assessment and concluded
that the carrying value of the investment was appropriate and
that no further impairment was required in 2024 (see note 14 in
the Notes on the Accounts). The Committee also assessed the
accounting treatment applicable to further investments made
by the Group in OGI in 2024 and determined management's
approach to be appropriate (see note 14 in the Notes on
the Accounts).
– Foreign exchange and hyperinflation: In the context of Group
operations in certain jurisdictions with severe currency
restrictions where foreign currency is not readily available,
including hyperinflationary jurisdictions such as Venezuela, the
Committee assessed management's approach to applicable
accounting treatment and confirmed that the methodologies
used to determine applicable exchange rates for accounting
purposes were appropriate (see note 1 in the Notes on
the Accounts).
Specific risk topics considered by the Committee included:
– review of the Group's principal risks and emerging risks,
including identification of Climate Change and Circular
Economy as distinct Principal Risks, assessment of changes in
impact and likelihood of existing risks, and the report on the
effectiveness of the Company’s risk management system prior
to Board assessment;
– evolution of physical and transitional climate change risks and
their impact on the Group, including climate change impacts,
extreme weather events, greenhouse gas emissions, oversight
of processes in place to manage climate change risks, and
annual reporting on the identification, assessment and
management of those risks, in continued alignment with the
Taskforce on Climate-Related Financial Disclosures (TCFD)
framework (discussed further at pages 120 to 136 and 161);
– consolidation of risks associated with circular economy,
including product sustainability, single-use plastics and waste
management, into the Group's risk register, discussed at pages
155 and 128;
– current and emerging risks in relation to the Group’s digital
strategy and data management, with emphasis on digital
transformation, cyber security resilience, responsible use of AI,
and the approach to managing those risks (discussed further
at pages 162 and 199 to 201);
– oversight of the Group's sustainability data and reporting
programme established to develop sustainability reporting in
alignment with EU CSRD and other recognised international
standards, including outcomes of the assessment of the
Group's sustainability Impacts, Risks and Opportunities (IROs)
identified in 2024 following the mapping of IROs across the
Group's value chain (discussed further below);
– risks associated with exposure to interest rate changes on net
finance costs arising from existing, new and refinanced debt
and restricted cash in the Group and actions to mitigate those
risks (discussed on page 160);
– revisions to the Group’s risk appetite framework as it relates to
the Group’s strategic objectives, and review of emerging risks
to the Group twice per year, prior to Board consideration; and
– submission of the Group’s annual compliance report to the U.S.
Department of Justice, in accordance with reporting
obligations specified under the deferred prosecution
agreement entered into by the Company.
For further information please refer to the Group Principal Risks on
pages 155 to 162 and the Group risk factors on pages 414 to 435
+
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Risk Management and Internal Control Overview
The Company maintains its framework of risk management and
internal control with a view to safeguarding shareholders’
investment and the Company’s assets. This framework is designed
to identify, evaluate, manage and monitor risks that may impede
the Company’s objectives. It cannot, and is not designed to,
eliminate risk entirely.
This framework provides a reasonable, not absolute, assurance
against material misstatement or loss. The main features of the risk
management and internal control framework operated within the
Group are described below. The framework has been in place
throughout the year under review and remains in place to date.
It does not cover associates of the Group.
Risk management
Risks are actively assessed and mitigated at Group, functional,
directly-reporting business unit (DRBU) and market levels. Risk
registers, based on a standardised methodology, are used as
appropriate at Group, functional, above-market, DRBU and
individual market levels to identify, assess and monitor the
risks (both financial and non-financial) faced by the business
at each level.
During the year, the Group amended its risk management
framework to enable risks to be assessed on both an inherent and
residual basis and in a greater level of detail. Risks are now
assessed and prioritised at five levels by reference to their impact
(severe/significant/moderate/minor/insignificant) and likelihood
(probable/likely/possible/unlikely/remote). Mitigation plans are
required to be in place to manage the risks identified, and progress
against those plans is monitored. The risk registers are reviewed on
a regular basis.
The SAP Enterprise Risk Management module is used across the
Group to record and track risk management activity. Functional
and regional risk registers are reviewed biannually by the relevant
Regional Audit Committee or the Corporate Audit Committee, as
appropriate. DRBU risk registers are reviewed as part of DRBU Risk
and Controls meetings. At the Group level, specific responsibility
for managing each identified risk is allocated to a member of the
Management Board. The Group risk register is reviewed twice
yearly by the Group Risk Management Committee, a committee of
senior managers chaired by the Chief Financial Officer. Board level
oversight of risks to the Group is discussed below.
Board oversight
During the year, the Board considered the nature and extent of Group
risks which are material to the Group and the delivery of its
strategic objectives (its ‘risk appetite’), and the Group's risk
management and internal control framework.
The Group risk register is reviewed annually by the Board and twice
yearly by the Committee. The Board and the Committee review
changes in the status of identified risks, assess the changes in
impact and likelihood and are briefed on any delayed mitigations.
The Committee conducts detailed reviews on selected risks during
the year, with discussion of those risks at a more granular level with
senior managers responsible for managing and mitigating them.
Risk appetite is reviewed annually by the Board to ensure that it
remains appropriate and aligned with the Group's strategic
objectives. Alongside a robust assessment of the Principal Risks
and uncertainties facing the Group (including those that would
threaten its business model, future performance, solvency or
liquidity and reputation), the Board also considers emerging risks
which may challenge the Group’s ability to achieve its strategic
objectives in the future.
Emerging risks are assessed by the Board on potential impact
and likelihood and, where applicable, incorporated into the Group’s
risk register with appropriate mitigating activities. Emerging risks
are reviewed by the Committee twice during the year, prior to
Board assessment.
As part of the Board's review of risks faced by the Group, the Board
considered the material climate-related risks and opportunities for
the Group (discussed in the context of TCFD reporting on pages
120 to 136). In 2024, Climate Change and Circular Economy were
recognised as distinct principal risks to the Group, taking into
account the differing challenges and mitigation strategies in each
context, enabling enhanced focus, assessment and management
of the specific risks associated with Climate Change and Circular
Economy. The Board and the Committee continue to monitor
integration of sustainability-related risks and associated mitigation
activities into the Group's risk management framework over
the year.
In 2024, the Committee oversaw the development of the Group's
sustainability reporting programme and evaluated the outcomes
of the assessment of the Group's sustainability Impacts, Risks and
Opportunities (IROs) mapped across the value chain, in
preparation for planned disclosure of the Group's material IROs for
the 2025 financial year in alignment with EU CSRD. A consistent
methodology is applied across the Group for assessment and
quantification of sustainability risks and opportunities, utilising the
Group's risk management framework. The previously maintained
sustainability risk register has been incorporated into the Group's
sustainability reporting programme.
Internal controls
Group operating companies and other business units are annually
required to complete a controls self-assessment, called Control
Navigator, of the key controls that they are expected to have in
place. Its purpose is to enable them to self-assess their internal
control environment, assist them in identifying any controls that
may need strengthening and support them in implementing and
monitoring action plans to address control weaknesses. The
Control Navigator assessment is reviewed annually to ensure that
it remains relevant to the business and covers all applicable key
controls. In addition, at each year-end, Group operating companies
and other business units are required to:
– review their system of internal control, confirm whether it
remains effective, and report on any specific control deficiencies
and the action being taken to address them; and
– review and confirm that policies and procedures to promote
compliance with the SoBC are fully embedded and identify any
material instances of non-compliance.
The results of these reviews are reported to the relevant Regional
Audit Committees or to the Corporate Audit Committee, and to
the Committee, to ensure that appropriate remedial action has
been, or will be, taken where necessary. The results are also
considered by the SOx Steering Committee and the Disclosure
Committee in determining management’s opinion on the internal
controls over financial reporting (ICFR).
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Financial reporting controls
The Group maintains a series of policies, practices and controls
in relation to the financial reporting and consolidation process,
designed to address key financial reporting risks, including risks
arising from changes in the business or accounting standards
and to provide assurance of the completeness and accuracy of
the Annual Report and Form 20-F. The Group Manual of
Accounting Policies and Procedures sets out the Group
accounting policies, its treatment of transactions and its internal
reporting requirements.
The internal reporting of financial information to prepare the
Group’s annual and half-year financial statements is signed off
by the heads of finance responsible for the Group’s markets and
business units. The heads of finance responsible for the Group’s
markets and all senior managers must also confirm annually that
all information relevant to the Group audit has been provided and
that reasonable steps have been taken to ensure full disclosure in
response to requests for information from the external auditors.
The Committee Chair participated in the drafting and review
processes for the Annual Report and Form 20-F for 2024, and
engaged with the Chief Financial Officer and the Group Head of
Internal Audit during the drafting and review processes.
'Fair, balanced and understandable' assessment
A key focus is to assess whether the Annual Report and Form 20-F
and financial statements are ‘fair, balanced and understandable’ in
accordance with the 2018 Code, with particular regard to:
– Fair: Consistency of reporting between the financial statements
and narrative reporting of Group performance and coverage of
an overall picture of the Group’s performance;
– Balanced: Consistency of narrative reporting of significant
accounting judgements and key matters considered by the
Committee with disclosures of material judgements and
uncertainties noted in the financial statements; appropriate use,
prominence and explanation of primary and adjusted
performance measures; and
– Understandable: Clarity and structure of the Annual Report and
Form 20-F and financial statements, appropriate emphasis of
key messages, and use of succinct and focused narrative with
strong linkage throughout the report, to provide shareholders
with the information needed to assess the Group’s business,
performance, strategy and financial position.
SOx compliance oversight
The Company is subject to certain rules and regulations of U.S.
securities laws, including the U.S. Securities Exchange Act 1934
and SOx. SOx places specific responsibility on the Chief Executive
and Chief Financial Officer to certify or disclose information applicable
to the financial statements, disclosure controls and procedures (DCP)
and internal controls over financial reporting (ICFR). This includes our
Chief Executive and Chief Financial Officer giving attestations in
respect of ICFR effectiveness under §404 of SOx.
The Committee has oversight of processes established to ensure
full and ongoing compliance with applicable U.S. securities laws,
including SOx. Two committees provided assurance during 2024
with regard to applicable SOx certifications. The Disclosure
Committee reviews the Company’s financial statements for
appropriate disclosure, designs and maintains DCPs, and reports
to, and is subject to the oversight of, the Chief Executive and the
Chief Financial Officer.
A sub-committee of the Disclosure Committee, the SOx Steering
Committee, provides assurance that ICFR have been designed,
and are being operated, implemented, evaluated and disclosed
appropriately, in accordance with applicable requirements and
subject to the oversight of the Chief Executive and Chief Financial
Officer. The activities of this sub-committee are directly reported
to the Disclosure Committee. The outputs from the Disclosure
Committee and SOx Steering Committee were presented to and
reviewed by the Committee.
No material weaknesses were identified and the Committee is
satisfied that, where areas for improvement were identified,
processes are in place to ensure that remedial action is taken and
progress is monitored. In 2024, the Committee also reviewed the
scope of the external auditors’ SOx procedures, and received
reports on their progress with their independent assessment of
ICFR across the Group.
Cyber Security Risk Management and Internal Controls
Risk management and strategy
Cyber security is crucial to the Group’s business operations, as the
Group relies on information and digital technology (IDT) systems
and networks to conduct core activities, such as manufacturing,
distribution, marketing, customer service, R&D and financial and
management reporting, amongst other core activities.
The Board acknowledges that cyber security threats present
significant risks to the Group’s business, reputation, financial
condition and competitive position, and to the security and privacy
of our consumers, employees and other stakeholders. This is
particularly relevant as the Group transforms its business and
introduces new technologies, such as loyalty programmes,
connected technologies and other interactive platforms, which
may alter its risk profile and are likely to increase the Group’s
exposure to such threats.
The Group implements processes to identify, assess and manage
material cyber security risks. These processes are integrated into
the Group’s overall risk management systems and processes,
overseen by the Board and implemented by management. The
Group implements various processes to manage and mitigate the
material risks from cyber security threats, including:
– implementing appropriate technical and organisational security
measures, such as defensive technologies, encryption,
authentication, and backup and recovery systems, to protect
the confidentiality, integrity and availability of IDT systems and
networks, and the data stored on or transmitted through them;
– providing regular training and awareness programmes to Group
company employees and contractors on cyber security best
practices and procedures, adherence to our SoBC (including
cyber security and information security requirements) and other
relevant standards;
– maintaining vendor management processes for key vendors,
including conducting due diligence and incorporating
contractual obligations, intended to ensure that third-party
service providers with access to Group IDT systems and
networks, or that process or store Group data, adhere to our
cyber security requirements and standards;
– developing, maintaining and testing thorough incident response
and business continuity procedures designed to enable the
Group to promptly detect, contain, analyse, report and recover
from any potential or actual incidents and minimise their impact
on our operations and stakeholders;
– engaging external assessors, consultants and other third parties
as appropriate, to support cyber security risk assessment,
identification and management processes and to provide
independent assurance and recommendations; and
– engaging with relevant internal and external stakeholders, such
as regulators, law enforcement authorities, customers and other
industry stakeholders, on cyber security matters and being
prepared to disclose any material cyber security risks or
incidents in a timely and transparent manner.
Our SoBC and Supplier Code of Conduct (discussed on page 116)
both include requirements for cyber security risk management.
The Group regularly reviews and updates its cyber security risk
processes to support alignment with business objectives,
regulatory requirements and industry standards. In view of the
continued transformation of the Group’s business and evolution of
the Group’s product portfolio, the Group is enhancing its digital
risk management programme, including by revising its cyber
security controls and incident response plan, augmenting its cyber
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security team, increasing engagement across the business and
extending coverage to a broadening range of solutions and
technologies to improve the identification, management,
monitoring and reporting of cyber risks. Feedback and learnings
from audits, assessments and incident reports are reviewed and
used on a regular basis to enhance the Group’s cyber resilience
programme and awareness.
Cyber security risk management is integrated into, and follows, the
Group’s risk identification process (see page 198). Cyber security
risks are integrated into the Group risk register and assessed by
defined impact and likelihood categories (set out on page 198).
For additional information on cyber security threats and how these
could materially affect our business strategy, results of operations or
financial condition, refer to the Group Principal Risk 'Cyber Security'
on page 162 and Group risk factor 'Disruption to the Group's data
and information technology systems' on page 416
+
Governance and oversight
The Board is responsible for the Group's strategy, including
oversight of the Group’s IDT and cyber security strategy, and for
reviewing the effectiveness of its risk management and internal
control systems. On an annual basis, the Board reviews the Group
risk register, which incorporates cyber security risks (discussed on
pages 162, 198 to 199 and 416). Through the Audit Committee’s
terms of reference, the Board has delegated certain
responsibilities to the Audit Committee, including the review of the
Group's risk management and internal control framework to
ensure there is due process for risk identification and
management, monitoring the effectiveness of material controls,
reviewing the Group risk register and emerging risks, and
monitoring procedures and controls for safeguarding assets
including cyber security controls.
The Audit Committee reviews the Group risk register twice
annually and is briefed periodically on the cyber risk landscape and
Group cyber resilience by the Group Chief Information Security
Officer (CISO) (reporting to the Director, Digital & Information). In
2024, all Directors were briefed at an Audit Committee meeting on
the cyber risk landscape and the Group’s cyber security resilience
programme by the Director, Digital & Information and the Group
CISO. The Audit Committee receives reports from the Corporate
Audit Committee, which monitors the effectiveness of risk
management and internal controls across the Group’s functions
and oversees the Group’s cyber security risk management
framework. The Corporate Audit Committee receives half-yearly
reports from the Group CISO on current and emerging cyber
security threats to the Group, measures taken to prevent, detect
and respond to those threats and efficacy of cyber security
controls and incident response plans.
The Group maintains a dedicated cyber security team, led by the
Group CISO, responsible for developing and implementing the
Group’s cyber security strategy, standards and procedures,
including to address any material incident that might arise. The
Group's cyber security team has appropriate professional
expertise, knowledge and experience in the field, including to
identify, assess and manage cyber security risks, maintain
appropriate security monitoring, incident response and business
continuity procedures, and to implement those should an incident
arise. Senior cyber security team members, including the Group
CISO, all have prior relevant industry experience. The Group CISO
has over 20 years of information security experience, previously
serving as CISO for GSK’s Pharmaceutical, Supply Chain, and R&D
divisions before joining the Group. Relevant industry certifications
are also held within the cyber security team, for example, Certified
Information Security Manager (CISM), Certified Information
Systems Auditor (CISA), Certified in Risk and Information Systems
Controls (CRISC), Certified Incident Handler, Certified Forensic
Analyst and Certified Information Systems Security Professional.
The team leverages professional memberships from ISACA and
SANS Institute for continuous professional development.
The Group's cyber security team actively monitors and evaluates
the evolving cyber security threat landscape. It assesses the
security posture of the Group’s IDT landscape using various tools,
including vulnerability scans, penetration tests and control
assessments. Specialists are engaged on an annual basis to assess
the Group’s cyber security programme and identify and prioritise
cyber security risks and vulnerabilities. Key findings from these
assessments and incident summaries are reported periodically to
the Director, Digital & Information and to the Audit Committee,
accompanied by recommendations for mitigating or addressing
any identified risks. Any significant cyber security incidents would
be reported as soon as reasonably practicable to the Audit
Committee and the Board in accordance with the Group’s incident
response procedures.
@External assurance of sustainability
metrics and related information
Robust procedures are maintained for reporting sustainability
metrics and related information for the Group in the Annual Report
and Form 20-F, supported by external assurance over defined
sustainability metrics and related information conducted by the
external assurance provider KPMG LLP (KPMG). The Committee
has approved KPMG’s provision of assurance services in
accordance with the requirements of the Group Auditor
Independence Policy. The work of the external assurance provider
is overseen by the Committee during the year. In 2024, this
included review of scoping and other planning activities for
assurance to be conducted over sustainability metrics, monitoring
the progress of assurance activities against the work plan, review
of KPMG’s report on assurance over sustainability metrics and
related information reported for the 2024 financial year and
discussion of findings with the External Assurance Partner.
Sustainability metrics and related information subject to external
assurance for the 2024 financial year are identified in the assurance
report set out at pages 153 to 154.
As regulatory frameworks and international standards for reporting
sustainability metrics and related information continue to evolve,
and in preparation for reporting in accordance with CSRD in future
reporting years, the Committee maintains oversight of the Group's
sustainability data and reporting programme and the approach to
phased adoption of enhanced external assurance of sustainability
metrics for future reporting years.
@
Annual review
The Group's risk management and internal control framework
enables the Board and the Committee to monitor risk and internal
control management on a continuing basis throughout the year
and to review its effectiveness at the year-end.
With the support of the Committee, the Board conducts an annual
review of the effectiveness of the Group’s risk management and
internal control framework. This review covers all material controls
including financial, operational and compliance controls and risk
management systems. In conducting the oversight responsibilities
of the Board and the Committee, both forums meet with senior
management during the year to assess key judgements applied.
In accordance with the 2018 Code, the Board, with advice from the
Committee, has completed its review of the risk management and
internal control framework as described above and is satisfied that
the Group's risk management and internal control framework
accords with current requirements under the 2018 Code. Looking
ahead to the introduction of enhanced reporting on the
effectiveness of material controls under Provision 29 of the 2024
UK Corporate Governance Code, the Committee will oversee the
implementation of a programme to facilitate reporting in
alignment with the new requirements from financial year 2026.
@The Board also considered the Group Viability Statement,
see page 163
@
+
Refer to the Group Principal Risks on pages 155 to 162
and Group risk factors on pages 414 to 435
+
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Internal Audit function
The Group’s Internal Audit function is responsible for carrying out
risk-based audits of Group companies, business units, factories,
global processes and major change initiatives. A separate Business
Controls Team provides advice and guidance on controls to the
Group’s business units.
In July 2024, the Committee approved the introduction of a
refreshed internal audit strategy to develop the firm foundations
of the existing strategy in view of the evolving assurance
requirements of the Group and the emergence of digital
capabilities within the business and as an audit tool. The refreshed
strategy emphasises assurance that is risk-focused and leverages
data analytics for enhanced efficiency, within an organisation that
fosters dynamic and diverse talent.
The purpose, authority and responsibilities of the Group’s Internal
Audit function are defined by the Committee through the Group’s
Internal Audit Charter, which is reviewed by the Committee and
refreshed on a three-year cycle. The Committee approved the
introduction of a revised Internal Audit Charter with effect from
September 2024 to reflect the Group's executive management
structure and to maintain alignment with evolving market practice.
Internal Audit effectiveness
The Committee reviews the effectiveness of the Group’s Internal
Audit function annually, supported by an effectiveness review
conducted periodically by an independent third party. In 2024, the
Committee's assessment of the effectiveness of the Internal Audit
function was supported by an external quality assessment
conducted by Deloitte LLP. This assessment was undertaken in
accordance with the UK Institute of Internal Audit (IIA) standards,
including interviews, analysis and peer benchmarking.
Findings from the external quality assessment noted Internal Audit
to be a well-defined function, reflecting a role, remit and approach
that delivers value for the organisation. Taking into account the
outcomes of the assessment, the Committee considers the
Internal Audit function to be effective and to have the resources
needed to fulfil its mandate. Recommendations to enhance the
effectiveness of Internal Audit included further opportunities to
optimise the use of technology and data analytics in the Internal
Audit function's ways of working, and plans will be developed to
address these recommendations in 2025.
2024 Internal Audit plan
The Group’s Internal Audit function works to a rolling audit plan,
prioritising risk areas aligned to the Group’s risk register. During
2024, progress against the Internal Audit plan was regularly
reviewed with the Committee to enable monitoring of the ongoing
effectiveness of audit work, with flexibility to augment coverage of
internal audits in response to emerging risks where appropriate.
In 2024, internal audits covered various markets and business
units, manufacturing facilities and the Group’s own Leaf
Operations in various locations, along with a balanced cross-
section of other business activities mapped to the Group risk
register, including digital network infrastructure and cyber security
resilience; supply chain, route to market and IDT efficiency
programmes; responsible marketing controls; and sanctions
compliance procedures. Audits were conducted through a blend of
on-site fieldwork and remote auditing. Audit assignments
conducted during the year leveraged data analytics to optimise
efficiency, effectiveness and coverage of audits, and to provide
insightful assurance to business units.
The Committee reviews regular summary reports from the
Group Head of Internal Audit in respect of internal audits
conducted during the year and findings from those audits,
together with management feedback and agreed action plans
established where areas for improvement are identified.
The scope of each internal audit is assessed for SOx impact.
Reviews of SOx controls and their effectiveness are primarily
conducted by the Group’s Business Controls Team. Assurance
is also undertaken by the Group’s external auditors, as referred
to on page 202.
2025 Internal Audit plan
The Committee has approved the 2025 Internal Audit plan and
reviewed its alignment with the Group’s risk register to ensure it
enables robust coverage of Group risks and balanced coverage of
Group activities.
The design of the 2025 Internal Audit plan reflects the refreshed
Internal Audit strategy, to be aligned with the evolving assurance
requirements of the Group to deliver impactful assurance with
emphasis on effective use of digital capabilities and data analytics.
Audit engagements will continue to combine remote fieldwork with
focused site visits. and take account of assurance provided by
second line of defence functions, including the Group's Business
Controls, Security and Business Integrity & Compliance teams.
The scope of the 2025 Internal Audit plan was validated through
consideration of various perspectives, including the Group's
strategic objectives, risk assessments, evolving regulatory
requirements, external benchmarking, and value and volume of
activities. Its scope remains risk-focused, mapped to the Group’s
risk register and taking into account identified emerging risks.
Internal audit engagements planned for 2025 include sustainability
reporting, cyber security resilience, AI governance, sanctions and
other regulatory compliance procedures, alongside robust
coverage of core business activities, lines of defence and IDT
infrastructure and controls.
Regional and Corporate Audit Committee framework
The Group’s Regional Audit Committee framework underpins the
Audit Committee. It provides a flexible channel for review of risk
topics relevant to each region of the Group, with committees for
each of the Group's regions and for locally-listed Group entities
and specific markets where appropriate.
The Regional Audit Committees are supported by Risk and Control
Committees established at business unit level, and within certain
Group functions where applicable. This framework ensures that
significant financial, social, environmental, governance and
reputational risks faced by the Group are appropriately managed
and that any failings or weaknesses are identified so that remedial
action may be taken.
The Group’s Regional Audit Committees are chaired by the Chief
Executive or the Chief Financial Officer, comprise members of the
Management Board and regularly attended by one or more Non-
Executive Directors as observers.
The Corporate Audit Committee focuses on the Group’s risks and
control environment that fall outside the regional committees’ remit,
including central functions, and global programmes, processes and
projects. It comprises members of the Management Board and is
chaired by a Regional Director or the Chief Operating Officer. One or
more of the Non‑Executive Directors also regularly attend meetings
of the Corporate Audit Committee as observers.
External and internal auditors attend meetings of these committees
and have private audiences with members of the committees after
meetings as needed. Additionally, central, regional and individual
market management, along with internal audit, support the Board in
its role of ensuring a sound control environment.
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External Auditors
The Committee, on behalf of the Board, is responsible for the
relationship with the external auditors. KPMG LLP (KPMG) were initially
appointed as the Company’s auditors with effect from 23 March 2015,
following a competitive tender process carried out in 2015. During 2023,
the Committee conducted a formal tender process in respect of the
external audit for the 2025 financial year. Following this tender process,
the Board accepted the recommendation of the Committee to appoint
KPMG as the external auditor for financial year 2025. The Board
considers it is in the best interests of the Company’s shareholders for
KPMG to be appointed as external auditor for the next financial year
and a resolution proposing KPMG's appointment will be put forward to
shareholders at the 2025 AGM. The conduct of the external audit
tender process for the 2025 financial year is discussed in full on page
167 of the Annual Report and Form 20-F for 2023.
UK Competition and Markets Authority Audit Order
The Company has complied with the Statutory Audit Services
Order issued by the UK Competition and Markets Authority for
the financial year ended 31 December 2024.
Ways of working
The external auditors report to the Committee in depth on the work
programme, scope and outcomes of the annual audit, including their
procedures in relation to internal controls over financial reporting. There
is regular and open communication between the Committee and the
external auditors and with management. The Committee reviews and
discusses the external audit plan and the external auditors’
assessments of management's proposed treatment of significant
transactions and accounting judgements, inviting challenge and giving
due consideration to points raised by the external auditors. During the
year, the Committee also met independently with the external audit
partner after every Committee meeting. Outside of Committee
meetings, the Committee Chair, the Chief Financial Officer, the
Director, Legal & General Counsel, the Group Head of Internal Audit and
the Company Secretary all meet with the external auditors regularly
throughout the year to discuss relevant issues and the progress of the
external audit. Any significant issues are also included on the
Committee’s agenda. Further, access to personnel and records across
the Group is facilitated as required to enable the external auditors to
conduct the external audit.
External auditor effectiveness
The Committee carries out an annual assessment of the external
auditors, including their expertise, qualification and resources, their
objectivity and independence, and the quality and effectiveness of the
audit process. This assessment takes into account the Committee’s
interactions with, and observations of, the external auditors and a range
of other factors, including:
– experience and expertise of the external auditors in their
communications with the Committee;
– their mindset, objectivity and approach to challenging management’s
assumptions and judgements where necessary;
– the effectiveness and efficiency of the external auditors in completing
the agreed external audit plan and whether that plan has been met;
– their approach to handling significant audit and accounting
judgements;
– content, quality and robustness of the external auditors’ reports;
– the Committee's review of the content of the external auditors'
management letter, and other communications with the Committee,
to assess their understanding of the business and whether
recommendations have been acted on (or if not, the reasons why not
acted on);
– provision by the external auditors of non-audit services, discussed
below, and other matters that may impact on their independence;
and
– relevant reviews and reports issued by external regulatory bodies,
including the FRC and the PCAOB.
Audit Committees and the External Audit
Minimum Standard
The Company and its Audit Committee apply the 'Audit
Committees and the External Audit: Minimum
Standard' (Standard), published by the FRC in May 2023.
This Annual Report and Form 20-F, and in particular this Audit
Committee report, sets out how the Standard has been applied
during the year. Pages noted below refer to specific discussion
relevant to the application of the Standard in this Annual Report
and Form 20-F.
Responsibilities
The Committee's responsibilities are set out in its terms of
reference, available at www.bat.com/governance. An overview
of the Committee's responsibilities is provided at page 172 and
the Committee's work programme for the year is discussed at
page 195.
The Chair of the Committee provides a briefing to the Board
following each Committee meeting covering the Committee's
activities, including how it has undertaken its responsibilities in
relation to the external audit.
The annual investor engagement programme provides a range
of opportunities for shareholders to engage with the Company
on governance topics, including the scope of the external audit.
The Chair and other members of the Committee are available
to meet with major shareholders on request. There were no
requests from shareholders in 2024 for any specific matters
to be covered in the audit.
Oversight of auditors and audit
The Committee is responsible for overseeing and assessing
the external audit and the external auditors. The Committee's
approach to reviewing the effectiveness of the external audit
process and the external auditors' independence and
objectivity is discussed at page 202. The Group maintains an
Auditor Independence Policy set out at page 203 and its
application is overseen by the Committee. The external
auditors provided certain non-audit services to the Group
during the year. Information on how auditor independence and
objectivity are safeguarded is provided on pages 202 to 204.
The Committee has reviewed the FRC's audit quality inspection
and supervision report issued in July 2024 in respect of KPMG
and discussed the findings of that report with the External
Audit Partner.
Tendering
The Committee's approach to carrying out its responsibilities in
relation to the external audit tender process for the 2025
financial year is discussed in full on page 167 of the Annual
Report and Form 20-F for 2023. As announced in the
Company's Half-Year report to 30 June 2023, the Board has
accepted the recommendation of the Committee to appoint
KPMG as the external auditor for financial year 2025 and a
resolution proposing this appointment will be put forward to
shareholders for approval at the 2025 AGM.
Reporting
The work of the Committee during the year is set out in the
Audit Committee's report, including significant issues that the
Committee considered in relation to the financial statements
at page 196. An explanation of the application of the Group's
accounting policies is provided in the Notes on the Accounts
at pages 269 to 273.
There were no regulatory inspections in relation to the
Company's financial statements or audit for financial year 2023.
Information about the review of the Company's Annual Report
and Accounts to 31 December 2022 conducted by the FRC is
provided in the Annual Report and Form 20-F for 2023.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Audit, Risk, Internal Control
Audit Committee
Continued
202
The Committee’s assessment is further informed by feedback
from the Group's Internal Audit function and from a survey
completed by members of the Group’s senior management to
obtain their perspectives on the effectiveness and quality of the
external auditors’ work. There were no material issues or risks to
external audit quality identified through the external auditor
effectiveness review in 2024. Actions identified through the review
have been discussed between the external auditors and
management and taken into account for planning for the following
annual audit.
The Committee is satisfied with the qualification, expertise and
resources of KPMG as external auditors, that they have
demonstrated an appropriate degree of objectivity and that their
independence is not in any way impaired by non-audit services
which they provide.
Audit Partner Rotation
The tenure of the current external audit partner, Mr Philip Smart,
commenced from the start of the audit for the financial year 2021.
Audit Partner rotation is implemented in accordance with the
requirements of the FRC Ethical Standard and the U.S. SEC
independence rules on partner rotation.
External audit fees
The Committee is responsible for approving the terms of
engagement and remuneration of the external auditors and has
approved KPMG's terms of engagement and level of fees for 2024.
The Committee reviews a schedule identifying the total fees for all
audit and audit-related services, tax services and non-audit
services expected to be undertaken by the external auditors in the
following year. Tax services and other non-audit services in excess
of the thresholds in the Auditor Independence Policy must be
itemised. Updated schedules are also submitted to the Committee
at mid- year and year-end, so that it has full visibility of the Group
spend on services provided by the Group’s external auditors.
A breakdown of audit, audit-related, tax services and non-audit
fees paid to KPMG firms and associates in 2024 is provided in note
6(m) in the Notes on the Accounts and is summarised as follows:
Services provided by KPMG and associates 2024
2024
£m
2023
£m
Audit services
21.6
20.8
Audit of defined benefit schemes
0.3
0.2
Audit-related assurance services
6.8
6.9
Total audit and audit-related
services
28.7
27.9
Other assurance services
0.7
0.9
Tax advisory services
—
—
Tax compliance
—
—
Other non-audit services
—
—
Total non-audit services
0.7
0.9
Note:
In 2024, non-audit fees paid to KPMG amounted to 2.4% of the audit and audit‑related
assurance fees paid to them (2023: 3.2%). All audit and non-audit services provided
by the external auditors in 2024 were pre-approved in accordance with the Group Auditor
Independence Policy.
Group Auditor Independence Policy (AIP)
The Group has an established AIP which was updated with effect
from 10 December 2024 to take account of developments in
regulatory guidance and market practice.
The AIP reflects the requirements of applicable regulations, to
safeguard the independence and objectivity of the Group’s
external auditors and to specify the approval processes for the
engagement of the Group’s external auditors to provide audit,
audit-related and permissible non-audit services. The key principle
of the AIP is that the Group’s external auditors may only be
engaged to provide services where the provision of those services
does not impair auditor independence and objectivity.
The Committee recognises that using the external auditors to
provide services can be beneficial given their detailed knowledge
of our business. However, the AIP does not permit the Committee
to delegate its responsibilities to the external auditors and the
external auditors are only permitted to provide audit, audit-related
and permissible non-audit services in accordance with the AIP. The
AIP does not permit the external auditors to maintain a financial,
employment or business relationship with any Group company,
or provide services to any Group company, which:
– creates a mutual or conflicting interest with any Group company;
– places the external auditors in the position of auditing their
own work;
– results in the external auditors acting as a manager or employee
of any Group company; or
– places the external auditor in the position of advocate for any
Group company.
Audit services are approved in advance by the Committee on the
basis of an annual engagement letter and the scope of audit
services is agreed by the Committee with the external auditors.
Subject to the restrictions specified in the AIP, the external
auditors may also provide certain permissible non-audit services
with prior approval in accordance with the AIP. The requirement
for appropriate prior approval of permissible non-audit services
may be waived only if the aggregate amount of all permissible non-
audit services provided is less than 5% of the total amount paid to
the external auditors during the reporting year, where those
services were not recognised to be non-audit services at the time
of engagement, and provided those permissible non-audit services
are promptly brought to the attention of the Committee and their
provision is approved prior to completion of the audit in the
relevant reporting year.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
203
The provision of permissible non-audit services must be put
to tender if expected spend exceeds limits specified in the AIP,
unless a waiver of this requirement, in accordance with the terms
of the AIP, is agreed by the Chief Financial Officer and notified to
the Committee.
The AIP:
– requires appropriate prior approval for all audit, audit-related and
permissible non-audit services, except in respect of permissible
non-audit services falling within the exceptions described above;
– prohibits the provision of certain types of services by the external
auditors, including those with contingent fee arrangements, expert
services unrelated to audit and other services prohibited by U.S.
securities laws, the PCAOB and/or the FRC;
– prohibits the Chief Executive, Chief Financial Officer, Group
Financial Controller and Group Chief Accountant (or any person
serving in an equivalent position) from having been employed by
the external auditors in any capacity in connection with the
Group audit for two years before initiation of an audit;
– specifies requirements in respect of audit partner rotation,
including for both the lead and the concurring external audit
partners to rotate off the Group audit engagement at least every
five years, and not to recommence provision of audit or audit-
related services to the Group for a further five years; and
– provides authority for the Committee to oversee any allegations
of improper influence, coercion, manipulation or purposeful
misleading in connection with any external audit, and to
review any issues arising in the course of engagement with
the external auditors.
Group Standards of Business Conduct
The SoBC requires all staff to act with a high degree of business
integrity, comply with applicable laws and regulations, and ensure
that standards are never compromised for the sake of results. All
Group companies have adopted the SoBC or local equivalent.
Every Group company and all staff worldwide, including senior
management and the Board, are expected to adhere to the SoBC
or local equivalent. The SoBC and the Group’s Delivery with
Integrity compliance programme are discussed on pages 118
to 119.
The Committee is responsible for monitoring compliance with the
SoBC, and reports on this to the Board. Information on compliance
with the SoBC is gathered at a regional and global level and reports
of SoBC allegations, including details of the channels through
which allegations are reported, are provided on a regular basis to
the Regional Audit Committees, Corporate Audit Committee, and
to the Committee.
A breakdown of SoBC contacts and SoBC allegations reported
across the Group in 2024 is set out on page 118.
The SoBC and information on the total number of SoBC contacts
and SoBC allegations reported in 2024 (including established
breaches) is available at bat.com/sobc
+
Speak Up
The Group maintains Speak Up channels which enable concerns
regarding SoBC compliance matters, including concerns about
possible improprieties in financial reporting, to be raised in
confidence (and anonymously should an individual wish) without
fear of reprisal. Further information about these Speak Up
channels is set out on page 118.
The SoBC includes the Group’s Speak Up policy, which is
supplemented by local procedures throughout the Group that
provide staff with further guidance on reporting matters and
raising concerns, and the channels through which they can do so.
The Board periodically reviews the Group’s Speak Up policy and
reports arising from Speak Up channels. The Speak Up policy was
revised with effect from 1 January 2024 and introduced as part of
the revised SoBC (discussed on page 118). The Board is satisfied
that the Group’s Speak Up policy and procedures enable
proportionate and independent investigation of matters raised,
and ensure that appropriate follow-up action is taken.
Read more about Speak Up channels and Speak Up reports
on pages 118 to 119
+
Code of Ethics for the Chief Executive
and Senior Financial Officers
The Company has adopted a Code of Ethics applicable to the
Chief Executive, the Chief Financial Officer and other senior
financial officers, as required by U.S. securities laws and NYSE
listing standards. No waivers or exceptions to the Code of Ethics
were granted in 2024.
Political contributions
The Group does not make contributions to UK political
organisations or incur UK political expenditure.
The total amount of political contributions made to non-UK
political parties in 2024 was £23,922,755 (2023: £6,044,775)
as follows: Reynolds American Companies reported political
contributions totalling £23,922,755 (US$30,573,281) for the full year
2024 to U.S. political organisations and to non-federal-level
political party and candidate committees in accordance with their
contributions programme. No corporate contributions were made
to federal candidates or party committees and all contributions
were made in accordance with applicable laws.
All political contributions made by Reynolds American Companies
are assessed and approved in accordance with Reynolds
American’s policies and procedures to ensure appropriate
oversight and compliance with applicable laws.
In accordance with the U.S. Federal Election Campaign Act,
Reynolds American Companies continue to support an employee-
operated Political Action Committee (PAC), a non-partisan
committee registered with the U.S. Federal Election Commission
that facilitates voluntary political donations by eligible employees
of Reynolds American Companies. According to U.S. federal
finance laws, the PAC is a separate segregated fund and is
controlled by a governing board of individual employee-members
of the PAC. In 2024, Reynolds American Companies incurred
expenses, as authorised by U.S. law, in providing administrative
support to the PAC.
No other political contributions were reported.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Audit, Risk, Internal Control
Audit Committee
Continued
204
Our new Remuneration Policy
will drive the Group’s ambition
to transform into a predominantly
smokeless business, strengthen
the focus on the continued
transformation of our portfolio,
incentivise the financial
performance of the Group,
support value delivery to
shareholders and attract and
retain high-calibre talent.
Kandy Anand
Chair of the Remuneration Committee
Remuneration Committee
current members
Kandy Anand (Chair)
Karen Guerra
Murray S. Kessler
Serpil Timuray
The 2024 Directors’ Remuneration Report has been prepared in accordance with the
relevant provisions of the Companies Act 2006 and as prescribed in The Large and
Medium-sized Companies and Group (Accounts and Reports) Regulations 2008 (the UK
Directors’ Remuneration Report Regulations).
@Where required and for the purpose of
the audit conducted in accordance with International Standards on Auditing (ISA), data
has been audited by KPMG and this is indicated appropriately.
@
Remuneration Committee terms of reference
The Committee’s terms of reference align with the UK Corporate Governance Code.
Revised terms of reference were introduced with effect from 1 August 2024.
For the Committee’s terms of reference see www.bat.com/governance
+
Introduction
On behalf of the Board, I am pleased to
present to you the Directors’ Remuneration
Report for the year ended 31 December
2024. This is my first report since being
appointed Chair of the Remuneration
Committee in April last year and I would like
to thank my Board colleagues for their
support and to acknowledge my
predecessor, Dimitri Panayotopoulos, for
his leadership of the Committee.
This year we will be asking shareholders to
vote on three resolutions at our 2025 AGM:
– Our new Directors’ Remuneration Policy
(the ‘Remuneration Policy’), which
outlines the remuneration framework
that will apply to the Executive Directors,
Non-Executive Directors and the Chair,
following approval by shareholders (set
out on pages 217 to 226);
– The 2024 Directors’ annual report on
remuneration, which sets out
remuneration outcomes for 2024 and
explains how the current remuneration
policy has been implemented in 2024 (set
out on pages 227 to 246); and
– The new 2025 British American Tobacco
p.l.c. Performance Share Plan (the “PSP”)
rules which will replace the existing BAT
2016 LTIP which expires next year
(further information is provided in the
Notice of AGM).
In 2024, we were delighted to welcome
Soraya Benchikh back to the Group as our
Chief Financial Officer and Executive
Director, completing appointments to the
Management Board team. Our refined
strategy was launched during 2024, with
a clearer articulation of our vision and a
greater focus on quality execution and
delivery, which has guided our continued
transformation.
It was a year to build, invest, innovate
and refine for a sustainable future. Our
continued transformation this year added
more consumers to our Smokeless
products, which now account for 17.5%
of Group revenues. We made further
progress increasing profitability across
New Categories, delivering an increase
in New Categories contribution of
£251 million on an organic basis
(at constant FX).
Despite a challenging macro-economic
environment and growing presence of illicit
products in the top markets, the resilience
of BAT was reflected in our 2024
performance. We are tremendously proud
of the efforts made by the Group’s
employees and management teams. Our
results are a reflection of the hard work and
commitment from our people throughout
the Group.
Our focus during 2024
During 2024, the Committee has
conducted a comprehensive review of the
current Directors’ Remuneration Policy,
which has focused on ensuring the new
Remuneration Policy supports the
following strategic ambitions:
– Growth of New Category products
– Responsible transition from
Combustibles
– Stewardship of the Group’s
transformation
– Delivery of financial performance and
sustainable returns to shareholders
Our priority has been to ensure that the
new Remuneration Policy:
– Creates close, long-term links between
the Group’s senior management and our
shareholders.
– Supports our need to compete for,
attract and retain talent in the
international market.
– Directly supports Group strategy delivery
and our A Better Tomorrow™ agenda,
by rewarding high levels of sustainable
long-term performance in both an
appropriate and competitive manner.
– Is informed by shareholder perspectives,
both from our engagement during 2024
and our last engagement on policy during
2021.
– Continues to incorporate best practice
policy features.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
Annual Statement on Remuneration
205
A changing business and talent landscape
Our transformation journey is seeing the Group evolve from being
a predominantly single-category combustibles business to a
company with a global footprint and a multi-category product
portfolio. We now manage five product categories, with 17.5% of
revenues delivered from our Smokeless products and overall
revenue growth of 75% since 2016.
The Group is now a significantly larger and more complex organisation,
particularly following the acquisition of Reynolds American Inc. in
2017. Circa 44% of Group revenues and 54% of Group adjusted
profit from operations are derived from the U.S. market.
We compete for talent in over 100 markets, with the U.S. and UK
being our largest talent hubs, hosting circa 60% of the Group’s
senior leadership. Most of our key talent competitors are
headquartered outside of the UK and this is reflected in our talent
inflow to BAT: over the last three years, at least one-third of all our
senior hires have joined the Group from U.S. companies.
Our transformation agenda has a clear influence on our talent
strategy. New capabilities are essential to support the Group’s
increasingly diverse operations, which requires diversification in
the talent sectors from which we recruit. Capability areas such as
scientific research, product design and technical innovation,
digital and data science, to name a few, are fundamental to the
Group’s transformation.
Consequently, over the last four years, we have seen an increasing
inflow of talent from consumer electronics, technology, and
pharmaceutical companies in addition to consumer goods.
Similarly, we have lost talent to those sectors.
The increasingly competitive global market for senior talent has
resulted in upwards pressure on pay. This has become more
evident as we bring more senior external hires into the Company.
With many U.S.-based candidates we observe that pay disparities
are particularly evident with incentive opportunities, which tend to
be far above typical UK levels.
These changes in our competitive landscape have required several
changes to the Group’s compensation programme, below the
Executive Directors, in order for us to be able to compete for talent
across senior management levels. Since 2020, the Group has
increased incentive opportunities across senior management
levels on two occasions, re-designed its short-term incentives (“STI”)
to become more competitive and market relevant and redesigned its
long-term incentives (“LTI”) with the same objectives.
These changes, while absolutely necessary, have created a pay
compression challenge for the Group. Incentive opportunities for
the Chief Executive were last reviewed nine years ago, in 2016. The
current remuneration policy now limits our ability to develop
appropriately leveraged and differentiated pay for performance,
both for the Executives and the wider senior leadership population.
Consequently, the Group carries a risk with talent attraction,
retention and succession planning in what is an international
market and a challenging category.
While these competitive headwinds have not yet resulted in higher
employee turnover for the Group, we do experience an elevated
vacancy rate across senior management levels, with lengthening
times to hire. These changes in the Group’s business and the
competitive pressures in the talent marketplace have been key
influences behind the proposals to adjust incentive opportunities
for the Executive Directors, which are covered in further detail in
the next section.
New Remuneration Policy
The Committee commenced its review of the Directors’
Remuneration Policy in early 2024. Initially a range of different
incentive structures were considered recognising the diverse
range of remuneration frameworks used by companies within our
international peer group. It was however determined that overall
the current incentive structure remains appropriate, with our long-
term incentive plan continuing to operate as a performance share
plan for the Executive Directors.
The Committee believes this simple structure is straightforward,
performance led and provides the best means to align the
interests of the Executive Directors with those of our shareholders.
The Committee consulted with shareholders and their
representatives on the following four key changes to the
Remuneration Policy:
– Increase in incentive plan opportunities to appropriately reflect
the size, scope and complexity of BAT and support the Group’s
talent strategy as we transform.
STI maximum
opportunity
(% of salary)
LTI maximum
opportunity
(% of salary)
Chief Executive
No change
(remains at 250%)
Increase from
500% to 600%
Chief Financial
Officer
Increase from
190% to 200%
Increase from
400% to 450%
– Increase in shareholding requirements in line with the proposed
LTI maximum opportunity levels (600% and 450% of salary for
the Chief Executive and Chief Financial Officer, respectively).
– Rebalancing of the mandatory level of deferral in the STI to 25%
for Executives who have met their minimum shareholding
requirement, while maintaining a default deferral level of 50%
for those who have not yet achieved this threshold.
– Alignment of the level of LTI vesting at threshold for the
Executive Directors with that of all other LTI participants, from
15% to 20%. The proposed change would remove an internal
anomaly and align the level of vesting at threshold with prevailing
market practice in the UK. This proposal was withdrawn
following discussions with shareholders.
As set out on page 212, the overall resultant package is positioned
around mid-market levels for the Chief Executive and below mid-
market levels for the Chief Financial Officer, compared to our
International Pay Comparator Group. The incentive increases will
be accompanied by a cap on salary increases for the Chief
Executive, which will be held at or below the UK employee average
for the lifetime of the new Remuneration Policy.
In addition, the review focused on implementation of the
Remuneration Policy including the composition of our International
Pay Comparator Group and specific performance measures for
2025. In relation to our International Pay Comparator Group, several
companies (including a number of larger US companies) have been
removed to better reflect the market within which BAT competes for
senior talent.
Changes are also proposed to performance measures and
weightings for 2025, to ensure our incentives continue to support
the Group’s ambition to transform into a predominantly smokeless
business with a greater balance between top and bottom-line
delivery, and a focus on returns on incremental investment as we
continue to transform and invest in new products and innovations.
Specifically, through the review of the Remuneration Policy, we
have sought to:
– Strengthen the focus on improving profitability in New
Categories.
– Ensure there is an increased emphasis on the continued
transformation of our portfolio.
– Incentivise the financial performance of the Group.
– Improve our ability to compete for, attract and retain talent in
the international market.
The proposed changes represent an evolution of the current
Remuneration Policy and its implementation rather than a
fundamental reset. The Committee will however keep the
Remuneration Policy under review to ensure it continues to
support the Group’s transformation and long-term value creation
for all stakeholders. The Remuneration Policy will be subject to
shareholder approval at the 2025 AGM.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
Annual Statement on Remuneration
Continued
206
Shareholder engagement
The latter part of 2024 was dedicated to a programme of engagement with shareholders on the proposals. We have engaged with
shareholders representing circa 60% of our issued share capital, together with The Investment Association, Institutional Shareholder
Services and Glass Lewis.
Our programme of engagement has helped to refine and improve proposals and ensure that changes to the Remuneration Policy and its
implementation are focused and relevant. Initial feedback indicated:
– That shareholders were broadly supportive of the proposal to increase incentive opportunities in the context of our transformation
journey and our strong focus on pay for performance.
– That proposals to strengthen the focus on New Categories contribution to Group profitability within the STI and the LTI are timely and
relevant for the Group.
– There were opportunities to reconsider the balance and weighting between metrics in both the STI and LTI and some specific
performance conditions. Consequently, some changes to the original proposals, as further listed below, have been made for 2025.
– There were opportunities to reconsider the increase in LTI threshold vesting given the proposed increases in LTI opportunity.
Recognising this feedback, the Committee decided to retain threshold vesting at 15% and not implement the originally proposed
change to 20%.
The tables that follow summarise the proposals put forward by the Committee during the engagement, the key points
of feedback received from shareholders and advisory bodies, and the changes made by the Committee taking into account the
feedback received.
Short-Term Incentive Plan (STI)
Engagement with shareholders has focused on opportunities to strengthen the emphasis on New Categories contribution to Group
profitability, together with the incentivisation of the continued financial performance of the Group. The Committee considers that the
proposed changes outlined below will strengthen alignment with the Group’s long-term strategy delivery and the interests of
shareholders.
Summary of changes
2024 measures
Original proposal for 2025
Final proposal for 2025
Volume Share Growth 10%
Total Revenue Growth 10%
Total Revenue Growth 10%
Adjusted Profit from Operations 25%
Adjusted Profit from Operations 25%
Adjusted Profit from Operations 30%
Adjusted Cash Generated from Operations
30%
Adjusted Cash Generated from Operations
25%
Adjusted Cash Generated from Operations
25%
Transformation metrics
Transformation metrics
New Categories Revenue Growth 15%
New Categories Revenue Growth 15%
New Categories Revenue Growth 12.5%
New Categories Contribution 20%
New Categories Adjusted Gross Profit
Margin 15%
New Categories Adjusted Gross Profit
Margin 12.5%
Sustainability – Climate 10%
Sustainability – Climate 10%
1.Introduction of ‘Total Revenue Growth’ metric
Proposed change and rationale
Shareholder feedback
The introduction of ‘Total Revenue Growth’ with a 10% weighting,
replacing the ‘Volume Share Growth’ metric. This metric will
incentivise optimal value delivery from the traditional business
together with continued growth in New Categories, in the context
of changing market and consumer dynamics.
Shareholders have welcomed the introduction of ‘Total Revenue
Growth’ to the STI as a relevant metric alongside profit and
cash delivery.
Some shareholders wanted to understand the rationale to move
away from ‘Volume Share Growth’, as this metric was a well-
established feature of the STI.
Committee response
We have discussed with shareholders that the new metric is preferable as it supports a balanced focus across the Group’s entire
portfolio, recognising both current and future sources of value. The ‘Volume Share Growth’ metric had some inherent limitations in
measuring performance across combustibles and heated products only.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
207
2. Introduction of ‘New Categories Adjusted Gross Profit Margin’ metric
Proposed change and rationale
Shareholder feedback
The introduction of ‘New Categories Adjusted Gross Profit Margin’
with a 12.5% weighting. This metric will support the improvement
in the profitability of New Categories as we continue the
transformation and premiumisation of our portfolio.
Shareholders have been supportive of the introduction of this new
metric. Some shareholders wanted to understand if this new
metric had replaced the focus on New Categories Contribution in
the Group's incentive plans.
Committee response
The Committee understands the feedback from shareholders and has ensured that there is a continued focus on New Categories
Contribution, which now features in the LTI as part of the ‘New Categories Contribution Margin’ metric.
Full information on the New Categories Adjusted Gross Profit Margin is available in our financial disclosures, providing
shareholders with information on our performance. Further details are provided in the Quality Growth section starting from page
26 and in the non-GAAP measures section starting on page 399.
3. Introduction of ‘Sustainability – Climate’ metric
Proposed change and rationale
Shareholder feedback
The introduction of the ‘Sustainability – Climate’ metric, with a 10%
weighting. The reduction in greenhouse gas emissions is a
significant matter for the Group, as reflected in our annual double
materiality assessment. This metric directly supports our stated
ambition to reduce Scope 1 and 2 emissions from our operations
by 50% by 2030 and is directly linked to our externally reported
targets.
Shareholders have broadly been supportive of the introduction of
this new metric. Some shareholders wanted to understand why
the STI was selected, rather than the LTI, whether other
sustainability metrics were considered, such as supply chain
labour standards or circularity, and sought confirmation that
performance would be subject to a quantitative assessment.
Committee response
The Committee did consider several options for sustainability metrics. The possible adoption of a climate metric was raised by
shareholders during our 2021 policy engagement. We have returned to this proposal, as the Group now has a well-established
externally reported metric to measure performance in this area.
Alternative metrics such as supply chain labour standards and human rights were not considered as appropriate for incentive plans.
The Group has made significant inroads in reducing instances of child labour in our supply chain, and our due diligence processes and
ongoing independent assessments will provide ongoing focus in this important area; please refer to page 109 for further details.
The Committee recognises the importance of circularity, recycling of materials and the reduction of virgin raw materials in our
products. At the present time the Company is looking to establish robust measures of performance in this area. Consequently, the
introduction of a circularity metric would be premature at this stage. This will be kept under review, for consideration in the future.
The inclusion of the climate metric in the STI at this stage supports performance in managing an important sustainability matter in the
Group’s business. The STI allows for a straightforward assessment of progress year-on-year, against quantitative and reported targets.
Significantly, inclusion in the STI will generate substantial reach throughout BAT, promoting alignment with circa 19,000 participants in
the plan.
4. STI metrics and weightings
Proposed change and rationale
Shareholder feedback
The STI has been constructed with an allocation of metrics to
support the Group’s financial performance, complemented by
a discrete group of metrics which are relevant to the continued
transformation of the business. Minor adjustments were proposed
between the weightings of metrics, with a slightly lower weighting
attached to the adjusted profit and cash metrics (50% in
aggregate versus 55% in aggregate in the current plan).
Shareholders have broadly been supportive of the allocation of
metrics between supporting financial delivery and the continued
transformation of the Group. Some shareholders did express
a preference for some re-weighting from the transformation
metrics to Adjusted Profit from Operations.
Committee response
The Committee has considered the feedback carefully and understands the views of shareholders and the interest in retaining an
appropriate weighting towards financial performance.
Consequently, the Committee has decided to make an adjustment to weightings between metrics; the ‘New Categories Revenue
Growth’ metric will be re-weighted from 15% to 12.5%, the New Categories Adjusted Gross Profit Margin metric will be re-weighted
from 15% to 12.5% and the ‘Adjusted Profit from Operations’ metric will be re-weighted from 25% to 30%, retaining a total weighting
of 55% on adjusted profit and cash metrics in line with the current plan.
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Performance Share Plan (PSP)
Engagement with shareholders has focused on opportunities to strengthen the emphasis on portfolio transformation, together with
the incentivisation of the continued financial performance of the Group. The Committee considers that the proposed changes outlined
below will strengthen alignment with the Group’s long-term strategy delivery and the interests of shareholders.
Summary of changes
2024 measures
Original proposal for 2025
Final proposal for 2025
Relative TSR 20%
Relative TSR 20%
Relative TSR 20%
EPS (current / constant) 30%
EPS at constant rates 20%
EPS at constant rates 25%
Operating Cash Flow Conversion 20%
Operating Cash Flow Conversion 20%
Operating Cash Flow Conversion 20%
Transformation metrics
Transformation metrics
New Categories Revenue Growth 15%
Smokeless Revenue / Total Revenue 10%
Smokeless Revenue / Total Revenue 10%
Revenue Growth 15%
New Categories Spend Effectiveness 15%
New Categories Contribution Margin 10%
Return on Capital Employed 15%
Return on Capital Employed 15%
1.‘Earnings per share at constant rates’ metric
Proposed change and rationale
Shareholder feedback
The ‘Earnings per share’ metric is retained but its operation
simplified to constant rates only, thereby focusing on performance
as a result of management decisions. The Group has a substantial
international presence and sterling, being the Group’s reporting
currency, has experienced significant fluctuations as a result of
various economic factors which are outside of management’s
control. Re-positioning to constant rates provides a continued
focus on quality earnings delivery, based on management’s
performance. This metric aligns the Group’s approach with that
of comparable multinationals, including tobacco peers.
The majority of shareholders have expressed comfort with the re-
positioning of the EPS metric to constant rates, recognising the
fact that this centres the metric on performance arising from
management decisions. Some shareholders have expressed a
preference for a higher weighting to attach to the EPS metric.
Committee response
The Committee is satisfied that EPS at constant rates is the appropriate metric to focus on quality of earnings delivery as this
eliminates foreign exchange volatility from the translation of local currency results to sterling. Transactional foreign exchange is not
eliminated as this is deemed to be a cost of operations when acquiring foreign currency denominated inputs as part of our operations.
The EPS performance measured at constant rates approach is aligned with that taken by other multinationals and other tobacco
peers. Shareholder feedback on the weighting that attaches to the metric is understood, a proposed change in weighting is detailed
on page 210.
2. Introduction of ‘Smokeless Revenue / Total Revenue’ metric
Proposed change and rationale
Shareholder feedback
As a Group we are committed to becoming a predominantly
Smokeless business, targeting 50% of our revenues from
Smokeless products by 2035. This metric directly supports this
strategic ambition and incentivises the continued transformation
of our portfolio and changes in sources of revenue.
The majority of shareholders have expressed comfort with the
introduction of this new metric, recognising its importance in
supporting the Group’s ambition to become a predominantly
Smokeless business.
Committee response
The Committee is satisfied that this metric is strongly aligned with the Group’s strategy. The metric incentivises the continued
transformation of our portfolio and any risk of underperformance in the traditional business’s flattering performance is addressed
through the presence of Total Revenue Growth, Profit, Cash and EPS metrics in the STI and PSP.
3. Introduction of ‘New Categories Contribution Margin’ metric
Proposed change and rationale
Shareholder feedback
As part of the Group’s strategic ambition of delivering ‘Quality
Growth’, the Committee had proposed the introduction of a New
Categories Spend Effectiveness metric. The metric looked to
assess the effectiveness of our New Categories investments and
encourage focus and discipline with geographic expansion plans
and new product introductions.
While shareholders have understood the rationale for this new
metric, several have wanted to understand the basis of
measurement for this new metric, the ease with which
performance delivered may be understood and the extent
to which financial disclosures will support a straightforward
appraisal of performance.
Committee response
The Committee appreciates the feedback provided by shareholders and has decided to reposition the metric to 'New Categories
Contribution Margin'. This metric will incentivise continued profitable growth in the New Categories business, as per our 'Quality
Growth' agenda, and performance can be easily understood, supported by our financial disclosures. Further details can be found
starting on page 399.
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4. Introduction of ‘Return on Capital Employed (ROCE)’ metric
Proposed change and rationale
Shareholder feedback
Capital effectiveness, continuing a disciplined approach to capital
allocation and debt management, is critical to our business. Its
inclusion in the PSP will incentivise effective value creation and
support allocation to shareholders, the business and to fund M&A
opportunities as appropriate. The metric is an existing, reported
measure of the Group’s performance.
Shareholders have welcomed the introduction of this metric; the
potential inclusion of ROCE has been an ongoing discussion with
shareholders since the 2021 engagement on policy.
Some shareholders have raised the basis of measurement for
ROCE, specifically in relation to how any adjustments for
amortisation and goodwill impairment will be managed
consistently in both the Group’s profit delivery and the capital base.
Committee response
The Committee appreciates the feedback provided by shareholders and the importance of consistency in how performance is viewed
under this metric. Group performance will be measured in line with the Group’s financial reporting standards to maintain consistency
with our wider disclosures. Material events (e.g. material impairments and/or acquisitions) will be reported to and considered by the
Committee, should they arise, as part of the assessment of the Group’s underlying performance. Measurement of performance is
based on an average growth rate over the 3-year performance period to moderate potential foreign exchange rate fluctuations which
may impact the ROCE in a specific year.
5. PSP metrics and weightings
Proposed change and rationale
Shareholder feedback
The PSP has been constructed with an allocation of metrics to
support the Group’s financial performance, complemented by a
discrete group of metrics which are relevant to the continued
transformation of the business. Adjustments were proposed
between the weightings of metrics, with a slightly lower weighting
attached to the EPS and cash metrics (40% in aggregate versus
50% in aggregate in the current plan).
Shareholders have broadly been supportive of the allocation of
metrics between supporting financial delivery and the continued
transformation of the Group. Several shareholders did express a
preference for some re-weighting from the transformation
metrics to the EPS at constant rates metric.
Committee response
The Committee has considered the feedback carefully and understands the views of shareholders and the interest in retaining an
appropriate weighting towards financial performance.
Consequently, the Committee has decided to make an adjustment to weightings between metrics; the ‘New Categories Contribution
Margin’ metric will be re-weighted from 15% to 10% and the ‘EPS at constant rates’ metric will be re-weighted from 20% to 25%,
retaining a total weighting of 80% on financial metrics.
International Pay Comparator Group
We have updated our International Pay Comparator Group to appropriately reflect the talent marketplace within which BAT competes.
The pay comparator group is also used for the broader management population. Company selection is based on a number of factors,
including whether individual businesses are a source of relevant capabilities to BAT, their size, scale, geographical footprint, evidence of
talent interaction with BAT over time (recruitment, attrition) and comparability of pay practices. Consequently, the following companies
were removed from our pay comparator group: Anheuser-Busch InBev, Accenture, Colgate-Palmolive, Johnson & Johnson and Microsoft.
Shareholder feedback
Shareholders have been supportive of the proposed changes, recognising that the resulting group is primarily weighted towards
consumer goods companies and tobacco peers, with a balanced representation between the UK, Europe and the U.S.
Some shareholders did want to better understand the relevance of sectors such as technology and the pharmaceutical sector to BAT
and some did express a preference to remove Salesforce from the comparator group.
Committee response
The Committee is satisfied that the revised comparator group encompasses sectors which reflect the Group’s capability requirements
and the talent marketplace within which BAT competes. The balanced mix of UK, European and U.S. companies, approximately a third
each, reflects the internationality of the Group and the significance of the U.S. to our business, representing potential sources of
recruitment or attrition.
The Committee has considered further the evidently higher pay practices which are typical in the U.S. market and the feedback
from shareholders and has decided to also remove Salesforce from the comparator group. The constituents of the International
Pay Comparator Group will be kept under review and may be updated by the Committee from time to time. The revised peer group
is shown below.
Peer Group
UK
Europe
U.S.
AstraZeneca, Diageo, GlaxoSmithKline,
Imperial Brands, Reckitt Benckiser,
Unilever, Vodafone
Bayer, Danone, Heineken, L'Oréal, LVMH,
Nestlé, Novartis, Siemens
Altria, Coca-Cola, Kraft Heinz, Mondelēz
International, Nike, PepsiCo, Procter &
Gamble, Philip Morris International
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Incentive plan opportunities
We have explored with shareholders how the challenges posed by the competitive environment may be addressed in a thoughtful and
appropriate way. The Committee has considered the matter carefully and is acutely aware of the sensitivities related to the quantum of
executive remuneration. It is important that the Remuneration Policy appropriately reflects the size, scope and complexity of the Group
and supports talent engagement to lead the next stage of BAT's transformation, particularly as incentive opportunities for the Chief
Executive were last reviewed in 2016.
The following illustrative scenarios, based on targeted changes to incentive plan opportunities, were shared with shareholders as a basis
for discussion.
Changes to incentive opportunities
STI maximum opportunity
(% of salary)
LTI maximum opportunity
(% of salary)
Chief Executive
250% (no change)
Increase from 500% to 600%
Chief Financial Officer
Increase from 190% to 200%
Increase from 400% to 450%
The Committee believes that these targeted changes are now essential, given the changes in the Group’s business and competitive
landscape as well as internal pay compression challenges. While there is a modest adjustment to the Chief Financial Officer’s STI
maximum opportunity from 190% to 200%, the proposed changes are LTI-led, thereby aligning to long-term performance with any value
delivered not realised until at least 2030 when the 2025 LTI awards will be released. Overall, these changes result in a slight improvement
in Total Direct Compensation positioning versus our revised International Pay Comparator Group.
The illustration of the current incentive levels compression at BAT versus a typical spread within our comparator group is shown below.
The distance between the levels represent the spread in incentive opportunities within BAT versus market, expressed in percentage
points (ppt). In market terms the spread between levels is nearly double versus BAT indicating an internal pay compression.
Illustration of the incentive levels compression at BAT versus a typical spread
within our International Pay Comparator Group
Other Executives
Chief Financial Officer
Chief Executive
Note:
The chart above illustrates the difference (in percentage points) in target STI and expected value of LTI incentive opportunities for the Chief Executive, the Chief Financial Officer and other
executives at BAT, compared to the companies within our International Pay Comparator Group. For example, the difference in STI incentive opportunity between the Chief Executive and
the Chief Financial Officer is 30ppt at target levels of performance in BAT compared to 60ppt within the International Pay Comparator Group. The chart further illustrates the relative
distance between Executive Director level and next level executives at BAT and the market.
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30ppt
60ppt
60ppt
120ppt
Shareholder feedback
Shareholders have been receptive to the context and rationale provided for these proposed changes, with many viewing the proposed
adjustments as an evolution in the Group’s practice in response to a changing market.
Shareholders have acknowledged that changes are primarily LTI-led, ensuring greater emphasis on long-term value creation and
reinforce our pay for performance principles. The accompanying increase to the minimum shareholding requirements were also noted as
a positive and appropriate change.
Several shareholders highlighted the importance of accompanying these changes with appropriately stretching performance targets, to
ensure there is a strong alignment between results delivery and remuneration.
Committee response
The increase in scope, size and complexity of our business since the last material review of our incentives opportunities in 2016, together
with the evolving talent requirements of our business and the challenges related to pay compression among our senior population, mean
these changes are essential.
While the Committee is aware of the differences in executive remuneration between the UK, Europe and the U.S., the proposals are
not driven by benchmarking data, nor does the Committee look to match pay levels in the U.S. The Group’s ability to compete
internationally is fundamentally important and the changes discussed will help towards levelling the playing field in competing for
international talent, while remaining aligned with expectations of BAT as a FTSE-listed company. The resultant pay positioning of the
Executive Directors following these changes is that the Chief Executive’s total target direct compensation (‘TDC’) would be positioned
around mid-market levels when compared to the revised International Pay Comparator Group and the Chief Financial Officer’s TDC
would be positioned below mid-market levels.
An illustration of the potential TDC competitive positioning, at current and new Remuneration Policy levels, for the Chief Executive and
the Chief Financial Officer against the companies within our revised International Pay Comparator Group is provided below:
Illustration of total target direct compensation
1 (‘TDC’) position of BAT versus the revised International Pay
Comparator Group
BAT TDC at new Remuneration Policy levels
BAT TDC at current Remuneration Policy levels
Note:
1.
Total target direct compensation represents 2024 salary plus target STI plus expected value of the LTI (for comparison purposes, a 60% of maximum LTI opportunity was used in the
chart above). The STI and LTI values are calculated at current and new Remuneration Policy levels to allow comparison.
Our LTI will continue to operate as a performance share plan. We believe this simple structure is straightforward, performance-led and
provides the best means to align with shareholder interests.
The Committee recognises shareholder feedback in relation to target setting and ensuring there is sufficient stretch with performance
expectations. It is a fundamental belief of the Committee that performance expectations should be demanding, as evidenced in LTI
results over the last 10 years. Please refer to page 236 for further details. Details of the 2025 LTI performance targets are provided on
page 240.
The proposed increase to incentive quantum will also be accompanied by a cap on annual salary increases for the Chief Executive, which
would be held at or below the UK employee average for the lifetime of the new Remuneration Policy.
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£8.1mn
(£7.8mn)
(£4.4mn)
£7.3mn
£3.8mn
£3.5mn
STI mandatory deferral
In line with the current Remuneration Policy, the STI is awarded
50% in cash and 50% in shares through the Deferred Share Bonus
Scheme. We are proposing to rebalance the level of mandatory
deferral in the STI from 50% to 25% for Executive Directors who
have met their minimum shareholding requirement, while
maintaining a default deferral level of 50% for those who have not
yet achieved this threshold.
This policy change reflects multiple considerations. The Group’s
shareholding requirements are significant; subject to approval of
the proposed LTI opportunity levels, the requirements are set at 6x
salary for the Chief Executive and 4.5x salary for the Chief Financial
Officer, providing significant alignment for our Executive Directors
with shareholder interests whilst in employment and post-
employment. Only once the minimum shareholding requirement
is achieved, will the adjusted deferral level of 25% take effect,
ensuring that our Remuneration Policy continues to enable the
build-up of shareholding at pace but also provides additional
flexibility once a threshold level of shareholding is established.
The policy change helps to better align our pay practices with
global peers and remains aligned with the guidelines provided by
shareholder advisory bodies.
Shareholder feedback
Shareholders have confirmed during the engagement that they
are comfortable with the proposed change, recognising that it is
consistent with existing practice in the market and alignment
with the guidance provided by shareholder advisory bodies.
Some shareholders did look to understand if there were any
potential implications regarding the Group’s ability to use malus
and clawback in the future, should it be necessary.
Committee response
The Committee has carefully reviewed the malus and clawback
provisions within the Remuneration Policy, which remain a core
element of our risk mitigation strategy. The Committee is satisfied
that at a lower level of deferral there remains material value
attached to in-flight awards under the deferred share bonus
scheme. Malus and clawback will remain fully enforceable
following this change and include a comprehensive set of trigger
events (further details on malus and clawback provisions are on
page 221).
Performance and Remuneration Outcomes for 2024
The “At a Glance” section provides an overview of our financial
performance and how it translates into outcomes under the STI and
LTI plans, with further details provided on pages 229 and 230. After
reflecting on a range of considerations as described further in this
report, the Committee was satisfied that the current Remuneration
Policy had operated as intended during the year and confirmed
that no discretion has been exercised by the Committee.
2024 Target Setting
The performance targets set by the Committee early in the year
have remained unchanged throughout the 2024 performance
period. 2024 target setting focused on the continuation of the
Group’s commitment to Building a Smokeless World, with active
investment choices made to enhance our capabilities and
accelerate our transformation, while delivering value through our
combustibles business supported by strong cash flow generation
to reduce leverage and provide flexibility to the Group.
The New Categories revenue growth targets in both the STI and
LTI plans emphasise the importance of New Categories growth in
our long-term strategy and Sustainability agenda, providing focus
on in-year delivery through our STI plan, and focusing on
cumulative and sustained performance over a three-year period
through our LTI plan.
As reported previously, in 2023, the Group finalised the sale of the
Russian and Belarusian businesses, therefore the targets for 2024
were set on an organic basis, excluding the Russian and Belarusian
businesses from both 2023 and 2024 results.
The 2022 LTI performance measures and targets have remained
unchanged during the three-year performance period. In assessing
performance results for the 2022 LTI award against the targets set
at the start of the performance period, performance has been
assessed excluding the Russian and Belarusian businesses disposal
impact from the 2023 and 2024 results while performance in 2022
will be assessed as previously reported. This approach provides a
fair, balanced, and understandable measurement of the LTI
outcomes by excluding material one-off events to ensure
comparability period to period.
2024 Short-Term Incentive
Our 2024 performance continued to demonstrate our focus on
delivery against our strategic priorities, with New Categories being
a greater driver of Group performance and a key performance
metric of the STI and the LTI plans. In 2024, organic revenue was up
(at constant rates of exchange), driven by New Category revenue
growth (organic) which increased by 8.9% to £3,551 million (at
constant rates of exchange) with Smokeless products now
representing 17.5% of Group revenue.
New Categories organic contribution improved by £251 million
through volume growth, strong pricing and cost of sales
productivity savings. We have outperformed the 2024 targets for
this measure, which were set in relation to the original 2025
ambition, enabling the Group to accelerate progress early in this
critical area of our business. Adjusted organic profit from
operations (at constant rates of exchange) improved by 1.4%, driven
by accelerated growth in New Categories profitability and further
costs saving initiatives. Cash delivery continued to be strong
realising circa £8.0 billion of adjusted organic cash generated from
operations (at constant rates). Group volume share (of cigarettes
and heated products) in top markets increased by 10 bps. The
above performance translates into a result of 78.6% of maximum
opportunity. Further details of the performance against targets for
the 2024 STI measures are set out on page 229.
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2022 Long-Term Incentive
In assessing performance results for the 2022 LTIP award against
the targets set at the start of the performance period, performance
has been assessed on an organic basis for the 2023 and 2024
financial years by excluding the Russian and Belarusian businesses
disposal impact (where applicable) as described above.
The outcomes are reflected below:
– Total shareholder return (TSR) relative to peers (20%): BAT TSR
ranked 5th out of 15 amongst our TSR peer group of companies
(page 230).
– Adjusted diluted earnings per share (EPS) (30%): We measure
adjusted diluted EPS at current and constant rates of exchange
(equally weighted). The three-year adjusted diluted EPS compound
annual growth rate (CAGR) was 4.4% and 4.9%, at current and
constant rates, respectively.
– Group revenue growth (15%): The three-year Group revenue
CAGR was 2.2% at constant rates of exchange.
– New Categories revenue growth (15%): The three-year Group
revenue CAGR was 21.8% at constant rates of exchange.
– Operating cash flow conversion ratio (20%): We have continued our
strong track record of cash conversion delivery, resulting in a
100.6% operating cash flow conversion ratio at current rates
measured over three years.
The above performance translates into an outcome of 42.1% of
maximum for the 2022 LTIP.
Following evaluation of the formulaic outcomes for both the STI
and LTI plans, the Committee considered the results against the
underlying performance of the Group and the experience of our
shareholders. The Committee concluded that the outcomes were
a fair reflection of performance delivered in what continues to be
challenging and volatile market conditions and no adjustments were
required. In addition, share price fluctuations are reflected
throughout the Executive Directors’ remuneration in the vesting
and holding periods as well as individual shareholdings. The
Committee also considered whether there were any potential
windfall gains for the LTI award granted in March 2022 and
concluded that an adjustment to the size of the awards was not
warranted. More details are provided on page 230.
Chief Financial Officer appointment
The Board has appointed Soraya Benchikh to the role of Chief
Financial Officer and Executive Director. Soraya joined BAT on
1 May 2024. Soraya's base salary on appointment was set at
£800,000, a 5% reduction versus her predecessor's salary. Soraya's
remuneration for 2024 is presented in the single figure table in this
report on page 228 and further detail of Soraya’s remuneration on
appointment was set out in the Annual Report and Form 20-F
2023 on page 186.
Wider Workforce Context
We remain committed to prioritizing employees’ wellbeing and
providing support especially in markets where macro-economic
factors are affecting employees’ ability to maintain acceptable
standards of living. Throughout 2024, we remained focused on
our employees’ diverse needs and continued to make significant
reward related investments where necessary to alleviate the
impact of macro-economic challenges, including inflationary one-
off lump sum payments, regular salary increases, and off-cycle
targeted salary increases. These initiatives covered 11 markets with
an overall spend of £10.9 million across circa 6,000 employees.
Additionally, in May 2024, we launched our Global Benefits &
Wellbeing framework to all markets. The framework is designed to
support renewing our offerings and policies to be truly inclusive. It
provides greater flexibility and choice to meet the diverse needs of
our populations, supporting our health and wellbeing agenda and
our wider sustainability, diversity and inclusion programmes.
The Remuneration Committee keeps up to date with the views of our
wider workforce drawing from a range of well-established engagement
channels worldwide to enable a robust understanding of the issues
affecting the workforce globally. For more information on engagement
with the wider workforce refer to page 235.
The Committee considers executive pay in this broader context,
seeking to ensure the Remuneration Policy is implemented with the
desired attributes of fairness, transparency, proportionality, and
alignment to broader organisational culture and societal expectations.
Pay Equity
In 2024, for the fourth year in succession, we received an
independent accreditation from Fair Pay Workplace for all markets
included in the scope of their review, demonstrating our
commitment to pay equity in order to create a more equitable and
inclusive workplace.
Our pay equity review covers approximately 43,000 direct
employees
1 in more than 100 markets from a gender perspective
(all our direct employees), and approximately 17,000 employees in
eight markets from an ethnicity perspective (approximately 40% of
our global workforce).
The Group results show that men and women are paid within 1%
of each other, and ethnically diverse and non-ethnically diverse
groups are paid within 1% of one another for doing the same work
or work of equal value. This demonstrates that our pay practices
are founded on fair and consistent drivers of pay. Further
information about the Group’s approach to Pay Equality is
described in the Diversity and Inclusion Report (see www.bat.com/
investors-and-reporting/reporting/diversity-and-inclusion-report).
Living Wage
Living Wage is an ongoing area of focus for BAT. In 2024, for the
second year in succession, we received an independent
accreditation from the Fair Wage Network for all the markets
included in the scope of our living wage analysis. The assessment
has been conducted across our global business, covering
approximately 43,000 employees (all our direct employees) in more
than 100 markets. We will continue to monitor global living wage
references regularly to ensure that our fair and equitable principles
for wage setting are upheld.
Note:
1.
Direct Employees' are permanent employees employed directly by the Group. Further
details on the definition is provided in our Diversity and Inclusion Report 2024.
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2025 salary changes
In determining the 2025 salary increases for the Chief Executive
and Chief Financial Officer, the Remuneration Committee noted
that in the UK, salary increases for the majority of employees are
expected to be around 4% on average.
In addition, the Remuneration Committee also considered the
underlying Group performance for the financial year and the
individual contribution of the Executive Directors.
The Remuneration Committee also reviewed market data to
reference the competitive positioning of the Chief Executive's and
Chief Financial Officer's total remuneration in relation to our
revised International Pay Comparator Group and wider market.
The Remuneration Committee also reviewed the impact of salary
adjustments on total remuneration of the Executive Directors to
ensure the overall potential quantum remains reasonable.
Taking the above points into account, the Committee decided to
approve a salary increase of 2.5% for the Chief Executive and 3.5%
for the Chief Financial Officer, which are below the average level of
the wider UK workforce.
Looking Ahead to 2025
The Committee discussed the importance of ensuring performance
ranges are appropriately calibrated to the Group’s business model and
outlook and remain stretching for participants.
We have carefully considered internal forecasts, external market
expectations for future growth, the sensitivities attached to target
ranges and the current business environment in which the Group is
operating.
The Committee is confident that the targets remain suitably stretching
and incentivising for participants, ensuring maximum payout only for
exceptional performance. Further details related to the 2025 PSP
targets are provided on page 240.
We will review the grant price of the 2025 PSP award, taking into
account previous grant prices, and review both on grant and on
vesting whether there is or has been any potential for windfall gains.
The Committee retains discretion to determine whether the formulaic
outcome of the 2025 PSP at vesting is a fair reflection of underlying
business performance and consistent with the shareholder experience
over the performance period, and if not, to adjust the outcome
accordingly.
Canadian settlement
In 2024, there was progress towards a settlement agreement
under the Proposed Plans in connection with ITCAN's tobacco-
related litigation in Canada (further details are available on page
328). In setting targets for 2025, the Remuneration Committee has
carefully considered relevant factors known at this time with
regards to the Canadian settlement and the corresponding
accounting treatment in the context of STI and LTI target setting.
The Committee’s approach is fully described on pages 239 to 240
and further information will be disclosed in the Annual Report and
Form 20-F for the year ending 31 December 2025.
New Performance Share Plan (PSP)
The BAT Long-Term Incentive Plan 2016 approved by shareholders in
2016 will expire next year. As a result, we will be seeking shareholder
approval for a new long-term incentive plan, the British American
Tobacco p.l.c. Performance Share Plan at our forthcoming 2025 AGM.
Further information is provided in the Notice of AGM.
In relation to Committee composition, I was delighted to welcome
Karen Guerra back to the Committee on 10 February 2025 and I
would like to thank Murray Kessler for his contributions to the
Committee over his tenure.
I would like once again to thank our shareholders and wider
stakeholders for the direct engagement and feedback during this past
year on both our remuneration policy and practices. I look forward to
continuing this dialogue in 2025 and respectfully ask for your support
at the forthcoming Annual General Meeting.
Kandy Anand
Chair, Remuneration Committee
12 February 2025
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
215
Quality Growth
Sustainable Future
Dynamic Business
2024 Business performance highlights
+8.9%
£251m
+1.3%
101%
+1.4%
New Categories
organic revenue growth
Change in organic New
Categories contribution
Organic Group revenue
growth
Organic operating
cash flow
conversion ratio
Adjusted organic profit from
operations growth
STI
STI
LTI
LTI
STI
Performance outcomes
STI and LTI outcomes for 2024 are shown in the charts below.
Full details can be found on pages 229 and 230.
Short-Term Incentive 2024*
Delivery: 50% in cash
and 50% in shares
(0%) Threshold
Maximum (100%)
Outcome as %
of maximum
Group's volume share
growth (10%)
78.6%
New Categories revenue
growth (15%)
Chief Executive (£'000)
New Categories contribution
(20%)
£2,700
Chief Financial Officer
(£'000)
Adjusted profit from
operations growth (25%)
£796
Adjusted cash generated
from operations (30%)
Long-Term Incentive 2022-2024**
(15%) Threshold
Maximum (100%)
Outcome as %
of maximum
Relative total shareholder
return (20%)
42.1%
Adjusted diluted EPS growth
(current) (15%)
Chief Executive (£'000)
Adjusted diluted EPS growth
(constant) (15%)
£1,474
Group revenue growth
(15%)
New Categories revenue
growth (15%)
Operating cash flow
conversion ratio (20%)
Shareholding as % of salary
(31 Dec 2024)
Chief Executive
482 %
Chief Financial Officer
266 %
277%
140%
205%
126%
476%
228%
Tadeu Marroco
Soraya Benchikh
At risk – unvested subject to performance
Unvested subject to continued employment
Ordinary Shares
l
2024 Shareholding requirement: 500% of
salary for the Chief Executive and 400% for
the Chief Financial Officer
– Current shareholding includes: ordinary shares
owned outright and shares subject to continued
employment on a net-of-tax basis (estimated).
– Shares "at risk" include unvested LTI awards
subject to performance on a net-of-tax basis.
2024 Remuneration (£'000)
Notes:
*
For the STI 2024 targets and performance have been set and assessed excluding
the impact of the disposal of the Russian and Belarusian businesses from outcomes.
** In assessing performance results for the 2022 LTIP award against the targets set at
the start of the performance period, performance has been assessed by removing the
impact of the disposal of the Russian and Belarusian businesses from the 2023 and
2024 results. Performance in the year 2022 will remain as previously reported.
Base salary
Total Remuneration
Chief Executive
£1,374
£5,964
Chief Financial Officer
£533
£4,781
The above numbers are as reported in the Single Figure Table, page 228.
The majority of the Executive Directors' remuneration package is made up
of variable at-risk pay, linked to stretching targets that align with our
strategy and shareholder value creation, and is largely delivered in shares.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Remuneration at a Glance
Remuneration at the Group is designed to reward performance in line with the delivery
of the Group's strategy, A Better Tomorrow™, and provides alignment with shareholders'
expectations and our Sustainability agenda. In 2024, we continued to accelerate our
transformation journey towards A Better Tomorrow™. The below summary highlights
how our business performance translated into the remuneration of our Chief Executive and
Chief Financial Officer.
216
+
Further details on page 231
Introduction
This policy section of the Remuneration Report (the Policy Report) sets out a proposed new Remuneration Policy for the Executive
Directors and the Non-Executive Directors.
The Remuneration Committee discussed the details of the Remuneration Policy over a number of meetings during the year, taking into
account the strategic priorities of the Group and evolving market practice. The Remuneration Committee Chair and the Chair of the
Board engaged with the Company’s largest shareholders and their representatives regarding the policy proposals. As referenced in the
Annual Statement from the Chair of the Remuneration Committee, the Committee believes the new Remuneration Policy has strong
alignment with the BAT strategy and the transformation agenda.
This new Remuneration Policy, which is intended to replace the current Remuneration Policy approved by shareholders at the 2022 AGM,
is subject to a binding vote by shareholders at the AGM on 16 April 2025 and, if approved, will come into effect from 17 April 2025. The new
Remuneration Policy is set out in full on the following pages with key changes from the current Remuneration Policy identified for
reference.
The Committee reserves the right to make minor changes to the Remuneration Policy, where required for regulatory, tax or
administrative reasons.
Principles of remuneration
The Committee’s remuneration principles are to:
– reward, as an overriding objective, the delivery of the Group’s long-term strategy in a manner which is simple, straightforward and
understandable and which is aligned with shareholders’ interests;
– structure a remuneration package that is appropriately positioned relative to the market and comprises core fixed elements and
performance-based variable elements;
– design the fixed elements of pay (comprising base salary, pension and other benefits) to recognise the skills and experience of our
Executive Directors and to ensure current and future market competitiveness in attracting talent;
– design the variable elements of pay (provided via two performance-based incentive schemes: a short-term incentive scheme delivered
through a combination of a cash element and a deferral element, and a long-term incentive scheme), to be both transparent and
stretching and to support, motivate and reward the successful delivery of the Group’s long-term strategy and growth for shareholders
on a sustainable basis;
– ensure that reputational, behavioural and other risks that can arise from target-based incentive plans are identified and mitigated;
– maintain an appropriate balance between fixed pay and the opportunity to earn performance-related remuneration with immediate
and deferred elements, such that the majority of the Executive Directors' total remuneration package is delivered in BAT shares;
– ensure that the performance-based elements form, at maximum opportunity, between 80% and 90% of the Executive Directors’ total
remuneration packages;
– ensure, through its annual review, that the Remuneration Policy is both rigorously applied and remains aligned with the Group’s
purpose, values and strategy and the need to promote the long-term success of the Group; and
– ensure that remuneration arrangements are transparent and promote effective engagement with shareholders and the workforce.
Summary of key changes
The background and explanation of the proposed key changes from the current remuneration policy are given in the Annual Statement from
the Chair of the Remuneration Committee starting on page 205 of this Remuneration Report. The key changes are summarised below:
Policy element
Summary of changes
Short-Term Incentive (STI)
– Performance measures and weightings: Underlying policy is unchanged, however alternative
measures and weightings have been selected for awards made in 2025 to align to strategy and
continued transformation of the business.
– Deferral: Introduced a reduced deferral level from 50% to 25% once the minimum shareholding
requirements have been met. As part of the review, the Committee has assessed the malus
and clawback provisions and is comfortable that they will remain fully enforceable following
this change.
– Maximum opportunity: Increased maximum opportunity for the Chief Financial Officer from
190% to 200% of salary. Chief Executive maximum opportunity to remain unchanged at 250%.
Long Term Incentive -
Performance Share Plan (PSP)
– Performance measures and weightings: Underlying policy is unchanged, however alternative
measures and weightings have been selected for awards made in 2025 to align to strategy and
continued transformation of the business.
– Maximum opportunity: Increase maximum opportunity from 500% to 600% for the Chief
Executive and from 400% to 450% for the Chief Financial Officer.
Shareholding requirements
– Increase shareholding requirements from 500% to 600% for the Chief Executive and from
400% to 450% for the Chief Financial Officer to align with the maximum LTI opportunity levels.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Directors' Remuneration Policy
217
Executive Directors: Remuneration Policy Table
Base Salary
Purpose & link to strategy
To attract and retain senior high-calibre talent to deliver the Group’s strategic plans and to offer
market-competitive levels of fixed remuneration to reflect an individual’s skills, experience and
role within the Group, as well as the scale and complexity of the business.
Operation and performance
measurement
Base salary is normally paid in 12 equal monthly instalments during the year. Salaries are normally
reviewed annually in February (with salary changes effective from April) or subject to an ad hoc
review on a significant change of responsibilities.
Salaries are reviewed taking into account factors including individual performance as well as
appropriate market data, including general UK pay trends and a relevant pay comparator group
taking into account the Company’s size and complexity and reflecting the talent marketplace
within which BAT operates.
Maximum opportunity
Annual increases for Executive Directors’ base salaries in the normal course will generally be in
the range of the increases in the base pay of other UK-based employees in the Group. The
proposed increase to incentive quantum will also be accompanied by a cap on annual salary
increases for the Chief Executive, which would be held at or below the UK employee average for
the lifetime of the new policy.
The salary of a recently appointed Executive Director as he or she progresses in a role may
exceed the top of the range of the salary increases for UK-based employees where the
Committee considers it appropriate to reflect the accrual of experience. A significant change in
responsibilities or material change in role may be reflected in an above average increase in salary.
Benefits
Purpose & link to strategy
To provide market-competitive benefits consistent with the role which:
– attract and retain senior high-calibre talent to deliver the Company’s strategic plans; and
– recognise that such talent is global in source and that the availability of certain benefits (e.g.
relocation, repatriation, taxation compliance advice) will from time to time be necessary to
avoid such factors being an inhibitor to accepting the role.
Operation and performance
measurement
The Company currently offers the following contractual benefits to Executive Directors: a car or
car allowance; the use of a car and driver for personal and business use; employment tax advice
(including in instances where multi-jurisdictional tax authorities are involved); tax equalisation
payments (where appropriate); private medical insurance, including general practitioner ‘walk-in’
medical services; personal life and accident insurance; and housing and education allowances or
similar arrangements as appropriate to family circumstances (anticipated to be provided for
Executive Directors who relocate internationally).
Other benefits may include the Executive Directors' and their partners’ attendance at hospitality
or similar functions, and the provision of services and benefits which may be treated as benefits
for tax purposes, such as the provision of home security and the reimbursement of expenses
incurred in connection with their duties.
Other benefits not identified above may be offered if, in the Committee’s view, these are
necessary in order to remain aligned with market practice.
Where necessary any benefits may be grossed up for taxes.
The Company provides Directors and Officers liability insurance (D&O) and an indemnity to
Directors to cover costs and liabilities incurred in the execution of their duties.
Maximum Opportunity
The maximum potential values are based on market practice for individuals of this level of
seniority and as appropriate to an individual’s circumstances, with any tax on benefits paid by the
Company in addition.
The maximum annual value is based on the cost to the Company and is not pre-determined.
Pensions
Purpose & link to strategy
To provide competitive post-retirement benefit arrangements which are aligned to the wider UK
workforce whilst also recognising the external environment in the context of attracting and
retaining senior high-calibre talent to deliver the Group’s long-term strategy.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
Directors' Remuneration Policy
Continued
218
Executive Directors: Remuneration Policy Table continued
Operation and performance
measurement
Defined contribution benefits
Executive Directors are eligible to receive a pension benefit which is aligned with the wider UK
workforce. This is currently up to 15% of salary in the UK. The pension benefit can be provided as
a contribution into the British American Tobacco UK Pension Plan ("Pension Plan") (or a similar
defined contribution arrangement from time to time) or as a gross cash sum paid in lieu thereof.
The level of contribution in the Plan is restricted to take into account the annual allowance, and if
eligible, the Executive Director may elect to accumulate any balance in the Defined Contribution
Unfunded Unapproved Retirement Benefits Scheme ("DC UURBS") or receive the balance as a
gross cash sum. The DC UURBS closed to new entrants on 31 March 2021.
The pension arrangements operate in accordance with the rules of the applicable scheme,
including in respect of any benefits payable in the event of death or on early retirement.
Maximum opportunity
The maximum annual contribution in the defined contribution section of the Pension Plan is
currently up to 15% of base salary in alignment with the UK wider workforce. Excess benefits
(whether accrued in the DC UURBS or paid as a cash sum) are subject to this same limit.
Short-term Incentive
Purpose & link to strategy
To incentivise the attainment of corporate targets aligned to the Group’s strategic objectives on
an annual basis, with a deferred element to ensure alignment with shareholders' interests.
To ensure, overall, a market-competitive package to attract and retain high calibre individuals to
deliver the Group’s long-term strategy.
Operation and performance
measurement
The STI is normally awarded 50% in cash and 50% in shares through the Deferred Share Bonus
Scheme (DSBS). Once the minimum shareholding requirements have been met further STI
awards will normally be awarded 75% in cash and 25% in shares through the DSBS.
The deferred shares normally vest after three years and attract additional dividend equivalent shares.
Cash payments are subject to clawback provisions, and the deferred shares element is subject
to robust malus and clawback provisions, as described on page 221.
The STI is assessed against a range of performance measures. The Committee determines
performance measures, weightings and targets annually each year. Performance measures
typically relate to financial delivery and measuring progress in our transformation, aligning with
the Company’s priorities and strategy delivery. Performance measures applicable to the 2025
awards can be found on page 239.
The Committee will review the formulaic outcome of the incentive measures to ensure it reflects
the underlying performance of the business and the experience of shareholders over the
performance period and retains the ability to adjust any formulaic outcomes if considered
appropriate. Any such adjustments will be fully disclosed in the relevant Directors' Remuneration
Report, including in cases of identified poor individual performance.
Maximum opportunity
Chief Executive - Maximum 250% of salary; on-target 125% of salary.
Other Executive Directors - Maximum 200% of salary; on-target 100% of salary.
The payout at threshold is normally 0% for each performance measure.
Long-term Incentive ( Performance Share Plan)
Purpose & link to strategy
To incentivise individuals to deliver the Group’s long-term strategy and promote the long-term
success of the Company, and facilitate the appointment and retention of senior high-calibre talent.
To put in place a combination of measures with appropriately stretching targets around the
long-term plan that provides a balance relevant to the Company’s business and market conditions
as well as providing alignment between Executive Directors’ and shareholders’ interests.
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
219
Executive Directors: Remuneration Policy Table continued
Operation and performance
measurement
PSP awards are annual awards over shares that vest and are released to participants only to the
extent that:
– the performance condition is satisfied at the end of the three-year performance period; and
– an additional holding period of two years has been completed.
Dividend equivalents may be paid in respect of share awards to the extent that the performance
conditions have been achieved.
PSP awards may be delivered in any form provided under the PSP rules as approved by
shareholders. Awards are subject to robust malus and clawback provisions, as described on
page 221.
The Committee sets performance measures and targets for each PSP grant. Measures,
weightings and targets will be selected based on the strategic priorities for BAT at that time.
The performance measures typically include relative total shareholder return, financial and
transformation progress measures. Performance measures for the 2025 awards can be found
on page 240.
The Remuneration Committee will engage with shareholders in advance if it proposes significant
changes to the PSP performance measures.
The Remuneration Committee will review the formulaic outcome of the incentive measures to
ensure it reflects the underlying performance of the business and the experience of shareholders
over the performance period. The Committee retains the ability to adjust any formulaic
outcomes if considered appropriate. Any such adjustments will be fully disclosed in the relevant
Directors' Remuneration Report.
Maximum opportunity
Maximum award of shares permitted is 600% of salary for the Executive Directors.
The maximum award for the Chief Executive is typically in line with this limit at 600% of salary
and typically below this limit for other Executive Directors, currently at 450% of salary.
The payout for threshold performance is 15% of maximum for each measure.
All-employee share schemes
Purpose & link to strategy
Executive Directors are eligible to participate in the Company’s all-employee share schemes, in
the same way as the wider workforce, which are designed to incentivise employees by giving
them an opportunity to build shareholdings in the Company.
Operation and performance
measurement
The Company currently operates the following HMRC tax-advantaged all-employee share
schemes: the Sharesave Scheme, a savings-related share option scheme, and the Share
Incentive Plan (SIP), which allows eligible employees to purchase shares in the Company (under
the Partnership Plan) and to receive an annual award of free shares under the Share Reward
Scheme (SRS) based on the Group’s performance in the previous financial year.
Maximum opportunity
Executive Directors are subject to the same limits on participation as other employees, as defined
by the applicable statutory provisions from time to time. Further details about each scheme are
provided on page 338.
Shareholding Requirement (including post-employment)
Purpose & link to strategy
To strengthen the alignment between the interests of the Executive Directors and those of
shareholders by requiring Executive Directors to build up a high level of personal shareholding in
the Company.
To ensure long-term alignment through the operation of post-employment shareholding
requirements.
Operation and performance
measurement
Executive Directors are required to hold shares in the Company:
– during service as an Executive Director, equal to the value of the same multiple of salary at
which LTI awards are made to that Executive Director; and
– after ceasing service as an Executive Director during the period until the second anniversary of
cessation of employment with the Group, of a value equal to 100% of the shareholding
requirement that applied whilst an Executive Director or, if lower, such shares as are held at
the date of cessation. In order to monitor and enforce the above provisions, former Executive
Directors are required to hold their shares in a nominee account in respect of which a sale
restriction applies to shares held to comply with the requirements.
Those Executive Directors who do not meet the shareholding requirements may generally sell a
maximum of up to 50% of any shares vesting (after tax) until the threshold for the shareholding
requirements has been met.
A waiver of compliance with the shareholding requirements is permitted at the discretion of the
Remuneration Committee in circumstances which the Committee considers to be exceptional.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
Directors' Remuneration Policy
Continued
220
Notes to the Policy table
Other Policy Provisions in Relation to Directors’ Pay
Flexibility, judgement and discretion
There are a number of specific areas in which the Committee may exercise discretion, including:
– to determine performance measures, weightings and targets annually for the STI and to set performance measures, weightings
and targets for each LTI grant based on the strategic priorities of BAT at that time.
– to alter performance conditions if events happen which cause the Committee to determine that the performance conditions
are no longer a fair measure of the Company's performance, or to take account of legal changes or to obtain or retain favourable
tax, regulatory or exchange control treatment or in the event that it considers it fair and reasonable to do so, provided that
the revised target is, in the opinion of the Committee, not materially less challenging than was intended in setting the
original condition.
– to adjust formulaic pay outcomes for STI and LTI if and to the extent that it considers this appropriate. This power to adjust the
outcomes is broad and includes adjusting the outcomes either positively or negatively, including reducing to zero. For example,
an adjustment might be made if the Remuneration Committee considers:
– the formulaic outcomes do not reflect the overall financial or non-financial performance of the Company or the participant over the
performance period;
– the LTI vesting percentage is not appropriate in the context of circumstances that were unexpected or unforeseen at award; or
– there is any other reason why an adjustment is appropriate.
– in connection with any termination of employment or change of control or similar event.
– to determine whether awards under the LTI are delivered as options or under any other form permitted under the PSP rules as
approved by shareholders, and in respect of operational matters not otherwise covered by this Policy, to operate the STI, DSBS
and LTI plans in accordance with their terms.
– to operate the malus and clawback provisions.
Malus and clawback
Amounts paid under the STI are subject to clawback provisions, and awards made under the DSBS and the PSP are subject to malus and
clawback provisions. Malus and clawback provisions apply to DSBS awards and the cash portion of the STI for the duration of three years
from the date of the award and to PSP awards for the duration of five years from the date of award. Malus and clawback may be applied
in circumstances including where:
– there has been a material misrepresentation in relation to the performance of any Group company, relevant business unit and/or the
participant;
– an erroneous calculation was made in assessing the extent to which an award vested or bonus was paid, which in either case resulted
in the value of the award or payment being more than it should have been;
– participant misconduct;
– participant caused a material loss for any Group company as a result of (a) reckless, negligent or wilful actions, or (b)
inappropriate behaviour or behaviour that is not aligned with the Group’s corporate values;
– participant contributed to serious reputational damage of any Group company or one of its business units; or
– there is an insolvency event or corporate failure.
Where the Committee determines that these provisions are to be applied, the number of shares subject to outstanding awards may be
reduced (malus) and/or the participant may be required to repay up to the excess value which was paid or vested (clawback). Clawback
may also be effected by the number of shares subject to outstanding awards being reduced and/or by a reduction in other cash or share-
based awards held by the participant.
The above provisions are supplemented by the additional malus and clawback policy which is compliant with the requirements of
the New York Stock Exchange (the “NYSE”) listing standards for NYSE-listed companies to adopt malus and clawback policies that
meet the requirements of the Dodd-Frank Act and the SEC’s final rules implementing clawback provisions of the Dodd-Frank Act
(i.e., cases in which there has been an accounting restatement due to material non-compliance with any financial reporting
requirement under the securities laws).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
221
Payments from previously agreed remuneration arrangements
The Committee reserves the right to make any remuneration payments where the terms were agreed prior to an individual being
appointed an Executive Director of the Company or prior to the approval and implementation of the Remuneration Policy (including, for
the avoidance of doubt, pursuant to the current Remuneration Policy). This includes the achievement of the applicable performance
conditions for Executive Directors who are eligible to receive payment from any award made prior to the approval and implementation of
the Remuneration Policy.
External Appointments
The Company recognises the opportunities and benefits that accrue to the Company and its Executive Directors who undertake non-
executive roles. Consequently, an Executive Director may, with the permission of the Board, undertake a single external appointment and
the Executive Director may retain the fees from such appointment.
Differences in Remuneration Policy for Executive Directors from that for other employees
The Remuneration Policy is structurally similar to remuneration for the majority of wider workforce, with consideration given to location,
seniority and responsibilities. A higher proportion of total remuneration is tied to variable pay for Executive Directors and members of
senior management, refer to “Remuneration in the context of the wider workforce” on page 232 for more details.
Illustrations of the application of the Remuneration Policy
The charts below illustrate the potential future value and composition of the Executive Directors’ total remuneration opportunities under
four performance scenarios (‘Minimum’, ‘On-target’, ‘Maximum’ and ‘Maximum +50% share price appreciation between award and vest
of the PSP’) for the first complete year in which the Remuneration Policy will apply. The total remuneration opportunity for Executive
Directors is strongly performance-based and weighted to the long term.
Remuneration outcomes for varying levels of performance
Chief Executive
(£m)
Minimum
On-target
Maximum
Maximum plus 50%
share price
appreciation
The ‘Minimum’ scenario shows fixed remuneration
only, i.e. salary, pension and benefits.
The 'On target' scenario shows fixed remuneration
plus on target payout under the STI
1 and PSP.
The 'Maximum' scenario shows fixed remuneration
plus maximum payout under STI
1 and PSP.
For the ‘Maximum plus 50% share price
appreciation’, all elements are the same as the
‘Maximum’ scenario, but assuming 50% share
price growth across the performance period for
PSP awards.
For simplicity, the charts exclude dividend accrual,
and exclude the effect of any share price
movement except in the ‘Maximum +50% share
price appreciation’ scenario.
Chief Financial Officer
(£m)
Minimum
On-target
Maximum
Maximum plus 50%
share price
appreciation
Assumptions and performance scenarios
Base Salary
Salary effective from 1 April 2025
Pension
Cash in lieu of pension benefit of up to 15% of salary
Benefits
2
Illustrative, based on 2024 figure
Minimum
On target
3,4
Maximum
Chief
Executive
STI
Nil
125%
250%
PSP
Nil
90%
600%
Chief
Financial
Officer
STI
Nil
100%
200%
PSP
Nil
68%
450%
Notes:
1.
STI value is inclusive of the annual Share Reward Scheme (SRS)
award (an all-employee share scheme) up to a maximum of £3,600
and an on target value of 50% of maximum.
2. Excluding one-off benefits related to relocation.
3. STI on target is 50% of maximum.
4. PSP on target is at threshold vesting of 15%.
BAT Annual Report and Form 20-F 2024
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Other Information
Remuneration Report
Directors' Remuneration Policy
Continued
222
Fixed remuneration
STI
PSP
Share price growth
100%
43%
34% 23%
16%
26%
58%
12%
20%
45%
23%
Fixed remuneration
STI
PSP
Share price growth
100%
38%
36% 26%
13%
26%
61%
10%
20%
47%
23%
£1.0
£2.4
£6.4
£8.3
£1.8
£4.9
£13.9
£18.2
Approach to Remuneration of Directors on Recruitment
Principles
In making an Executive Director
appointment (whether an internal
promotion or external appointee) the
Committee will follow these principles.
– British American Tobacco seeks to appoint senior, high calibre managers. Many of its
competitors for talent are based outside the UK.
– To offer a package (both fixed salary, benefits, pension and performance-related
remuneration) which is sufficiently competitive (but not excessively so) so that senior, high
calibre candidates can be appointed, and which is designed to promote the long-term
success of the Company.
– The Committee will consider the market, including the International Pay Comparator Group,
and by reference to other companies of equivalent size and complexity to ensure that it does
not overpay.
– Consideration will be given to relevant factors, such as the candidate’s skills, knowledge
and experience and his or her current package and current location in determining the
overall package.
– Internal pay relativities and the terms and conditions of employment of the new and existing
Executive Directors will be considered to ensure fairness between Executive Directors.
External appointment to role of
Executive Director – additional
considerations
– The remuneration package, including maximum incentive opportunities, will be set in line
with the Policy set out in the policy table.
– In addition, to facilitate the recruitment of an individual, the Committee retains the discretion
to offer additional payments or awards to buy-out incentive awards, benefits and/or other
contractual arrangements, including in relation to the forfeiture of such amounts on leaving
a previous employer. The maximum value of any such payments or awards would normally
be no higher than the expected value of the forfeited arrangements. In determining any
such buy-out, the Committee will take account of relevant factors which may include the
form of any forfeited awards (e.g. cash or shares), the time horizons, and any performance
conditions attached.
– Where appropriate, any replacement award would be made subject to malus and
clawback provisions.
Relocation
In the event that an internal or external candidate were required to relocate internationally to
take up the Executive Director position, the Committee may offer appropriate relocation
provisions. Examples of this support may include shipment of goods; temporary
accommodation; assistance to find accommodation; tax support services; immigration support,
education assistance and spouse or partner support. Inbound relocation and shipment expenses
are subject to clawback provisions. Where relevant, amounts will be grossed up for tax.
Such benefits would be set at an appropriate level by the Committee, taking into account the
circumstances, provisions applicable to the wider internationally mobile workforce, and typical
market practice.
Executive Directors’ service contracts and end of employment arrangements (including change of control provisions)
The following table describes the provisions of the service contracts of Tadeu Marroco and Soraya Benchikh and applicable plan rules. It
is currently anticipated that service contracts for newly-appointed Executive Directors will not contain terms differing materially from
these provisions (provided that other arrangements may be entered into in connection with the recruitment of Executive Directors, as
described in the ‘Approach to remuneration of Directors on recruitment’ section above).
The table below sets out the effective dates of the Executive Directors' service contracts.
Executive Director
Effective date of current service contract
Tadeu Marroco
15 May 2023
Soraya Benchikh
1 May 2024
Copies may be inspected at the Company’s registered office.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
223
Provision
Notice period
Employed on a permanent contract, terminable by either party on one year’s notice. The Company may require
the Executive Director to be on garden leave during all or any part of the period of notice (whether given by the
Executive Director or the Company).
Contractual terms
The contracts include obligations which could give rise to, or impact upon, remuneration and/or payments for loss
of office.
The primary obligations under the contracts which may give rise to remuneration or payments for loss of office
are as follows:
– to terminate the contract only on the expiry of 12 months’ written notice or to make a payment in lieu of notice
in respect of all, or the unexpired part, of the 12 months’ notice calculated based on: (1) salary at then current
base pay; and (2) the cost to the Company of providing private medical expenses insurance and personal
accident insurance (or the Company may, at its option, continue those benefits for the unexpired period of the
notice). In determining the value of a payment in lieu of notice the Company shall not be required to reward
failure on the part of the Executive Director and shall have regard to corporate governance standards at the
termination date. The Company may, at its reasonable discretion, make the payment in lieu of notice in phased
monthly or quarterly instalments and may determine that it should be reduced in accordance with the duty on
the part of the Executive Director to mitigate their loss; and
– to continue to pay the Executive Director’s salary and contractual benefits during any garden leave period.
In addition to the contractual rights to a payment on loss of office, the Executive Director may have statutory and/
or common law rights to certain additional payments depending on the circumstances of the termination.
Treatment of STI
and Deferred
Bonus Scheme
(DSBS) awards
The following provisions will normally apply:
– In the event of death, disability, injury or ill health, and other circumstances at the Committee’s discretion, any
STI in the year of departure is pro-rated based on service and deferred awards under the DSBS will vest upon
termination of employment.
– Payments made during a notice period or after cessation may, at the discretion of the Committee, be made in
cash only.
– STI amount payable will be determined based on the assessment of the actual full-year performance and paid at
the normal time.
– In other circumstances (including resignation and summary dismissal), no STI award will be made and DSBS
awards will lapse unless the Committee, in its absolute discretion, decides otherwise.
Treatment of PSP
awards
PSP awards will be treated in accordance with the applicable plan rules. The following provisions will normally apply:
– In the event of disability, injury or ill health, and other circumstances at the Committee’s discretion outstanding
awards will continue to vest and will ordinarily be reduced pro-rata for time elapsed during the performance
period.
– Awards will remain subject to the same vesting period, performance conditions, holding period and malus and
clawback provisions, as if the Executive Director had remained in employment.
– The extent to which awards vest will be determined by the Committee taking into account the extent to which
the performance conditions have been satisfied.
– In the event of death, the award will vest in full on the date of death.
– In other circumstances (including resignation and summary dismissal): unvested awards will lapse on cessation
of employment, unless the Committee, in its absolute discretion, decides otherwise.
All-employee
share schemes
Executive Directors are treated in accordance with the scheme rules, in the same manner as applies to
all employees.
Other
The Company may make payment of legal fees and/or other professional advice fees incurred by an individual in
connection with their termination of employment, and/or fees for outplacement services. Payment may also be
made in relation to accrued but untaken holiday.
Reimbursement of reasonable relocation costs where an Executive Director (and, where relevant, his or her
family) had originally relocated to take up the appointment; this may include the shipment of personal goods and
winding-up his or her affairs in the UK and the incidental costs incurred in doing so.
In certain circumstances, the Committee may approve new contractual arrangements with departing Executive
Directors, potentially including (but not limited to) settlement, confidentiality, restrictive covenants and/or
consultancy arrangements. These arrangements would only be entered into where the Committee believes that it
is in the best interests of the Company and its shareholders to do so.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
Directors' Remuneration Policy
Continued
224
Terms of Appointment for the Chair of the Board and other Non-Executive Directors
Non-Executive Directors, including the Chair of the Board, are appointed as officeholders, not employees. In any given year, the period of
appointment runs from the close of the Company’s last AGM to the close of the Company’s next AGM.
The Chair of the Board may terminate his or her appointment with one month’s written notice, and the Company may give a
compensation payment in lieu of all or part of such notice. The Chair may be removed by the Company prior to the expiry of his or her
term of appointment by three months’ written notice or a compensation payment in lieu of all or part of such notice.
A Non-Executive Director may terminate his or her appointment at any time in accordance with the Company’s Articles of Association.
Alternatively, a Non-Executive Director’s appointment will terminate if: (1) the Board requests that he or she not offer himself or herself
for re-election at the next AGM; (2) the Non-Executive Director is not re-elected at the next AGM; (3) the Non-Executive Director is
required to vacate office for any reason pursuant to any of the provisions of the Company’s Articles of Association; or (4) the Non-
Executive Director is removed as Director or otherwise required to vacate office under any applicable law.
The Chair of the Board and other Non-Executive Directors do not participate in any discussion on their own respective remuneration.
Chair of the Board and Non-Executive Directors
Fees
The Chair of the Board receives a single all-inclusive fee. Other Non-Executive Directors receive a base fee and
may also receive additional fees in respect of committee membership and/or chairmanship.
The Committee considers annually the fee payable to the Chair of the Board and the Board considers fees payable
to the other Non-Executive Directors. This process may take into account factors including the breadth and
demands of the relevant role as well as comparison with fees paid by the comparator group of companies used in
the base salary review of Executive Directors. The annual review does not necessarily result in a change to the fees.
The Company has the discretion to pay additional fees to the Chair of the Board and/or Non-Executive Directors
should the Company require significant additional time commitment in exceptional or unforeseen circumstances.
Fees may be paid in cash or a combination of cash and shares, with the proportion to be paid in shares in a year to
be disclosed in the relevant Directors' Remuneration Report.
It is anticipated that any future aggregate increase in fees for the Chair of the Board and other Non- Executive
Directors will generally be in the range of the increases in the base pay of UK-based employees in the Group.
1
Benefits, travel
and related
expenses
The Chair of the Board and Non-Executive Directors may be reimbursed for the cost of travel, accommodation
and related expenses incurred in connection with their duties and are eligible to use general practitioner ‘walk-in’
services. The Chair of the Board and Non-Executive Directors and their partners may attend hospitality or
similar functions.
Benefits for the Chair of the Board may also include: the use of a Company driver; private medical insurance and
personal accident insurance benefits; the provision of home and personal security; and assistance in relation to
personal tax matters.
If necessary, the Company will pay for independent professional advice in connection with the performance of
duties as Chair of the Board and Non-Executive Directors.
The Company provides D&O insurance and an indemnity to the Chair of the Board and Non-Executive Directors
to cover costs and liabilities incurred in the execution of their duties.
In instances where any benefits, reimbursements or expenses are classified by HMRC as a benefit to the Chair of
the Board and Non-Executive Directors, it is also the practice of the Company to pay any tax due on any such benefits.
Other
There are no formal requirements or guidelines to hold shares in the Company. The Chair of the Board and Non-
Executive Directors are not eligible to participate in the British American Tobacco share schemes, bonus schemes
or incentive plans, or be a member of any Group pension plan.
Note:
1.
Fees for Non-Executive Directors and the Chair cannot currently exceed in aggregate an annual sum of £2,500,000 as authorised by shareholders with reference to the Company's
Articles of Association. Any Director who holds any other office in the Company (including the office of Chair of the Board), serves on any Committee of the Board, or performs services
that the Directors consider go beyond the ordinary duties of a Director may be paid such additional remuneration as the Directors may determine.
Non-Executive Directors’ letters of appointment
Non-Executive Directors, including the Chair of the Board, have letters of appointment which are signed annually upon re-election at the
AGM and are available for inspection at the AGM or at the Company's registered office. For further details on appointment and
reappointment of Non-Executive Directors, see the Governance section on pages 189 to 191.
Non-Executive Director recruitment
The remuneration package for new Non-Executive Directors is determined within the confines of the Policy table for Non-Executive
Directors fees, and subject to the Articles of Association. Non-Executive Directors are not offered variable remuneration or retention
awards. When determining the benefits for a new Chair of the Board, the individual circumstances of the future Chair will be taken into
account.
Non-Executive Director termination of office
No payments for loss of office will be made to Non-Executive Directors.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
225
Consideration of wider employee and other stakeholders views
Engaging with stakeholders on remuneration
Employees
Shareholders
The Committee takes account of the pay and employment
conditions of the broader workforce when setting the Policy for
Executive Directors.
The Company promotes and maintains regular and meaningful
engagement with our employees across multiple channels and at
different levels in the organisation (Annual Your Voice engagement
survey, focus groups, Directors' market and site visits, works
councils, and Chief Executive's ‘Let's Talk’ sessions) through which
employees can engage on various business matters, including pay.
The feedback from these channels is reviewed by the Board
(discussed on page 182 to 183).
The Remuneration Committee considers workforce feedback and
pay practices across the Group when designing and implementing
the Directors’ Remuneration Policy, and reviews relevant reference
points and trends, which include internal data on employee
remuneration (for example, average salary increases applying in
the UK and other top markets).
During the Remuneration Policy review, pay and employment
conditions of the wider employee population were taken into
account by ensuring alignment with the same performance,
rewards and benefits principles for the Executive Directors. More
information is provided in the "Differences in Remuneration Policy
for Executive Directors from that for other employees" section on
page 222.
We proactively communicate with employees to help them
develop a clear understanding of their remuneration and benefits
and provide financial literacy resources designed to equip
employees with the knowledge and tools to better manage their
compensation. These communications provide employees with
the context to understand pay for performance alignment and
broader pay structures, helping foster greater engagement on pay
topics, including on executive remuneration.
We actively engage with our shareholders on a range of topics
including executive remuneration to better understand their
perspectives and solicit feedback. This information is carefully
considered when shaping remuneration policy and when making
decisions within our existing frameworks.
In 2024, our Chair of the Board and the Remuneration Committee,
supported by senior managers, met with our major institutional
shareholders and representative bodies, including proxy voting
agencies to review the proposed changes to our Directors'
Remuneration Policy. This iterative process involved incorporating
feedback and conducting follow-up meetings where necessary,
demonstrating our commitment to meaningful dialogue and
responsiveness to shareholder views.
During our engagements, the transparency and level of detail in
our approach were highlighted as key strengths. A recurring theme
was the importance of translating this clarity into our disclosures,
a priority we have aimed to reflect in this report.
Shareholder engagement and input were instrumental in shaping
key decisions, including our proposed adjustments to the STI and
PSP performance measures and weighting, and other policy
aspects. The tables on pages 207 to 213 summarise the
Committee’s proposals, the key points of feedback received, and
the changes made by the Committee taking into account the
feedback received.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
Directors' Remuneration Policy
Continued
226
Summary of the Current Remuneration Policy
The current Remuneration Policy was approved by shareholders at the AGM on 28 April 2022. The full Directors’ Remuneration Policy is
set out in the 2021 Remuneration Report contained in the Annual Report and Form 20-F for the year ended 31 December 2021 (pages
152–157), which is available at www.bat.com.
Current Directors’ Remuneration Policy – Summary
Year 1
Year 2
Year 3
Year 4
Year 5
Fixed Pay – Salary
Attracts and retains high-calibre individuals to deliver the Group's long-term
strategy. Salaries are reviewed annually, taking into account factors including
individual performance, experience and business performance, and reference
appropriate market data
1 and the approach taken for the general UK
employee population.
Fixed Pay – Pensions and Benefits
Pension provides competitive post-retirement benefits arrangements in the
form of a Defined Contribution benefit equivalent to a maximum of up to 15% of
salary, aligned with the rate applicable to the wider UK workforce.
Market competitive benefits are provided which are consistent with the role.
Short-Term Incentive
2
Incentivises the attainment of corporate targets aligned to the Group's strategic
objectives on an annual basis, with a deferred element to ensure alignment with
shareholders' interests. The Chief Executive's on-target opportunity is 125% of
salary and maximum is 250% of salary. The Chief Financial Officer's on-target
opportunity is 95% of salary and maximum is 190% of salary. Malus and clawback
provisions apply.
50% cash
50% shares deferred for 3 years
Long-Term Incentive
2
A combination of stretching targets aligned with long-term strategy delivery that
provides a balance relevant to the Group's business and market conditions as
well as alignment between Executive Directors' and shareholders' interests.
Awards granted under the Group's LTIP - Performance Share Plan vest after
a 5-year extended vesting period from the grant date, and only to the extent
that the performance conditions are satisfied at the end of the 3-year
performance period, and employment continues for an additional 2-year period
from the third anniversary of the grant date. Annual maximum award of 500%
of salary for the Chief Executive and 400% of salary for the Chief Financial
Officer. Malus and clawback provisions apply.
3-year performance period
2-year holding period
Shareholding (including post-employment)
Strengthens the long-term alignment between the interests of Executive
Directors and shareholders.
Executive Directors are required to hold BAT shares equal to the value of 500%
of salary for the Chief Executive and 400% for the Chief Financial Officer during
their service, and post-employment are required to maintain the same level of
shareholding until the second anniversary of cessation of employment.
Minimum shareholding requirement
Notes:
1.
International Pay Comparator group: Anheuser-Busch InBev, Accenture, Altria, AstraZeneca, Bayer, Coca-Cola, Colgate-Palmolive, Danone, Diageo, GlaxoSmithKline, Heineken, Imperial
Brands, Johnson & Johnson, Kraft Heinz, L'Oréal, LVMH, Microsoft, Mondelēz International, Nestlé, Nike, Novartis, Procter & Gamble, PepsiCo, Philip Morris International, Reckitt
Benckiser, Salesforce, Siemens and Vodafone.
2. Further details on the performance measures for the performance period ended 31 December 2024 can be found on pages 229 and 230.
Current Remuneration Policy and the Corporate
Governance Code
When setting the current Remuneration Policy, the Committee has
considered the provision 40 disclosures from the UK Corporate
Governance Code, as summarised below.
Clarity and simplicity
Our current Remuneration Policy provides an overall remuneration
package that is transparent for our Executive Directors and shareholders
alike; its simple structure has a clear and straightforward link to the
delivery of the Group’s long-term strategy. Principles driving fixed
remuneration (salary, benefits, pension) are closely aligned with the
wider workforce and variable remuneration (STI and LTI) rewards delivery
of financial and strategic objectives both in the short- and long-term.
Risk
The combination of performance target setting for the STI and LTI,
the inclusion of provisions for discretionary adjustments and malus
and clawback provisions ensure that we remunerate our Executive
Directors in accordance with high standards of governance while
mitigating, as far as possible, reputational and other risks arising
from remuneration that are not proportionate to outcomes.
Predictability and proportionality
There is a clear link between the operation of our short and long-
term incentive plan awards and the delivery of our strategy and long-
term performance. Variable remuneration at the Company accounts
for between 80%-90% of an Executive Director’s total remuneration,
ensuring that poor performance is not rewarded.
Alignment to culture
The Remuneration Committee has worked extensively to develop
a policy that closely aligns the Executive Directors to the wider
workforce and rewards long-term sustainable performance. The
Remuneration Committee continually reviews the Remuneration
Policy, taking into account any feedback received from engagement
with the wider workforce and shareholders, to ensure it is aligned to
the Company’s purpose and values, and promotes the long-term
success of the Company. The current Remuneration Policy was
approved at the 2022 AGM with 94.85% of votes in favour.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
2024 Annual Report on Remuneration
227
The below section of the Remuneration Report sets out the Executive Directors’ remuneration for the year ended 31 December 2024.
Executive Director remuneration earned in the year ended 31 December 2024 –
@Audited
@
Single figure of remuneration
Executive Directors
Tadeu Marroco
Soraya Benchikh
£’000
2024
2023
2024
2023
Salary
1
1,374
1,149
533
—
Pension
206
173
70
—
Taxable benefits
2
206
243
411
—
Other emoluments
3
4
2
2
—
Short-Term Incentives
2,700
1,650
796
—
Long-Term Incentives
4,5
1,474
1,350
—
—
Incentives buyout
6
—
—
2,969
—
Total Remuneration
5,964
4,567
4,781
—
Total Fixed Pay
1,786
1,565
1,014
—
Total Variable Pay
7
4,178
3,002
3,767
—
Notes:
1.
Tadeu Marroco's 2023 salary figure reflects the increases applied during the year, i.e. it was £803,400 per annum between 1 January and 31 March, £843,600 per annum between 1 April
and 14 May and £1,343,700 per annum between 15 May and 31 December 2023. Soraya Benchikh's 2024 salary was pro-rated from her start date with BAT on 1 May 2024.
2. Soraya Benchikh’s 2024 taxable benefits include standard benefits with a total sum of £76,829, which equate to circa 14% of salary, and relocation payments with a total sum of
£237,736 which cover schooling and housing support as well as £95,940 (gross) as a reimbursement for relocation benefits, which she was required to repay to her previous employer
as disclosed in the Annual Report and Form 20-F for the year ended 31 December 2023, on page 186.
3. The amounts included as Other emoluments relate to the all-employee share schemes: (1) Share Reward Scheme representing the value of ordinary shares awarded in 2024 in line with
the scheme rules, and the (2) Sharesave Scheme representing the face value of the discount on options exercised during the year, if applicable.
4. The 2022 LTI award is due to vest, by reference to performance on 25 March 2025, based on completion of the three-year performance period on 31 December 2024. The value shown
is based on the average share price for the three-month period ended 31 December 2024 of 2,818p and includes accumulated notional dividends. None of the value of the award is
attributable to share price appreciation. The actual value of shares to vest will be the value on 25 March 2027, when the award will fully vest after the expiry of the additional two-year
extended vesting period.
5. LTIP values shown for 2023 have been restated to reflect the actual closing BAT share price of 2,404p on the date the awards were adjusted for performance and include
accumulated dividends.
6. On joining BAT, Soraya Benchikh received a cash payment of £1,171,471 as compensation for awards forfeited with her previous employer which were due to be paid or vest in 2024
soon after her joining date, shares worth £247,612 and restricted shares worth £1,549,770 (as further detailed on page 231).
7. No malus or clawback provisions were applied.
The following sections provide further detail on the figures in the above table, including the underlying calculations and assumptions
and the Committee’s performance assessment for variable remuneration.
Salary
Salaries are normally reviewed annually in February with salary changes effective from April. Tadeu Marroco's salary was increased by
3% (£1,343,700 to £1,384,000) in April 2024. The increase is below the average level of the wider UK workforce (6%). Soraya Benchikh
joined BAT as Group Chief Financial Officer on 1 May 2024. Soraya Benchikh's base salary on appointment was set at £800,000 per
annum, a 5% reduction versus her predecessor's salary as at April 2023 (£843,600 per annum).
Pension
The pension values shown in the table represent company contributions of up to 15% of
an annual base salary to the Defined Contribution arrangements in line with the
contribution level for the wider UK workforce. No excess retirement benefits have been
paid to, or receivable by, the Executive Directors in 2024 and neither was entitled to
defined benefits pension arrangements.
£'000
Employer pension
contributions
Tadeu Marroco
£206
Soraya Benchikh
£70
Benefits
The table below summarises the benefits provided to the Executive Directors in 2024. Where relevant, the costs include VAT and a
gross-up for tax.
£'000
Car or car
allowance
Health
insurance
Tax
advice
Company
driver
Security
1
Relocation
benefits
Other
Total Benefits
Tadeu
Marroco
2,3
£17
£16
£67
£32
£8
—
£66
£206
Soraya
Benchikh
2,4
£13
£21
£23
£17
—
£334
£3
£411
Notes:
1.
Security costs relate to annual maintenance and monitoring of personal and home security systems.
2. In addition to taxable benefits, other non-taxable benefits were provided to Executive Directors including Life and Accident Insurance.
3. Other benefits for Tadeu Marroco include expenses relating to attendance at company-sponsored events which are treated by HMRC as taxable benefit in the United Kingdom.
The amounts include tax gross-up, where relevant.
4. Soraya Benchikh joined the Board on 1 May 2024, and as such the figures shown are for the part of the year during which she served on the Board. In line with her appointment terms,
Soraya Benchikh received housing (£181,132 gross) and schooling (£56,604 gross) payments in relation to 2024. The housing and schooling support will be provided for three years.
Additionally, she received a one-off payment of £95,940 (gross) as a reimbursement for relocation benefits, which she was required to repay to her previous employer, as disclosed in the
Annual Report and Form 20-F for the year ended 31 December 2023, on page 186.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
228
Short-Term Incentive outcomes for the Year Ended 31 December 2024
In 2024, our performance was focused on supporting delivery against our three strategic pillars, with New Categories being a greater
driver of Group performance, delivering strong alignment with our corporate purpose to build A Better Tomorrow
TM.
New Category performance measures directly support our strategic aim to Build a Smokeless World, reducing the health impact of
our business and delivering sustainable growth through encouraging more consumers to transition to reduced-risk
*† products.
Tobacco Harm Reduction is a key component of our Sustainability strategy and was identified in BAT’s 2023 Double Materiality
Assessment (page 71) as having the greatest outward impact on society and the environment, the greatest inward impact on BAT, and
the greatest financial materiality. New Categories revenue growth and New Categories contribution measures provide a direct link
between BAT's strategy, our Sustainability agenda and pay outcomes under the STI (and under the LTI for 2022 awards onwards).
Group volume share growth
(10%)
Group volume share is based on duty-paid cigarettes and HP consumables. The Group’s share
of top markets increased above the maximum target for this metric in 2024, resulting in maximum
outcome for this performance measure.
New Categories revenue
growth (15%) (at constant rates)
New Categories revenue on an organic basis increased by 8.9% to £3,551 million in revenue, resulting
in no payout as threshold performance for this performance measure was not achieved.
New Categories contribution
(20%)
Measures year-on-year improvement (at constant rates) in organic New Categories Contribution in
line with the Group’s original break-even expectation by 2025. In 2024, we have delivered an increase
in New Categories contribution of £251 million (on an organic basis), resulting in a maximum
outcome for this performance measure. We have outperformed the 2024 targets for this measure,
which were set in relation to the original 2025 ambition, enabling the Group to accelerate progress
early in this critical area of our business.
Adjusted profit from operations
growth (25%) (on an organic
basis, at constant rates)
Adjusted profit from operation increased by 1.4% to £12,439 million, resulting in an 18.6% outcome
out of a 25% maximum for this performance measure.
Adjusted cash generated
from operations (30%)
Cash delivery continued to be strong, realising £7,955 million of adjusted organic cash generated from
operations (at constant rates), resulting in a maximum outcome for this performance measure.
The chart below illustrates STI performance compared to the targets.
STI performance measures, weightings and outcomes for the year ended 31 December 2024 –
@audited
@
Measure
1,2
Weighting
Threshold (0%)
Maximum (100%)
Result
Outcome
(max)
Group's volume
share growth
3
Year on year % growth of Group share
of top markets
4, including HP
10%
10 bps
10% (10%)
0%
6%
New Categories
revenue growth
Year on year improvement % in organic
revenue from Vapour, HP and Modern
Oral at constant rates
15%
+8.9%
0% (15%)
10%
20%
New Categories
contribution
Year on year improvement in organic
New Categories contribution
20%
£251m
20% (20%)
50m
150m
Adjusted profit from
operations growth
Year on year % growth at constant rates
of exchange (on an organic basis)
25%
+1.4%
18.6% (25%)
0.25%
2%
Adjusted cash
generated from
operations
Annual adjusted organic cash generated
from operations (at constant rates)
30%
£7.96bn
30% (30%)
£7.2bn
£7.6bn
Total outcome as % of maximum
78.6% (100%)
Notes:
1.
For the STI, 2024 targets and performance have been set and assessed excluding the impact of the disposal of the Russian and Belarusian businesses.
2. Non-GAAP measures: Organic New Categories revenue, Organic New Categories contribution, adjusted organic profit from operations and adjusted organic cash generated from
operations are non-GAAP measures used by the Remuneration Committee to assess performance. Please refer to pages 395 to 410 for definitions of these measures and a
reconciliation of these measures to the most directly comparable IFRS measure where applicable.
3. Group volume share is presented as a rounding movement to the nearest 10 bps. Payout is based upon the actual performance of +12 bps in 2024.
4. Group share of top markets includes HP performance for all major markets (Japan, South Korea, Italy, Poland, Germany, Greece, Hungary, the Czech Republic and Romania).
Following evaluation of the formulaic outcomes of the STI, the Committee considered the results against the underlying performance of
the Group and concluded that the outcomes were a fair reflection of performance delivered in what continues to be challenging and
volatile market conditions and no adjustments were required.
Under the Remuneration Policy, 50% of the annual STI will be delivered as an award of BAT shares under DSBS which will be deferred for
a three-year period and will be released in March 2028. The 2024 STI outcome for the Executive Directors is as follows:
STI outcome for the year ended 31 December 2024
Base salary for
2024 (£'000)
Maximum
opportunity as %
of base salary
STI outcome
(out of 100%)
STI award
achieved,(£’000)
1
50% delivered
in cash
50% deferred
in shares
Tadeu Marroco
£1,374
x
250%
x
78.6%
=
£2,700
£1,350
£1,350
Soraya Benchikh
2
£533
x
190%
x
78.6%
=
£796
£398
£398
Notes:
1.
Malus and clawback provisions apply. No further performance conditions apply.
2. Soraya Benchikh's 2024 STI is pro-rated from the date of her appointment (1 May 2024).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
229
Long-Term Incentive 2022 – 2024
The LTI is designed to align participants with shareholders through making awards which are subject to stretching performance
conditions. The measures below were set under the terms of our 2022 Directors' Remuneration Policy. In assessing performance
results for the 2022 LTIP award against the targets set at the start of the performance period, performance has been assessed on an
organic basis for the 2023 and 2024 results by removing the impact of the disposal of the Russian and Belarusian businesses.
Performance in 2022 will remain as previously reported. This approach is aligned with the 2021 LTIP and provides a fair, balanced, and
understandable measurement of the LTI outcomes, by removing material one-off events, to ensure comparability period to period. The
performance results were assessed over the three-year period from 2022 - 2024 as follows:
Total shareholder return
(TSR) (20%)
BAT TSR ranked 5th amongst our TSR peers resulting in 17.6% vesting for this measure.
Adjusted diluted earnings
per share (EPS) (30%)
EPS is measured at current and constant rates of exchange (equally weighted). The three-year EPS
compound annual growth rate (CAGR) was 4.4% and 4.9% at current and constant rates, respectively,
resulting in 0% vesting for this measure.
Group revenue growth (15%) The three-year Group revenue CAGR was 2.2% at constant rates of exchange, resulting in 0% vesting
for this measure.
New Categories revenue
growth (15%)
The three-year Group revenue CAGR was 21.8% at constant rates of exchange, resulting in 4.5%
vesting for this measure.
Operating cash flow
conversion ratio (20%)
We have continued to demonstrate the ongoing strength of the Group in turning operating
performance into cash, resulting in a 100.6% operating cash flow conversion ratio at current rates of
exchange over the three years, resulting in full vesting for this measure.
The chart below illustrates performance compared to the targets.
LTI performance measures, weightings and results for year ended 31 December 2024 –
@audited
@
Measure
1
Weighting
Threshold (15%)
Maximum
(100%)
Result
Outcome
Relative TSR
2
Relative to a peer group of international
FMCG companies
20%
5th
17.6% (20%)
Median
UQ
EPS growth at current
rates of exchange
Compound annual growth in adjusted
diluted EPS measured at current rates
of exchange
15%
4.4%
0% (15%)
5%
10%
EPS growth at constant
rates of exchange
Compound annual growth in adjusted
diluted EPS measured at constant rates
of exchange
15%
4.9%
0% (15%)
5%
10%
Group revenue growth
Compound annual growth measured
at constant rates of exchange
15%
2.2%
0% (15%)
3%
5%
New Categories
revenue growth
Compound annual New Categories
growth measured at constant rates of
exchange
15%
21.8%
4.5% (15%)
20%
30%
Operating cash flow
conversion ratio
Ratio over the performance period
at current rates of exchange
20%
100.6%
20% (20%)
85%
95%
Total vesting as % of maximum
42.1% (100%)
Notes:
1.
Non-GAAP measures: Adjusted diluted EPS (at current and constant rates of exchange) and operating cash flow conversion ratio are non-GAAP measures used by the Remuneration
Committee to assess performance of the 2022-2024 LTI. Please refer to pages 395 to 410 for definitions of these measures and a reconciliation of these measures to the most directly
comparable IFRS measure where applicable. In assessing performance results for the 2022 LTI award against the targets set at the start of the performance period, performance has
been assessed by removing the impact of the disposal of the Russian and Belarusian businesses from the 2023 and 2024 results. Performance in the year 2022 will remain as previously
reported.
2. Relative TSR: peer group constituents for the 2022-2024 LTIP were: Altria Group, Anheuser-Busch InBev, Carlsberg, Coca-Cola, Diageo, Heineken, Imperial Brands, Japan Tobacco,
PepsiCo, Pernod Ricard, Philip Morris International, Procter & Gamble, Reckitt Benckiser, and Unilever.
Following evaluation of the formulaic outcomes for the LTI, the Committee considered the results against the underlying performance
of the Group and concluded that the outcomes were a fair reflection of performance delivered in what continues to be challenging and
volatile market conditions and no adjustments were required on this basis. In addition, the Committee has reviewed the grant price of
the 2022 LTIP (3,218p), as well as the share price movement over the 2022 to 2024 performance period, taking into account the BAT
share price on 31 December 2024 of 2,880p and was satisfied that no windfall gains have occurred and that no adjustment is required
to the award.
The Committee noted that the value of shares reflects the share price changes that all shareholders experience and that the value of
the 2022 award is at this stage indicative. Shares will not be released to the Chief Executive until after the two-year additional extended
vesting period which will end on 25 March 2027.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
230
2022-2024 LTIP outcome
@audited
@
Shares awarded
Vesting %
Number of shares
to vest
Dividend equivalent
£'000
1
Total value to vest
£’000
2
Impact of share
price change
£'000
3
Tadeu Marroco
99,863
42.1%
42,042
£290
£1,474
-£168
Notes:
1.
Value of the dividend equivalents accrued on the proportion of the award that is due to vest only. Dividend equivalents will be delivered as shares following the expiry of the two-year
extended vesting period on 25 March 2027.
2. The value of ordinary shares to vest is calculated using the average share price for the three-month period ended 31 December 2024 of 2,818p. The actual value of shares to vest will be
the value on 25 March 2027, when the award fully vests and is released to the Chief Executive.
3. None of the value of the award is attributable to share price appreciation and no discretion has been exercised as a result of share price appreciation or depreciation.
The below table details the shares awarded under the LTIP and Deferred Share Bonus Scheme (DSBS) during the 2024 financial year.
Details in relation to scheme interests granted during the year ended 31 December 2024
@audited
@
Plan
Date of award
Shares
awarded
1
Market price
at award
(pence)
2
Face value
£’000
Performance
period
3
Date from which
shares will be released
Tadeu Marroco
LTIP
20 Mar 2024
281,816
2,384
6,718
2024-2026
20 Mar 2029
DSBS
4
20 Mar 2024
34,597
2,384
825
n/a
20 Mar 2027
Soraya Benchikh
LTIP
5
03 Sep 2024
119,313
2,384
2,844
2024-2026
03 Sep 2029
DSBS
4
-
-
-
-
-
-
Notes:
1.
Shares awarded represent potential maximum opportunity.
2. The market price at award is the price used to determine the number of ordinary shares subject to the awards, which is calculated in the ordinary course as the average of the closing
mid-market price of an ordinary share over the three dealing days preceding the date of grant. An award price of 2,384 pence per share was used for the LTI award granted to Soraya
Benchikh, consistent with the award price used for the LTI award granted to the Chief Executive Officer on 20 March 2024.
3. The performance period for the LTI award is from 1 January 2024 - 31 December 2026. Performance conditions can be found on page 243. The proportion of the award that will vest for
achieving threshold performance is 15% of maximum opportunity and 100% of award will vest at maximum.
4. DSBS awards relate to the 2023 performance as disclosed in the Annual Report and Form 20-F for the year ended 31 December 2023.
5. Soraya Benchikh's LTI award value is equivalent to a pro rata proportion of 400% of her annual salary with the proportion being calculated from her appointment date (1 May 2024) to
31 December 2026.
The below table details the shares and share awards granted to Soraya Benchikh on her appointment on 1 May 2024 representing
replacement awards which cover long-term incentives that were lost by Ms Benchikh from her previous employer on joining BAT. In line
with the Policy, the value of the replacement awards was based on an expected value (at a discount to face value where appropriate,
taking into account forecast vesting) of the awards being given up. Further details with regards to Ms Benchikh remuneration on
appointment can be found in the Annual report and Form 20-F for the year ended 31 December 2023, on page 186.
Details in relation to scheme interests granted during the year ended 31 December 2024
@audited
@
Date of award
Shares awarded
Market price
at award (pence)
1
Face value
£’000
Date from which
shares were /will be
released
Soraya Benchikh
Ordinary shares
1 May 2024
10,532
2,351
248
1 May 2024
Restricted Share
Award
1 May 2024
23,368
2,351
549
30 Sep 2025
1 May 2024
42,550
2,351
1,000
30 Sep 2026
Note:
1.
The market price at award is the price used to determine the number of ordinary shares subject to the awards, which is the closing mid-market price of an ordinary share on 30 April 2024.
Executive Directors’ shareholding requirements
Executive Directors are encouraged to build up a high level of personal shareholding to ensure a continuing alignment of interests with
shareholders. Executive Directors are required to hold BAT shares equal to the value of 500% of salary for the Chief Executive and 400%
for the Chief Financial Officer during their service, and post-employment are required to maintain the same level of shareholding until the
second anniversary of cessation of employment, with a sale restriction mechanism in place for this period.
If, at any time, an Executive Director does not meet the requirements of the shareholding guidelines, the individual may, generally, only
sell a maximum of up to 50% of any ordinary shares vesting (after tax) under the Company share plans until the threshold required under
the shareholding guidelines has been met. Waiver of compliance with guidelines is permitted with the approval of the Remuneration
Committee in circumstances where a restriction on a requested share sale could cause undue hardship. No such applications were
received from the Executive Directors during 2024.
Non-Executive Directors are expected to purchase shares in the Company on the open market to build up a shareholding in the Company
during the term of their appointment.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
231
Executive Directors’ shareholding as at the year ended 31 December 2024
@audited
@
No. of eligible
ordinary shares
held at
31 Dec 2024
1
Value of eligible
ordinary shares
held at
31 Dec 2024
2
£'000
Actual
percentage (%)
of base salary at
31 Dec 2024
Shareholding
requirements
(% of base salary
31 Dec 2024)
Compliance with
shareholding
requirement
Tadeu Marroco
3
231,641
6,671
482%
500%
No
Soraya Benchikh
4
73,904
2,128
266%
400%
No
Notes:
1.
Eligibility of shares: (a) ordinary shares owned outright; (b) unvested ordinary shares under the DSBS, which represent deferral of earned bonus, are eligible and count towards the
requirement on a net-of-tax basis; (c) unvested ordinary shares under the LTI plan are not eligible and do not count towards the requirement during the performance period, but the
estimated notional net number of ordinary shares held during the LTI plan Extended Vesting Period are eligible and will count towards the requirement; (d) unvested ordinary shares
granted as a buy-out award on recruitment are eligible to count towards the requirement on a net-of-tax basis; and (e) ordinary shares held in trust under the all-employee share plan
are not eligible and do not count towards the shareholding requirement.
2. Value of ordinary shares shown above: this is based on the closing mid-market share price on 31 December 2024 of 2,880p.
3. Tadeu Marroco does not yet meet the shareholding requirement as a result of the increase in the requirement following his appointment as the Chief Executive on 15 May 2023. As such,
Mr Marroco may only sell a maximum of up to 50% of any ordinary shares vesting (after tax) under the Company share plans until he has met the threshold shareholding requirement
unless a waiver is granted by the Committee.
4. Soraya Benchikh does not yet meet the shareholding requirement as a result of her appointment as the Chief Financial Officer on 1 May 2024. As such, Ms Benchikh may only sell a
maximum of up to 50% of any ordinary shares vesting (after tax) under the Company share plans until she has met the threshold shareholding requirement unless a waiver is granted by
the Committee.
Remuneration in the context of the wider workforce
The Group’s remuneration policies and practices are founded on a high degree of alignment and consistency across the organisation.
Accordingly, remuneration for senior management is determined considering the remuneration principles that apply to the Executive
Directors, and similar principles also form the basis of the remuneration arrangements for the wider workforce.
The reward strategy for all employees is built around and designed to deliver the following objectives:
– Attract, retain and engage a diverse talent pool for competitive advantage
– Offer a reward that is externally competitive and internally equitable as well as being commercially sustainable
– Alignment with short-term and long-term shareholder interests
The key difference between Executive Directors’ remuneration and the wider employee population is the increased emphasis on long-
term performance in respect of Executive Directors, with a greater percentage of their total remuneration being performance-related
and delivered in BAT shares. This includes an additional two-year extended vesting period on LTI, and post-employment shareholding
requirements which do not apply to other employees.
The following table summarises the remuneration structure for the wider workforce.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
232
Element
Wider workforce remuneration
Salary
– Salary ranges across all grades are set by reference to external market data. Individual positioning
within the set salary ranges will depend on level of experience, responsibility and individual performance.
– A globally consistent pay comparator group, derived from the International Pay Comparator Group used by the
Remuneration Committee for executive pay benchmarking, is utilised across all levels of the organisation for pay
benchmarking purposes, with an appropriate level of flexibility provided to end markets.
Pension &
Benefits
– Retirement benefits and other benefit arrangements are provided to employees based on and to reflect local
market practice.
– Company pension contribution rates for Executive Directors and the wider UK workforce are aligned.
Short-Term
Incentive
– Our International Executive Incentive Scheme (IEIS) is operated consistently across the organisation and has more
than 1,640 employees participating. It is designed to reward employees for the delivery of financial, strategic and
operational targets.
– The IEIS is globally aligned for all managers in senior management roles, including Executive Directors, and for the
most senior managers, a portion of any award receivable is deferred in BAT shares for three years and the
remaining portion is delivered in cash. Both cash and deferred share awards are subject to malus and clawback.
Approximately 1,330 employees globally participate in the DSBS.
– Corporate annual bonus plans are in operation for employees in corporate functions designed to mirror
the basic construct of the IEIS and with performance metrics which align with the IEIS. Approximately 17,240
employees globally participate in the corporate annual bonus plans.
– Functional incentive schemes are in operation in non-corporate functions with functional performance metrics
incorporated to provide line of sight for participants.
Long-Term
Incentives
– The Group operates two globally aligned discretionary LTI plans designed to reward and retain our senior talent
while incentivising long-term business results and shareholder value creation, aligning interests of our senior
leaders with those of shareholders.
– Performance Share Plan (PSP) awards are granted to the Group's most senior leaders (circa 160), including the
Management Board, which are subject to the same performance measures and three-year performance period as
for the Executive Directors. Executive Directors' awards are also subject to the additional 2-year holding period.
– Restricted Share Plan (RSP) awards are granted to circa 1,860 senior leaders globally and are subject to continuous
employment conditions during the three-year vesting period. The Executive Directors do not participate in the RSP.
– Discretionary share awards are subject to malus and clawback for all participants.
All-employee
share
schemes
– Our all-employee share schemes are key to fostering a culture of ownership amongst our employees. In the UK,
all employees (circa 2,450) are eligible to participate in the Company's all-employee share schemes, the
Partnership Share Scheme and the Share Reward Scheme under our UK Share Incentive Plan and the Sharesave
Scheme. Similar plans are also offered in Germany and Belgium.
Process for setting Executive Directors’ remuneration
The Remuneration Committee considers the budgeted salary increases for the UK-based employee population, the guidance given to
managers on the range of salary increases and other remuneration arrangements and employment conditions for all UK-based
employees when determining remuneration for the Executive Directors.
It is expected that salary reviews for the Executive Directors will be in line with the approach taken for the general UK employee
population, except in exceptional circumstances, such as where a recently appointed Executive Director’s salary is increased to reflect
his or her growth in the role over time or where significant additional responsibilities are added to the role.
As a key principle, management provides the Remuneration Committee with visibility of the potential impact of proposed changes to
the Executive Directors’ Remuneration Policy on the wider employee population.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
233
Pay Equality at a glance
Our Pay Equality Reporting aims to support the Group's commitment to gender
balance, diversity, and inclusion, aligning with our Diversity & Inclusion (D&I) and
Sustainability goals. We are committed to fostering an equitable and thriving
workplace. In 2024, we continued our Pay Equity journey, successfully maintaining our
independent accreditation from Fair Pay Workplace (FPW) and upholding our global
scope for gender analysis, covering over 100 markets and all our direct employees.
Furthermore, we’ve expanded our ethnicity analysis to include approximately 17,000
employees across eight locations, representing around 40% of our global workforce.
The consolidated results from our pay equity assessments confirm our commitment to
pay fairness:
– Women and men are paid within 1% of one another for doing the same work or work
of equal value; and
– ethnically diverse groups and non-ethnically diverse groups are paid within 1% of one
another for doing the same work or work of equal value.
100+
Markets in scope
c.43,000
All direct employees
Supporting our employees
Wellbeing
We remain committed to supporting our colleagues’ wellbeing. In May 2024, we introduced our Global Benefits & Wellbeing guidelines
and the LiveWell framework, providing a global structure with flexibility for local needs. We have launched comprehensive benchmarking
reviews across our key markets to optimize our benefits portfolio, enhance Sustainability, and elevate the overall employee experience.
By 2026, LiveWell will be fully implemented in all top markets, creating a consistent and inclusive approach to employee benefits.
Targeted interventions
In response to ongoing macro-economic challenges, we have taken targeted actions to support employees recognising sustainable,
long-term performance in a commercially relevant and equitable way, whilst supporting the diverse needs of our employees. In 2024,
these measures included:
– Market-specific interventions – periodic salary reviews and inflationary allowances to mitigate economic pressures.
– Salary budget allocation – prioritising towards those most impacted by the external factors.
– Off-cycle salary reviews – enhancing competitiveness where needed.
Living Wage
In times of economic volatility and continuous cost of living pressures around the world, the Group remains committed to paying all our
direct employees at least the applicable living wage
1.
In 2024, for the second year in succession, we received an independent accreditation from the Fair Wage Network for all the markets
included in the scope of our living wage analysis. The assessment has been conducted across our global business, covering approximately
43,000 employees (all our direct employees) in more than 100 markets. We will continue to monitor global living wage references regularly
to ensure that our fair and equitable principles for wage setting are upheld.
Note:
1.
Our definition of a 'living wage' is aligned with the UN Global Compact definition: "living wage is the local remuneration received for a standard work week that enables workers and their
families to meet their basic needs".
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
234
For more information about Diversity & Inclusion at BAT
please see our D&I Report at bat.com/investors-and-
reporting/reporting/diversity-and-inclusion-report
+
Workforce engagement
The Board keeps up to date with the
current views of our wider workforce
and provides the workforce with
information, including on how
executive pay and the pay of the wider
workforce are aligned, through a
combination of engagement methods
across multiple channels at different
levels of our organisation.
A robust framework of well-
established engagement methods is
in place, spanning multiple channels
and organisational levels:
Employee listening framework
Chief Executive's ‘Let's Talk’ live
Q&A forum
Global, Functional and Regional
webcasts and town hall sessions
Global Leadership Meeting (GLM)
Directors' market and site visits
Works Councils and European
Employee Council meetings
Speak Up channels
Employee listening framework:
In 2024, we strengthened our approach to
employee engagement with the launch of
our employee listening framework. This
framework facilitates more frequent
opportunities for employees to share their
feedback. The framework includes our
global Your Voice Engagement survey as an
annual core index, complemented by a
suite of tools such as topical surveys that
can address a variety of subjects, including
compensation. As part of this enhanced
approach, the Board reviews an annual
summary of the feedback received
through the framework, with outcomes
and actions provided back to employees
across the Group.
Direct engagement channels:
Comprise Directors’ market and site visits,
including participation in town hall and
Q&A sessions; the Executive Directors'
programme of regional and market visits to
connect with local employees; our Chief
Executive's 'Let's Talk' live Q&A forum
series; and live webcasts presented by our
Chief Executive and Chief Financial Officer
to talk about our performance, results,
strategic objectives, business outlook and
embedding our culture, including Q&A.
These engagement channels have also
offered the opportunity of a two-way
transparent dialogue where employees
have raised compensation related topics
with the Directors.
Additional engagement channels:
Directors are kept informed of the views
and perspectives of our people arising from
engagement at different levels of the
organisation (for example, town halls,
employee focus groups, works councils,
global leadership meeting, and regional,
function and local webcasts), through
reports from the Chief People Officer,
and from the Group Head of Business
Integrity & Compliance in relation to
Speak Up channels.
The views of our workforce are a key
consideration for the Remuneration
Committee when reviewing the reward
priorities of the organisation.
There continues to be an ongoing dialogue
with employees, through a variety of
channels, about the Group’s pay practices.
Through share ownership as a result of our
all-employee share schemes, our
employees are invited to vote on the
Directors' Remuneration Policy and Report
at our Annual General Meeting in the same
way as our shareholders.
Information about how our Board engages
with our workforce is set out on page 182
to 183. The Board also receives updates
from management on feedback received
during the year where relevant to
remuneration matters considered by the
Remuneration Committee and takes
feedback into account as applicable in
determining executive remuneration. The
Remuneration Committee is regularly
updated on the pay principles and
practices in operation across the Group
and considers them in relation to the
implementation of the Directors’
Remuneration Policy, and in ensuring there
is an appropriate degree of alignment
throughout the Group. In 2024, the
Remuneration Committee considered
employee feedback alongside the Group’s
broader pay principles and practices to
inform the development of the proposed
revised Directors’ Remuneration Policy,
to be presented to shareholders at the
2025 AGM.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
235
Other Information Relating to Executive Directors' Remuneration for the Year Ended 31 December 2024
The below table details the comparative figures for Chief Executive remuneration for the performance years 2015 to 2024.
Chief Executive’s pay – Comparative figures 2015 to 2024
Nicandro Durante
Jack Bowles
Tadeu Marroco
2015
2016
2017
2018
2019
1
2019
1
2020
2021
2022
2023
2
2023
2,3
2024
Chief Executive's ‘single figure’ of
total remuneration (£’000)
4,543
8,313
10,244
8,651
3,054
3,512
4,954
8,063
8,987
722
3,777
5,964
STI paid as % of maximum
opportunity
100%
100%
97.2%
100% 50.0% 96.0%
71.1%
85.7%
77.7%
—%
61.3%
78.6%
LTI paid as % of maximum
opportunity
8.7% 46.0%
96.1%
70.5%
69.3% 69.9%
54.2%
49.1%
58.9%
—%
38.2%
42.1%
Notes:
1.
For 2019, the 'single figure' reflects the respective periods Jack Bowles and Nicandro Durante served as Chief Executive. Nicandro Durante retired as Chief Executive on 1 April 2019.
Historical data is taken from the Directors’ Remuneration Reports for the relevant years and is presented (as appropriate) on the basis of the ‘single figure’ calculation as prescribed in
the UK Directors’ Remuneration Report Regulations.
2. For 2023, the 'single figure' reflects the respective periods for which Tadeu Marroco and Jack Bowles served as Chief Executive. Jack Bowles stepped down from the Board on 15 May 2023.
3. The 2023 figure has been updated to reflect the restated LTI amounts for the Chief Executive as per the single figure table on page 228.
Performance graph
The graph below shows the TSR of the Company and the FTSE 100 index over the 10-year period 1 January 2015 to 31 December 2024.
The chart shows the growth in value of a hypothetical £100 invested on 31 December 2014. The FTSE 100 index was selected as an
appropriate comparator group by the Committee due to the Company's position within the FTSE.
Total shareholder return (TSR) performance: 1 January 2015 to 31 December 2024
Value of hypothetical £100 holding
British American Tobacco
FTSE 100
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
Dec 21
Dec 22
Dec 23
Dec 24
50
100
150
200
Relative importance of spend on pay
The chart below sets out distributions to shareholders by way of dividends and share buy-backs, and total remuneration
paid to employees for the years 2023 and 2024. In 2024, there was a 16.9% increase in distributions to shareholders
and a 6.3% increase in total employee remuneration costs.
£2,664m
£2,831m
£5,055m
£5,911m
Remuneration¹
Shareholder distributions²
0m
1,000m
2,000m
3,000m
4,000m
5,000m
6,000m
7,000m
2023
2024
Notes:
1.
Remuneration: represents the total employee remuneration costs for the Group, set out on page 277 within note 3 in the Notes on the Accounts.
2. Shareholder distributions represent the total dividends paid (£5,213 million) and share buy-backs (£698 million) made in 2024. For 2023, the amount represents the total dividends paid in 2023.
For further details please refer to page 55.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
236
Chief Executive Pay Ratio Disclosure
The below table reflects the Chief Executive pay ratio when compared to employees at the 25th percentile, median and 75th percentile
of the Group’s UK workforce pay for the years 2019 - 2024. The table also includes the salary and total remuneration figures for
employees at each percentile for 2024.
Chief Executive Pay Ratio
Year
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
2024
Option A
94:1
56:1
27:1
2023
1,2
Option A
84:1
51:1
23:1
2022
Option A
167:1
108:1
43:1
2021
Option A
149:1
97:1
40:1
2020
Option A
103:1
66:1
29:1
2019
Option A
144:1
86:1
36:1
Employees remuneration for 2024
25th percentile
Median
75th percentile
Salary
£42,001
£66,734
£117,204
Total Remuneration
3
£63,551
£106,536
£216,994
Notes:
1.
The 2023 pay ratio figures are based on the pro-rated single figure for the Chief Executive, reflecting the respective periods for which Tadeu Marroco and Jack Bowles served in the role.
Jack Bowles stepped down from the Board on 15 May 2023.
2. 2023 pay ratio figures have been updated to reflect the restated 2023 LTI amounts for the Chief Executive as per the single figure on page 228.
3. Total Remuneration for the employees is based on the UK employees' data as at 31 December 2024, and is calculated as far as possible on the same basis as the Chief Executive single
figure calculation and includes salary, taxable benefits, short-term incentive, long-term incentive, dividends, pension benefits and any other remuneration receivable. For the purposes of
this analysis, the following methodology and assumptions have been used:
–
Remuneration is annualised, where applicable, for the earnings period 1 January 2024 to 31 December 2024;
–
For all employees that are eligible for a car benefit, the applicable car allowance amounts have been used;
–
For all employees that participate in the global International Executive Incentive Scheme or equivalent corporate incentive scheme, incentive payouts are calculated based on the
same metrics;
–
For all employees that participate in the UK DC scheme, Company contributions of 15% of salary have been used;
–
Employees on international assignment into and out of the UK have been included; however, assignment benefits, such as housing support, education support, home leave allowance
or relocation costs, have not been included as these are not consistent with the benefits included in the Chief Executive single figure calculation, which is consistent with the
approach taken last year;
–
For hourly paid employees who are not full time, total pay and benefits have been pro-rated based on full-time employee hours.
Option A uses the total full-time equivalent remuneration for all UK employees for the financial year ended 31 December 2024 and has
been used to calculate the ratio as this is viewed to be the most robust and comprehensive means of assessment and is also reflective
of shareholder preferences. For the Chief Executive, the total remuneration as provided in the single figure of remuneration table on
page 228 has been used.
The figures above show a slight increase across all quartiles compared to 2023. The increase is mainly attributable to a higher STI out
turn in 2024 reflecting full-year salary and STI opportunity as the Chief Executive, and 2022 LTIP vesting which was granted to the Chief
Executive in his capacity as Finance Director at the time. Pay for the Chief Executive is heavily weighted towards the variable elements of
remuneration. Therefore, year-on-year movements in the pay ratio will largely be driven by STI and LTI outcomes. The majority of UK
employees do not participate in a similar type of long-term incentive plan and their overall remuneration is less leveraged compared to
the Chief Executive's remuneration with the variable pay opportunity accounting for 80% to 90% of total remuneration for the Chief
Executive. As such the Chief Executive pay ratio is likely to continue to vary over time. Fixed remuneration remained aligned with that of
the wider UK-based workforce, with the pension contribution percentage for the Chief Executive remaining aligned with the wider
workforce of up to 15% of salary.
The Company believes the median pay ratio for 2024 reflects the diversity of our business footprint and employee population across the
UK. The Group’s remuneration policies and practices are founded on a high degree of alignment and consistency, with total remuneration
at all levels providing competitive compensation that enables the attraction and retention of talent while also providing equitable
differentiated remuneration based on grade, performance and experience. Further details on all-employee remuneration at BAT can be
found on page 232.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
237
Chair and Non-Executive Directors’ Remuneration for the Year Ended 31 December 2024 –
@Audited
@
The following table shows the single figure of remuneration for the Chair and Non-Executive Directors in respect of qualifying services
for the year ended 31 December 2024, together with comparative figures for 2023.
Base fee
£’000
Chair/Committee
membership fees
1
£’000
Taxable benefits
2
£’000
Total remuneration
£’000
2024
2023
3
2024
2023
3
2024
2023
3
2024
2023
3
Luc Jobin (Chair)
4
711
688
—
—
17
17
728
705
Kandy Anand
104
100
48
28
4
4
156
132
Karen Guerra
104
100
29
28
3
4
136
132
Holly Keller Koeppel
5
133
100
38
55
3
6
174
161
Murray Kessler
6
104
16
29
4
55
1
188
21
Véronique Laury
104
100
29
28
3
3
136
131
Darrell Thomas
104
100
48
28
4
4
156
132
Serpil Timuray
104
8
29
2
4
— —
137
10
Former Non-Executive Directors
Sue Farr (stepped down 24/04/2024)
46
142
9
28
3
4
58
174
Dimitri Panayotopoulos (stepped down
24/04/2024)
32
100
18
55
—
3
50
158
Total
1,546
1,454
277
256
96
46
1,919
1,756
Notes:
1.
Committee memberships are shown, together with changes during the year, in the reports of the respective committees in the Governance sections of the Directors’ Report.
2. Benefits for the Chair in 2024 comprised health insurance and ‘walk-in’ medical services of £10,113 (2023: £9,300), hotel accommodation and travel expenses of £4,320 (2023: £5,200),
and security service cost of £2,394 (2023: £1,550). The benefits for the other Non-Executive Directors principally comprised travel-related expenses incurred in connection with individual
and/or accompanied attendance at certain business functions and/or events and ‘walk-in’ medical services. The figures shown are grossed-up for tax (as appropriate) as, in line with the
UK market, it is the normal practice for the Company to pay the tax that may be due on any benefits.
3. The 2023 fees and benefits reflect the following appointment dates: Murray Kessler’s appointment as a Non-Executive Director on 6 November 2023 and Serpil Timuray's appointment
as a Non-Executive Director on 4 December 2023.
4. Luc Jobin receives a pension in respect of prior service to Imasco Limited (acquired in 2000 by the Group) and Imperial Tobacco Canada Limited, a subsidiary of BAT. In 2024, this
amount was CAD$150,228 (£83,824), in 2023: CAD$150,228 (£88,878).
5. Deferred Compensation Plan for Directors of Reynolds American Inc. (DCP): as a former outside director of Reynolds American Inc. Holly Keller Koeppel participated in the DCP under
which she elected to defer payment of a portion of her Reynolds American retainers and meeting attendance fees to a Reynolds American stock account. Following the acquisition of
Reynolds American by BAT, amounts deferred to a stock account (Deferred Stock Units or DSUs) mirror the performance of, and receive dividend equivalents based on, BAT American
Depository Shares (ADSs). The DSUs of Holly Keller Koeppel are disclosed as a note to ‘Summary of Directors’ share interests'. DSUs deferred under the DCP will be paid in accordance
with the terms of the DCP, section 409A of the U.S. Internal Revenue Code of 1986, as amended, and the Director’s existing deferral elections.
6. Taxable benefits for Murray Kessler include expenses relating to attendance at company-sponsored events which are treated by HMRC as taxable benefit in the United Kingdom. The
amounts include tax gross-up, where relevant.
Payments to past Directors or for loss of office
@audited
@
In addition to the payments to Mr Bowles, the Company's former Chief Executive Officer, which were disclosed in the Directors'
Remuneration Report for 2023, Mr Bowles received tax advice (pertaining to his subsisting long term incentive awards) in 2024 for which
the Group was invoiced £7,272 (plus VAT). It is anticipated that a further invoice in 2025 with reference to tax advice provided to Mr
Bowles in 2024, expected to be in the amount of £7,750 (plus VAT). As the payment of these amounts is a benefit in kind, the Group will
also settle the amount of tax arising for Mr Bowles if applicable. The aggregate amount of the invoices (including VAT) is anticipated to
be £32,774.
There were no other payments to past Directors or for loss of office.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
238
Remuneration policy implementation for 2025
Base Salary for 2025
The Remuneration Committee has determined the following salary for the Executive Directors.
The Remuneration Committee has considered a number of factors in determining the appropriate salary review for the Executive
Directors, including: the average salary increase for the wider workforce in the UK, the contribution of the Executive Directors, and
underlying Group performance in 2024.
Chief Executive
Current Base salary
Base salary from 1 Apr 2025
Percentage change %
Tadeu Marroco
£1,384,000
£1,419,000
2.5%
Soraya Benchikh
£800,000
£828,000
3.5%
Pensions and Benefits
No changes have been made to the pension and benefits provision for Executive Directors, noting that the pension provision for
Executive Directors has been aligned with the wider UK workforce since 2019.
Short-Term Incentive for 2025
STI opportunity levels for Executive Directors will be in line with those set out in our Directors’ Remuneration Policy. Due to the
commercial sensitivity of the targets, details for the year ending 31 December 2025 will be disclosed retrospectively in the Annual Report on
Remuneration for the year ending 31 December 2025.
As described in the Remuneration Committee Chair’s statement, the following performance measures and weightings will apply to the
STI in 2025:
2025 STI performance measures and weightings
Total Revenue Growth
10%
Measures year-on-year % growth in total revenue at constant rates
of exchange on an organic basis.
Adjusted Profit from Operations
1
30%
Measures year-on-year % growth at constant rates of exchange
on an organic basis.
Adjusted Cash Generated
from Operations
2
25%
Measures annual adjusted organic cash generated from operations
at constant rates.
Transformation metrics
New Categories Revenue Growth
12.5%
Measures year-on-year % improvement in organic revenue from Vapour,
HP and Modern Oral at constant rates.
New Categories Adjusted
Gross Profit Margin
12.5%
Measures gross profit margin % accretion delivered by Vapour, HP and
Modern Oral products at constant rates of exchange on an organic basis.
Sustainability - Climate
10%
Measures annual % reduction (versus 2020 baseline) in Scope 1 and 2 GHG
emissions from direct operations including direct emissions from BAT
owned facilities and indirect emissions associated with purchased energy.
Total
100%
Notes:
1.
Notwithstanding the progress made towards a settlement agreement in 2024, given the outcome and the timing of the Canada litigation is unknown at the time of target setting, the
Committee determined that the Canadian business (excluding New Categories) should be removed for the purposes of the 2025 Adjusted Profit from Operations targets. The 2024
Adjusted Profit from Operations outcome figure will therefore also be adjusted to exclude Canada to ensure performance can be assessed on a like-for-like basis. This treatment is
consistent with the Group’s accounting treatment as it relates to the proposed Canadian settlement. The Committee reserves the right to review this approach in light of a change in
circumstances or other relevant factors in the future. Any adjustments will be fully explained in the 2025 Annual Report on Remuneration.
2. Net cash generated from operating activities, less net finance costs, net capital expenditure, dividends from associates and dividends paid to non-controlling interests and before cash
paid/received in respect of litigation. Adjusted CGFO is measured at constant rates of exchange.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
239
Performance Share Plan awards for 2025
The Chief Executive and the Chief Financial Officer will be granted PSP awards equal to a maximum of 600% of salary and 450% of
salary, respectively, subject to the approval of the 2025 Remuneration Policy.
The PSP performance measures applicable to the 2025 awards will strengthen the focus on portfolio transformation, together with
the incentivisation of the continued financial performance of the Group, creating a strong alignment with the Group’s long-term
strategy delivery and the interests of shareholders. The measures and targets for the 2025 PSP awards are set out below:
– Relative TSR (20%): BAT's total shareholder return over the performance period relative to the total shareholder return of the TSR
peer group.
– Earnings per share (25%): Measures adjusted, diluted EPS compound annual growth rate (CAGR) over a 3-year performance period
at constant rates of exchange.
– Operating Cash Flow Conversion (20%): Measures average operating cash flow as a % of Adjusted Operating Profit over the
performance period at current rates of exchange.
Transformation metrics
– Smokeless Revenue/Total Revenue (10%): Measures revenue delivered from New Categories, Traditional Oral and Beyond Nicotine
products over total revenue at current rates of exchange.
– New Categories Contribution Margin (10%): Measures New Categories Contribution over New Categories revenue, where New
Categories Contribution is the contribution to APFO from Vapour, HP and Modern Oral products. It is stated after deduction of
attributable costs and allocated cross category shared costs, before the deduction of administrative overheads and excluding the
impact of adjusting items in line with the policy for APFO. The measure is assessed at constant rates of exchange.
– Return on Capital Employed (ROCE) (15%): Measures annual average ROCE growth on an adjusted basis at current rates over a 3-
year performance period: profit from operations, excluding adjusting items and including dividends received from associates and
joint ventures as a proportion of average total assets less current liabilities. The approach taken is consistent with the Group’s
financial reporting standards. Material events (e.g. material impairments and/or acquisitions) will be reported to and considered by
the Committee as part of the assessment of the Group’s underlying performance. Measurement of performance is based on an
average growth rate over the 3-year performance period to moderate potential foreign exchange rate fluctuations which may
impact the ROCE in a specific year.
The targets have been set having carefully considered our internal forecasts and external market expectations for future growth, as well
as the current business environment in which the Group is operating. The Committee is confident that the targets remain suitably
stretching and incentivising for participants, ensuring only maximum payout for exceptional performance. In addition, the Committee
retains discretion to determine whether the formulaic outcome of the 2025 PSP at vesting is a fair reflection of underlying business
performance and consistent with the shareholder experience over the performance period and, if not, to adjust the outcome accordingly.
PSP measures
Weighting
Threshold (15%)
Maximum (100%)
Relative TSR
1
20%
Median
Upper Quartile
Earnings per share
2 (at constant rates) CAGR
25%
3%
7%
Operating cash flow conversion ratio
20%
94%
99%
Transformation metrics
Smokeless Revenue / Total Revenue
10%
21%
24%
New Categories Contribution Margin
10%
20%
25%
Return on Capital Employed
15%
0.6%
0.8%
Total
100%
Notes:
1.
The 2025 TSR peer group constituents are: Altria Group, Anheuser-Busch InBev, Carlsberg, Coca-Cola, Diageo, Heineken, Imperial Brands, Japan Tobacco, PepsiCo, Pernod Ricard, Philip
Morris International, Procter & Gamble, Reckitt Benckiser, and Unilever.
2. Notwithstanding the progress made towards a settlement agreement in 2024, as the outcome and the timing of the Canada litigation is unknown at the time of target setting, the
Committee determined that the Canadian business (excluding New Categories) should be removed for the purposes of the 2025 PSP Earnings per share targets. The 2024 Earnings per
share outcome figure will therefore also be adjusted to remove the Canadian business (excluding New Categories) to ensure performance can be assessed on a like-for-like basis over
the performance period. This treatment is consistent with the Group’s accounting treatment as it relates to the Canadian settlement. The Committee reserves the right to review this
approach in light of a change in circumstances or other relevant factors in the future. Any adjustments will be fully explained in future Annual Reports on Remuneration.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
240
2025 Non-Executive Directors’ fees
The 2025 Non-Executive Directors’ fees structure is set out in the table below. The Chair's fee and the fees for Non-Executive Directors
have been reviewed with the changes below to apply in May 2025. Adjustments to fees have taken into consideration the increasing
demands placed on the Board, the strategic agenda of the business, the complexity of the sector and the approach to salary
adjustments among the wider UK workforce. The Chair's fee will be adjusted by 3.7% and the fees of Non-Executive Directors, when
viewed in aggregate, will be adjusted by 4.1%.
Fees from 1 May 2025
£
Fees to 30 April 2025
£
Chair's fee
745,000
718,000
Base fee
104,800
104,800
Senior Independent Director
43,150
43,150
Audit Committee: Chair
43,150
43,150
Audit Committee: Member
20,000
15,850
Nominations Committee: Chair
—
—
Nominations Committee: Member
15,000
13,600
Remuneration Committee: Chair
43,150
43,150
Remuneration Committee: Member
20,000
15,850
Other disclosures
Annual change in remuneration of Directors and employees
The following table shows the percentage change in the Directors’ remuneration measured against a comparator group comprising the
UK employee population across all UK entities. This comparator group is considered to be the most appropriate group due to the limited
number of employees employed under BAT p.l.c. contracts outside of the Director group. In addition, using a more widely-drawn group
encompassing the worldwide nature of the Group’s business would also present practical difficulties in collation and would be a less
relevant comparator given the significant variations in employee pay across the Group, the differing economic conditions and wide
variations in gross domestic product per capita.
% change in salary/fees
% change in taxable benefits
1
% change in STI
2023
to
2024
2022
to
2023
2021
to
2022
2020
to
2021
2019
to
2020
2023
to
2024
2022
to
2023
2021
to
2022
2020
to
2021
2019
to
2020
2023
to
2024
2022
to
2023
2021
to
2022
2020
to
2021
2019
to
2020
Executive Directors
Tadeu Marroco
2
20
43
—
4
5
(15)
55
57
(33)
22
64
39
(9)
25 (24)
Soraya Benchikh
3
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Chair
Luc Jobin
4
3
3
28 334
2
1
42
59
24
(79)
n/a
n/a
n/a
n/a
n/a
Non-Executive Directors
Kandy Anand
5
18
3
n/a
n/a
n/a
1
(10)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Sue Farr
6
—
20
18
1
2
(22)
9 931
— (100)
n/a
n/a
n/a
n/a
n/a
Karen Guerra
7
4
3
—
—
n/a
(15) (24) 3,977
—
n/a
n/a
n/a
n/a
n/a
n/a
Holly Keller Koeppel
8
10
2
—
1
2 (49)
(61) 4,907 (99) (82)
n/a
n/a
n/a
n/a
n/a
Murray Kessler
9
2
—
n/a
n/a
n/a 10,130
—
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Véronique Laury
10
4
2
n/a
n/a
n/a
(5) 100
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Dimitri Panayotopoulos
11
—
(12)
(12)
9
21
(87)
8 262
(78) (88)
n/a
n/a
n/a
n/a
n/a
Darrell Thomas
18
3
(6)
n/a
n/a
(5)
48 100
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Serpil Timuray
12
2
n/a
n/a
n/a
n/a 100
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Average UK-based
employee
13
7
5
5
6
3
16 (23)
2
(1)
1
7
—
2
20
(5)
Notes:
1.
Benefits: The changes in taxable benefit values for 2022 vs 2021 and 2021 vs 2020 were primarily a result of COVID-related travel restrictions in 2021 and 2020 with minimum or no travel
compared to 2022 when COVID-related restrictions were lifted, as well as subsistence costs associated with business functions due to COVID-related travel restrictions throughout
2020 and 2021. Further details of the taxable benefits figures can be found in the table on page 238.
2. Tadeu Marroco was appointed as an Executive Director from 5 August 2019, therefore the figures for 2019 were annualised to calculate the year-on-year change. Tadeu Marroco was
appointed as Chief Executive from 15 May 2023.
3. Soraya Benchikh was appointed as an Executive Director from 1 May 2024. Accordingly, no year-on-year change figures have been included.
4. Luc Jobin was appointed Chair from 28 April 2021. The change in fees from 2020 to 2021 is due to the increase in fees received following the appointment.
5. Kandy Anand was appointed to the Board on 14 February 2022, therefore the figures for 2022 were annualised to calculate the year-on-year change. Kandy Anand was appointed
as Remuneration Committee Chair from 24 April 2024, therefore the change in fees from 2023 to 2024 is due to the increase in fees received following the appointment.
6. Sue Farr stepped down from the board effective 24 April 2024, therefore figures for 2024 were annualised to calculate the year-on-year change.
7. Karen Guerra was appointed to the Board on 14 September 2020, therefore figures for 2020 were annualised to calculate the year-on-year change.
8. Holly Keller Koeppel was appointed as Senior Independent Director on 24 April 2024 therefore the change in fees from 2023 to 2024 in due to the increase in fees received following
the appointment.
9. Murray Kessler was appointed to the Board on 6 November 2023, therefore figures for 2023 were annualised to calculate the year-on-year change.
10. Véronique Laury was appointed to the Board on 19 September 2022, therefore figures for 2022 were annualised to calculate the year-on-year change.
11. Dimitri Panayotopoulos stepped down from the Board effective 24 April 2024, therefore figures for 2024 were annualised to calculate the year-on-year change.
12. Serpil Timuray was appointed to the Board on 4 December 2023, therefore figures for 2023 were annualised to calculate the year-on-year change.
13. The data for the UK-based employees comparator group (which excludes directors) is on a full-time equivalent basis and is made up as follows as at 31 December 2024: (1) the weighted
average base salaries; (2) the average taxable benefits per grade; and (3) the weighted average bonus result based on that population as at that date.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
241
Directors’ Share Interests
Summary of Directors’ Share Interests –
@Audited
@
Ordinary
shares held at
31 Dec 2024
Outstanding scheme interests 31 Dec 2024
1
Total of all
interests in
ordinary
shares at
31 Dec 2024
Unvested
awards subject
to
performance
conditions and
continued
employment
(LTIP)
Unvested
awards
subject to
continued
employment
only
(DSBS, LTIP in
extended
vesting period
and buyout
awards)
Unvested
interests
(Sharesave)
Total ordinary
shares subject
to outstanding
scheme interests
Executive Directors
Tadeu Marroco
2
135,338
489,844
185,927
1,443
677,214
812,552
Soraya Benchikh
3
38,983
119,313
65,918
—
185,231
224,214
Chair of the Board
Luc Jobin
4
90,236
—
—
—
—
90,236
Non-Executive Directors
Kandy Anand
4
7,585
—
—
—
—
7,585
Karen Guerra
23,400
—
—
—
—
23,400
Holly Keller Koeppel
5
—
—
—
—
—
—
Murray Kessler
4
5,000
—
—
—
—
5,000
Véronique Laury
1,650
—
—
—
—
1,650
Darrell Thomas
4
4,600
—
—
—
—
4,600
Serpil Timuray
—
—
—
—
—
—
Sue Farr (stepped down 24/04/2024)
6
392
—
—
—
—
392
Dimitri Panayotopoulos (stepped down
24/04/2024)
6
3,300
—
—
—
—
3,300
Changes from 31 December 2024:
– Tadeu Marroco: purchase of 5 ordinary shares on 2 January 2025 and 4 ordinary shares on 5 February 2025 under the SIP and delivery on 5 February 2025 of 387 ordinary shares,
representing dividend equivalents due on outstanding DSBS awards in respect of the quarterly dividend paid to shareholders on 3 February 2025.
– Soraya Benchikh: purchase of 5 ordinary shares on 2 January 2025 and 5 ordinary shares on 5 February 2025 under the SIP.
– There were no changes in the interests of the Chair and the other Non-Executive Directors.
Notes:
1.
On 29 March 2024, Tadeu Marroco received 18,727 shares following the vesting of his 2021 awards under the Deferred Share Bonus Scheme. On May 9 2024, Tadeu Marroco exercised
433 options granted to him under the UK Sharesave scheme. No other options were exercised by Directors in 2024.
2. Tadeu Marroco: ordinary shares held include 2,236 held by the trustees of the BAT Share Incentive Plan (SIP).
3. Soraya Benchikh: joined the Board on 1 May 2024. Upon joining, the following replacement awards were granted to Ms Benchikh to compensate for the long-term incentives that she
lost with her previous employer upon joining BAT: an award of 7,572 BAT shares (on a net-of-tax basis) which were immediately vested, an award of 23,368 shares vesting on 30
September 2025, and an award of 42,550 shares vesting on 30 September 2026. Ordinary shares held include 15 shares held by the trustees of the SIP.
4. American Depositary Shares (ADSs): each of the interests in ordinary shares held by Luc Jobin, Kandy Anand, Murray Kessler and Darrell Thomas consists of an equivalent number of BAT
ADSs, each of which represents one ordinary share in the Company.
5. Holly Keller Koeppel: at the date of this report, Holly Keller Koeppel, being a former director of Reynolds American Inc. and a participant in the Deferred Compensation Plan for Directors
of Reynolds American (DCP), holds Deferred Stock Units (DSUs) which were granted prior to becoming a Director of BAT. In accordance with an election made by Holly Keller Koeppel
in December 2016, a proportion of her DSUs representing her fees as a director of Reynolds American Inc. for 2017 are payable from January 2023 over a period of 10 years, with the
remainder of her DSUs (representing her fees as a director of Reynolds American Inc. in prior years) becoming payable following her cessation as a Director of BAT. Each DSU entitles
the holder to receive a cash payment equal to the value of one BAT ADS. The number of DSUs increases on each dividend date by reference to the value of dividends declared on the
ADSs underlying the DSUs. Ms Koeppel currently holds 33,906 DSUs (2023: 30,721 DSUs).
6. Sue Farr and Dimitri Panayotopoulos: holdings are as of the date of departure (24 April 2024).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
242
Further details in relation to performance conditions attaching to outstanding scheme interests
LTIP awards granted in 2023
LTIP awards granted in 2024
1 January 2023–31 December 2025
1 January 2024–31 December 2026
Weighting
Threshold
(15% vests)
Maximum
(100% vests)
Weighting
Threshold
(15% vests)
Maximum
(100% vests)
Relative TSR
1
Ranking against a peer group of
international FMCG companies
20%
Median
Upper quartile
20%
Median
Upper quartile
EPS growth at current rates of exchange
Compound annual growth (CAGR) in
adjusted diluted EPS measured at current
rates of exchange
15%
5% CAGR
10% CAGR
15%
2% CAGR
6% CAGR
EPS growth at constant rates of
exchange
Compound annual growth (CAGR) in
adjusted diluted EPS measured at constant
rates of exchange
15%
5% CAGR
10% CAGR
15%
2% CAGR
6% CAGR
Revenue growth
Compound annual growth (CAGR)
measured at constant rates of exchange
15%
3% CAGR
5% CAGR
15%
3% CAGR
5% CAGR
New Categories revenue growth
Compound annual growth (CAGR)
measured at constant rates of exchange
15%
20% CAGR
30% CAGR
15%
15% CAGR
25% CAGR
Operating cash flow conversion ratio
Measured at current rates of exchange,
as a percentage of APFO
20%
85%
95%
20%
87.5%
97.5%
Note:
1.
The relative TSR peer group constituents for the LTIP awards granted in 2023 and 2024 are: Altria Group, Anheuser-Busch InBev, Carlsberg, Coca-Cola, Diageo, Heineken, Imperial
Brands, Japan Tobacco, PepsiCo, Pernod Ricard, Philip Morris International, Procter & Gamble, Reckitt Benckiser, and Unilever.
Directors and Management Board
No Directors or Management Board Members own more than 1% of the ordinary shares in issue. At 5 February 2025, the Directors and
Management Board collectively held interests (or their calculated equivalents) under the Company share schemes of: 1,069,119 ordinary shares,
828,891 restricted share units, 2,065,673 performance share units, 11,891 options over ordinary shares and 33,906 deferred share units.
Shareholder dilution – options and awards outstanding
Satisfaction of Company share plan awards in accordance with the Investment
Association’s Principles of Remuneration
New ordinary shares issued by the Company during the year ended
31 December 2024
– by the issue of new ordinary shares;
– ordinary shares issued from treasury only up to a maximum
of 10% of the Company’s issued share capital in a rolling
10-year period;
– within this 10% limit, the Company can only issue (as newly
issued ordinary shares or from treasury) 5% of its issued share
capital to satisfy awards under discretionary or executive plans
(in line with changes to the Principles of Remuneration, this 5%
limit is not included in the new LTI to be approved by
shareholders at the 2025 AGM).; and
– the rules of the Company’s DSBS do not allow for the satisfaction
of awards by the issue of new ordinary shares.
– 275,824 ordinary shares issued by the Company in relation
to the Sharesave Scheme;
– 267,649 treasury shares issued by the Company in relation
to the LTI awards vesting;
– a total of 918,656 Sharesave Scheme options over ordinary
shares and a total of 1,889,380 LTI awards that may be settled
using newly-issued or treasury shares were outstanding at
31 December 2024, representing 0.13% of the Company’s issued
share capital (excluding shares held in treasury); and
– options outstanding under the Sharesave Scheme are
exercisable until 1 April 2030 at option prices ranging from 1,927p
to 2,727p.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
243
The Remuneration Committee Governance
Remuneration Committee current members
Kandy Anand (Chair)
Karen Guerra
Murray S. Kessler
Serpil Timuray
Role
As set out in the Terms of Reference, the Remuneration Committee is responsible for:
– determining and proposing the Directors’ Remuneration Policy (including salary, benefits, performance-based variable rewards and
retirement benefits) for shareholder approval;
– determining, within the terms of the approved Directors’ Remuneration Policy, the specific remuneration packages for the Chair and
the Executive Directors, on appointment, on review and, if appropriate, any compensation payment due on termination of appointment;
– the setting of targets applicable for the Company’s performance-based variable reward schemes and determining achievement
against those targets, including consideration of factors relating to any potential adjustments, for example, to reflect changes in the
Group’s business context such as restructuring, mergers and acquisitions activity; exercising discretion where appropriate and as
provided by the applicable scheme rules and the Directors’ Remuneration Policy;
– reviewing Group workforce remuneration and related policies and the alignment of incentives and rewards with Group culture, taking
these into account in setting the remuneration policy for Executive Directors, members of the Management Board and the Company
Secretary, providing feedback to the Board on workforce reward, incentives and conditions applicable across the Group, and
supporting the Board’s monitoring of the Group’s culture and its alignment with the Group’s purpose, values and strategy;
– setting remuneration for members of the Management Board and the Company Secretary; and
– monitoring and advising the Board on any major changes to the policy on employee benefit structures for the Group.
Revised terms of reference for the Committee were introduced with effect from 1 August 2024 to reflect the introduction of the 2024 UK
Corporate Governance Code, as it applies to the Company from 1 January 2025, including to specify the Committee's responsibility for
maintaining appropriate malus and clawback arrangements.
Attendance at meetings in 2024
Name
2(a)
Member
since
Meeting attendance
Attended/Eligible to attend
1(a)
Kandy Anand
2(b)
2022
6/6
Karen Guerra
2(c)
2025
0/0
Murray S. Kessler
2(d)
2023
6/6
Serpil Timuray
2023
6/6
Dimitri Panayotopoulos
2(e)
2015 - 2024
1/1
Sue Farr
2(e)
2016 - 2024
1/1
Notes:
1.
Number of meetings in 2024: (a) the Committee held six meetings in 2024, two of which were ad hoc. Four meetings of the Committee are scheduled for 2025.
2. Membership: (a) all members of the Committee are independent Non-Executive Directors in accordance with the UK Corporate Governance Code 2018 Provisions 10 and 2 and
applicable NYSE listing standards; (b) Kandy Anand succeeded Dimitri Panayotopoulos as Chair of the Remuneration Committee from the conclusion of the 2024 AGM; (c) Karen Guerra
joined the Committee with effect from 10 February 2025, (d) Murray Kessler will cease to be a member of the Committee on stepping down from the Board with effect from 17 February
2025, and (e) Dimitri Panayotopoulos and Sue Farr ceased to be members of the Committee on stepping down from the Board at the conclusion of the AGM on 24 April 2024.
Other attendees: the Chair, the Chief Executive, the Chief People Officer, the Group Head of Reward and other senior management,
including the Company Secretary, may be consulted and provide advice, guidance and assistance to the Remuneration Committee.
They may also attend Committee meetings (or parts thereof) by invitation. None of the Chair, any Executive Director or member of
senior management plays any part in determining their own respective remuneration.
Independence and advice
PricewaterhouseCoopers LLP (PwC): PwC were appointed by the Remuneration Committee following a rigorous tender process in
January 2020 as one of the Remuneration Committee’s remuneration consultants. PwC provided independent advice to the Committee
in 2024 and a representative of PwC attended scheduled Remuneration Committee meetings in 2024. PwC's advice included, for
example, support with market trends and comparator group analysis, updates on market practice and shareholder engagement
perspectives. PwC is a member of the Remuneration Consulting Group and, as such, operates under the code of conduct in relation to
executive remuneration consulting in the UK. The Committee is satisfied that the advice received is objective and independent. The
Committee is comfortable that the PwC advisory team is not involved in any other services PwC provides to the Company, such as tax,
corporate finance and consulting services to Group companies worldwide excluding the U.S. Total fees for the provision of remuneration
advice to the Committee in 2024 were £191,800.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
244
Meridian Compensation Partners (Meridian): Meridian, a U.S. based advisory firm, were appointed by the Remuneration Committee
following a rigorous tender process in January 2020 as one of the Remuneration Committee’s remuneration consultants. Meridian
provided advice to the Committee in 2024 and a representative of Meridian attended scheduled Remuneration Committee meetings in
2024. Meridian's advice included advice on remuneration matters including market trends, shareholder engagement perspectives and
comparator group analysis from a U.S. perspective. The Committee is satisfied that the advice received is objective and independent.
Meridian did not provide any other services to the Company. Total fees for the provision of remuneration advice to the Committee in
2024 were US$33,420.
Deloitte LLP were appointed by the Remuneration Committee as one of the Remuneration Committee's remuneration consultants
replacing PwC from December 2024 following a rigorous tender process. Deloitte LLP provided independent advice to the Committee
following their appointment. A representative of Deloitte LLP attended the scheduled Remuneration Committee meeting in December
2024. Deloitte's advice included, for example, support with updates on market practice, shareholder engagement perspectives and
independent measurement of the relative TSR performance conditions. Deloitte LLP is a member of the Remuneration Consulting Group
and, as such, operates under the code of conduct in relation to executive remuneration consulting in the UK. The Committee is satisfied
that the advice received is objective and independent. The Committee is comfortable that the Deloitte LLP advisory team is not involved
in any other services Deloitte LLP provides to the Company. Total fees for the provision of remuneration advice to the Committee in 2024
were £22,667.
Regular work programme 2024
The Remuneration Committee:
– reviewed the Chair's fee from 1 May 2024, taking into account market positioning, the broader external environment and the level
of salary increases awarded to UK employees;
– reviewed salary for the Chief Executive to take effect from 1 April 2024, taking into account market positioning, the external
environment including stakeholder expectations and shareholder perspectives, and the level of salary increases awarded to
UK employees;
– reviewed salaries for members of the Management Board and the Company Secretary from 1 April 2024, taking into account market
positioning, the external market environment and the level of salary increases awarded to UK employees;
– assessed the achievement against the targets for the 2023 STI award and set the STI targets for 2024 to provide an appropriate
degree of stretch within the target ranges to drive performance in alignment with the Group's strategic objectives and shareholder
interests;
– reviewed updates on performance against the 2024 STI target measures and for outstanding LTI awards;
– assessed the achievement against the performance conditions for the vesting of the 2021 LTIP award, determined the contingent
level of LTI awards for March 2024 and reviewed the associated performance conditions;
– assessed the achievement against the targets for the 2023 Share Reward Scheme and set the targets for the 2024 award;
– reviewed the Annual Statement and the Annual Report on Remuneration for the year ended 31 December 2023 prior to its approval
by the Board and subsequent proposal to shareholders at the Company’s AGM on 24 April 2024;
– reviewed the 2024 AGM voting results relating to remuneration resolutions, market trends in the context of that annual general
meeting season and corporate governance developments relating to executive remuneration and wider workforce remuneration
in the UK and the U.S.;
– monitored the continued application of the Company’s shareholding guidelines for Executive Directors and members of the
Management Board; and
– reviewed the Committee’s effectiveness following the Board and Committees review process (discussed on pages 187 to 188).
Directors' Remuneration Policy Review
– In preparation for the presentation of a revised remuneration policy to shareholders in 2025, the Committee conducted an in-depth
review of the current policy, proposed changes and approach to shareholder engagement. An associated programme of shareholder
engagement was subsequently led by the Committee Chair.
– In determining the revised Directors' Remuneration Policy to be proposed to shareholders at the Company's AGM in 2025, the
Committee has taken into account shareholder feedback, the Group's transformation strategy, talent marketplace, remuneration
and related policies applicable to the wider workforce, the alignment of incentives and rewards with the Group's values and culture,
the application of the 2018 UK Corporate Governance Code, future application of the 2024 UK Corporate Governance Code, and other
applicable regulations.
Other activities in 2024
The Remuneration Committee:
– reviewed remuneration arrangements in connection with Management Board role changes during the year;
– assessed various aspects of the Group’s workforce remuneration strategy and alignment with our values, strategic objectives,
Executive Directors’ remuneration and external market positioning, with specific focus on variable pay architecture for management
grade employees across the Group;
– approved changes to the methodology for calculating the share of market read for the STI volume share metric in several markets,
based on the local market environment and reporting capabilities;
– reviewed the Group's pay equality data and associated reporting, including UK gender pay reporting for 2023 for applicable UK Group
companies prior to publication in March 2024, and voluntary reporting on international gender pay and ethnicity pay;
– conducted a competitive tender exercise to select new UK remuneration advisers to the Committee which led to the appointment of
Deloitte LLP from December 2024; and
– reviewed the Committee's Terms of Reference to align with the requirements of the 2024 Code and recommended revisions to those
Terms of Reference be introduced from 1 August 2024, which were subsequently approved by the Board.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
245
Voting on Remuneration and Engagement with Shareholders
At the AGM on 24 April 2024, shareholders considered and voted on the 2023 Directors’ Remuneration Report as set out in the table
below. No other resolutions in respect of Directors’ remuneration or incentives were considered at the 2024 AGM. The current
Remuneration Policy was approved by shareholders at the AGM on 28 April 2022 as set out below. The full Directors’ Remuneration
Policy is set out in the 2021 Annual Report on Remuneration and summarised on page 227. Further information regarding shareholder
engagement in relation to remuneration matters is set out in the Annual Statement on Remuneration on page 207 and in the discussion
of Board engagement with shareholders on pages 178 and 179.
Approval of Directors' Remuneration Report
1 and Policy
2
Directors' Remuneration Policy 2022 AGM
Directors' Remuneration Report 2024 AGM
Percentage for
94.85
96.58
Votes for (including discretionary)
1,663,434,518
1,509,240,342
Percentage against
5.15
3.42
Votes against
90,313,970
53,407,399
Total votes cast excluding votes withheld
1,753,748,488
1,562,647,741
Votes withheld
3
2,811,496
1,912,941
Total votes cast including votes withheld
1,756,559,984
1,564,560,682
Notes:
1.
Directors’ Remuneration Report: does not include the part of the Remuneration Report containing the Directors' Remuneration Policy (see note 2 below).
2. Directors’ Remuneration Policy: was approved by shareholders at the 2022 AGM held on 28 April 2022 and is set out in full in the 2021 Annual Report on Remuneration.
3. Votes withheld: these are not included in the final proxy figures as they are not recognised as a vote in law.
The Directors’ Remuneration Report has been approved by the Board on 12 February 2025 and signed on its behalf by:
Kandy Anand
Chair, Remuneration Committee
12 February 2025
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Remuneration Report
2024 Annual Report on Remuneration
Continued
246
Statement of Directors’ Responsibilities in Respect of the
Annual Report and the Financial Statements
@
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in
accordance with applicable law and regulations. Under company
law, directors must not approve the Financial Statements unless
they are satisfied that they give a true and fair view of the state of
affairs of the Parent Company and the Group for that period.
Under applicable law, directors are required to prepare the
financial statements in accordance with UK-adopted international
accounting standards and applicable law. The Directors have
elected to prepare the Parent Company financial statements in
accordance with UK Accounting Standards and applicable law,
including FRS 101 'Reduced Disclosure Framework'. In preparing
these Group financial statements, the Directors have also elected
to comply with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
In preparing each of the Group and Parent Company financial
statements, the Directors are required to:
– select suitable accounting policies and then apply them
consistently;
– make judgements and estimates that are reasonable, relevant,
reliable and prudent;
– state whether Group financial statements have been prepared
in accordance with UK-adopted international accounting
standards;
– state whether, for the Parent Company financial statements,
applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained
in those statements;
– assess the Group and Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
– use the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or
to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Parent Company and enable
them to ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such internal
control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that comply with applicable law and regulations.
The Directors are responsible for the maintenance and integrity of
the Annual Report included on the Company’s website. Legislation
in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule
(DTR) 4.1.16R, the financial statements will form part of the annual
financial report prepared using the single electronic reporting
format under DTRs 4.1.17R and 4.1.18R. The auditor’s report on
these financial statements provides no assurance over whether
the annual financial report has been prepared in accordance with
those requirements.
Directors’ Declaration in Relation to Relevant
Audit Information
@
Having made appropriate enquiries, each of the Directors who held
office at the date of approval of this Annual Report confirms that:
– so far as he or she is aware, there is no relevant audit information
of which the Company’s auditors are unaware; and
– he or she has taken all steps that a Director ought to have taken
in order to make himself or herself aware of relevant audit
information and to establish that the Company’s auditors are
aware of that information.
Responsibility Statement of the Directors in Respect of
the Annual Financial Report
@
We confirm that to the best of our knowledge:
– the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the consolidation
taken as a whole; and
– the Strategic Report and the Directors’ Report include a fair
review of the development and performance of the business
and the position of the Company and the undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
This responsibility statement has been approved and is signed
by order of the Board by:
Luc Jobin
Soraya Benchikh
Chair
Chief Financial Officer
12 February 2025
British American Tobacco p.l.c.
Registered in England and Wales No. 3407696
@ Denotes phrase, paragraph or similar that does not form part of BAT’s Annual Report
on Form 20-F as filed with the SEC.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Governance
Responsibility of Directors
247
1 Our Opinion is Unmodified
In our opinion:
– the financial statements of British American Tobacco p.l.c. give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2024, and of the Group’s profit for the year then ended;
– the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
– the Parent Company financial statements have been properly prepared in accordance with UK accounting standards including FRS 101
Reduced Disclosure Framework; and
– the Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Additional opinion in relation to IFRS Accounting Standards as issued by the IASB
As explained in note 1 to the Group financial statements, the Group, in addition to complying with its legal obligation to apply UK-adopted
international accounting standards, has also applied IFRS Accounting Standards as issued by the International Accounting Standards
Board (“IASB”).
In our opinion, the Group financial statements have been properly prepared in accordance with IFRS Accounting Standards as issued by
the IASB.
What our opinion covers
We have audited the Group and Parent Company financial statements of British American Tobacco p.l.c. (the “Company”) for the year
ended 31 December 2024 (“2024”) included in the Annual Report, which comprise:
Group (British American Tobacco p.l.c. and its subsidiaries)
Parent Company (British American Tobacco p.l.c.)
Group Income Statement
Group Statement of Comprehensive Income
Group Statement of Changes in Equity
Group Balance Sheet
Group Cash Flow Statement
Notes 1 to 34 to the Group financial statements,
including the accounting policies in note 1
Balance Sheet
Statement of Changes in Equity
Notes 1 to 8 to the Parent Company financial statements,
including the accounting policies in note 1
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit
opinion and matters included in this report are consistent with those discussed and included in our reporting to the Audit Committee.
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed public interest entities.
2 Overview of Our Audit
Factors driving our view of risks
As a result of the 2017 acquisition of Reynolds American Inc. (“Reynolds American”), the Group has goodwill, trademarks and similar
intangibles where a high degree of estimation uncertainty exists with regards to assumptions and estimates used in the Group’s analysis
of recoverable amount, which include projected net revenue, terminal growth rate (goodwill and indefinite lived trademarks), long-term volume
growth rates (definite lived trademarks) and post-tax discount rates. The effect of these matters could result in a potential range of
reasonable outcomes greater than our materiality for the financial statements as a whole, and possibly many times that amount. There is
significant auditor judgement involved in evaluating these assumptions. Our assessment is that the risk relating to the impact of the
proposed rule to prohibit menthol flavour for cigarettes, which would have impacted the recoverable amounts of the Group’s Newport and
Camel trademarks and goodwill associated with the Reynolds American cash-generating unit, has decreased compared with 2023 following
the regulatory updates in 2024.
The Group is subject to a large number of claims, including class actions, which could have a significant impact on the results if potential
exposures were to materialise. For our 2024 audit, in our judgement, the most significant risk and area of uncertainty relating to these
claims relates to ongoing litigation in Canada, which has had further developments in the year. The amounts involved are significant, and
the Group’s application of accounting standards to estimate the amount to be provided as a liability and the related disclosures is
inherently subjective. Significant auditor judgement was involved in evaluating the Group’s ability to estimate the timing and extent of
any future economic outflow arising from the ultimate resolution of the Canadian litigation. The nature of the risk has changed compared
to prior year as a result of the proposed plan of compromise and arrangement, which has resulted in the recognition of a provision. Our
assessment however, is that the overall level of risk is similar to 2023.
Due to the materiality of investment in subsidiaries in the context of the Parent Company financial statements, investment in
subsidiaries is considered to be an area that had the greatest effect on our overall Parent Company audit and our assessment of this Key
Audit Matter has remained the same in the current year.
Key Audit Matters
Vs 2023
Item
Goodwill, relevant trademarks and similar intangibles impairment analysis – arising from the Reynolds American Inc.
acquisition in 2017
↓
4.1
Provision arising from litigation in Canada
← →
4.2
Recoverability of Parent Company’s investment in subsidiaries
← →
4.3
Audit Committee interaction
During the year, the Audit Committee met six times. KPMG were invited to attend all Audit Committee meetings and also used the
opportunity provided at each meeting to meet with the Audit Committee in private sessions without the Executive Directors being
present. For each Key Audit Matter, we have set out communications with the Audit Committee in section 4, including matters that
required particular judgement for each.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Independent Auditor’s Report
@
To the members of British American Tobacco p.l.c.
248
The matters included in the Audit Committee report on pages 197 and 198 are materially consistent with our observations of those
meetings.
Our independence
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed public interest entities.
We have not performed any non-audit services during the financial year ended 31 December 2024 or subsequently which are prohibited
by the FRC Ethical Standard.
We were first appointed as auditor by the Directors for the year ended 31 December 2015. The period of total uninterrupted engagement
is for the 10 financial years ended 31 December 2024.
The Group engagement partner is required to rotate every 5 years. Philip Smart became the Group engagement partner for the 2021
audit and will be required to rotate off the engagement following the 2025 audit.
The average tenure of component engagement partners is 3 years, with the shortest being 1 and the longest being 7. There were no key
audit partners with tenure over 5 years.
Total audit fee
£21.6 m
Audit related fees (including interim review)
£7.1 m
Other services
£0.7 m
Non-audit fee as a % of total audit and audit related fee %
2.4%
Date first appointed
23 March 2015
Uninterrupted audit tenure
10 years
Next financial period which requires a tender
2035
Tenure of Group engagement partner
4 years
Average tenure of component engagement partners
3 years
Materiality (item 6 below)
The scope of our work is influenced by our view of materiality and our assessed risk of material misstatement.
We have determined overall materiality for the Group financial statements as a whole at £380 million (2023: £480 million) and for the
Parent Company financial statements as a whole at £302 million (2023: £301 million).
Consistent with 2023, materiality for the Group financial statements was determined with reference to a benchmark of Group profit
before taxation because it is the metric in the primary statements which best reflects the focus of the financial statements' users and we
adjusted for costs that do not represent the normal, continuing operations of the Group. As such, our Group materiality represents 4.34%
(2023: 4.4%) of normalised Group profit before taxation.
Materiality for the Parent Company financial statements was determined with reference to a benchmark of Parent Company total
assets of which it represents 0.75% (2023: 0.76%).
Materiality levels used in our audit (£m)
380
285
280
302
70
19
480
360
280
301
50
24
Group
GPM
HCM
PLC
LCM
AMPT
2024
2023
Group
Group Materiality
PLC
Parent Company Materiality
GPM
Group Performance Materiality
LCM
Lowest Component Materiality
HCM
Highest Component Materiality
AMPT
Audit Misstatement Posting Threshold
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
249
Group scope (item 7 below)
We have performed risk assessment and planning procedures to determine which of the Group’s components are likely to include risks
of material misstatement to the Group financial statements, the audit procedures to perform at these components and the extent of
involvement required from our component auditors around the world.
We identified 318 components. Of those, we classified 1 component as a quantitatively significant component and 1 component as
requiring special audit consideration. Additionally, having considered qualitative and quantitative factors, we selected 20 components
with accounts contributing to the specific risks of material misstatement of the Group financial statements.
The Group operates 3 finance shared service centres based in Romania, Malaysia and Costa Rica that are relevant to our audit, and each
of the shared service centres is subject to specified risk-focused testing of the design and operating effectiveness of manual controls.
The Group auditor has also performed some audit procedures centrally, tested centrally managed controls (manual and automated),
tested general IT controls over centrally managed IT systems and applied data and analytics procedures over revenue and journal entries
on behalf of the components.
In addition, for the remaining components for which we performed no audit procedures, we performed analysis at an aggregated Group
level to re-examine our assessment that there is not a reasonable possibility of a material misstatement in these components.
We consider the scope of our audit, as communicated to the Audit Committee, to be an appropriate basis for our audit opinion.
We performed audit procedures at components that accounted for 53% of Group profit before tax, 74% of Group revenue and 16% of
total Group assets.
In addition, at the Group level, we performed audit procedures over intangible assets and related amortisation and impairment expense
and investments in associates and joint ventures and the related share of post-tax results that together accounted for 19% of the Group
profit before tax and 69% of the total Group assets.
The impact of climate change on our audit
In planning our audit, we considered the impacts of climate change on the Group’s business and its financial statements.
The Group has set its targets under the Paris Agreement in relation to 50% reduction in its scope 1 and 2 emissions, 30.3% reduction in
scope 3 (FLAG) emissions and 42% reduction in scope 3 industrial (non-FLAG) emissions by 2030, in each case compared to 2020, and to
reach net zero emissions by 2050. Further information has been provided in the Group’s Strategic Report on page 134. The Group
continues to align its climate-related disclosures with the recommendations of the Task Force on Climate Related Financial Disclosure
(“TCFD”). These disclosures are included on pages 121 to 137 of the Annual Report.
Climate change risk, emerging climate regulations and the Group’s own decarbonisation strategy could have a significant impact on the
Group’s business and operations. There is a possibility that climate change risks, particularly emerging carbon and product regulations,
as well as chronic and acute weather, could affect financial statement balances. This impact is expected to be most prevalent in
accounting estimates such as forecast cashflows used in the impairment assessment of intangible assets.
As part of our audit we performed a risk assessment of the impact of climate change risk and the commitments made by the Group in
respect of climate change on the financial statements and our audit approach. In preparing this assessment, we held discussions with
our own climate change professionals to challenge our risk assessment. The focus of our risk assessment was the following:
– Understanding the Group’s processes: We made enquiries to understand the Group’s assessment of the potential impact of climate
change risk on the Group’s financial statements and the Group’s preparedness for this. As a part of this, we made enquiries to understand the
Group’s risk assessment process as it relates to possible effects of climate change on the Annual Report and Accounts, including how the
Group identifies and complies with emerging climate regulations, such as the Extended Producer Responsibility product regulation in Europe.
– Impairment assessment of intangible assets: We assessed how the Group considers the impact of climate change risk when
calculating the recoverable amount of intangible assets. The focus of our procedures was assessing the extent to which decarbonisation
costs, such as investments in energy efficiency and renewable energy generation, are included in forecast cashflows underpinning the
Reynolds American's trademarks and goodwill. We further sensitised the Group’s value-in-use models for physical and transitional
climate risks.
– Annual report narrative: We read the climate-related information in the front half of the Annual Report and Accounts and
considered consistency with the financial statements and our audit knowledge.
On the basis of our risk assessment, we determined that while climate change poses a risk to the determination of future cash flows, the
risk to this year’s financial statements from climate change is not significant taking into account the magnitude of the financial impact of
identified climate risks alone on the impairment assessment of Reynolds American’s cash-generating unit and trademarks, relative to the
materiality of the financial statements. The impact to non-US cash-generating units is also not considered significant taking into account
the extent of headroom available on these assets. As such, there was no impact on our Key Audit Matter.
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3 Going Concern, Viability and Principal Risks and Uncertainties
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the
Parent Company or to cease their operations, and as they have concluded that the Group’s and the Parent Company’s financial position
means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over
their ability to continue as a going concern for at least twelve months from the date of approval of the financial statements (“the going
concern period”).
Going concern
We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over
the going concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial
resources over this period were:
– The enactment of regulation that significantly impairs the Group’s ability to communicate, differentiate, market, or launch its
products; and
– Product liability, regulatory or other significant cases (including investigations) may be lost or settled resulting in a material loss or
other consequence.
We also considered less predictable but realistic second order impacts, such as the erosion of customer or supplier confidence, which
could result in a rapid reduction of available financial resources.
We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe, but plausible,
downside scenarios that could arise from these risks individually and collectively against the level of available financial resources
indicated by the Group’s financial forecasts.
We considered whether the going concern disclosure in note 1 to the financial statements gives a full and accurate description of the
Directors’ assessment of going concern.
Accordingly, based on those procedures, we found the Directors’ use of the going concern basis of accounting without any material
uncertainty for the Group and Parent Company to be acceptable.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the
Parent Company will continue in operation.
Our conclusions
– We consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is
appropriate;
– We have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or
conditions that, individually or collectively, may cast significant doubt on the Group’s or Parent Company's ability to continue as a going
concern for the going concern period;
– We have nothing material to add or draw attention to in relation to the Directors’ statement in note 1 to the financial statements on the
use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Parent
Company’s use of that basis for the going concern period, and we found the going concern disclosure in note 1 to be acceptable; and
– The related statement under the UK Listing Rules set out on page 164 is materially consistent with the financial statements and our
audit knowledge.
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in
respect of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
– the Directors’ confirmation within the viability statement on page 164 that they have carried out a robust assessment of the emerging
and principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;
– the Group Principal Risks disclosures describing these risks and how emerging risks are identified and explaining how they are being
managed and mitigated; and
– the Directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have
done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the viability statement set out on page 164 under the UK Listing Rules.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit.
As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee
as to the Group’s and Parent Company’s longer-term viability.
Our reporting
We have nothing material to add or draw attention to in relation to these disclosures. We have concluded that these disclosures are
materially consistent with the financial statements and our audit knowledge.
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4 Key Audit Matters
What we mean
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on:
– the overall audit strategy;
– the allocation of resources in the audit; and
– directing the efforts of the engagement team.
We include below the Key Audit Matters in decreasing order of audit significance together with our key audit procedures to address
those matters and our results from those procedures. These matters were addressed, and our results are based on procedures
undertaken, for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.
4.1 Goodwill, relevant trademarks and similar intangibles impairment analysis – arising from the Reynolds American Inc.
acquisition in 2017 (Group)
Financial Statement Elements
Our assessment of risk vs 2023
Our results
2024
2023
Goodwill – arising from the Reynolds
American Inc. acquisition
£31,491m £30,938m
↓
Our assessment is that the risk relating
to the impact of the proposed rule to
prohibit menthol flavour for cigarettes,
which would have impacted the
recoverable amounts of the Group’s
Newport and Camel trademarks and
goodwill associated with the Reynolds
American cash-generating unit, has
decreased compared with 2023
following the regulatory updates in
2024.
2024: Acceptable
2023: Acceptable
Impairment charge - Goodwill
£ nil
£4,299m
Relevant trademarks and similar
intangibles – arising from the Reynolds
American Inc. acquisition:
– Definite lived intangible assets
– Indefinite lived intangible assets
£40,911m
£9,832m
£ nil
£51,930m
Impairment charge – relevant
trademarks and similar intangibles
£646m
£22,992m
Description of the Key Audit Matter
Forecast-based assessment: As a result of the 2017 acquisition of Reynolds American, the Group, as at 31 December 2024 has goodwill
of £31,491 million and trademarks and similar intangibles of £50,743 million (2023: goodwill of £30,938 million and trademarks and similar
intangibles of £51,930 million).
From 1 January 2024 the combustible trademarks (Newport, Camel, Pall Mall, and Natural American Spirit (“NAS”)) were redesignated as
definite lived intangible assets with amortisation commencing from that date. Following the impairment of these trademarks in 2023
these definite lived brands had no headroom, and given their value, a small adverse change in the US combustibles market could result in
a material impairment of the trademarks.
The Group is required to test for impairment the indefinite lived trademarks (Grizzly and Camel Snus) and the goodwill associated with
the Reynolds American cash-generating unit. The cash flow forecasts of both the definite and indefinite lived trademarks form part of the
cash flow forecasts of the goodwill associated with the Reynolds American cash-generating unit.
There is inherent uncertainty with regard to assumptions and estimates involved in the Group’s forecast-based assessment of the
recoverable amount of these relevant trademarks and similar intangibles and goodwill.
In particular, there is significant auditor judgement involved in evaluating the below assumptions:
– the projected net revenue (for the forecast period) and post-tax discount rates used in the analysis of the recoverable amount of the
goodwill associated with the Reynolds American cash-generating unit, and the recoverable amount of the relevant trademarks and
similar intangibles (Newport, Camel, Pall Mall, NAS, and Grizzly);
– the terminal growth rates used in the analysis of the recoverable amount of the goodwill associated with the Reynolds American cash-
generating unit, and the recoverable amount of the Grizzly indefinite lived trademark; and
– the long-term volume growth rate beyond the forecast period used in the analysis of the recoverable amount of the Newport definite lived
trademark.
The effect of these matters is that, as part of our risk assessment, we determined that the recoverable amount of both relevant
trademarks and similar intangibles and goodwill has a high degree of estimation uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial statements as a whole, and possibly many times that amount.
The financial statements (note 12) disclose the sensitivity of the recoverable amount of relevant trademarks and similar intangibles and
goodwill estimated by the Group.
Our response to the risk
Our procedures to address the risk included:
Control design and operation: Evaluating the design and testing the operating effectiveness of certain internal controls within the
goodwill, trademarks and similar intangibles impairment testing process, including controls related to the development of the projected
net revenue, and the Group’s determination of the applicable long-term growth rates and post-tax discount rates;
Benchmarking and assessing assumptions: Assessing and challenging the projected net revenue and long-term growth rates against
externally derived publicly available data including broker and analyst reports, industry reports, macro-economic assumptions, academic
and scientific studies, and regulatory changes;
Historical comparisons: Challenging the projected net revenue and long-term growth rates by comparing the historical projections to
actual results to assess the Group’s ability to accurately forecast;
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Sensitivity analysis: Performing sensitivity analysis on the projected net revenue, long-term growth rates and post-tax discount rates to
assess the impact of changes in these assumptions on the amount of headroom for the goodwill associated with the Reynolds American
cash-generating unit and relevant trademarks and similar intangibles;
Our valuation expertise: Involving a valuation professional with specialised skills and knowledge, who assisted in independently
developing a range of post-tax discount rates using market data points for comparable companies and comparing these market rates to
those utilised by the Group; and
Assessing transparency: Assessing whether the Group’s disclosures detail the key estimates and sensitivities including any impact of
changes to key assumptions used in the impairment testing of relevant trademarks and similar intangibles and the goodwill arising from
the Reynolds American acquisition.
Communications with the British American Tobacco p.l.c.’s Audit Committee
Our discussions with, and reporting to, the Audit Committee included:
– Our approach to the audit of relevant trademarks and similar intangibles and goodwill arising from the Reynolds American acquisition,
including details of our planned substantive procedures and the extent of our control reliance;
– Our conclusions on the appropriateness of the Group’s impairment assessment, including assumptions used by the Group to calculate
the recoverable amount of relevant trademarks and similar intangibles and goodwill and whether the projected net revenue, long-term
growth rates, and post-tax discount rate assumptions were reasonable; and
– The adequacy of disclosures, particularly as it relates to the key estimates and sensitivities with regard to the impairment testing.
Areas of particular auditor judgement
Our evaluation of the assumptions used by the Group in the analysis of the recoverable amount of relevant trademarks and similar
intangibles and goodwill associated with the Reynolds American cash-generating unit is an area requiring particular auditor judgement.
These assumptions are the projected net revenue, long-term growth rates and post-tax discount rates.
Our results
We found the balances and the related impairment charge of relevant trademarks and similar intangibles and goodwill arising from the
Reynolds American acquisition to be acceptable (2023: We found the balances and the related impairment charge of trademarks and
similar intangibles with indefinite lives and goodwill arising from the Reynolds American acquisition to be acceptable).
Further information in the Annual Report: See the Audit Committee Report on page 197 for details on how the Audit Committee
considered goodwill, relevant trademarks and similar intangibles impairment analysis arising from the Reynolds American Inc. acquisition
in 2017 as an area of significant attention, page 272 for the accounting policy on goodwill, and intangible assets other than goodwill, and
pages 294 to 299 for the financial disclosures.
4.2 Provision arising from litigation in Canada (Group)
Financial Statement Elements
Our assessment of risk vs 2023
Our results
2024
2023
Provisions for liabilities
£6,203m
£ nil ← →The nature of the risk has changed
compared to prior year as a result of the
proposed plan of compromise and
arrangement, which has resulted in the
recognition of a provision. Our
assessment however, is that the overall
level of risk is similar to 2023.
2024: Acceptable
2023: Acceptable
Description of the Key Audit Matter
Subjective estimate: The Group is subject to a large number of claims, including class actions, which could have a significant impact
on the results if potential exposures were to materialise. For our 2024 audit, in our judgement, the most significant risk and area of
uncertainty relating to these claims relates to ongoing litigation in Canada, which has had further developments in the year. In 2019,
Imperial Tobacco Canada Limited (“Imperial”) received an unfavourable judgment on the smoking and health class actions certified by
the Quebec Superior Court. As a result of this judgment, in 2019 Imperial filed for creditor protection under the Companies’ Creditors
Arrangement Act (the “CCAA”). In October 2024, while under CCAA, the court-appointed mediator and monitor filed a proposed plan of
compromise and arrangement to resolve all outstanding tobacco litigation in Canada. Substantially similar proposed plans were also filed
for Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp. (collectively the “proposed plans”). Under the proposed plans, if ultimately
sanctioned and implemented, Imperial, Rothmans, Benson & Hedges Inc. and JTI -Macdonald Corp. would pay an aggregated settlement
amount of CAD$ 32.5 billion (approximately £18 billion). As a result of the proposed plans, an amount can now be reliably estimated and
as such, the Group has recognised a provision.
The amounts involved are significant, and the Group’s application of accounting standards to estimate the amount to be provided as a
liability and the related disclosures is inherently subjective. Significant auditor judgement was involved in evaluating the Group’s ability
to estimate the timing and extent of any future economic outflow arising from the ultimate resolution of the Canadian litigation. This
involved evaluating the assumptions related to the rate at which volumes will decline and the execution of future pricing plans
(collectively “projected net revenue”), which were used to derive this estimate and the related disclosures.
The effect of these matters is that, as part of our risk assessment, we determined that the estimation of the amount to be provided as a
liability has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the
financial statements as a whole, and possibly many times that amount.
The financial statements (note 24) disclose the sensitivities estimated by the Group.
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Our response to the risk
Our procedures to address the risk included:
Control design and operation: Evaluating the processes and controls within the legal exposure process, including controls related to the
estimation of the timing and extent of any future economic outflow arising from the ultimate resolution of the Canadian litigation;
Enquiry of lawyers: Reading letters received directly from the Group's external and internal legal counsel that evaluated the current
status of the Canadian legal proceedings. We also inquired of internal legal counsel to evaluate their basis for conclusions in their letter;
Benchmarking assumptions: Assessing and challenging Imperial’s projected net revenue against externally derived publicly available
data and historical trends;
Historical comparisons: Challenging the projected net revenue by comparing the historical projections to actual results to assess
Imperial’s ability to accurately forecast;
Sensitivity analysis: Performing sensitivity analyses on Imperial’s projected net revenue to assess the impact of changes in this
assumption on the amount of the provision recorded; and
Assessing transparency: Assessing whether the Group’s disclosures detail the key estimates and sensitivities including any impact of
changes to key assumptions used in the estimation of the provision for liabilities related to ongoing litigation in Canada.
Communications with the British American Tobacco p.l.c.’s Audit Committee
Our discussions with, and reporting to, the Audit Committee included:
– Our approach to the audit of the provision for liabilities related to ongoing litigation in Canada, including details of our planned
substantive procedures and the extent of our control reliance;
– Our conclusion on the appropriateness of the Group’s assessment, including assumptions used by the Group to estimate the amount
to be provided for; and
– The adequacy of disclosures, particularly as it relates to the key estimates and sensitivities with regard to the provision.
Areas of particular auditor judgement
Our evaluation of the assumptions used by the Group to estimate the amount to be provided as a liability is an area requiring particular
auditor judgement. These assumptions are based on the rate at which volumes will decline and the execution of future pricing plans
(collectively “projected net revenue”).
Our results
We found the amount provided for as a liability and related disclosures relating to ongoing litigation in Canada to be acceptable (2023:
we found the Group’s treatment of the contingent liabilities and related disclosures arising from ongoing litigation in Canada to be
acceptable).
Further information in the Annual Report: See the Audit Committee Report on page 197 for details on how the Audit Committee
considered the accounting treatment applicable to ongoing litigation in Canada, including the developments in the year, as an area of
significant attention, page 271 for the accounting policy on provisions for liabilities, and pages 328 and 329 for the financial disclosures.
4.3 Recoverability of the Company's investment in subsidiaries (Parent Company)
Financial Statement Elements
Our assessment of risk vs 2023
Our results
2024
2023
Investment in Subsidiaries
£27,727m
£27,747m
← →
Our assessment is that the
risk is similar to 2023.
2024: Acceptable
2023: Acceptable
Description of the Key Audit Matter
Low risk, high value: The carrying amount of the Parent Company's investment in subsidiaries is £27,727 million (2023: £27,747 million)
which represents 69% (2023: 70%) of the Company's total assets. Their recoverability is not a high risk of material misstatement or
subject to significant judgement.
However, due to the materiality of investment in subsidiaries in the context of the Parent Company financial statements, this is the area
that had the greatest effect on our overall Parent Company audit.
Our response to the risk
Our procedures to address the risk included:
Tests of detail: Comparing the carrying amount of the Parent Company’s direct investments, representing 100% (2023: 100%) of the
total investment balance with the relevant subsidiaries’ draft balance sheets to identify whether their net assets, approximating their
minimum recoverable amount, were in excess of their carrying amount and assessing whether those subsidiaries have historically been
profit-making.
We performed the tests above rather than seeking to rely on any of the Parent Company's controls because the nature of the balance is
such that we would expect to obtain audit evidence primarily through the detailed procedures described.
Communications with the British American Tobacco p.l.c.’s Audit Committee
Our discussions with, and reporting to, the Audit Committee included:
– Our approach to the audit of the Parent Company’s investment in subsidiaries including details of our planned substantive procedures; and
– Our conclusion whether the carrying amount of the Parent Company’s investment in subsidiaries remains recoverable based on our
audit procedures.
Our results
We found the Parent Company’s conclusion that there is no impairment of the investment in subsidiaries to be acceptable (2023:
acceptable).
Further information in the Annual Report: See page 385 for the accounting policy on investments in Group companies, and page 386 for
the financial disclosures.
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5 Our Ability to Detect Irregularities, and our Response
Fraud – Identifying and responding to risks of material misstatement due to fraud
Fraud risk assessment
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive
or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
– Enquiring of Directors, the Audit Committee, and internal audit whether they have knowledge of any actual, suspected, or alleged
fraud, and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud,
including the internal audit function, and the Group’s channel for “whistleblowing”.
– Reading minutes of the Board of Directors, Audit Committee, Remuneration Committee, Nominations Committee and other relevant
Committees.
– Considering the International Executive Incentive Scheme and performance targets for senior management.
– Using analytical procedures to identify any unusual or unexpected relationships.
Our forensic specialists assisted us in identifying key fraud risk factors. This included attending the Risk Assessment and Planning
Discussion and participating in meetings with management, to discuss matters relating to ongoing investigations.
With regards to anti-bribery and corruption, they assisted us in developing our audit approach to address fraud risk factors and
inspected reporting deliverables submitted by component auditors to the Group auditor in relation to additional anti-bribery and
corruption risk assessment procedures.
Risk communications
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.
This included communication from the Group auditor to component auditors of relevant fraud risks identified at the Group level and
requests to component auditors to report to the Group auditor any instances of fraud that could give rise to a material misstatement at
the Group level.
Fraud risks
As required by auditing standards, and taking into account possible pressures to meet profit targets, we performed procedures to address the risk
of management override of controls, in particular the risk that Group and component management may be in a position to make inappropriate
accounting entries and the risk of bias in accounting estimates. On this audit we do not believe there is a fraud risk related to revenue recognition
as the revenue model is non-complex with no material estimation or manual intervention, revenue is disaggregated between a significant number
of End Markets and remuneration targets are based on Group performance rather than End Market performance.
We did not identify any additional fraud risks.
Procedures to address fraud risks
In determining the audit procedures, we took into account the results of our evaluation and testing of the operating effectiveness of the
Group-wide fraud risk management controls.
We also performed procedures including:
– Identifying journal entries to test from a Group perspective based on risk criteria and comparing the identified entries to supporting
documentation. These included those unexpected adjustments posted to revenue accounts, those posted to external cash or external
borrowing accounts, those posted to accounts that contain significant estimates, those posted or approved by an individual not
authorised to post or approve, those posted and approved by the same user and those posted to accounts which could drive certain
key metrics such as the bonus calculation.
– Identifying journal entries to test for all components based on risk criteria and comparing the identified entries to supporting
documentation. These included those posted by senior finance management or Directors, those posted to an account that had one
entry during the last two months of the year and those posted with an unusual account combination.
– Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.
Laws and regulations – identifying and responding to risks of material misstatement relating to compliance with
laws and regulations
Laws and regulations risk assessment
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from
our general commercial and sector experience, through discussion with the Directors and other management (as required by auditing
standards), and from inspection of the Group’s regulatory and legal correspondence and discussed with the Directors and other
management the policies and procedures regarding compliance with laws and regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s
procedures for complying with regulatory requirements.
Risk communications
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance
throughout the audit. This included communication from the Group auditor to component auditors of relevant laws and regulations
identified at the Group level, and a request for component auditors to report to the Group auditor any instances of non-compliance with
laws and regulations that could give rise to a material misstatement at the Group level.
The potential effect of these laws and regulations on the financial statements varies considerably.
Direct laws context and link to audit
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation
(including related companies’ legislation), distributable profits legislation, taxation legislation and pension legislation and we assessed
the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
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Most significant indirect law/regulation areas
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the
following areas as those most likely to have such an effect: health and safety, anti-bribery and corruption, money-laundering, sanctions,
environmental protection legislation, food and drug administration, data privacy, competition and contract legislation recognising the
financial and regulated nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the
Directors and other management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Known actual or suspected matters
In relation to the investigations into allegations of misconduct by the governmental authorities discussed in note 31, we, with the
involvement of forensic specialists, performed inquiries, obtained legal confirmations, and assessed disclosures against our
understanding from legal correspondence.
Context
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements
in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We
are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
6 Our Determination of Materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative
considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the
effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.
Materiality for the Group financial statements as a whole £380m (2023: £480m)
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the Group financial statements as a whole was set at £380 million (2023: £480 million). This was determined with
reference to a benchmark of Group profit before taxation, normalised to adjust for restructuring costs, impairment charges, charges in
relation to the litigation in Canada, other one-off litigation expenses and one-off income relating to sales of shares or early repayment of
bonds (2023: restructuring costs, charges in respect of the sale of the Group’s operations in Russia and Belarus, impairment charges and
other one-off litigation expenses), of £8,757 million (2023: £10,921 million). Consistent with 2023, we determined that the benchmark should
be derived from Group profit before taxation because it is the metric in the primary statements which best reflects the focus of the financial
statements' users and we adjusted for these items because they do not represent the normal, continuing operations of the Group.
Our Group materiality of £380 million was determined by applying a percentage to the Group profit before taxation, normalised to adjust
items described above. KPMG’s approach to determining materiality for listed entities considers a guideline range 3% to 5% of the
benchmark. Our Group materiality represents 4.34% (2023: 4.4%) of the normalised Group profit before taxation.
Materiality for the Parent Company financial statements as a whole was set at £302 million (2023: £301 million), determined with
reference to a benchmark of Parent Company total assets, of which it represents 0.75% (2023: 0.76%).
Performance materiality £285m (2023: £360m)
What we mean
Our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to
reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (2023: 75%) of materiality for British American Tobacco p.l.c. Group
financial statements as a whole to be appropriate.
The Parent Company performance materiality was set at £226 million (2023: £225 million), which equates to 75% (2023: 75%) of
materiality for the Parent Company financial statements as a whole.
We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an
elevated level of risk.
Audit misstatement posting threshold £19m (2023: £24m)
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from a quantitative point of view. We may
become aware of misstatements below this threshold which could alter the nature, timing and scope of our audit procedures, for
example if we identify smaller misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to British American Tobacco p.l.c.’s Audit
Committee.
Basis for determining the audit misstatement posting threshold and judgements applied
We set our audit misstatement posting threshold at 5% (2023: 5%) of our materiality for the Group financial statements. We also report
to the Audit Committee any other identified misstatements that warrant reporting on qualitative grounds.
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The overall materiality for the Group financial statements of £380 million (2023: £480 million) compares as follows to the main financial
statement caption amounts:
Total Group revenue
Group Profit/(loss) before tax
Total Group Assets
2024
2023
2024
2023
2024
2023
Financial statement Caption
£25,867m
£27,283m
£3,538m
£(17,061)m
£118,899m
£118,716m
Group Materiality as % of caption
1.46%
1.75%
10.74%
2.81%
0.31%
0.40%
7 The Scope of our Audit
What we mean
How the Group auditor determined the procedures to be performed across the Group.
Group scope
This year, we applied the revised group auditing standard in our audit of the consolidated financial statements. The revised standard changes how
an auditor approaches the identification of components, and how the audit procedures are planned and executed across components.
In particular, the definition of a component has changed, shifting the focus from how the entity prepares financial information to how we,
as the Group auditor, plan to perform audit procedures to address Group risks of material misstatement (“RMMs”). Similarly, the Group
auditor has an increased role in designing the audit procedures as well as making decisions on where these procedures are performed
(centrally and/or at component level) and how these procedures are executed and supervised. As a result, we assess scoping and
coverage in a different way and comparisons to prior period coverage figures are not meaningful. In this report we provide an indication
of scope coverage on the new basis.
We performed risk assessment procedures to determine which of the Group’s components are likely to include RMMs to the Group
financial statements and which procedures to perform at these components to address those risks.
In total, we identified 318 components, having considered our evaluation of the Group's operational structure, geographical locations and
our ability to perform audit procedures centrally.
Of those, we identified 1 quantitatively significant component which contained the largest percentages of total revenue and total assets
of the Group, for which we performed audit procedures.
We also identified 1 component as requiring special audit consideration, owing to the Group risk relating to the litigation exposure in
Imperial Tobacco Canada Limited residing in the component.
Additionally, having considered qualitative and quantitative factors, we selected 20 additional components with accounts and/or
disclosures contributing to the specific RMMs of the Group financial statements.
The below summarises where we performed audit procedures:
Component type
Number of components where we
performed audit procedures
Materiality/Range of materiality applied
Quantitatively significant component
1
£280,000,000
Component requiring special audit consideration
1
£160,000,000
Other components where we performed procedures
20
£70,000,000 – £170,000,000
Total
22
We involved component auditors in performing the audit work on 22 components. For those items adjusted to normalise Group profit
before taxation used as the benchmark for our materiality, the component auditors performed procedures on items relating to their
components. We performed procedures on the remaining adjusted items.
We set the component materialities having regard to the mix of size and risk profile of the Group across the components. We also
performed the audit of the Parent Company.
We performed audit procedures at components that accounted for 53% of Group profit before tax, 74% of Group revenue, and 16% of
total Group assets.
In addition, at the Group level, we performed audit procedures over intangible assets and related amortisation and impairment expense
and investments in associates and joint ventures and the related share of post-tax results that together accounted for 19% of the Group
profit before tax and 69% of the total Group assets.
The Group auditor has also performed some audit procedures centrally, tested centrally managed controls (manual and automated),
tested general IT controls over centrally managed IT systems and applied data and analytics procedures over revenue and journal entries
on behalf of the components.
For the remaining components for which we performed no audit procedures, no component represented more than 2.5% of Group total
revenue, Group profit before tax or Group total assets. We performed analysis at an aggregated Group level to re-examine our
assessment that there is not a reasonable possibility of a material misstatement in these components.
Impact of controls on our Group audit
We have centrally identified a number of key finance IT systems relevant to our Group audit, which includes the Enterprise Resource
Planning (“ERP”) system used across the majority of components of the Group to record underlying transactions, and the Group’s
consolidation system.
These IT systems are primarily managed from the centralised IT function in British American Tobacco p.l.c.’s shared service centre located in
Malaysia. Our IT auditors from the UK and Malaysia centrally assessed the design and operating effectiveness of the general IT controls and key
automated controls related to financial reporting of these IT systems. Following our testing, including testing compensating controls where
necessary, we relied on general IT controls and automated controls in determining the work to be performed in the audit.
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257
The Group operates three finance shared service centres (2023: three) based in Romania, Malaysia and Costa Rica that are relevant to our audit,
the outputs of which relate to the financial information of the reporting components they service and therefore they are not separate reporting
components. We instructed the auditors of the shared service centres to perform specified risk-focused audit procedures.
This included the testing of the design and operating effectiveness of manual controls in relation to the processes associated with
Financial Reporting, Purchases, Sales and Treasury. We communicated the results of these procedures to the component auditors.
Following this testing, including testing compensating controls where necessary, we relied on these manual controls which enabled us to
reduce the scope of our substantive audit work in these areas.
We also tested design and operating effectiveness of, and placed reliance on, controls at the individual component level in some other
areas of the audit.
We have identified some control deficiencies over centrally managed controls at the shared service centres, the general IT controls over
the ERP system and other IT systems, at the Group level and at certain components of the Group. For the majority of the control
deficiencies identified, compensating controls were identified and evaluated and, where relevant, relied upon. Therefore the control
deficiencies identified did not lead to significant changes to our planned audit approach to key audit matters.
Group auditor oversight
What we mean
The extent of the Group auditor’s involvement in work performed by component auditors.
In working with component auditors, we:
– Included the component auditors’ engagement partners and managers in the Group planning discussions to facilitate inputs from
component auditors in the identification of matters relevant to the Group audit.
– Held an audit risk planning discussion in June 2024 which component auditors attended and we hosted a strategy global conference in
September 2024 in London which emphasised key areas of the Group audit instructions and allowed for the sharing of risk assessment
considerations and Group updates. It helped us to enhance our understanding of the component auditors’ perspective on the overall
audit approach and improve two-way communication. The conference covered key Group developments, the origins of risk and the
deployment of data and analytic tools. We issued Group audit instructions to component auditors on the scope and nature of their
work and the information to be reported back.
– Visited in-person 6 components’ auditors including 2 finance shared service centres for the purpose of business understanding, risk
assessment and challenging the audit approach. Video and telephone conference meetings were also held with these component
auditors and others that were not physically visited. At these visits and meetings, the results of the planning procedures and/or audit
procedures communicated to us were discussed in more detail, and any further work required by us was then performed by the
component auditors.
– We inspected the work performed by the component auditors for the purpose of the Group audit and evaluated the appropriateness of
conclusions drawn from the audit evidence obtained and consistencies between communicated findings and work performed, with a
particular focus on audit procedures performed in relation to significant risks and the key audit matter in relation to the provision
arising from the litigation in Canada.
8 Other Information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except
as explicitly stated below, any form of assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.
Our reporting
Based solely on that work we have not identified material misstatements or inconsistencies in the other information.
Strategic report and Directors’ report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
– we have not identified material misstatements in the strategic report and the Directors’ report;
– in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
– in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ Remuneration Report
Our responsibility
We are required to form an opinion as to whether the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Our reporting
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance disclosures
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency between the financial statements and our
audit knowledge, and:
– the Directors’ statement that they consider that the Annual Report and financial statements taken as a whole is fair, balanced and
understandable, and provides the information necessary for shareholders to assess the Group’s position and performance, business
model and strategy;
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
Financial Statements
Independent Auditor’s Report
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258
– the section of the Annual Report describing the work of the Audit Committee, including the significant issues that the Audit Committee
considered in relation to the financial statements, and how these issues were addressed; and
– the section of the Annual Report that describes the review of the effectiveness of the Group’s risk management and internal control systems.
Our reporting
Based on those procedures, we have concluded that each of these disclosures is materially consistent with the financial statements and
our audit knowledge.
We are also required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions
of the UK Corporate Governance Code specified by the UK Listing Rules for our review.
We have nothing to report in this respect.
Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report to you if, in our opinion:
– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
– the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
– certain disclosures of Directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
Our reporting
We have nothing to report in these respects.
9 Respective Responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 248, the Directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting
unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and
Transparency Rule 4.1.17R and 4.1.18R. This auditor's report provides no assurance over whether the annual financial report has been
prepared in accordance with those requirements.
10 The Purpose of our Audit Work and to Whom We Owe our Responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
the terms of our engagement by the Company. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report, and the further matters we are required to state to them in
accordance with the terms agreed with the Company, and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or
for the opinions we have formed.
Philip Smart (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
12 February 2025
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
259
To the Shareholders and Board of Directors of British American Tobacco p.l.c.
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying Group Balance Sheet of British American Tobacco p.l.c. and subsidiaries (the Group) as of December
31, 2024, and 2023, the related Group Income Statement, Group Statement of Comprehensive Income, Group Statement of Changes in
Equity, and Group Cash Flow Statement for each of the years in the three-year period ended December 31, 2024, and the related notes
(collectively, the consolidated financial statements). We also have audited the Group’s internal control over financial reporting as of
December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Group as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2024, in conformity with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board. Also in our opinion, the Group maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Group’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Group’s consolidated
financial statements and an opinion on the Group’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements,
taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Impairment analysis of goodwill and trademarks and similar intangibles arising from the 2017 acquisition of Reynolds
American Inc. (Reynolds American)
As discussed in Note 12 to the consolidated financial statements, the Group, as at December 31, 2024, has goodwill and trademarks of
£31,491 million and £51,930 million respectively, arising from the 2017 acquisition of Reynolds American.
We identified the evaluation of the impairment analysis of goodwill and relevant trademarks arising from the 2017 acquisition of Reynolds
American as a critical audit matter. There was a high degree of auditor judgment involved in evaluating: (i) the projected net revenue (for
the forecast period) and post-tax discount rates used in the analysis of the recoverable amount of the goodwill allocated to the Reynolds
American cash-generating unit, and the recoverable amount of the relevant trademarks and similar intangibles (Newport, Camel, Pall
Mall, Natural American Spirit (NAS) and Grizzly); (ii) the terminal growth rates used in the analysis of the recoverable amount of the
goodwill allocated to the Reynolds American cash-generating unit, and the recoverable amount of the Grizzly indefinite lived trademark;
and (iii) the long-term volume growth rate beyond the forecast period used in the analysis of the recoverable amount of the Newport
definite lived trademark.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of relevant internal controls related to the goodwill, trademarks and similar intangibles impairment testing
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Accounting Firm >>
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process, including controls related to the development of the projected net revenue, management’s determination of the applicable
long-term growth rates, terminal growth rates and post-tax discount rates. In addition, we assessed the impairment analysis by:
– assessing and challenging Reynolds American’s projected net revenue and long-term growth rates of relevant trademarks by
examining externally derived publicly available data, including broker and analyst reports, industry reports, macro-economic
assumptions, academic and scientific studies, and regulatory changes;
– challenging the projected net revenue and long-term growth rates by comparing the historical projections to actual results to assess
the Group’s ability to accurately forecast;
– performing sensitivity analysis on the projected net revenue, long-term growth rates and post-tax discount rates to assess the impact
of changes in these assumptions on the amount of headroom for the Reynolds American goodwill and relevant trademarks and similar
intangibles; and
– involving a valuation professional with specialised skills and knowledge, who assisted in independently developing a range of post-tax
discount rates using market data points for comparable companies and comparing these market rates to those utilised by Reynolds
American.
Canadian legal proceedings
As discussed in Note 24 and Note 31 to the consolidated financial statements, the Group’s operating company in Canada, Imperial
Tobacco Canada Limited (“Imperial”), has received an unfavourable judgment on the smoking and health class actions certified by the
Quebec Superior Court. As a result of this judgment, in 2019 Imperial filed for creditor protection under the Companies’ Creditors
Arrangement Act (the “CCAA”). In October 2024, while under CCAA, the court-appointed mediator and monitor filed a proposed plan of
compromise and arrangement to resolve all outstanding tobacco litigation in Canada. Substantially similar proposed plans were also filed
for Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp. (collectively the “proposed plans”). Under the proposed plans, if ultimately
sanctioned and implemented, Imperial, Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp would pay an aggregated settlement
amount of CAD$ 32.5 billion (approximately £18 billion). At December 31, 2024, a provision of £6.2 billion has been recognised.
We identified the evaluation of the Canadian legal proceedings as a critical audit matter because complex and subjective auditor
judgment was required in evaluating the Group’s ability to estimate the timing and extent of any future economic outflow arising from
the ultimate resolution of the Canadian litigation. This involved evaluating the assumptions related to the rate at which volumes will
decline and the execution of future pricing plans (collectively “projected net revenue”), which were used to derive this estimate and the
related disclosures.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of certain internal controls related to the legal exposure process including controls related to the estimation of
the timing and extent of any future economic outflow arising from the ultimate resolution of the Canadian litigation. In addition, we
assessed the Canadian legal proceedings by:
– reading letters received directly from the Group's external and internal legal counsel that evaluated the current status of the Canadian
legal proceedings. We further inquired of internal legal counsel to evaluate their basis for conclusions in their letter;
– assessing and challenging Imperial’s projected net revenue by examining externally derived publicly available data, and historical trends;
– challenging the projected net revenue by comparing the historical projections to actual results to assess Imperial’s ability to accurately
forecast;
– performing sensitivity analyses on Imperial’s projected net revenue to assess the impact of changes in this assumption on the amount
of the provision recorded; and
– assessing whether the Group’s disclosures detail the key estimates and sensitivities including any impact of changes to key
assumptions used in the estimation of the provision for Imperial.
We have served as the Group’s auditor since 2015.
London, United Kingdom
February 12, 2025
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
261
For the years ended 31 December
Notes
2024
£m
2023
£m
2022
£m
Revenue
1
2
25,867
27,283
27,655
Raw materials and consumables used
(4,565)
(4,545)
(4,781)
Changes in inventories of finished goods and work in progress
129
(96)
227
Employee benefit costs
3
(2,831)
(2,664)
(2,972)
Depreciation, amortisation and impairment costs
4
(3,101)
(28,614)
(1,305)
Other operating income
5
340
432
722
Loss on reclassification from amortised cost to fair value
(10)
(9)
(5)
Other operating expenses
6, 33
(13,093)
(7,538)
(9,018)
Profit/(loss) from operations
2
2,736
(15,751)
10,523
Net finance costs
8
(1,098)
(1,895)
(1,641)
Share of post-tax results of associates and joint ventures
2,9
1,900
585
442
Profit/(loss) before taxation
3,538
(17,061)
9,324
Taxation on ordinary activities
10
(357)
2,872
(2,478)
Profit/(loss) for the year
3,181
(14,189)
6,846
Attributable to:
Owners of the parent
3,068
(14,367)
6,666
Non-controlling interests
113
178
180
3,181
(14,189)
6,846
Earnings/(loss) per share
Basic
11
136.7
(646.6)
293.3
Diluted
11
136.0
(646.6)
291.9
Note:
1.
Revenue is net of duty, excise and other taxes of £33,818 million, £36,917 million and £38,527 million for the years ended 31 December 2024, 2023 and 2022, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
BAT Annual Report and Form 20-F 2024
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Other Information
Financial Statements
Group Income Statement
262
For the years ended 31 December
Notes
2024
£m
2023
£m
2022
£m
Profit/(loss) for the year
3,181
(14,189)
6,846
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit or loss:
(50)
(3,317)
8,506
Foreign currency translation and hedges of net investments in foreign operations
– differences on exchange from translation of foreign operations
(195)
(4,049)
8,923
– reclassified and reported in profit for the year
22(c)
—
552
5
– net investment hedges - net fair value gains/(losses) on derivatives
20
236
(578)
– net investment hedges - differences on exchange on borrowings
17
9
(21)
Cash flow hedges
– net fair value gains
65
59
81
– reclassified and reported in profit for the year
36
12
101
– tax on net fair value gains in respect of cash flow hedges
10(f)
(23)
(23)
(17)
Investments held at fair value
– net fair value (losses)/gains
18
—
(6)
6
Associates
– share of OCI, net of tax
9
(13)
(107)
6
– differences on exchange reclassified to profit or loss
9,22(c)
43
—
—
Items that will not be reclassified subsequently to profit or loss:
(7)
(57)
201
Retirement benefit schemes
– net actuarial (losses)/gains
15
(19)
(106)
316
– movements in surplus restrictions
15
(14)
24
(39)
– tax on actuarial losses/(gains) in respect of subsidiaries
10(f)
(1)
30
(95)
Investments held at fair value
– net fair value losses
18
(6)
—
—
Associates – share of OCI, net of tax
9
33
(5)
19
Total other comprehensive (expense)/income for the year, net of tax
(57)
(3,374)
8,707
Total comprehensive income/(expense) for the year, net of tax
3,124
(17,563)
15,553
Attributable to:
Owners of the parent
3,013
(17,699)
15,370
Non-controlling interests
111
136
183
3,124
(17,563)
15,553
The accompanying notes are an integral part of these consolidated financial statements.
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
Group Statement of Comprehensive Income
263
Attributable to owners of the parent
Notes
Share
capital
£m
Share
premium,
capital
redemption
and merger
reserves
£m
Other
reserves
£m
Retained
earnings
£m
Total
attributable
to owners of
parent
£m
Perpetual
hybrid
bonds
£m
Non-
controlling
interests
£m
Total
equity
£m
Balance at 1 January 2024
614
26,630
(894) 24,531
50,881
1,685
368 52,934
Total comprehensive (expense)/income
for the year comprising:
—
—
(21)
3,034
3,013
—
111
3,124
Profit for the year
—
—
—
3,068
3,068
—
113
3,181
Other comprehensive expense
for the year
—
—
(21)
(34)
(55)
—
(2)
(57)
Other changes in equity
Cash flow hedges reclassified and
reported in total assets
—
—
13
—
13
—
—
13
Employee share options
– value of employee services
28
—
—
—
70
70
—
—
70
– proceeds from new shares issued
22(b)
—
6
—
—
6
—
—
6
Dividends and other appropriations
– ordinary shares
22(f)
—
—
— (5,209)
(5,209)
—
— (5,209)
– to non-controlling interests
—
—
—
—
—
—
(127)
(127)
Purchase of own shares
– held in employee share
ownership trusts
—
—
—
(94)
(94)
—
—
(94)
– share buy-back programme
22(c)(vi)
—
—
—
(698)
(698)
—
—
(698)
– shares bought back and cancelled
22(a),(b)
(7)
7
—
—
—
—
—
—
Treasury shares cancelled
22(a),(b)
(22)
22
—
—
—
—
—
—
Perpetual hybrid bonds
– coupons paid
—
—
—
(56)
(56)
—
—
(56)
– tax on coupons paid
—
—
—
14
14
—
—
14
Other movements
—
—
—
18
18
—
—
18
Balance at
31 December 2024
585
26,665
(902) 21,610
47,958
1,685
352 49,995
The accompanying notes are an integral part of these consolidated financial statements.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Group Statement of Changes in Equity
264
Attributable to owners of the parent
Notes
Share
capital
£m
Share
premium,
capital
redemption
and merger
reserves
£m
Other
reserves
£m
Retained
earnings
£m
In respect
of assets
held-for-
sale
£m
Total
attributable
to owners of
parent
£m
Perpetual
hybrid
bonds
£m
Non-
controlling
interests
£m
Total
equity
£m
Balance at 1 January 2023
614
26,628
2,655 44,081
(295)
73,683
1,685
342 75,710
Total comprehensive (expense)/
income for the year comprising:
—
— (3,281) (14,418)
—
(17,699)
—
136 (17,563)
(Loss)/profit for the year
—
—
— (14,367)
—
(14,367)
—
178 (14,189)
Other comprehensive expense
for the year
—
— (3,281)
(51)
—
(3,332)
—
(42) (3,374)
Other changes in equity
Cash flow hedges reclassified
and reported in total assets
—
—
27
—
—
27
—
—
27
Employee share options
– value of employee services
28
—
—
—
71
—
71
—
—
71
– proceeds from new
shares issued
—
2
—
—
—
2
—
—
2
Dividends and other
appropriations
– ordinary shares
22(f)
—
—
—
(5,071)
—
(5,071)
—
—
(5,071)
– to non-controlling interests
—
—
—
—
—
—
—
(110)
(110)
Purchase of own shares
– held in employee share
ownership trusts
—
—
—
(110)
—
(110)
—
—
(110)
Perpetual hybrid bonds
– coupons paid
—
—
—
(58)
—
(58)
—
—
(58)
– tax on coupons paid
—
—
—
14
—
14
—
—
14
Reclassification of equity in
respect of assets classified as
held-for-sale
27(d)
—
—
(295)
—
295
—
—
—
—
Other movements
—
—
—
22
—
22
—
—
22
Balance at
31 December 2023
614
26,630
(894)
24,531
—
50,881
1,685
368 52,934
The accompanying notes are an integral part of these consolidated financial statements.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
265
Attributable to owners of the parent
Notes
Share
capital
£m
Share
premium,
capital
redemption
and merger
reserves
£m
Other
reserves
£m
Retained
earnings
£m
In respect of
assets held-
for-sale
£m
Total
attributable
to owners of
parent
£m
Perpetual
hybrid
bonds
£m
Non-
controlling
interests
£m
Total
equity
£m
Balance at 1 January 2022
614
26,622 (6,032) 44,212
—
65,416
1,685
300 67,401
Total comprehensive income
for the year comprising:
—
—
8,521
6,849
—
15,370
—
183 15,553
Profit for the year
—
—
—
6,666
—
6,666
—
180
6,846
Other comprehensive
income for the year
—
—
8,521
183
—
8,704
—
3
8,707
Other changes in equity
Cash flow hedges
reclassified and reported
in total assets
—
—
(129)
—
—
(129)
—
—
(129)
Employee share options
—
– value of employee services
28
—
—
—
81
—
81
—
—
81
– proceeds from new
shares issued
—
5
—
—
—
5
—
—
5
– treasury shares used for
share option schemes
—
1
—
(1)
—
—
—
—
—
Dividends and other
appropriations
—
– ordinary shares
22(f)
—
—
—
(4,915)
—
(4,915)
—
— (4,915)
– to non-controlling interests
—
—
—
—
—
—
—
(141)
(141)
Purchase of own shares
—
– held in employee share
ownership trusts
—
—
—
(80)
—
(80)
—
—
(80)
– share buy-back
programme
22(c)(vi)
—
—
—
(2,012)
—
(2,012)
—
— (2,012)
Perpetual hybrid bonds
– coupons paid
—
—
—
(59)
—
(59)
—
—
(59)
– tax on coupons paid
—
—
—
11
—
11
—
—
11
Non-controlling interests -
acquisitions
27(c)
—
—
—
(1)
—
(1)
—
—
(1)
Reclassification of equity in
respect of assets classified
as held-for-sale
27(d)
—
—
295
—
(295)
—
—
—
—
Other movements
—
—
—
(4)
—
(4)
—
—
(4)
Balance at 31 December
2022
614
26,628
2,655 44,081
(295)
73,683
1,685
342 75,710
The accompanying notes are an integral part of these consolidated financial statements.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Group Statement of Changes in Equity
Continued
266
31 December
Notes
2024
£m
2023
£m
Assets
Intangible assets
12
94,276
95,562
Property, plant and equipment
13
4,379
4,583
Investments in associates and joint ventures
14
1,902
1,970
Retirement benefit assets
15
937
956
Deferred tax assets
16
2,573
911
Trade and other receivables
17
282
321
Investments held at fair value
18
146
118
Derivative financial instruments
19
110
109
Total non-current assets
104,605
104,530
Inventories
20
4,616
4,938
Income tax receivable
67
172
Trade and other receivables
17
3,604
3,621
Investments held at fair value
18
513
601
Derivative financial instruments
19
186
181
Cash and cash equivalents
21
5,297
4,659
14,283
14,172
Assets classified as held-for-sale
11
14
Total current assets
14,294
14,186
Total assets
118,899
118,716
Equity – capital and reserves
Share capital
22(a)
585
614
Share premium, capital redemption and merger reserves
22(b)
26,665
26,630
Other reserves
22(c)
(902)
(894)
Retained earnings
22(c)
21,610
24,531
Owners of the parent
47,958
50,881
Perpetual hybrid bonds
22(d)
1,685
1,685
Non-controlling interests
22(e)
352
368
Total equity
49,995
52,934
Liabilities
Borrowings
23
32,638
35,406
Retirement benefit liabilities
15
820
881
Deferred tax liabilities
16
11,679
12,192
Other provisions for liabilities
24
4,071
531
Trade and other payables
25
685
893
Derivative financial instruments
19
268
206
Total non-current liabilities
50,161
50,109
Borrowings
23
4,312
4,324
Income tax payable
1,681
992
Other provisions for liabilities
24
3,044
468
Trade and other payables
25
9,550
9,700
Derivative financial instruments
19
156
189
Total current liabilities
18,743
15,673
Total equity and liabilities
118,899
118,716
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board
Luc Jobin
Chair
12 February 2025
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Group Balance Sheet
267
For the years ended 31 December
Notes
2024
£m
2023
£m
2022
£m
Profit/(loss) for the year
3,181
(14,189)
6,846
Taxation on ordinary activities
357
(2,872)
2,478
Share of post-tax results of associates and joint ventures
(1,900)
(585)
(442)
Net finance costs
1,098
1,895
1,641
Profit/(loss) from operations
2,736
(15,751)
10,523
Adjustments for
– depreciation, amortisation and impairment costs
4
3,101
28,614
1,305
– decrease/(increase) in inventories
35
265
(246)
– increase in trade and other receivables
(269)
(487)
(42)
– decrease in Master Settlement Agreement payable
6
(294)
(287)
(145)
– increase in trade and other payables
58
640
3
– decrease in net retirement benefit liabilities
(76)
(111)
(110)
– increase/(decrease) in other provisions for liabilities
6,322
(489)
643
– other non-cash items
(40)
436
606
Cash generated from operating activities
11,573
12,830
12,537
Dividends received from associates
406
506
394
Tax paid
(1,854)
(2,622)
(2,537)
Net cash generated from operating activities
10,125
10,714
10,394
Cash flows from investing activities
Interest received
187
145
85
Purchases of property, plant and equipment
(486)
(460)
(523)
Proceeds on disposal of property, plant and equipment
145
54
31
Purchases of intangibles
(122)
(141)
(133)
Proceeds on disposals of intangibles
39
27
3
Purchases of investments
18
(216)
(448)
(257)
Proceeds on disposals of investments
18
299
405
128
Investment in associates and acquisitions of other subsidiaries net of cash acquired
(48)
(37)
(39)
Proceeds from disposal of shares in associate, net of tax
1,577
—
—
Disposal of subsidiary, net of cash disposed of
27(d)
—
159
—
Net cash generated from/(used in) investing activities
1,375
(296)
(705)
Cash flows from financing activities
Interest paid on borrowings and financing related activities
(1,703)
(1,682)
(1,578)
Interest element of lease liabilities
(37)
(30)
(25)
Capital element of lease liabilities
(165)
(162)
(161)
Proceeds from increases in and new borrowings
2,404
5,134
3,267
Reductions in and repayments of borrowings
(4,826)
(6,769)
(3,044)
Outflows relating to derivative financial instruments
(128)
(480)
(117)
Purchases of own shares - share buy-back programme
22(c)
(698)
—
(2,012)
Purchases of own shares held in employee share ownership trusts
22(c)
(94)
(110)
(80)
Coupon paid on perpetual hybrid bonds
(56)
(59)
(60)
Dividends paid to owners of the parent
(5,213)
(5,055)
(4,915)
Capital injection from and purchases of non-controlling interests
30
—
—
(1)
Dividends paid to non-controlling interests
(121)
(105)
(158)
Other
5
4
6
Net cash used in financing activities
(10,632)
(9,314)
(8,878)
Net cash flows generated from operating, investing and financing activities
868
1,104
811
Transferred from/(to) held-for-sale
*
—
368
(368)
Differences on exchange
(281)
(292)
431
Increase in net cash and cash equivalents in the year
587
1,180
874
Net cash and cash equivalents at 1 January
4,517
3,337
2,463
Net cash and cash equivalents at 31 December
21
5,104
4,517
3,337
Note:
*
Included in the transferred from held-for-sale in 2023 is £102 million of foreign exchange loss due to the devaluation of the Russian ruble, as explained in note 27(d)(i).
The accompanying notes are an integral part of these consolidated financial statements.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Group Cash Flow Statement
268
1 Accounting policies
Basis of preparation
The consolidated financial statements have been prepared in
accordance with IFRS Accounting 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’s 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’s 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 2025, expected payments under the
Proposed Plans in Canada (refer to note 24) and other known
liabilities or future payments (including interim dividends), as they
fall due. This assessment includes consideration of geopolitical
events and the general outlook in the global economy, as well as
plausible downside scenarios after taking into account the Group’s
Principal Risks and how they could impact the Group’s operations.
Any mitigating actions, should they be required, are all within
management’s control and could include reductions in
discretionary spending such as acquisitions and capital
expenditure, or drawdowns on committed facilities. After reviewing
the Group’s 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‑F.
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 impact is
not expected to be material:
– On the going concern and viability of the Group, over the next
three years;
– On the Group’s assessment of future cash flows (including as
related to the capital expenditure plans as related to the Group’s
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 12(b)); and
– In respect of factors including useful lives and residual values
that determine 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’s financial statements depend on environmental, regulatory
and other factors outside of the Group’s 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:
– 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’s ability to appoint
Directors to the entity’s 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 certain territories, including
Canada, is explained in note 32;
– the review of applicable exchange rates for transactions with
and translation of entities in territories where there are
restrictions on free access to foreign currency, or multiple
exchange rates;
– 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.
Refer to note 24 for the provision associated with the Proposed
Plans in Canada. 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;
– the determination as to whether perpetual hybrid bonds should
be classified as equity instead of borrowings (note 22(d)); and
– 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 11.
The critical accounting estimates include:
– the review of intangible asset values, including 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;
– 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 including those in relation to Canada. 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
– the estimation of and accounting for retirement benefit costs.
The determination of the carrying value of assets and liabilities,
as well 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Notes on Accounts
269
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’s
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 12 February 2025.
With effect from 1 January 2024, the Group has adopted the
Amendments to IAS 7 Cash Flow Statements and IFRS 7 Financial
Instruments: Disclosures in respect of disclosures relating to
Supplier Financing Arrangements. Applying these amendments
impacted certain disclosures in the notes to the financial
statements. In addition, Amendments to IAS 1 Presentation
of Financial Statements have clarified certain aspects of the
classification of liabilities as current or non-current. The impact
of these amendments was not material.
Basis of consolidation
The consolidated financial information includes the financial
statements of British American Tobacco p.l.c. and its subsidiary
undertakings, collectively ‘the Group’, together with the Group’s
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 not 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 losing 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’s 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’s
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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
270
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’s 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 a straight-line basis over their remaining useful lives, consistent
with the pattern of economic benefits expected to be received,
which previously did not exceed 20 years. With effect from
1 January 2024, the Group’s previously indefinite-lived combustible
trademarks and similar assets are amortised on a straight-lined
basis over periods not exceeding 30 years. The revision in useful
economic life reflects the ongoing challenging macro-economic
conditions and revised forecasts in the U.S., with an expected
increase in amortisation expense of £1.4 billion per annum. In
addition, with effect from 1 January 2025, Camel Snus will be
designated as a definite-lived intangible asset and amortised on a
straight-line basis with a remaining useful economic life of 20 years,
increasing the annual amortisation charge for the Group’s brands
and trademarks by £23 million. The Group's other non-combustible
trademarks will remain as indefinite-lived assets. Any impairments
of trademarks are recognised in the income statement, but
increases in trademark values are not recognised.
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 years. The
revision in useful life is a result of ongoing use of Global software
solutions due to the extension of third-party supplier support.
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 2.0% and 4% per annum, and
plant and equipment at rates between 5% and 25% per annum.
No depreciation is provided on freehold land or assets classified
as held-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 less 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 the 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’s 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.
The costs of such plans are recognised in the Group income
statement within operating profit as part of employment costs.
Service costs are spread systematically over the expected service
lives of employees with past service costs or credits, the impact of
settlements and curtailments, and the net interest on the net
defined benefit deficit or surplus recognised in the periods in which
they arise. Actuarial gains and losses and surplus restrictions are
recognised immediately in other comprehensive income.
Benefits provided through defined contribution schemes are
charged as an expense in employment costs as payments fall due.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
271
Financial instruments
The Group’s business model for managing financial assets aims:
to protect against the loss of principal, to maximise Group liquidity
by concentrating cash at the centre, to align the maturity profile
of external investments with that of the forecast liquidity profile,
to match the interest rate profile of external investments to that
of debt maturities or fixings wherever practicable, and to optimise
the investment yield within the Group’s investment parameters.
The majority 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 held for investment potential.
Financial assets and financial liabilities are recognised when
the Group 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’s business model as
investments, loans and receivables, or cash and cash equivalents
and accounted for as follows:
– 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’s
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.
– 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.
– 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 months 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:
– 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 income 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);
– 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 changes in fair value of these derivatives are also recognised
in the income statement;
– 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
– for derivatives that do not qualify for hedge accounting or are
not designated as hedges, the changes in their fair values are
recognised in the income statement in the period in which
they arise. These are referred to as ‘held-for-trading’.
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 hedge has remained, and is expected to remain, highly
effective. Hedge accounting is discontinued when a hedging
instrument is derecognised (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 immediately reclassified to the income statement.
Derivative fair value changes recognised in the income statement
are either reflected in arriving at profit from operations
(if the hedged 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
272
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’s 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’s 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’s 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’s 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’s 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’s principal
non-GAAP measures of Smokeless revenue,
@adjusted gross profit,
adjusted gross margin, category contribution, category
contribution margin,
@ adjusted profit from operations, adjusted
operating margin and adjusted diluted earnings per share,
@
adjusted EBITDA, adjusted net debt, operating cash flow
conversion ratio, adjusted cash generated from operations and free
cash flow (before and after dividends)
@, all of which are before the
impact of adjusting items and which are reconciled from revenue,
profit from operations and diluted earnings per share
@, profit for
the year, cash conversion ratio and net cash generated from
operating activities
@.
Other accounting policies:
Share-based payments
– The Group has equity-settled and cash-settled share-based
compensation plans.
– 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’s 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.
– 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.
– 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’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Research and development
Research expenditure is charged to profit or loss in the year
in which it is incurred. Development expenditure is charged
to profit or loss in the year it is incurred, unless it meets the
recognition criteria of IAS 38 Intangible Assets to be capitalised
as an 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 time to get ready
for its intended use or sale, are capitalised as part of the cost of
the asset.
Biological Assets
The investments in associates and joint ventures shown
in the Group 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.
The replacement to IAS 1 Presentation of Financial Statements,
which is expected to change certain aspects of the Group’s reporting
of the profit and loss account, balance sheet, cash flow statement,
and certain notes to the accounts, was published by the IASB on
9 April 2024 as IFRS 18 Presentation and Disclosure in Financial
Statements. Subject to endorsement by the UK Endorsement
Board (UKEB), the requirements of IFRS 18 will be implemented
with effect from 1 January 2027, with retrospective application.
@ 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
273
2 Segmental analyses
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 Products 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.
The Group is organised into three geographic regions as follows:
– Americas and Europe (AME), comprising markets operating in Europe, Latin America and Canada;
– Asia-Pacific, Middle East and Africa (APMEA) comprising markets operating in Asia-Pacific, Middle East, Central Asia, Caucasus and
Africa, as well as in Mongolia; and
– the U.S.
The three geographic regions are the reportable segments for the Group as they form the focus of the Group’s 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’s 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 post-tax results of associates and joint ventures and taxation are centrally managed, and accordingly, such items are not presented
by segment 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 Management 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’s business performance across periods and by reference to the Group’s 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 ‘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’s or RAI’s (and/or the Reynolds Group’s) primary U.S. GAAP based financial
statements and information.
The following table shows 2024 revenue at 2024 rates of exchange, and 2024 revenue translated using 2023 rates of exchange. The 2023
figures are stated at the 2023 rates of exchange.
2024
2023
Revenue
constant
rates
£m
Translation
exchange
£m
Revenue
current
rates
£m
Revenue
current
rates
£m
U.S.
11,592
(314)
11,278
11,994
AME
9,764
(523)
9,241
9,791
APMEA
5,795
(447)
5,348
5,498
Revenue
27,151
(1,284)
25,867
27,283
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
274
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
£m
Translation
exchange
£m
Revenue
current
rates
£m
Revenue
current
rates
£m
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
The following table shows 2024 profit/(loss) from operations and adjusted profit from operations at 2024 rates of exchange, and 2024
adjusted profit from operations using 2023 rates of exchange.
2024
Adjusted*
segment
result
constant
rates
£m
Translation
exchange
£m
Adjusted*
segment
result
current
rates
£m
Adjusting*
items
£m
Segment
result
current
rates
£m
U.S.
6,580
(194)
6,386
(2,299)
4,087
AME
3,512
(192)
3,320
(6,784)
(3,464)
APMEA
2,347
(163)
2,184
(71)
2,113
Profit from operations
12,439
(549)
11,890
(9,154)
2,736
Net finance costs
(1,098)
Share of post-tax results of associates and joint ventures
1,900
Profit before taxation
3,538
Taxation on ordinary activities
(357)
Profit for the year
3,181
Note:
*
The adjustments to profit from operations are explained in notes 4, 5(c) 6(c), 6(d), 6(g), 6(h) and 6(k).
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
£m
Translation
exchange
£m
Adjusted*
segment
result current
rates
£m
Adjusting*
items
£m
Segment
result current
rates
£m
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(b), 6(d), 6(f), 6(h), 6(j), 6(k) and 7.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
275
The following table shows 2022 profit from operations and adjusted profit from operations at the 2022 rates of exchange.
2022
Adjusted*
segment
result
£m
Adjusting*
items
£m
Segment
result
£m
U.S.
6,835
(630)
6,205
AME
3,348
(422)
2,926
APMEA
2,225
(833)
1,392
Profit from operations
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(b), 6(d), 6(f), 6(h), 6(i), 6(j), 6(k) and 7.
Depreciation, amortisation and impairment charges
Adjusted profit from operations at constant rates of exchange of £12,439 million (2023 at constant rates: £12,789 million; 2022 at current
rates: £12,408 million) excludes adjusting depreciation, amortisation and impairment charges as explained in note 4. These are excluded
from segmental adjusted profit from operations as per table below. 2024 and 2023 are disclosed at constant rates of exchange and 2022
is disclosed at current rate of exchange.
2024
Adjusted
depreciation,
amortisation
and
impairment
constant
rates
£m
Translation
exchange
£m
Adjusted
depreciation,
amortisation
and
impairment
current rates
£m
Adjusting
items
£m
Depreciation,
amortisation
and
impairment
current rates
£m
U.S.
210
(4)
206
2,284
2,490
AME
291
(12)
279
123
402
APMEA
160
(11)
149
60
209
661
(27)
634
2,467
3,101
2023
Adjusted
depreciation,
amortisation
and
impairment
constant
rates
£m
Translation
exchange
£m
Adjusted
depreciation,
amortisation
and
impairment
current rates
£m
Adjusting
items
£m
Depreciation,
amortisation
and
impairment
current rates
£m
U.S.
218
—
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
£m
Adjusting
items
£m
Depreciation,
amortisation
and
impairment
£m
U.S.
237
322
559
AME
373
116
489
APMEA
190
67
257
800
505
1,305
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
276
Additional information by product category
Although the Group’s operations are managed on a Regional basis, additional information for revenue is provided based on product
category as follows:
Revenue
2024
£m
2023
£m
2022
£m
New Categories
3,432
3,347
2,894
Vapour
1,721
1,812
1,436
HP
921
996
1,060
Modern Oral
790
539
398
Traditional Oral
1,092
1,163
1,209
Combustibles
20,685
22,108
23,030
Other
658
665
522
Revenue
25,867
27,283
27,655
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
2024
£m
2023
£m
2022
£m
2024
£m
2023
£m
2022
£m
2024
£m
2023
£m
2022
£m
External revenue
254
255
228
25,613 27,028
27,427
25,867
27,283
27,655
United Kingdom
All foreign countries
Group
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Intangible assets
417
447
93,859
95,115
94,276 95,562
Property, plant and equipment
265
362
4,114
4,221
4,379
4,583
Investments in associates and joint ventures
—
—
1,902
1,970
1,902
1,970
The consolidated results of the Reynolds Group operating in the U.S. met the criteria for separate disclosure under the requirements
of IFRS 8 Operating Segments. Revenue arising from the operations of the Reynolds Group, inclusive of the sales made to fellow Group
companies, in 2024, 2023 and 2022 was £11,302 million, £11,985 million and £12,635 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 £85,843 million
(2023: £86,598 million).
The main acquisitions comprising the goodwill balance of £41,129 million (2023: £41,091 million), included in intangible assets, are provided
in note 12. Included in investments in associates and joint ventures are amounts of £1,762 million (2023: £1,851 million) attributable to the
investment in ITC Ltd. Further information is provided in notes 9 and 14.
3 Employee benefit costs
Note
2024
£m
2023
£m
2022
£m
Wages and salaries
2,424
2,263
2,553
Social security costs
218
219
201
Other pension and retirement benefit costs
15
115
108
133
Share-based payments - equity and cash-settled
28
74
74
85
2,831
2,664
2,972
In 2023 and 2022, included within employee benefits costs is a credit of £26 million and a charge of £315 million, respectively, in relation
to the Group’s restructuring and integration initiatives, as explained in note 7.
In 2022, a partial buy-out was concluded in the U.S. with approximately US$1.6 billion (£1.3 billion) of plan liabilities being removed from
the balance sheet, resulting in a settlement gain of £16 million, which was reported in the income statement, and recognised as an
adjusting item.
4 Depreciation, amortisation and impairment costs
2024
£m
2023
£m
2022
£m
Intangibles – amortisation and impairment of trademarks and similar intangibles
2,298
23,232
317
– amortisation and impairment of computer software
129
125
142
– impairment of goodwill
39
4,614
—
Property, plant and equipment - depreciation and impairment
635
643
846
3,101
28,614
1,305
Enumerated below are movements in costs that have impacted depreciation, amortisation and impairment in 2024, 2023 and 2022.
These include changes in the Group's underlying business performance, as well as impact of adjusting items, as defined in note 1.
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
277
Intangibles – amortisation and impairment of trademarks and similar intangibles
Acquisitions have resulted in the capitalisation of trademarks and similar intangibles, including those which are amortised over their
expected useful lives, which do not exceed 30 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 £2,279 million (2023: £23,202
million; 2022: £288 million). In 2022, included under amortisation and impairment of trademarks and similar intangibles is a £3 million gain
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 2024, the Group impaired £39 million of goodwill in Malaysia, as explained in note 12(e)(v).
During 2023, the Group impaired £4,614 million of goodwill in the U.S., South Africa and Peru, as explained in notes 12(e)(v) and 12(e)(vi).
During 2022, the Group made no impairments of goodwill.
Property, plant and equipment – depreciation and impairment
The following items are included within depreciation and impairment of property, plant and equipment:
– In 2024, an impairment charge of £149 million of fixed assets in respect of the Group's head office in London and the Group's intention
to seek an orderly exit from Cuba. This has been treated as an adjusting item.
– In 2023 and 2022, restructuring and integration related depreciation and impairment costs were a net charge of £39 million and
£220 million, respectively. In 2023, it included an impairment of £46 million for machinery in Reynolds American Companies due to the
adverse impact from macro-economic headwinds and industry volume declines in the U.S, as explained in note 12(e)(vi). 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
– Gains and losses recognised on disposal of property, plant and equipment.
5 Other operating income
Other operating income of £340 million (2023: £432 million; 2022: £722 million) comprises income that is associated with the Group’s
normal activities, but which falls outside the definition of revenue and includes gains on one-off transactions, such as capital profits
arising from the disposals of fixed assets, recoveries of indirect taxation and levies paid, litigation settlement received and transfers of
trademark rights.
(a) Sale and leaseback
In 2024, the Group recognised £34 million of gains arising from sale and leaseback transactions on excess offices and warehousing
capacity in Singapore and Nigeria. Consideration received for the Nigeria transaction included an investment in a property management
vehicle, Rising Sun Partners LP, as mentioned in note 18.
In 2023, the Group recognised £15 million of gains arising from a sale and leaseback transaction on excess warehousing capacity
in Argentina.
(b) Brazil tax matters
In 2023, in Brazil, £150 million of income was recognised in respect of excise on social contributions, as well as £19 million
(2022: £472 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, £78 million of the contingent asset in respect of historical VAT on social contributions claims was sold to financial
institutions for £38 million.
(c) Other
In 2024, a credit of £132 million has been recognised in respect of the settlement of historical litigation related to the Fox River in the U.S.
This has been treated as an adjusting item.
In addition, in 2024, £28 million (2023: £85 million; 2022: £27 million) of income has been recognised in respect of the transfer of non-
strategic trademark rights, which had not previously been capitalised, to third parties.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
278
6 Other operating expenses
(a) Items included within other operating expenses
The following items are included within other operating expenses:
Notes
2024
£m
2023
£m
2022
£m
Other operating expenses
13,093
7,538
9,018
The following items are included within other operating expenses:
Master Settlement Agreement and State Settlement Agreements
6(b),(d)
1,689
2,023
2,387
Proposed Plans in Canada*
6(c)
6,203
—
—
Inventory write-offs
20
134
250
250
Research and development expenses (excluding employee benefit costs
and depreciation)
6(e)
174
181
138
Loss/(gain) on disposal of businesses*
6(f)
—
546
(6)
Partial disposal of shares in ITC*
6(g)
6
—
—
Charges in respect of DOJ and OFAC investigation*
6(h)
4
75
450
(Reversals)/charges in respect of assets held-for-sale*
6(j)
—
(195)
612
Charges in respect of Nigerian FCCPC case*
6(i)
—
—
79
Romania and Brazil other taxes*
6(k)
449
49
12
Marketing costs in operating expenses
6(l)
1,111
1,152
1,160
Exchange differences
11
17
92
Hedge ineffectiveness within operating profit
5
(12)
36
Expenses relating to short-term leases
8
13
11
Expenses relating to leases of low-value assets
1
1
1
Auditor’s remuneration
6(m)
30
29
29
Note:
*
Recognised and reported as an adjusting item. In addition to these captions, as set out in note 6(d), some litigation costs are treated as adjusting items.
Sustainability costs are included in other operating expenses and reported in a separate note, refer to note 33 for further information.
(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’ 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.
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
279
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’s
operating subsidiaries’ expenses and payments under the MSA and the State Settlement Agreements for 2024 amounted to
US$2,160 million (2023: US$2,516 million; 2022: US$2,951 million) in respect of settlement expenses and US$2,535 million (2023:
US$2,874 million; 2022: US$3,129 million) in respect of settlement cash payments.
Note
US$m
2024
£m
US$m
2023
£m
US$m
2022
£m
Opening MSA liability
25
2,279
1,788
2,637
2,193
2,815
2,079
Settlement expense
31
2,160
1,689
2,516
2,023
2,951
2,387
Cash paid
31
(2,535)
(1,983)
(2,874)
(2,311)
(3,129)
(2,531)
Difference on exchange
—
26
—
(117)
—
258
Closing MSA liability
25
1,904
1,520
2,279
1,788
2,637
2,193
Non-Participating Manufacturer adjustments
During 2012, R.J. Reynolds Tobacco Company, Santa Fe Natural Tobacco Company (SFNTC), various other tobacco manufacturers,
17 states, 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 billion, 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’ 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 million 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 million 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 million 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$189 million 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$213 million in credits for settled periods through 2018. 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 million 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 million for settled periods through 2018, which will be
applied over a five-year period from 2024. In the first quarter of 2024, an additional state settled NPM disputes related to claims for the
period 2005 to 2031. It is estimated that R.J. Reynolds Tobacco Company will receive a credit of US$11 million for settled periods through
2018, which will be applied over a five-year period from 2024. In the third quarter of 2024, an additional state settled NPM disputes related
to claims for the period 2005 to 2011. It is estimated that R.J. Reynolds Tobacco Company will receive a credit of US$69 million for settled
periods through 2011, which will be applied over a five-year period from 2026.
State Settlement Agreements
In 2020, R.J. Reynolds Tobacco Company recognised additional expenses under the state settlement agreements in the States
of Mississippi, Florida, Texas and Minnesota. R.J. Reynolds Tobacco Company recognised US$241 million 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 unfavourable judgment. In addition, R.J. Reynolds Tobacco Company recognised US$264 million 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 the state settlement agreements in the states of Mississippi, Texas and Minnesota for US$8 million. During 2021, an additional
US$17 million 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 note 31. In 2022, R.J. Reynolds Tobacco Company recognised US$37 million in additional
expenses related to a settlement with Philip Morris USA resolving prior operating profit disputes under the MSA related to the ITG
Brands, LLC acquired brands.
(c) Proposed Plans in Canada
In March 2019, Imperial Tobacco Canada Limited and Imperial Tobacco Company Limited (together, ITCAN), Group subsidiaries, obtained
creditor protection under the Canadian Companies’ Creditors Arrangement Act (CCAA). Under a confidential court supervised mediation
process, ITCAN has since been negotiating a possible settlement of all of its outstanding tobacco litigation in Canada while continuing to
run its business in the normal course.
On 17 October 2024, ITCAN’s court-appointed mediator and monitor filed a proposed plan of compromise and arrangement in the
Ontario Superior Court of Justice. Substantially similar proposed plans were also filed for Rothmans, Benson & Hedges Inc. (a subsidiary
of Philip Morris International Inc.) and JTI-Macdonald Corp. (a subsidiary of Japan Tobacco International) (collectively, the Proposed
Plans).
On 31 October 2024, the court granted certain orders pursuant to which the Proposed Plans were accepted for filing. On 12 December
2024, the Proposed Plans were approved by the requisite majorities of the creditors.
Under the Proposed Plans, if ultimately sanctioned and implemented, ITCAN, Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp.
would collectively pay an aggregate settlement amount of CAD$32.5 billion (£18.0 billion).
If the Proposed Plans to settle all outstanding and future Canadian tobacco litigation are sanctioned and implemented, ITCAN is required
to pay an upfront amount into the settlement fund as explained in note 24. In addition, ITCAN is required to make annual payments based
on a percentage of net income after tax generated from all sources, excluding New Categories, until the aggregate settlement amount is
paid (see note 24).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
280
A provision of £6,203 million has been recognised in 2024 in relation to the above liabilities. The charge has been included in other
operating expenses and treated as an adjusting item in 2024.
(d) Litigation costs
Included in other operating expenses and reported in various accounts based on the nature of the expense are costs that are collectively
analysed as litigation costs. Certain litigation costs are reported as adjusting items and predominantly relate to health-related claims,
including Engle progeny. These litigation costs were £157 million (2023: £96 million; 2022: £170 million). Included in 2024 is a NPM credit of
£2 million recognised for the settlement with the state of Idaho and a credit of £18 million related to the Washington portion of the 2004
NPM adjustment award.
In 2023, an NPM credit of £6 million was recognised for the settlement with the state of Iowa.
In 2022, the Group received £26 million of NPM credits related to a favourable resolution in respect of MSA litigation in the state of Illinois.
(e) Research and development
Total research and development costs, including employee benefit costs and depreciation, are £380 million (2023: £408 million;
2022: £323 million).
(f) Loss on disposal of businesses
BAT Russia
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 £770 million were disposed of for proceeds of £425 million, with an impairment charge of £345 million recorded at that time.
As discussed in note 6(j), the impairment charge recognised in 2022 of £554 million (net of £14 million utilised during the year) was
reversed and offset by the above mentioned £345 million recorded at the date of sale, with a net reversal of impairment recognised of
£195 million.
The loss on disposal of businesses included within other operating expenses and recognised as an adjusting item in 2023 was a charge of
£548 million and included £554 million of foreign exchange reclassified from other comprehensive income (note 22(c)(i)) and associated
costs of £3 million partially offset by a realised foreign exchange gain on the proceeds received of £9 million.
The total net impact after the partial reversal and loss on disposal recognised in 2023 was therefore £353 million.
BAT Pars
On 6 August 2021, the Group disposed of its Iranian subsidiary, B.A.T. Pars Company PJSC (BAT Pars). 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 £6 million was recognised within other
operating expenses as an adjusting item. In 2023, a credit of £2 million arising from the revaluation of the receivable was recognised within
other operating expenses as an adjusting item.
As explained in note 17, the value of the consideration for the sale remains outstanding at 31 December 2024, and £57 million (2023:
£56 million) 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 Group recognised an expected credit loss within other
operating expenses of £28 million as at 31 December 2023.
(g) Partial disposal of shares in ITC
On 13 March 2024, the Group announced the divestment of 12% of its equity stake in ITC Limited (ITC). Income and expenses associated
with the divestment of these shares have been recognised as adjusting items within the relevant financial statement caption. Included
within other operating expenses is £6 million of foreign exchange losses arising from the conversion of the net proceeds from Indian
rupee to sterling which were repatriated to the UK in a series of foreign exchange transactions in the days following the sale. Refer to
note 27(b)(i) for further details.
(h) Charges in respect of DOJ and OFAC investigations
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’s Republic
of Korea 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’s charges against the Company − one count of conspiring to commit bank fraud and one
count of conspiring to violate sanctions laws − were 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 total amount payable to the U.S. authorities was US$635 million plus interest.
Having recognised an initial provision of £450 million (US$540 million) in 2022, the Group recognised additional charges of £75 million in
2023 and £4 million in 2024. Refer to notes 24 and 25 for further details. All charges were included within other operating expenses and
recognised as adjusting items.
(i) Charges in respect of Nigerian FCCPC case
In 2022, a charge of £79 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.
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
281
(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 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’s Management team, in compliance with local and international laws. As
previously announced, due to operational dependencies between BAT Russia and the Group’s 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 now 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 £554 million (and associated costs of £58 million) was recognised in other operating expenses as adjusting
items in 2022. During 2023, the previously recognised impairment was reversed (net of £14 million impairment utilised), offset by the net
£345 million (being the impairment arising on disposal of £770 million net assets for sales proceeds of £425 million). This resulted in a net
partial reversal of £195 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) Romania and Brazil other taxes
BAT Romania
On 5 November 2024, British-American Tobacco (Romania) Investment S.R.L. (BATRI) was issued with a final assessment by the Romanian
tax authority in respect of an excise audit of activities undertaken in the Ploiesti factory during the period January 2017 to February 2023.
On 12 November 2024, BATRI paid the assessed amount under the provisions of Ordinance 107/2024, which provides for cancellation of
past and ongoing penalties, interest, and surcharges (ancillary obligations) if the principal amount is paid in full. The ancillary obligations have
been duly cancelled. BATRI has filed an administrative appeal with the Romanian Tax Authority in respect of the findings of the audit, with
a decision expected in the second half of 2025 and, if unsuccessful, the Group will consider further judicial appeal.
The Group has recognised a charge of £449 million in other operating expenses as an adjusting item, of which £390 million was paid in 2024
and a provision recognised for the remainder. Refer to note 24.
BAT Brazil
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’s trial, recognising that the tax was constitutional. This decision has binding effects on all taxpayers. BAT Brazil’s individual lawsuit
has not yet concluded. However, given the decision in the leading case, in 2023, £47 million was recognised in other operating expenses,
as an adjusting item, to reflect the probability of an unfavourable decision. Out of the £47 million, £40 million was reported as provisions
(note 24) and £7 million was reported as trade and other payables.
In addition, in 2023, a charge of £2 million 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(b). In 2022, a charge of £12 million 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(b).
(l) Marketing costs in 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 consumer research, are reported as operating expenses and have been shown in the table above.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
282
(m) Auditor's remuneration
2024
£m
2023
£m
2022
£m
Auditor’s remuneration
Total expense for audit services pursuant to legislation:
– fees to KPMG LLP for Parent Company and Group audit
12.0
11.4
9.4
– fees to KPMG LLP firms and associates for local statutory and Group
reporting audits
9.6
9.4
11.0
Total audit fees expense - KPMG LLP firms and associates
21.6
20.8
20.4
Audit fees expense to other firms
0.1
0.2
0.2
Total audit fees expense
21.7
21.0
20.6
Fees to KPMG LLP firms and associates for other services:
– audit-related assurance services
6.8
6.9
7.1
– other assurance services
0.7
0.9
0.9
– tax advisory services
—
—
—
– tax compliance
—
—
—
– audit of defined benefit schemes of the Company
0.3
0.2
0.2
– other non-audit services
—
—
—
7.8
8.0
8.2
The total auditor’s remuneration to KPMG firms and associates included above are £29.4 million (2023: £28.8 million; 2022: £28.6 million).
Under SEC regulations, the remuneration to KPMG firms and associates of £29.4 million in 2024 (2023: £28.8 million; 2022: £28.6 million)
is required to be presented as follows: audit fees £28.4 million (2023: £27.7 million; 2022: £27.5 million), audit-related fees £0.3 million
(2023: £0.2 million; 2022: £0.2 million), tax fees £nil million (2023: £nil million; 2022: £nil million) and all other fees £0.7 million
(2023: £0.9 million; 2022: £0.9 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.
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’s 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’s manufacturing operations. Since 2022, no further Quantum restructuring charges have been recognised as adjusting
following the completion of the Quantum programme.
The costs of the Group’s initiatives are included in profit from operations under the following headings:
Notes
2024
£m
2023
£m
2022
£m
Employee benefit costs
3
—
(26)
315
Depreciation, amortisation and impairment costs
4
—
39
220
Other operating income
5
—
—
(1)
Other operating expenses
—
(15)
237
—
(2)
771
The adjusting charge in 2022 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 £26 million was recognised due to the reversal of restructuring
provisions recognised in respect of employee packages. In addition, a credit of £7 million was recognised in 2023 in relation to impairment
reversals associated with the Quantum programme. Included in this was an impairment reversal of £4 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 £46 million was recognised for machinery in Reynolds American Companies due
to the adverse impact from macro-economic headwinds and industry volume decline in the U.S., as explained in note 12(e)(vi).
The reversal recognised in other operating expenses in 2023 of £15 million included unutilised Quantum provisions along with £3 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 was reversed.
The restructuring costs reported in other operating expenses 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
283
8 Net finance costs
(a) Net finance costs/(income)
2024
£m
2023
£m
2022
£m
Interest expense
1,704
1,786
1,602
Interest expense on lease liabilities
38
30
25
Facility fees
17
19
21
Impact of the early repurchase of bonds (note 8(b))
(590)
29
—
Interest related to adjusting tax payables (note 8(b))
80
71
36
Fair value changes on derivative financial instruments, hedged items and investments
90
599
(473)
Fair value change on other financial items (note 8(b))
19
(4)
(2)
Exchange differences
(9)
(449)
524
Finance costs
1,349
2,081
1,733
Interest income under the effective interest method
(251)
(186)
(92)
Finance income
(251)
(186)
(92)
Net finance costs
1,098
1,895
1,641
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’s central banking facilities.
In 2024, the Group completed a tender offer to repurchase sterling-equivalent £1,824 million (2023: £3,133 million) of bonds, including
£15 million (2023: £43 million) 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 £112 million (2023: £97 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’s underlying financial performance.
In 2024, in relation to the early repurchase of bonds, the Group incurred a fair value loss of £9 million (2023: £151 million) on debt-related
derivatives, realised a gain of £602 million (2023: £129 million) arising on the difference between the redemption value and the amortised
cost of the bonds, and incurred other transaction costs of £3 million (2023: £7 million).
The Group recognised interest on adjusting tax payables of £80 million (2023: £71 million; 2022: £36 million), which included:
– interest of £61 million (2023: £60 million; 2022: £33 million) in relation to the Franked Investment Income Group Litigation Order
(FII GLO) (note 10(b));
– interest of £8 million (2023: £16 million) in relation to a tax provision in the Netherlands;
– a charge of £14 million in relation to a tax case in Brazil;
– interest of £11 million on a tax provision in Indonesia;
– a release of £25 million of interest on tax provision in Canada in relation to a settlement agreement with local authorities; and
– a further £11 million interest charge recorded on government liability balances accumulated during CCAA protection.
In prior periods, the interest on adjusting tax payables also included in 2023 a £3 million credit from the reversal of interest on a tax
provision in relation to the factory closure in Switzerland and a £2 million credit from the reversal of interest on tax provisions related
to Russia, and in 2022, a £3 million charge in respect of a potential tax clawback due to the factory closure in Switzerland.
Included within fair value changes on other financial items are:
(i) In 2024, the Group incurred a fair value loss of £19 million on embedded derivatives related to associates;
(ii) In 2021, as part of the disposal of the Group’s operations in Iran, a provision of £24 million 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 £17 million was recognised in net finance costs. In 2023, a further £4 million was
recovered and recognised in net finance costs; and
(iii) In 2022, a £15 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).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
284
9 Associates and joint ventures
2024
2023
2022
Total
£m
Group’s
share
£m
Total
£m
Group's share
£m
Total
£m
Group's share
£m
Revenue
9,936
2,635
9,412
2,630
9,486
2,675
Profit from operations
2,662
715
2,596
783
1,971
622
Net finance income
5
2
15
4
21
4
Profit on ordinary activities
before taxation
2,667
717
2,611
787
1,992
626
Taxation on ordinary activities
(639)
(172)
(664)
(194)
(595)
(176)
Profit on ordinary activities after taxation
2,028
545
1,947
593
1,397
450
Non-controlling interests
(27)
(6)
(28)
(8)
(27)
(8)
Post-tax results of associates and joint
ventures
2,001
539
1,919
585
1,370
442
Gain from partial divestment of shares in
ITC
—
1,361
—
—
—
—
Total post-tax results of associates and
joint ventures
2,001
1,900
1,919
5850
1,370
442
Enumerated below are movements that have impacted the post-tax results of associates and joint ventures in 2024, 2023 and 2022.
The amounts below were reported as adjusting items under the share of profit from associates in the income statement.
(a) Adjusting items
In 2024, the Group’s interest in ITC, an associate of the Group in India, decreased from 29.02% to 25.45% (2023: 29.19% to 29.02%; 2022:
29.38% to 29.19%) as a result of ITC issuing ordinary shares under the ITC Employee Share Option Scheme and the Group's partial
divestment of shares held in ITC.
The issue of these shares under the ITC Employee Option Scheme and related change in the Group’s share of ITC resulted in a
gain of £18 million (2023: £40 million gain; 2022: £3 million loss), which is treated as a deemed partial disposal and included in the
income statement.
On 13 March 2024, the Group announced the divestment of 436,851,457 ordinary shares held in ITC, representing 12% of the Group's
equity stake (the equivalent of 3.5% of ITC's ordinary shares). A gain of £1,361 million has been recognised in the Group’s share of post-tax
results of associates and joint ventures and includes a foreign exchange loss of £43 million reclassified to the income statement and
previously recognised in associates other comprehensive income. Refer to note 27(b)(i) for further details.
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’s share of which was £2 million.
In 2022, the Group incurred a £2 million amortisation charge in relation to the acquired intangibles associated with the acquisition
of Organigram. In 2023, these acquired trademarks were impaired in full. Additionally, in 2023, the Group impaired the investment
in Organigram by £34 million (2022: £59 million) (net of tax), driven by the decrease in Organigram’s share price. In 2024, no further
impairment was required.
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 Group's remaining associate in Yemen, United Industries Company Limited, with a charge of £18 million to the income statement.
(b) Other financial information
The Group’s share of the results of associates and joint ventures (excluding the gain from partial divestment of shares in ITC) is shown
in the table below.
2024
2023
2022
Group’s
share
£m
Group’s
share
£m
Group’s
share
£m
Profit on ordinary activities after taxation
– attributable to owners of the parent
539
585
442
Other comprehensive income:
Items that may be reclassified to profit and loss
(13)
(107)
6
Items that will not be reclassified to profit and loss
33
(5)
19
Total comprehensive income
559
473
467
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
285
Summarised financial information of the Group’s associates and joint ventures is shown below.
2024
ITC
£m
Others
£m
Total
£m
Revenue
7,265
2,671
9,936
Profit on ordinary activities before taxation
2,680
(13)
2,667
Post-tax results of associates and joint ventures
2,025
(24)
2,001
Other comprehensive income
98
(15)
83
Total comprehensive income
2,123
(39)
2,084
2023
ITC
£m
Others
£m
Total
£m
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 loss
(368)
(20)
(388)
Total comprehensive income
1,753
(222)
1,531
2022
ITC
£m
Others
£m
Total
£m
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
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
286
10 Taxation on ordinary activities
(a) Summary of taxation on ordinary activities
2024
£m
2023
£m
2022
£m
UK corporation tax
24
32
(3)
Comprising:
– current year tax expense
15
20
2
– adjustments in respect of prior periods
9
12
(5)
Overseas tax
2,679
2,779
2,721
Comprising:
– current year tax expense
2,571
2,804
2,675
– adjustments in respect of prior periods
108
(25)
46
Current tax
2,703
2,811
2,718
Pillar Two income tax (note 10(h))
79
—
—
Total current tax
2,782
2,811
2,718
Deferred tax
(2,425)
(5,683)
(240)
Comprising:
– deferred tax relating to origination and reversal of temporary differences
(2,176)
(5,577)
(174)
– deferred tax relating to changes in tax rates
(249)
(106)
(66)
357
(2,872)
2,478
(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 15 corporate groups in the FII GLO as at 31 December 2024. 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 £1.2 billion 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’ authorities on which those earlier judgments were
based. 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 £0.3 billion, 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. The High Court determined that claims should have been filed within 6 years of June 2000 meaning that BAT’s claims are
in time. HMRC have applied to appeal the judgment, which has been granted, with a hearing set for May 2025. The final resolution of all
issues in the litigation is likely to take several more years.
During 2015, HMRC paid to the Group a gross amount of £1,224 million in two separate payments. The payments made by HMRC
have been made without any admission of liability and are subject to refund were HMRC to succeed on appeal. The second payment
in November 2015 followed the introduction of a new 45% tax on the interest component of restitution claims against HMRC. HMRC
held back £261 million from the second payment contending that it represents the new 45% tax on that payment, leading to total cash
received by the Group of £963 million. 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’s appeal to the Upper Tribunal was heard in July 2018. In
February 2025, the Group reached agreement with HMRC that the 45% tax should not apply to the reduced value of Group’s claim
(£0.3 billion as mentioned above). This does not impact the repayment agreement referred to below, with the legal challenge on this
issue now concluded.
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 £61 million for the 12 months to
31 December 2024 (2023: £60 million; 2022: £33 million) accruing on the balance, which was also treated as an adjusting item.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
287
The Group made interim repayments to HMRC of £50 million in 2024, 2023 and 2022, and, during 2024, the Group agreed to repay £0.8
billion to HMRC (being the difference between the amounts received plus accrued interest and the amount determined in the July 2021
judgment (£0.3 billion)). The schedule for the remaining agreed repayments is:
– £479 million in 2025;
– £222 million in 2026; and
– £43 million in 2027.
(c) Factors affecting the taxation charge
The taxation charge differs from the standard rate of corporation tax in the UK of 25.0% for 2024, 23.5% for 2023 and 19.0% 2022.
The major causes of this difference are listed below:
2024
2023
2022
£m
%
£m
%
£m
%
Profit/(loss) before tax
3,538
(17,061)
9,324
Less: share of post-tax results of associates and joint
ventures (see note 9)
(1,900)
(585)
(442)
1,638
(17,646)
8,882
Tax at 25% (2023: 23.5%; 2022: 19%) on the above
410
25.0
(4,147)
23.5
1,688
19.0
Factors affecting the tax rate:
Tax at standard rates other than UK corporation tax rate
395
24.1
619
(3.5)
397
4.5
Other national tax charges
277
16.9
310
(1.8)
244
2.7
Pillar Two income taxes
79
4.8
—
—
—
—
Permanent differences
(71)
(4.3)
845
(4.8)
83
0.9
Overseas withholding taxes
168
10.3
179
(1.0)
156
1.8
Double taxation relief on UK profits
(30)
(1.8)
(46)
0.3
(26)
(0.3)
Unutilised/(utilised) tax losses
33
2.0
(15)
0.1
12
0.1
Adjustments in respect of prior periods
117
7.1
(13)
0.1
41
0.5
Deferred tax relating to changes in tax rates
(249)
(15.2)
(106)
0.6
(66)
(0.7)
Additional net deferred tax (credits)/charges
(772)
(47.1)
(498)
2.8
(51)
(0.6)
357
21.8
(2,872)
16.3
2,478
27.9
Additional net deferred tax credits in 2024 mainly reflect the Canadian provincial tax consequences of the Proposed Plans in Canada,
described further in notes 24 and 31.
The Group's reported 2023 tax rate is significantly impacted by the impairment of intangible assets as described in note 12.
– Permanent differences in 2023 consist mainly of the tax impact of the goodwill impairment (for which no tax relief is available).
– 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 2024, adjusting items in taxation included a net credit of £157 million mainly relating to Brazilian Federal Tax Authority challenges
regarding the treatment of Rio de Janeiro VAT incentives (described further in note 31) and a provision for potential tax exposures in
Indonesia, offset by 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 the reversal of a tax provision in Canada following a settlement agreement with local
authorities.
In 2023, adjusting items in taxation included a net credit of £73 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 tax 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 £27 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 tax reliefs arising on the closure of the Group's factory in Switzerland.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
288
(e) Tax on adjusting items
In addition, the tax on adjusting items, separated between the different categories, as per note 11, amounted to £2,049 million
(2023: £5,415 million; 2022: £176 million). The adjustment to the adjusted earnings per share (note 11) also includes £38 million
(2023: £1 million; 2022: £5 million) in respect of the non-controlling interests’ share of the adjusting items net of tax.
(f) Tax on items recognised directly in other comprehensive income
2024
£m
2023
£m
2022
£m
Current tax
(6)
(5)
(6)
Deferred tax
(18)
12
(106)
(Charged)/credited to other comprehensive income
(24)
7
(112)
(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 £14 million (2023: £14 million;
2022: £11 million) 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 €750 million (“Pillar Two” rules). The UK substantively enacted legislation implementing
these rules on 20 June 2023 and the rules apply to the Group as of 1 January 2024. The impact is shown in notes 10(a) and 10(c) above.
The Group continues to review this legislation together with developing guidance. The Group is also monitoring the status of
implementation of the Pillar Two rules outside of the UK to assess the potential impact.
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 or
not coupons have been declared and paid in the period. Below is a reconciliation of the earnings used to calculate earnings per share:
2024
£m
2023
£m
2022
£m
Earnings/(loss) attributable to owners of the parent
3,068
(14,367)
6,666
Coupon on perpetual hybrid bonds
(56)
(59)
(60)
Tax on coupon on perpetual hybrid bonds
14
14
11
Earnings/(loss)
3,026
(14,412)
6,617
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 2024 and 2022:
2024
2023
2022
Earnings
£m
Weighted
average
number of
shares
m
Earnings
per share
pence
Loss
£m
Weighted
average
number of
shares
m
Loss
per share
pence
Earnings
£m
Weighted
average
number of
shares
m
Earnings
per share
pence
Basic earnings/(loss) per share
(ordinary shares of 25p each)
3,026
2,214
136.7
(14,412)
2,229
(646.6)
6,617
2,256
293.3
Share options
—
11
(0.7)
—
—
—
—
11
(1.4)
Diluted earnings/(loss) per share*
3,026
2,225
136.0
(14,412)
2,229
(646.6)
6,617
2,267
291.9
Note:
*
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 remuneration purposes, and reflective of the Group's positive earnings on an adjusted basis,
Management 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 the profit from operations, net finance costs, taxation and the Group’s 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’s 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
289
Basic
2024
2023
2022
Notes
Earnings
£m
Earnings
per share
pence
(Loss)/
earnings
£m
(Loss)/
Earnings
per share
pence
Earnings
£m
Earnings
per share
pence
Basic earnings/(loss) per share
3,026
136.7
(14,412)
(646.6)
6,617
293.3
Effect of amortisation and impairment of
goodwill, trademarks and similar intangibles
4
2,318
104.7
27,816
1,247.9
285
12.6
Tax and non-controlling interests on
amortisation and impairment of goodwill,
trademarks and similar intangibles
10(e)
(522)
(23.6)
(5,390)
(241.8)
(67)
(3.0)
Effect of impairment charges in respect
of property, plant and equipment
4
149
6.7
—
—
—
—
Tax and non-controlling interests on
impairment charges in respect of property,
plant and equipment
10(e)
(48)
(2.2)
—
—
—
—
Effect of settlement of historical litigation
in relation to the Fox River
5(c)
(132)
(6.0)
—
—
—
—
Tax on settlement of historical litigation
in relation to the Fox River
10(e)
22
1.0
—
—
—
—
Net effect of excise and VAT cases
5(b), 6(k)
—
—
(167)
(7.5)
(460)
(20.4)
Tax on excise and VAT cases
10(e)
—
—
41
1.8
72
3.2
Effect of the ongoing litigation in Canada
6(c)
6,203
280.2
—
—
—
—
Tax on the ongoing litigation in Canada
10(e)
(1,644)
(74.3)
—
—
—
—
Effect of disposal of subsidiaries
6(f)
—
—
546
24.5
(6)
(0.3)
Effect of Romania and Brazil other taxes
6(k)
449
20.3
47
2.1
—
—
Tax on Romania and Brazil other taxes
10(e)
(2)
(0.1)
(16)
(0.7)
—
—
Effect of charges in respect of DOJ and OFAC
investigations
6(h)
4
0.2
75
3.4
450
19.9
Effect of planned disposal of subsidiaries
6(j)
—
—
(195)
(8.7)
612
27.2
Tax on planned disposal of subsidiaries
10(e)
—
—
—
—
(10)
(0.4)
Effect of restructuring and integration costs
7
—
—
(2)
(0.1)
771
34.2
Tax and non-controlling interests on
restructuring and integration costs
10(e)
—
—
(3)
(0.1)
(116)
(5.1)
Other adjusting items
3, 6(d),6(g),6(i)
163
7.4
96
4.3
233
10.3
Tax effect on other adjusting items
10(e)
(44)
(2.0)
(22)
(1.0)
(37)
(1.6)
Effect of early repurchase of bonds
8(b)
(590)
(26.6)
29
1.3
—
—
Tax effect of early repurchase of bonds
10(e)
141
6.4
(8)
(0.4)
—
—
Effect of interest on FII GLO settlement
and other
8(b)
99
4.5
67
3.0
34
1.5
Tax effect of interest on FII GLO settlement
and other
10(e)
(26)
(1.2)
(18)
(0.8)
(6)
(0.3)
Effect of gains related to the partial
divestment of shares held in ITC
9(a)
(1,361)
(61.5)
—
—
—
—
Capital gains tax and deferred tax associated
with the partial divestment of shares held in ITC
10(e)
36
1.6 2
—
—
—
—
Effect of associates' adjusting items net of tax
9(a)
(18)
(0.8) —
(8)
(0.4)
92
4.1
Deferred tax relating to changes in tax rates
10(d)
(267)
(12.1)
(97)
(4.4)
(44)
(2.0)
Adjusting items in tax
10(d)
110
5.0
24
1.2
—
—
Adjusted earnings per share (basic)
8,066
364.3
8,403
377.0
8,420
373.2
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
290
Diluted
2024
2023
2022
Notes
Earnings
£m
Earnings
per share
pence
(Loss)/
earnings
£m
(Loss)/
earnings
per share
pence
Earnings
£m
Earnings
per share
pence
Diluted earnings/(loss) per share
3,026
136.0
(14,412)
(646.6)
6,617
291.9
Effect of amortisation and impairment of
goodwill, trademarks and similar intangibles
4
2,318
104.2
27,816
1,247.9
285
12.6
Tax and non-controlling interests on
amortisation and impairment of goodwill,
trademarks and similar intangibles
10(e)
(522)
(23.5)
(5,390)
(241.8)
(67)
(3.0)
Effect of impairment charges in respect
of property, plant and equipment
4
149
6.7
—
—
—
—
Tax and non-controlling interests on
impairment charges in respect of property,
plant and equipment
10(e)
(48)
(2.2)
—
—
—
—
Effect of settlement of historical litigation
in relation to the Fox River
5(c)
(132)
(5.9)
—
—
—
—
Tax on settlement of historical litigation
in relation to the Fox River
10(e)
22
1.0
—
—
—
—
Net effect of excise and VAT cases
5(b), 6(k)
—
—
(167)
(7.5)
(460)
(20.3)
Tax on excise and VAT cases
10(e)
—
—
41
1.8
72
3.2
Effect of the ongoing litigation in Canada
6(c)
6,203
278.9
—
—
—
—
Tax on the ongoing litigation in Canada
10(e)
(1,644)
(73.9)
—
—
—
—
Effect of disposal of subsidiaries
6(f)
—
—
546
24.5
(6)
(0.3)
Effect of Romania and Brazil other taxes
6(k)
449
20.2
47
2.1
—
—
Tax on Romania and Brazil other taxes
10(e)
(2)
(0.1)
(16)
(0.7)
—
—
Effect of charges in respect of DOJ and OFAC
investigations
6(h)
4
0.2
75
3.4
450
19.9
Effect of planned disposal of subsidiaries
6(j)
—
—
(195)
(8.7)
612
26.8
Tax on planned disposal of subsidiaries
10(e)
—
—
—
—
(10)
(0.4)
Effect of restructuring and integration costs
7
—
—
(2)
(0.1)
771
34.0
Tax and non-controlling interests on
restructuring and integration costs
10(e)
—
—
(3)
(0.1)
(116)
(5.1)
Other adjusting items
3, 6(d)6(g),6(i)
163
7.3
96
4.3
233
10.3
Tax effect on other adjusting items
10(e)
(44)
(2.0)
(22)
(1.0)
(37)
(1.6)
Effect of early repurchase of bonds
8(b)
(590)
(26.5)
29
1.3
—
—
Tax effect of early repurchase of bonds
10(e)
141
6.3
(8)
(0.4)
—
—
Effect of interest on FII GLO settlement and other
8(b)
99
4.4
67
3.0
34
1.5
Tax effect of interest on FII GLO settlement
and other
10(e)
(26)
(1.2) —
(18)
(0.8)
(6)
(0.3)
Effect of gains related to the partial
divestment of shares held in ITC
9(a)
(1,361)
(61.1) 1
—
—
—
—
Capital gains tax and deferred tax associated with
the partial divestment of shares held in ITC
10(e)
36
1.6 2
—
—
—
—
Effect of associates' adjusting items net of tax
9(a)
(18)
(0.8) —
(8)
(0.4)
92
4.1
Deferred tax relating to changes in tax rates
10(d)
(267)
(12.0) 1
(97)
(4.4)
(44)
(1.9)
Adjusting items in tax
10(d)
110
4.9
24
1.2
—
—
Impact of dilution*
—
—
—
(1.4)
Adjusted diluted earnings per share
8,066
362.5
8,403
375.6
8,420
371.4
Note:
*
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 remuneration purposes, and reflective of the Group's positive earnings on an adjusted basis,
Management included the dilutive effect of share options in calculating adjusted diluted earnings per share.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
291
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 ‘Headline Earnings’, as issued by the South African Institute of
Chartered Accountants.
Basic
2024
2023
2022
Earnings
£m
Earnings
per share
pence
(Loss)/
earnings
£m
(Loss)/
earnings
per share
pence
Earnings
£m
Earnings
per share
pence
Basic earnings/(loss) per share
3,026
136.7
(14,412)
(646.6)
6,617
293.3
Effect of impairment of intangibles, property, plant and
equipment, associates and assets held-for-sale
875
39.5
27,800
1,247.2
429
19.0
Tax and non-controlling interests on intangibles, property,
plant and equipment, associates and assets held-for-sale
(203)
(9.2)
(5,430)
(243.6)
(77)
(3.4)
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
(129)
(5.8)
(125)
(5.6)
(21)
(0.9)
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
32
1.4
27
1.2
5
0.2
Effect of impairment of subsidiaries transferred to held-for-
sale and associated costs
—
—
(203)
(9.1)
548
24.2
Tax on impairment of subsidiaries and associated costs
—
—
—
—
(10)
(0.4)
Effect of foreign exchange reclassification from reserves to
the income statement
- Subsidiaries
—
—
552
24.8
6
0.3
- Associates
—
—
—
—
(1)
—
Issue of shares and change in shareholding of an associate
(18)
(0.8)
(40)
(1.8)
3
0.1
Gain on partial disposal of an associate and associated
capital gains tax, including foreign exchange recycled
(1,307)
(59.0)
—
—
—
—
Headline earnings per share (basic)
2,276
102.8
8,169
366.5
7,499
332.4
Diluted
2024
2023
2022
Earnings
£m
Earnings
per share
pence
(Loss)/
earnings
£m
(Loss)/
earnings
per share
pence
Earnings
£m
Earnings
per share
pence
Diluted earnings/(loss) per share
3,026
136.0
(14,412)
(646.6)
6,617
291.9
Effect of impairment of intangibles, property, plant and
equipment, associates and assets held-for-sale
875
39.3
27,800
1,247.2
429
18.9
Tax and non-controlling interests on intangibles, property,
plant and equipment, associates and assets held-for-sale
(203)
(9.1)
(5,430)
(243.6)
(77)
(3.4)
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
(129)
(5.8)
(125)
(5.6)
(21)
(0.9)
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
32
1.4
27
1.2
5
0.2
Effect of impairment of subsidiaries transferred to held-for-
sale and associated costs
—
—
(203)
(9.1)
548
24.1
Tax on impairment of subsidiaries and associated costs
—
—
—
—
(10)
(0.4)
Effect of foreign exchange reclassification from reserves to
the income statement
- Subsidiaries
—
—
552
24.8
6
0.3
- Associates
—
—
—
—
(1)
—
Issue of shares and change in shareholding of an associate
(18)
(0.8)
(40)
(1.8)
3
0.1
Gain on partial disposal of an associate and associated
capital gains tax, including foreign exchange recycled
(1,307)
(58.7)
—
—
—
—
Headline earnings per share (diluted)
2,276
102.3
8,169
366.5
7,499
330.8
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
292
12 Intangible assets
(a) Overview of intangible assets
2024
Trademarks
and similar
intangibles
£m
Goodwill
£m
Computer
software
£m
Assets in
the course of
development
£m
Total
£m
1 January
Cost
78,848
46,021
1,408
110
126,387
Accumulated amortisation and impairment
(24,847)
(4,930)
(1,048)
—
(30,825)
Net book value at 1 January
54,001
41,091
360
110
95,562
Differences on exchange
915
77
(1)
(1)
990
Additions
– internal development
—
—
—
80
80
– separately acquired
95
—
—
15
110
Reallocations
—
—
40
(40)
—
Amortisation charge
(1,652)
—
(120)
—
(1,772)
Impairment
(646)
(39)
(9)
—
(694)
31 December
Cost
80,277
46,169
1,299
165
127,910
Accumulated amortisation and impairment
(27,564)
(5,040)
(1,029)
(1)
(33,634)
Net book value at 31 December
52,713
41,129
270
164
94,276
2023
Trademarks
and similar
intangibles
£m
Goodwill
£m
Computer
software
£m
Assets in
the course of
development
£m
Total
£m
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
– internal development
—
—
—
75
75
– separately acquired
59
—
—
3
62
Reallocations
2
—
115
(111)
6
Amortisation charge
(237)
—
(120)
—
(357)
Impairment
(22,995)
(4,614)
(5)
—
(27,614)
31 December
Cost
78,848
46,021
1,408
110
126,387
Accumulated amortisation and impairment
(24,847)
(4,930)
(1,048)
—
(30,825)
Net book value at 31 December
54,001
41,091
360
110
95,562
(b) Goodwill
Goodwill of £41,129 million (2023: £41,091 million) is included in intangible assets in the balance sheet of which the following are the
significant acquisitions: Reynolds American £31,491 million (2023: £30,938 million); Rothmans Group £4,091 million (2023: £4,274 million);
Imperial Tobacco Canada £2,229 million (2023: £2,386 million); ETI (Italy) £1,363 million (2023: £1,428 million) and ST (principally
Scandinavia) £1,024 million (2023: £1,074 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.
During 2024, there was £39 million goodwill impairment (2023: £4,614 million) as explained in note 12(e)(v) below.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
293
(c) Trademarks and similar intangibles
Trademarks and similar intangibles with indefinite lives
The net book value of trademarks and similar intangibles with indefinite lives is £9,832 million (2023: £51,930 million) and relates to the
acquisition of Reynolds American. Following the redesignation of Newport, Camel, Natural American Spirit and Pall Mall as definite-lived
from 1 January 2024, the remaining indefinite-lived brands include Camel Snus and Grizzly. The trademarks acquired form the core focus
of the U.S. oral business and receive significant support in the form of dedicated internal resources, forecasting and, where appropriate,
marketing investment. The Grizzly trademark has significant market share and positive cash flow expectations. There are no regulatory or
contractual restrictions on the use of the trademark, and there are no plans by Management to significantly redirect resources elsewhere.
As explained in note 12(e)(ii), as a result of accelerated volume loss to Modern Oral, an impairment of £646 million in respect of Camel
Snus has been recognised and Management have concluded that it is appropriate to redesignate Camel Snus as definite-lived from
1 January 2025 (2024: indefinite-lived, 2023: indefinite-lived) with an estimated life of 20 years to be amortised on a straight-line basis.
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 on a straight-line basis over their expected useful lives, which do not exceed 30 years. Included in the net book value of
trademarks and similar intangibles with definite lives are trademarks relating to the acquisition of Reynolds American £42,605 million
(2023: £1,809 million) including Newport, Camel, Natural American Spirit and Pall Mall which were redesignated as definite-lived from
1 January 2024 (2023: indefinite-lived) with an estimated life of between 20-30 years. These trademarks are part of the Group’s Strategic
Portfolio of key brands and form the core focus of the U.S. combustibles 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.
The below table shows the change in carrying value for the key definite-lived brands relating to the acquisition of Reynolds American.
Carrying amount
1 January
£m
Differences on
exchange
£m
Amortisation
Charge
£m
Carrying amount
31 December
£m
Definite-lived intangibles
Newport
20,753
358
(690)
20,421
Camel
7,822
134
(260)
7,696
Pall Mall
2,608
44
(130)
2,522
Natural American Spirit
10,439
180
(347)
10,272
Other
1,809
29
(144)
1,694
Total
43,431
745
(1,571)
42,605
(d) 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
£398 million (2023: £450 million). The costs of internally developed assets include capitalised expenses of employees working full time
on software development projects, third-party consultants and software licence fees from third-party suppliers.
The Group has £5 million of future contractual commitments (2023: £2 million) related to intangible assets.
(e) 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 and fair value calculations incorporate
estimation uncertainty, particularly for certain assets held in relation to the U.S. market.
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 climate change-related risks. This sensitised discounted cash
flow included climate-related product taxes and carbon taxes within the future cash flows and resulted in no material adverse impact to
the impairment assessment.
(ii) Impairment testing - Trademarks and similar intangibles with indefinite lives (brands)
The trademarks and similar intangibles with indefinite lives (brands) have been tested for impairment with recoverable amounts
estimated on the basis of fair value less cost of disposal and classified as level 3 within the fair value hierarchy. The fair value calculations
use cash flows based on detailed brand budgets prepared by Management using projected sales volumes and pricing (net revenue) and
projected brand profitability covering a five-year horizon and, thereafter, grown into perpetuity. A tax amortisation benefit factor is then
applied to incorporate the additional value a market participant would derive in an asset acquisition scenario. Corporate costs are
allocated to the brand budgets based on either specific allocations, where appropriate, or based on revenue. The discount rates and long-
term growth rates applied to the brand fair value calculations have been determined by local management based on experience, specific
market and brand trends and pricing and cost expectations. As the trademarks and similar intangibles with indefinite lives relate to the
acquisition of Reynolds American, the brand budgets used in the fair value calculations have also been incorporated into the budget
information used in the impairment testing of Reynolds American goodwill.
As a result of accelerated volume loss to Modern Oral, an impairment of £646 million in respect of Camel Snus has been recognised.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
294
The below table indicates the key assumptions used in assessing the indefinite-lived brands for impairment.
2024
2023
Carrying
amount
£m
Volume 5 Year
CAGR**
Pre-tax
discount rate*
%
Carrying
amount
£m
Volume 5 Year
CAGR
Pre-tax
discount rate
%
Indefinite-lived intangibles
Camel Snus
459
(10.1) %
8.6
1,099
(5.4) %
7.8
Grizzly
9,373
7.6 %
7.6
9,209
(3.9) %
7.8
Total
9,832
10,308
Notes:
*
For the purpose of the current year impairment assessment, the recoverable amount for Camel Snus is estimated on the basis of fair value less cost of disposal and has 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 2025 to support the long term
growth rate. 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.
** Volume five-year CAGR is calculated by reference to the first five years annual volumes in the fair value less cost of disposal model against the 2024 baseline. The increase in volume 5 year CAGR
for the Grizzly brand reflects the inclusion of the Modern Oral product launched under the brand during 2024.
Concurrent to the impairment assessment, and reflecting Management's revised volume projections, Management have concluded that
it is appropriate to redesignate Camel Snus as definite-lived from 1 January 2025 (2024: indefinite-lived, 2023: indefinite-lived) with an
estimated life of 20 years to be amortised on a straight-line basis. The annual increase to amortisation as a result of this change is
expected to be £23 million.
Refer to note 12(e)(vi) for more details on impairment testing.
(iii) Impairment testing - Trademarks and similar intangibles with definite lives (brands)
Whilst no impairment triggers were identified, as noted in note12(e)(vi), the cash flow forecasts for the definite-lived brands have been
incorporated in the impairment test for the goodwill associated with the Reynolds CGU. These brands have therefore been tested for
impairment with recoverable amounts estimated on the basis of fair value less cost of disposal and classified as level 3 within the fair
value hierarchy. The fair value calculations use cash flows based on detailed brand budgets prepared by management using projected
sales volumes and pricing (net revenue) and projected brand profitability covering a five-year horizon. Thereafter volume decline, pricing
and margin assumptions are extrapolated over the remaining useful life. A tax amortisation benefit factor is then applied to incorporate
the additional value a market participant would derive in an asset acquisition scenario. Corporate costs are allocated to the brand
budgets based on either specific allocations, where appropriate, or based on revenue. The discount rates applied to the definite-lived
brand fair value calculations have been determined by local management based on experience, specific market and brand trends and
pricing and cost expectations.
The below table indicates the key assumptions used in assessing the definite-lived brands for impairment.
2024
2023
Carrying
amount
£m
Volume 5 Year
CAGR*
Pre-tax
discount rate
%
Carrying
amount
£m
Volume 5 Year
CAGR
Pre-tax
discount rate
%
Definite-lived intangibles
Newport
20,421
(12.5) %
8.6
20,753
(11.3) %
8.7
Camel
7,696
(12.6) %
8.6
7,822
(12.3) %
8.9
Pall Mall
2,522
(3.0) %
8.8
2,608
(18.8) %
9.4
Natural American Spirit
10,272
(8.1) %
7.9
10,439
(7.6) %
7.9
Total
40,911
41,622
Note:
*
Volume five-year CAGR is calculated by reference to the first five years’ annual volumes used in discounted cash flow model against the 2024 baseline.
The above table indicates a marginal decline in volume five-year CAGR compared to 2023 except for Pall Mall which has improved due to
increased promotional support and growth within the branded value segment.
Refer to note 12(e)(vi) for more details on impairment testing in respect of these brands.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
295
(iv) Cash generating units and information on goodwill impairment testing
In 2024, goodwill was allocated for impairment testing purposes to 17 (2023: 17) individual cash-generating units (CGUs) – one in the U.S.
(2023: one), nine in AME (2023: nine) and seven in APMEA (2023: seven).
For the purpose of impairment testing, goodwill has been attributed to the following cash-generating units:
2024
2023
Carrying
amount
£m
Pre-tax
discount rate
%
Carrying
amount
£m
Pre-tax
discount rate
%
Cash-generating unit
Reynolds American
31,491
9.0
30,938
9.6
Europe
5,358
6.7
5,596
6.6
Canada
2,229
9.8
2,386
20.3
Australia
662
7.9
717
7.3
South Africa
186
10.7
189
14.3
Singapore
376
8.4
382
7.4
GTR
249
7.1
253
7.6
Malaysia
187
10.6
217
10.2
Peru
74
8.7
73
12.4
Other
317
8.4
340
6.7
Total
41,129
41,091
Included within ‘Other’ 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 2024, the Group recognised a total impairment charge to goodwill of £39 million (2023: £4,614 million).
The recoverable amounts of all cash-generating units have been determined on a value-in-use basis. The key assumptions for the
recoverable amounts of all units are the projected sales volumes and pricing (net revenues) and long-term growth rates, which directly
impact the cash flows, and the discount rates used in the calculation. The long-term growth rate is used purely for the impairment
testing of goodwill under IAS 36 Impairment of Assets and does not reflect long-term planning assumptions used by the Group for
investment proposals or for any other assessments.
Post-tax discount rates were used in the impairment testing, based on the Group’s 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’s 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 American, for which the discount rate is 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’s approved budget.
(v) Impairment testing – Goodwill (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% (2023: 3%) in years two to ten, after which a growth rate of 1% (2023: 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’s 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 spanning a period of five years after which a long-term growth rate of -1.4% has been
assumed. During the year, the Malaysian government announced new regulations under the new tobacco control law, the Control of
Smoking Products for Public Health Act, which impact the sale of tobacco and vapour products. As a result of the upcoming regulations,
goodwill associated with the Malaysia CGU has been impaired by £39 million.
Due to difficult trading conditions 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, the Group recognised an impairment charge of £291 million in
2023. No further worsening of conditions has been observed in 2024. Forecasted cash flows continue to support the carrying value of
goodwill with no further indication of impairment.
In 2023, the Group recognised an impairment charge of £24 million in respect of its Peruvian cash-generating unit due to further market
deterioration. As a result of the assessment in 2024, no further deterioration in performance was identified requiring further impairment.
Following the application of a reasonable range of sensitivities to all cash-generating units, there was no reasonably possible scenario
identified that would lead to a potential impairment charge.
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
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Notes on Accounts
Continued
296
(vi) Impairment testing – Reynolds American
Goodwill and the 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.
Following delays, in January 2025, the new Trump administration withdrew the rule from the Office of Management and Budget and
it is currently held pending the new Trump administration’s reconsideration of regulations advanced by the previous administration.
Management notes that the timetable for any final product standard remains uncertain.
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. On 15 January 2025, in the final days of the outgoing
Biden administration, the FDA issued a proposed product standard whereby the agency would limit nicotine levels in cigarettes following
a two-year effective date from publication of any final rule. The proposed rule is currently subject to public comment, but may be de-
prioritised by the new Trump administration as it considers all proposed regulations advanced by the previous administration.
Management notes that the FDA proposed rule does not itself constitute restrictions on nicotine levels in cigarettes, and any proposed
rule must still go through the established comprehensive U.S. rule-making process, the timetable and outcome for which remains
uncertain. Management also notes that it is not known whether or when this proposed rule will be finalised, and, if adopted, whether
the final rule will be the same as or similar to the proposed rule.
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.
During 2023, evolving insights indicated that the decline in industry volume would be higher than previously forecasted 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 combustibles consumers turning to Vapour devices (specifically through the use of illicit single-use products). Due to the continued
challenging trading conditions in the U.S., a detailed external study was commissioned to assist Management with an independent view
of the potential forecast performance for the market. This review assisted Management in preparing the Group’s 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
£27,291 million in respect of the U.S. CGU was identified in 2023.
In 2024, in line with the approach used since 2022, the value-in-use calculation for the total U.S. CGU and the fair value calculations for
the brand intangibles 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.
The cash flow forecasts for the indefinite-lived brands, as described in note 12(e)(ii) above, have been incorporated in the probability
weighted scenarios used in the Reynolds American goodwill model. Similarly, the model also incorporates a five-year risk-adjusted cash
flow forecast for all of the definite-lived brands, based on detailed brand budgets prepared by Management using projected sales
volumes and pricing (net revenue) and projected brand profitability which assumes a long-term volume decline of cigarettes generally
offset by pricing. After this forecast, a probability weighted growth rate of 1.0% (2023: 1.0%) has been assumed for the Reynolds
American cash-generating unit.
For the Grizzly brand impairment test, a long-term growth rate of 1.0% (2023: 1.0%) is also applied. Following update of the recoverable
amount based on the fair value less cost of disposal for Grizzly, Management concluded that the carrying value of the brand is supported
by cash flows generated by the combined Traditional Oral and newly launched Grizzly Modern Oral product portfolio. There is significant
judgement with regard to assumptions and estimates involved in the forecasting of future cash flows, which form the basis of the fair
value calculation, and this is particularly true given the recent launch of the Grizzly Modern Oral product. A detailed external study was
commissioned to assist Management with an independent view of the potential impacts on volume forecasts of cross-category use
of Modern Oral products by Traditional Oral consumers to inform our forecast for the evolution of industry volumes for both Traditional
and Modern Oral and the potential share of market for the latter that a Grizzly product offering can achieve. Management consider a 3%
reduction in the five-year volume CAGR for Grizzly to be reasonably possible sensitivity scenario and this would result in an impairment
of £0.9 billion.
In order to support the long-term growth rates for Camel Snus, a cash flow forecast has also been prepared on a discrete basis, reflecting
the revised useful economic life from 1 January 2025. This implies a long-term growth rate of -6.9% (2023: 1.0%) for Camel Snus.
As explained in note 12(e)(iii), the impairment test calculations for Newport, Camel, Pall Mall and Natural American Spirit use cash flows
based on detailed brand budgets prepared by management over a five-year horizon after which volume decline, pricing and margin
assumptions are extrapolated over the remaining useful life.
As indicated in the table below, the Newport brand fair value is highly sensitive to changes in the volume assumptions. Management
believe a decrease in volume year-on-year in the discrete period by an additional 1% is a reasonably possible change. This would result
in an impairment of £1.3 billion.
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The excess of recoverable amount over the carrying value (headroom) of the Reynolds American cash-generating unit and the Newport,
Camel, Pall Mall, Natural American Spirit and Grizzly brand intangibles would be reduced to nil if the following individual changes were
made to the key assumptions used in the impairment model.
Reynolds
American
goodwill
Newport
Camel
Pall Mall
Natural
American
Spirit
Grizzly
Current headroom
£m
19,293
819
1,926
817
1,620
1,020
Assumptions:
Decrease in volume year-on-year in the discrete
period by an additional *
%
(0.4)
(2.4)
(3.7)
(1.2)
(2.0)
Increase in pre-tax discount rate by
%
1.9
0.5
3.9
6.3
1.6
0.7
Decrease in long-term growth rate by**
%
(1.8)
(0.8)
Notes:
*
Brand Intangibles only. Volume sensitivity results in a proportional reduction in both net revenue and direct costs with no impact to operating margin %. Fixed overhead cost allocations
remain flat. This demonstrates a year-on-year decrease in operating cash flow for the discrete forecast years.
** Goodwill and Grizzly indefinite-lived brand intangible only
(vii) Impairment testing – 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’
Creditors Arrangement Act (CCAA). Under a confidential court supervised mediation process, ITCAN has been negotiating a possible
settlement of all of its outstanding tobacco litigation in Canada while continuing to run its business in the normal course.
As explained in note 24, on 17 October 2024, the court-appointed mediator and monitor filed a proposed plan of compromise and
arrangement in the Ontario Superior Court of Justice. Substantially similar proposed plans were also filed for Rothmans, Benson &
Hedges Inc. (RBH, a subsidiary of Philip Morris International Inc.) and JTI-Macdonald Corp. (JTIM, a subsidiary of Japan Tobacco
International) (collectively, the Proposed Plans).
Under the Proposed Plans, if ultimately sanctioned and implemented, ITCAN, RBH and JTIM (the Companies) would pay an aggregate
settlement amount of CAD$32.5 billion (£18.0 billion). This amount would be funded by:
– an upfront payment equal to all the Companies’ cash and cash equivalents on hand (including investments held at fair value) plus
certain court deposits (subject to an aggregate industry withholding of CAD$750 million (£416 million)) plus 85% of any cash tax
refunds that may be received by the Companies on account of the upfront payments; and
– annual payments based on a percentage (initially 85%, reducing over time) of each of the Companies’ net income after taxes, based on amounts
generated from all sources, excluding New Categories, until the aggregate settlement amount is paid. The performance of ITCAN’s New
Categories (including Vapour products and nicotine pouches) is not included in the basis for calculating the annual payments.
These Proposed Plans, if ultimately sanctioned and implemented, would resolve ITCAN’s outstanding tobacco litigation in Canada and
provide a full and comprehensive release to ITCAN, BAT p.l.c. and all related companies for all tobacco claims in Canada.
On 31 October 2024, the court hearing to rule on the Claims Procedure Orders and Meeting Orders took place and these were granted.
In accordance with the Meeting Order, a creditors' meeting was held on 12 December 2024 and the Proposed Plans were approved by
the requisite majorities of the creditors. A sanction hearing took place between 29-31 January 2025. During the sanction hearing, the
Court was asked to sanction the Proposed Plans. The Court’s decision is currently pending and the stays are extended until 3 March
2025, or such time as the Court's decision on the sanction order is released.
The value-in-use calculations have been prepared based on a five-year cash flow forecast, after which a long-term rate of decline of
-3.65% (2023: -2.5%) on the underlying business is assumed. In line with the requirements of IAS36, the value-in-use derived from the
forecast cash flows has been adjusted to include the book value of the provision recognised in respect of the settlement agreement and
the liability is included within the carrying amount of the CGU for the purposes of the impairment test.
A pre-tax discount rate of 9.8% (2023: 20.3%) has been assumed. The change in rate is driven by the crystallisation of the liability related
to the payments under the settlement plan, whereas in 2023 and previous years the risk associated with the ongoing mediation process
was adjusted in the discount rate. Further information on the Québec Class Actions and CCAA can be found in note 31. Further details
on the provision for the liability associated with the Proposed Plans and the discount rate applied to such provision, which differs to that
applied for the impairment assessment, can be found in note 24.
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
goodwill
%
Assumptions
Decrease in revenue by
*
21.3
Decrease in long-term growth rate by
10.5
Increase in pre-tax discount rate by
8.0
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.
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
298
13 Property, plant and equipment
(a) Overview of property, plant and equipment, including right-of-use assets
2024
Freehold
property
£m
Leasehold
property
£m
Plant,
equipment and
other owned
£m
Plant,
equipment and
other leased
£m
Assets in the
course of
construction
£m
Total
£m
1 January
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 1 January
981
452
2,342
154
654
4,583
Differences on exchange
(29)
(26)
(139)
(4)
(37)
(235)
Additions
– right-of-use assets
—
152
—
105
—
257
– separately acquired
—
—
23
—
469
492
Reallocations
87
13
385
—
(485)
—
Depreciation
(35)
(97)
(291)
(74)
—
(497)
Impairment
(89)
(41)
(41)
(2)
—
(173)
Right-of-use assets − reassessments,
modifications and terminations
—
8
—
2
—
10
Disposals
(48)
(3)
(6)
—
—
(57)
Net reclassifications as held-for-sale
—
(1)
—
—
—
(1)
31 December
Cost
1,360
888
5,566
437
601
8,852
Accumulated depreciation and impairment
(493)
(431)
(3,293)
(256)
(4,473)
Net book value at 31 December
867
457
2,273
181
601
4,379
2023
Freehold
property
£m
Leasehold
property
£m
Plant,
equipment and
other owned
£m
Plant,
equipment and
other leased
£m
Assets in the
course of
construction
£m
Total
£m
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
– right-of-use assets
—
112
—
84
—
196
– separately acquired
—
—
20
—
460
480
Reallocations
69
24
431
—
(524)
—
Depreciation
(34)
(102)
(293)
(77)
—
(506)
Impairment
—
(5)
(131)
(9)
(6)
(151)
Right-of-use assets − reassessments,
modifications and terminations
—
(15)
—
(13)
—
(28)
Disposals
(1)
(3)
(5)
—
—
(9)
Net reclassifications as held-for-sale
(14)
—
—
—
—
(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
Refer to notes 4 and 7 for more information on property, plant and equipment impairments.
As mentioned in note 5(a), the Group completed certain sale and leaseback transactions. The cash flow effect of these transactions
in 2024 is £37 million (2023: £15 million).
Included in additions in 2024 is an amount of £30 million (2023: £34 million) related to sustainability as explained in note 33.
The Group has £67 million of future contractual commitments (2023: £60 million) related to property, plant and equipment.
BAT Annual Report and Form 20-F 2024
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Other Information
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(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 ‘Leasehold
Property’ (note 13(c)) and other right-of-use assets have been reported under ‘Plant, equipment and other leased’.
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 ‘plant, equipment and other leased’ relate to leases of various assets including industrial equipment and distribution
vehicles in Brazil, China, Canada, Mexico, Pakistan, Poland, Romania, the U.S. and other countries.
(c) Leasehold property
As of 31 December 2024, the Group holds £95 million (2023: £147 million) of leasehold properties acquired and another £362 million (2023:
£305 million) of right-of-use leased properties.
Assets representing ‘leasehold property’ 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, Italy, Pakistan, Romania, Singapore, Vietnam and the U.S., amongst other countries. In addition, capitalised expenditure
representing leasehold improvements is included in this asset class.
2024
£m
2023
£m
Leasehold land and property comprises
- net book value of long leasehold
22
18
- net book value of short leasehold
435
434
457
452
2024
Leasehold property net book value movements for the year
ended 31 December 2024
Net book value
at 1 January
£m
Differences on
exchange
£m
Depreciation
and impairment
£m
Other net
movements
*
£m
Net book value
at 31 December
£m
- Property acquired (IAS 16)
147
(7)
(50)
5
95
- Right-of-use properties (IFRS 16)
305
(19)
(88)
164
362
452
(26)
(138)
169
457
2023
Leasehold property net book value movements for the year
ended 31 December 2023
Net book value
at 1 January
£m
Differences on
exchange
£m
Depreciation and
impairment
£m
Other net
movements*
£m
Net book value
at 31 December
£m
- 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
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 2024, the Group owns freehold property amounting to £867 million (2023: £981 million), representing factories,
warehouses and office buildings together with adjoining land, mainly in the U.S., the UK, Bangladesh, Indonesia and South Korea.
2024
£m
2023
£m
Cost of freehold land within freehold property on which no depreciation is provided
151
238
The reduction in the cost of freehold land is mainly due to the impairment of the Group’s head office in London, as mentioned on note 4.
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Financial Statements
Other Information
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Notes on Accounts
Continued
300
14 Investments in associates and joint ventures
2024
£m
2023
£m
1 January
1,970
2,020
Total comprehensive income (note 9)
559
473
Dividends
(447)
(559)
Additions (note 27(b)(ii))
48
13
Disposals (note 27(b)(i))
(227)
—
Other equity movements
(1)
23
31 December
1,902
1,970
Non-current assets
1,230
1,331
Current assets
1,205
1,168
Non-current liabilities
(97)
(78)
Current liabilities
(436)
(451)
1,902
1,970
ITC Ltd. (Group’s share of the market value is £14,357 million (2023: £15,767 million))
1,762
1,851
Other listed associates (Group’s share of the market value is £224 million (2023: £175 million))
98
64
Unlisted associates
42
55
1,902
1,970
The principal associate undertaking of the Group is ITC Ltd. (ITC). Included within the dividends amount of £447 million
(2023: £559 million) are £434 million (2023: £545 million) attributable to dividends declared by ITC.
ITC Ltd.
ITC is an Indian conglomerate based in Kolkata with interests in cigarettes, paper and packaging, agri-business, other fast-moving goods (e.g.
confectionery, branded apparel, personal care, stationery and safety matches) and, up until the date of demerger (as described below), hotels.
BAT’s interest in ITC is 25.45%.
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 2024 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’s 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 2024.
2024
£m
2023
£m
Non-current assets
4,456
4,261
Current assets
4,152
3,622
Non-current liabilities
(306)
(240)
Current liabilities
(1,376)
(1,267)
6,926
6,376
Group’s share of ITC Ltd. (2024: 25.45%; 2023: 29.02%)
1,762
1,851
On 13 March 2024, the Group announced the divestment of 436,851,457 ordinary shares held in ITC, representing 12% of the Group's
equity stake (the equivalent of 3.5% of ITC's ordinary shares). Refer to note 27(b)(i) for further details.
On 24 July 2023, ITC announced a proposed demerger of its ‘Hotels Business’ 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. In January 2025, ITC
Hotels Limited was listed and commenced trading on the National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE).
The Group’s direct stake in ITC Hotels Limited is 15%.
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 19.90%
equity stake in Organigram Holdings Inc. (listed on both the Nasdaq and Toronto Stock Exchange under the symbol ‘OGI’) to become its
largest shareholder. Due to subsequent acquisitions carried out by Organigram and the Group’s additional investments, referred to
below, the Group’s effective interest in Organigram for equity accounting at the end of 2024 was 35.09% (2023: 18.79%). The Group’s
share of the fair value of net assets acquired included £49 million of intangibles and £30 million of goodwill, representing a strategic
premium to enter the legal cannabis market in North America. Organigram prepares accounts on a quarterly basis with a 30 September
year-end. As permitted by IAS 28, results up to 30 September 2024 have been used in applying the equity method.
During 2023 Management reassessed the carrying value of the Group’s 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’s 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 £36 million (or £34 million net of tax), was required
against the carrying value of the investment. No further impairments have been recognised to date and the carrying value of this
investment as at 31 December 2024 was £65 million (2023: £30 million). Management will continue to monitor the carrying value,
in line with IAS 36, over the course of future periods.
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
301
In November 2023, the Group announced the signing of an agreement for a further investment in Organigram Holdings Inc. (Organigram).
At 31 December 2023, the proposed investment of CAD$125 million (£74 million) 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 million (£24 million) acquiring a further 12,893,175 common shares of Organigram at a price of CAD$3.22 per share.
On 30 August 2024, BAT made the second tranche investment of CAD$42 million (£24 million) acquiring a further 4,429,740 common
shares and 8,463,435 preferred shares of Organigram at a price of CAD$3.22 per share. Goodwill of £5 million has been recognised
following these investments which have been recognised net of fair value of the embedded derivative in relation to the investment
agreement. Subject to conditions, the remaining 12,893,175 shares subscribed for shall be issued at the same price as the previous two
tranches by the end of February 2025. Under the terms of agreement, the Group’s voting rights are restricted to 30%.
As a result of Organigram’s acquisition of Motifs Lab Ltd on 6 December 2024, the Group’s ownership is diluted to 30.6%. The accounting
impact of such dilution is not material to the Group. Please refer to note 27(b)(ii) for further information on the acquisition.
Charlotte’s Web Holdings Inc.
In November 2022, the Group announced a £48 million investment in Charlotte’s Web Holdings, Inc. (Charlotte's Web). Based in
Colorado, USA, and listed on the Toronto Stock Exchange, Charlotte’s Web holds a prominent position in innovative hemp extract
wellness products. The Group’s investment has been made via a seven-year convertible debenture which is convertible at the Group’s
discretion into a non-controlling equity stake in Charlotte’s Web of around 19.9%. As part of the investment agreement, the Group has
the right to appoint directors to the Board of Charlotte’s 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.
Yemen associates
In 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.
15 Retirement benefit schemes
The Group's subsidiary undertakings in multiple jurisdictions operate various funded and unfunded defined benefit schemes, including
pension and post-retirement healthcare schemes, and defined contribution pension schemes, with the Group’s 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’s defined benefit arrangements and over 70% of the current
service cost.
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’ 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’s arrangements are closed to new entrants.
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. The costs of such plans are recognised in the Group income statement within operating profit as part of employment costs.
Service costs are spread systematically over the expected service lives of employees with past service costs or credits, the impact of
settlements and curtailments, and the net interest on the net defined benefit deficit or surplus recognised in the periods in which they
arise. Actuarial gains and losses and surplus restrictions are recognised immediately in other comprehensive income. Benefits provided
through defined contribution schemes are charged as an expense as payments fall due.
Through its defined benefit pension schemes and healthcare benefit schemes, the Group is exposed to a number of risks, including:
– 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
regulations regarding funding deficits. In addition, schemes in the UK and Canada have purchased insurance contracts which exactly
match the valuation volatility of all or part of the scheme liabilities.
– 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’ bond holdings, ‘buy-in’ insurance assets or other hedging instruments.
– Inflation risk: Some of the Group’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities, although
in most cases, caps on the level of inflationary increases are in place in the scheme rules, while some assets and derivatives provide
specific inflation protection.
– Life expectancy: The majority of the schemes’ obligations are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the plans’ 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 ‘buy-in’ and ‘buy-out’ transactions referred to below.
A ‘buy-out’ 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 constructive obligation to the pension scheme or to the sponsoring employer. By contrast, with a ‘buy-in’ 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 the pension liability reducing the risks associated with improved longevity and interest and discount rate movements. The Group
consequently benefits from the ‘buy-in’ as it reduces the individual scheme’s reliance on the Group for future cash funding requirements.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
302
All of the Group’s arrangements, including funded schemes where formal trusts or equivalents are required, have been developed
and are operated in accordance with local practices and regulations where applicable in the countries concerned. Responsibility for
the governance of these schemes, including specific investment decisions and funding contribution schedules, generally lies with
the trustees, 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 weighted 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 the individual externally funded schemes, and after taking into account regulatory requirements in each territory. The Group’s
contributions to funded defined benefit schemes in 2025 in total are expected to be £36 million compared to £30 million in 2024.
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’s 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 2024, the
Group contributed £10 million (2023: £2 million) to its funded pension and post-retirement plans in the U.S. The Group does not expect to
make significant contributions in 2025.
With effect from 31 December 2024, accruals for salaried U.S. employees who participate in the qualified (RAPP) and non-qualified
pension plans has ceased. A past service credit of £18 million was recognised on the difference between the salary increase assumption
for active members and the inflation assumption for deferred members at the date of the plan amendment and curtailment of benefits.
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 designed
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 billion (£1.4 billion) of plan liabilities were removed from the balance sheet,
resulting in a settlement gain of £35 million. 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 billion (£1.3 billion) of plan liabilities removed from the balance
sheet, resulting in a settlement gain of £16 million.
At 31 December 2024, the Reynolds and Affiliates Pension Plan was reporting a surplus under IAS 19 in total of £507 million (2023: £516
million). Under the rules of this plan, after assuming the gradual settlement of the plan liabilities over the lives of the arrangements, the
majority of any surplus would be repurposed for other existing or replacement benefit plans. Residual amounts returnable to the Group
in the event of a termination or other distribution would trigger an excise charge and accordingly, a surplus restriction of £14 million
(2023: £nil million) 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’s 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 £111 million 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 £169 million (2023: £184 million). Under the UKPF scheme rules, the Trustee does not have
a unilateral 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 current tax legislation, a charge of 25% (2023: 35%) would arise on the gross amount of any
authorised surplus payment and the potential impact of this has been accounted for as part of the Group’s deferred tax liability.
On 16 March 2023, the Schedule of Contributions was 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 2024 or 2023 and no contributions are expected in 2025.
On 26 October 2022, the Group entered into an agreement with the Trustee to provide a temporary liquidity facility capped at £40 million
for up to two years. The facility was undrawn as at 31 December 2023 and on 28 March 2024 the facility was cancelled.
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’s 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 £383 million of
assets held by UKPF to PIC, and on 26 October 2022, a third and final buy-in policy was acquired with PIC. £198 million of assets were
transferred immediately with £35 million of the premium deferred and subsequently settled in 2023.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
303
As a result of these transactions, approximately 92% of the assets held by UKPF (2023: 92%) are represented by the buy-in contracts,
covering 100% of UKPF’s retirement liabilities (2023: 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 47%
in return seeking assets and 53% 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.
In June 2023, the High Court handed down a decision in the case of Virgin Media Limited v NTL Pension Trustees II Limited and Ors.
This decision has potential but uncertain implications in the UK for the validity of certain amendments to contracted-out arrangements
between 1997 and 2016 where the requisite actuarial confirmation was not obtained at the time amendments were made. A plan
amendment to a contracted-out scheme without appropriate actuarial confirmation could be void. In response to this, the UKPF Trustee
has undertaken limited investigation into this matter pending further developments and opinions from the Courts in early 2025. As at
31 December 2024, management have not identified any benefit uncertainties for which the potential impact would need to be
considered and will continue to monitor developments during 2025 and beyond.
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 £11 million in 2025 and £36 million per annum for
the four years after that. Contributions to pension schemes in Canada, Netherlands and Switzerland in total are anticipated to be around
£6 million in 2025 and then also around £3 million per annum for the four years after that.
For schemes in the Netherlands reporting surpluses of £77 million (2023: £44 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 £103 million
(2023: £123 million). For schemes in surplus in Canada of £34 million (2023: £33 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 the plan rules,
which economically represents a potential surplus refund, and the value of the employer reserve account as defined in legislation, 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 million (£114 million). 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’s 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’s reliance on the Group for future cash funding requirements. Previously, on
2 September 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 million (£451 million). The buy-in covered all the Society Plan’s
liabilities in relation to pensioners and deferred members as well as the pensions accrued up to 31 December 2020 for active members.
On 1 October 2024, the Group concluded a transaction to transfer all of the remaining assets and liabilities of the scheme associated
with the Group’s Groningen factory, which closed in 2022, allowing the Group to fully settle these obligations by transfer to an insurance
company, Nationale-Nederlanden, in a buy-out arrangement. Approximately €235 million (£199 million) of plan liabilities were removed
from the balance sheet.
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’s 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, 53% of the liabilities reported at year-end are
expected to be settled by the Group within 10 years, 29% between 10 and 20 years, 13% between 20 and 30 years, and 5% thereafter.
For unfunded healthcare schemes in the U.S. and Canada, 71% of the liabilities reported at year-end are expected to be settled by the
Group within 10 years, 23% between 10 and 20 years, 5% between 20 and 30 years, and 1% thereafter.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
304
The amounts recognised in the balance sheet are determined as follows:
Pension schemes
Healthcare schemes
Total
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Present value of funded scheme liabilities
(5,560)
(6,267)
(145)
(150)
(5,705)
(6,417)
Fair value of funded scheme assets
6,472
7,172
140
145
6,612
7,317
912
905
(5)
(5)
907
900
Unrecognised funded scheme surpluses
(56)
(40)
—
—
(56)
(40)
856
865
(5)
(5)
851
860
Present value of unfunded scheme liabilities
(358)
(380)
(376)
(405)
(734)
(785)
498
485
(381)
(410)
117
75
The above net asset/(liability) is recognised in the balance sheet as follows:
– retirement benefit scheme liabilities
(434)
(467)
(386)
(414)
(820)
(881)
– retirement benefit scheme assets
932
952
5
4
937
956
498
485
(381)
(410)
117
75
The net assets of funded pension schemes by territory are as follows:
Liabilities
Assets
Total
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
– U.S.
(1,380)
(1,439)
1,843
1,890
463
451
– UK
(1,942)
(2,132)
2,109
2,315
167
183
– Germany
(695)
(741)
798
863
103
122
– Canada
(499)
(556)
534
594
35
38
– Netherlands
(465)
(736)
542
780
77
44
– Switzerland
(243)
(273)
267
295
24
22
– Rest of Group
(336)
(390)
379
435
43
45
Funded schemes
(5,560)
(6,267)
6,472
7,172
912
905
Of the Group’s unfunded pension schemes, 47% (2023: 48%) relate to arrangements in the UK and 38% (2023: 38%) relate to
arrangements in the U.S., while 87% (2023: 86%) of the Group’s 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
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Defined benefit schemes
Service cost
– current service cost
37
36
1
1
38
37
– past service (credit)/cost, curtailments
and settlements
(18)
(7)
—
1
(18)
(6)
Net interest on the net defined benefit
liability
– interest on scheme liabilities
288
315
28
32
316
347
– interest on scheme assets
(312)
(345)
(8)
(9)
(320)
(354)
– interest on unrecognised funded scheme
surpluses
3
4
—
—
3
4
(2)
3
21
25
19
28
Defined contribution schemes
96
80
—
—
96
80
Total amount recognised in the income
statement (note 3)
94
83
21
25
115
108
Included in current service cost in 2024 is £11 million (2023: £10 million) of administration costs. Current service cost is stated after
netting employee contributions, where applicable.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
305
The movements in scheme liabilities are as follows:
Pension schemes
Healthcare schemes
Total
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Present value at 1 January
6,647
6,697
555
615
7,202
7,312
Differences on exchange
(127)
(153)
5
(34)
(122)
(187)
Current service cost
37
36
1
1
38
37
Past service (credit)/cost and settlements
(221)
(67)
—
1
(221)
(66)
Interest on scheme liabilities
288
315
28
32
316
347
Contributions by scheme members
2
2
—
—
2
2
Benefits paid
(470)
(484)
(54)
(52)
(524)
(536)
Actuarial (gains)/losses
– arising from changes in demographic
assumptions
(13)
(28)
—
—
(13)
(28)
– arising from changes in financial
assumptions
(239)
268
(6)
9
(245)
277
Experience losses/(gains)
14
61
(8)
(17)
6
44
Present value at 31 December
5,918
6,647
521
555
6,439
7,202
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 for 2024 includes amounts
relating to the cessation of accruals for salaried employees in the U.S. and the buy-out of the Groningen liabilities in the Netherlands.
Scheme liabilities by scheme membership:
Pension schemes
Healthcare schemes
Total
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Active members
582
656
22
23
604
679
Deferred members
756
1,025
1
1
757
1,026
Retired members
4,580
4,966
498
531
5,078
5,497
Present value at 31 December
5,918
6,647
521
555
6,439
7,202
Approximately 95% of scheme liabilities in both years relate to guaranteed benefits.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
306
The movements in funded scheme assets are as follows:
Pension schemes
Healthcare schemes
Total
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Fair value of scheme assets
at 1 January
7,172
7,271
145
153
7,317
7,424
Differences on exchange
(128)
(182)
2
(10)
(126)
(192)
Settlements
(203)
(60)
—
—
(203)
(60)
Interest on scheme assets
312
345
8
9
320
354
Company contributions
30
64
—
—
30
64
Contributions by scheme members
2
2
—
—
2
2
Benefits paid
(442)
(448)
(15)
(14)
(457)
(462)
Actuarial (losses)/gains
(271)
180
—
7
(271)
187
Fair value of scheme assets
at 31 December
6,472
7,172
140
145
6,612
7,317
The actuarial losses and gains in both years principally relate to movements in the fair values of scheme assets including revaluations
on initial 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. Settlements in the table above includes amounts relating to the
buy-out of the Groningen liabilities in the Netherlands in 2024.
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
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Equities ‒ listed
336
629
5
5
341
634
Equities ‒ unlisted
688
675
—
49
688
724
Bonds ‒ listed
1,180
1,139
25
17
1,205
1,156
Bonds ‒ unlisted
777
803
98
58
875
861
Buy-in insurance policies
2,345
2,585
—
—
2,345
2,585
Other assets ‒ listed
509
556
2
8
511
564
Other assets ‒ unlisted
637
785
10
8
647
793
Fair value of scheme assets
at 31 December
6,472
7,172
140
145
6,612
7,317
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. Allowable investment types include public equity, fixed
income, real assets, private equity and hedge funds. The 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 a buy-in transaction.
The residual assets of this fund of £169 million (2023: £184 million) now predominantly consist of cash and a proportion of illiquid
investments, such as private equity and infrastructure investments.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
307
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
2024
£m
2023
£m
2022
£m
2024
£m
2023
£m
2022
£m
2024
£m
2023
£m
2022
£m
Unrecognised funded
scheme surpluses at
1 January
(40)
(60)
(16)
—
—
—
(40)
(60)
(16)
Differences
on exchange
1
—
(4)
—
—
—
1
—
(4)
Interest on
unrecognised funded
scheme surpluses
(3)
(4)
(1)
—
—
—
(3)
(4)
(1)
Movement in year
(note 22)
(14)
24
(39)
—
—
—
(14)
24
(39)
Unrecognised funded
scheme surpluses at
31 December
(56)
(40)
(60)
—
—
—
(56)
(40)
(60)
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.
2024
2023
U.S.
UK
Germany
Canada Netherlands
Switzerland
U.S.
UK
Germany
Canada
Netherlands
Switzerland
Rate of increase in
salaries (%)
3.3
Nil
2.8
2.5
2.0
2.0
3.3
Nil
2.5
2.5
1.4
2.0
Rate of increase in
pensions in payment
(%)
2.4
3.2
2.2
Nil
2.1
Nil
2.4
3.1
2.3
Nil
2.5
Nil
Rate of increase in
deferred pensions (%)
0.1
2.8
2.2
Nil
2.1
—
0.1
2.5
2.3
Nil
2.5
—
Discount rate (%)
5.6
5.5
3.5
4.6
3.5
0.9
5.2
4.8
3.5
4.6
3.3
1.4
General inflation (%)
2.5
3.2
2.2
2.0
2.0
1.1
2.5
3.1
2.5
2.0
2.0
1.4
2024
2023
U.S.
UK
Germany
Canada Netherlands
Switzerland
U.S.
UK
Germany
Canada
Netherlands
Switzerland
Weighted average
duration of liabilities
(years)
9.6
11.4
10.6
9.0
13.6
10.9
10.2
12.2
10.6
9.0
15.0
10.8
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
308
For healthcare inflation in the U.S., the assumption is 7.0% for 2024 (2023: 7.5%) and in Canada, the assumption is 5.0% for both years.
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 (2023) improvement model (smoothing parameter of 7) and 15% weighting to the 2022 and
2023 data with a 1.25% long-term improvement rate applied from 2020 onwards (2023: 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)
Germany
RT Heubeck 2018 G (both years)
Canada
CPM-2014 Private Table (both years)
Netherlands
AG Prognosetafel 2024 (2023: AG Prognosetafel 2022)
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 follows:
U.S.
UK
Germany
Canada
Netherlands
Switzerland
Male
Female
Male
Female
Male
Female
Male
Female
Male
Female
Male
Female
31 December 2024
Member age 65
(current life expectancy)
22.2
23.7
22.6
24.1
20.8
24.2
22.1
24.5
21.0
24.7
22.1
23.9
Member age 45
(life expectancy at age 65)
22.3
24.2
24.1
26.1
22.5
26.4
23.1
25.4
23.2
26.5
24.1
25.8
31 December 2023
Member age 65
(current life expectancy)
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 expectancy 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
For the remaining territories, typical assumptions are that real salary increases will be from 0% to 9.8% (2023: 0% to 11.7%) per annum
and discount rates will be from 0% to 8.7% (2023: 0% to 7.0%) 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 2024 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 practice such assumptions rarely change in isolation, while asset values also change,
and the impacts may offset to some extent.
1 year
increase
£m
1 year
decrease
£m
percentage
increase
£m
percentage
decrease
£m
Average life expectancy – increase/(decrease) of scheme liabilities
113
(113)
Rate of inflation (+/- 25bps) – increase/(decrease) of scheme liabilities
82
(79)
Discount rate (+/- 50bps) – (decrease)/increase of scheme liabilities
(258)
280
A one percent increase in healthcare inflation would increase healthcare scheme liabilities by £18 million, and a one percent decrease
would decrease liabilities by £16 million. The income statement effect of this change in assumption is not material.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
309
16 Deferred tax
Net deferred tax (liabilities)/assets comprise:
Stock
relief
£m
Excess of
capital
allowances
over
depreciation
£m
Tax
losses
£m
Undistributed
earnings of
associates and
subsidiaries
£m
Retirement
benefits
£m
Trademarks
£m
Other
temporary
differences
£m
Total
£m
1 January 2024
32
(21)
373
(221)
39
(12,486)
1,003
(11,281)
Differences on exchange
(5)
3
(1)
3
(1)
(227)
(4)
(232)
(Charged)/credited to the
income statement
(24)
42
6
21
(21)
517
1,635
2,176
Credited/(charged) relating
to changes in tax rates
4
2
—
—
—
268
(25)
249
Credited/(charged) to other
comprehensive income
—
—
—
—
5
—
(23)
(18)
31 December 2024
7
26 378
(197)
22
(11,928)
2,586
(9,106)
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
Credited/(charged) to the
income statement
(1)
72
153
(4)
(35)
5,384
8
5,577
(Charged)/credited relating
to changes in tax rates
—
—
9
—
—
105
(8)
106
Charged to other
comprehensive income
—
—
—
—
35
—
(23)
12
Net reclassifications as
held-for-sale
1
(4)
—
—
—
—
11
8
31 December 2023
32
(21)
373
(221)
39
(12,486)
1,003
(11,281)
The net deferred tax liabilities are reflected in the Group balance sheet as follows: deferred tax asset of £2,573 million and deferred tax
liability of £11,679 million (2023: deferred tax asset of £911 million and deferred tax liability of £12,192 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 the same fiscal authority.
The movement in other temporary differences during 2024 primarily relates to the recognition of a deferred tax asset in relation to the
Proposed Plans in Canada, described further in notes 24 and 31.
The Group net deferred tax liability of £9,106 million includes a net deferred tax asset of £551 million (2023: £493 million) in relation to UK
Group companies, which relates mainly to tax losses (£394 million; 2023: £363 million) and the excess of capital allowances over
depreciation (£215 million; 2023: £196 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 to 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 10% increase or decrease
in the total profits of UK group companies.
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 £365 million (2023:
£360 million) which have no expiry date and unused tax losses of £201 million (2023: £285 million) which will expire within the next 20 years.
In 2024 and 2023 the Group has not recognised any deferred tax asset in respect of deductible temporary differences which have no
expiry date and has not recognised any deferred tax asset (2023: £25 million) in respect of deductible temporary differences which will
expire within the next 10 years.
At the balance sheet date, the Group has unused tax credits of £80 million (2023: £80 million) which have no expiry date. No amount
of deferred 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 £1.2 billion (2023: £1.1 billion).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
310
17 Trade and other receivables
2024
£m
2023
£m
Trade receivables
2,855
2,887
Loans and other receivables
689
663
Prepayments and accrued income
342
392
3,886
3,942
Current
3,604
3,621
Non-current
282
321
3,886
3,942
Trade receivables
The majority of receivables are held in order to collect contractual cash flows, in accordance with the Group’s 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 balance sheet 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 2024, the value of trade
receivables derecognised through the factoring arrangements where the Group acts as a collection agent was £535 million
(2023: £545 million) and where the Group does not act as a collection agent was £7 million (2023: £16 million). Included in trade
receivables above is £213 million (2023: £189 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 2024, the value of trade receivables
derecognised through these arrangements was £172 million (2023: £141 million).
A number of Group companies have entered into arrangements with certain customers. Under these agreements the Group enters into
an agreement with a financial institution and/or a customer. The agreement allows the customer to obtain finance from the financial
institution in order to pay invoices due to the Group. The customer repays the financial institution based on an agreed maturity date
independently agreed between the customer and financial institution. Under these agreements there is normally no recourse to the Group
in the event of credit default by customers. However, the Group is subject to various performance obligations under the arrangement
including notifying the financial institution of credit default or of changes to, or termination of, the customer supply agreement. The
amount derecognised from trade receivables at 31 December 2024 in relation to these arrangements is £20 million. The cash flows have
been recognised within operating cash flows.
The Group also participates in agreements with customers where the Group can request early payment of invoices at a discount.
The discount is recognised as a deduction against revenue. At 31 December, £82 million was received in advance of the invoice due date
(2023: £67 million).
Loans and other receivables
Included in loans and other receivables are £113 million of litigation related deposits (2023: £131 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.
Loans and other receivables include £57 million (2023: £56 million) as a current receivable in relation to outstanding proceeds from the
sale of the Group’s Iranian subsidiary in 2021. Given the ongoing political situation, heightened sanctions and other uncertainties coupled
with the passage of time the receivable has been outstanding, the Group recognised an expected credit loss of £28 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 note 18, to the cash flow statement.
Prepayments and accrued income
Prepayments and accrued income include £16 million (2023: £17 million) of accrued income primarily in relation to rebates and royalties.
Other disclosures
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:
2024
£m
2023
£m
Trade receivables – gross
2,900
2,957
Trade receivables – allowance
(45)
(70)
Loans and other receivables – gross
717
691
Loans and other receivables – allowance
(28)
(28)
Prepayments and accrued income
342
392
Net trade and other receivables per balance sheet
3,886
3,942
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
311
The movements in the allowance account are as follows:
2024
2023
Trade
receivables
£m
Loans
and other
receivables
£m
Total
£m
Trade
receivables
£m
Loans
and other
receivables
£m
Total
£m
1 January
70
28
98
51
—
51
Differences on exchange
(3)
—
(3)
2
—
2
Provided in the year
8
—
8
33
28
61
Released
(30)
—
(30)
(16)
—
(16)
31 December
45
28
73
70
28
98
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% (2023: 3.3%), Euro: 5.5% (2023: 6.6%) and other currencies: 1.8% (2023: 1.4%).
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 credit risk with respect to trade receivables as the Group has a large number of internationally dispersed customers.
18 Investments held at fair value
2024
2023
Fair value
through P&L
£m
Fair value
through OCI
£m
Total
£m
Fair value
through P&L
£m
Fair value
through OCI
£m
Total
£m
1 January
652
67
719
640
60
700
Difference on exchange
(40)
—
(40)
(52)
(1)
(53)
Additions
210
4
214
405
11
416
Disposals
(288)
—
(288)
(372)
—
(372)
Provisions
—
—
—
4
—
4
Reclassifications
—
—
—
(3)
3
—
Other fair value movements
60
(6)
54
30
(6)
24
31 December
594
65
659
652
67
719
Current
513
—
513
601
—
601
Non-current
81
65
146
51
67
118
594
65
659
652
67
719
The Group’s 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’s corporate venture capital unit, Btomorrow Ventures, and other
Group companies.
Btomorrow Ventures has completed 28 investments since its launch in 2020, and continues to invest in innovative, consumer-led brands,
new sciences and technologies, and sustainability to support the Group’s transformational strategy for A Better Tomorrow™.
Throughout 2024, BTV has continued to support its portfolio of companies with a number of follow-on investment rounds, and new
investments including a U.S.-based adaptogens and nootropics beverage company, Hop Wtr Inc., and a German AI-powered sustainable
packaging company, one.five. During 2023, BTV invested into a UK-based bioplastics company, FlexSea, a U.S.-based organ-on-a-chip
technology company, Hesperos Inc. and into the Brazilian supplements company, Mais Mu.
The majority of investments held at fair value through other comprehensive income (OCI) relate to equity investments in various
businesses which are held for their strategic value.
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’s definition
of net debt. Investments held at fair value through profit and loss also include the Group’s investment in Charlotte’s Web (see note 14)
and other strategic investments which do not meet the definition of equity investments.
Investments held at fair value through profit and loss above include restricted amounts of £437 million (2023: £446 million) due to investments
held by subsidiaries in CCAA protection (note 32), as well as £60 million (2023: £89 million) subject to potential exchange control restrictions.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
312
As part of the sale and leaseback transaction in Nigeria, referred to in note 5(a), the Group obtained a 40% interest in Rising Sun Partners LP,
a property management company as part of the consideration receivable. As a general partner, the Group has no voting rights or influence over
the entity and has classified the interest as an investment at fair value through profit and loss. The fair value of the investment has been derived
as a share of the market value of the property owned and managed by Rising Sun Partners LP. The value of the investment as at 31 December
2024 is £10 million and as it is a non-cash addition it has been excluded from the cash flow reconciliation below.
In 2021, as part of the disposal of the Group’s operations in Iran, a provision of £24 million against non-current investments held at fair
value was charged to net finance costs as recoverability of these funds was not certain. During 2022, £17 million was recovered with the
remaining funds recovered during 2023.
Investments held at fair value are predominantly denominated in the functional currencies of subsidiary undertakings with less than
7% in other currencies (2023: less than 6% 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’s Web has been determined using a binomial option pricing model.
Included in the values in the table above are £212 million (2023: £192 million) of level 3 assets. Movements in these assets in 2024 included
£128 million (2023: £123 million) of additions, £114 million (2023: £90 million) of disposals and £6 million of net fair value gain (2023:
£27 million net fair value loss).
Below is a reconciliation of the fair value investments cash flows to the cash flow statement – investing activities:
2024
£m
2023
£m
Cash outflow from investments held at fair value
204
416
Cash outflow from loans and other receivables
12
32
Cash outflows from investments per cash flow statement
216
448
Cash inflow from investments held at fair value
(288)
(372)
Cash inflow from loans and other receivables
(11)
(33)
Cash inflows from investments per cash flow statement
(299)
(405)
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
313
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 liabilities under the IFRS 13 fair value hierarchy is given in note 26.
2024
2023
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Fair value hedges
– interest rate swaps
11
270
10
187
– cross-currency swaps
19
—
18
—
Cash flow hedges
– cross-currency swaps
81
16
97
13
– forward foreign currency contracts
71
33
48
55
Net investment hedges
– forward foreign currency contracts
35
67
81
9
Held-for-trading
*
– forward foreign currency contracts
79
31
36
131
Embedded derivative relating to associates (note 14)
—
7
—
—
Total
296
424
290
395
Current
186
156
181
189
Non-current
110
268
109
206
296
424
290
395
Derivatives
– in respect of net debt
**
184
297
147
317
– other
112
127
143
78
296
424
290
395
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 ‘held-for-trading’. These derivatives
principally consist of 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.
** Derivatives in respect of net debt are in a net liability position of £113 million as at 31 December 2024 (2023: net liability position of £170 million). The Group’s net debt is presented
in note 23.
For cash flow hedges, the timing of expected cash flows is as follows: assets of £152 million (2023: £144 million) of which £65 million
(2023: £46 million) is expected within one year and £nil million (2023: £ nil million) beyond five years and liabilities of £49 million
(2023: £68 million) of which £48 million (2023: £52 million) is expected within one year and £nil million (2023: £nil million) beyond five years.
The Group’s 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
314
The table below sets out the maturities of the Group’s derivative financial instruments (excluding the embedded derivative relating to
associates) on an undiscounted contractual basis, based on spot rates.
The maturity dates of gross-settled derivative financial instruments are as follows:
2024
2023
Assets
Liabilities
Assets
Liabilities
Inflow
£m
Outflow
£m
Inflow
£m
Outflow
£m
Inflow
£m
Outflow
£m
Inflow
£m
Outflow
£m
Within one year
– forward foreign currency
contracts
9,748
(9,556)
6,952
(7,075)
8,163
(8,006)
10,354
(10,549)
– interest rate swaps
—
(9)
117
(224)
—
—
124
(256)
– cross-currency swaps
34
(40)
306
(323)
34
(42)
6
(10)
Between one and two years
– forward foreign currency
contracts
377
(365)
199
(202)
171
(168)
182
(186)
– interest rate swaps
18
(14)
231
(316)
—
—
77
(151)
– cross-currency swaps
34
(38)
—
—
34
(35)
306
(316)
Between two and three years
– interest rate swaps
19
(15)
229
(249)
—
—
77
(124)
– cross-currency swaps
594
(492)
—
—
34
(33)
—
—
Between three and four years
– interest rate swaps
19
(16)
196
(218)
—
—
39
(31)
– cross-currency swaps
27
(25)
—
—
618
(488)
—
—
Between four and five years
– interest rate swaps
19
(17)
196
(218)
—
—
—
—
– cross-currency swaps
473
(454)
—
—
26
(21)
—
—
Beyond five years
– interest rate swaps
279
—
1,217
(685)
– cross-currency swaps
—
—
—
—
458
(453)
—
—
11,641
(11,041)
9,643
(9,510)
9,538
(9,246)
11,165
(11,623)
Group's net-settled derivative financial instruments are all due within one year with assets inflow of £1 million (2023: £10 million inflow)
and liabilities outflow of £8 million (2023: £5 million outflow).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
315
The items designated as hedging instruments are as follows:
2024
2023
Nominal
amount of
hedging
instrument
£m
Changes in
fair value used for
calculating hedge
ineffectiveness
£m
Nominal
amount of hedging
instrument
£m
Changes in
fair value used for
calculating hedge
ineffectiveness
£m
Interest rate risk exposure:
Fair value hedges
– interest rate swaps
6,509
(58)
2,798
79
– cross-currency swaps
459
(2)
451
13
Cash flow hedges
– cross-currency swaps
833
18
859
(26)
Foreign currency risk exposure:
Cash flow hedges
– forward foreign currency contracts
3,023
39
2,807
(6)
Net investment hedges (derivative related)
– forward foreign currency contracts
4,569
(33)
4,329
69
Net investment hedges (non-derivative related)
– debt (carrying value) in borrowings designated as net
investment hedges of net assets
363
17
380
9
20 Inventories
2024
£m
2023
£m
Raw materials and consumables
2,056
2,198
Finished goods and work in progress
2,434
2,584
Goods purchased for resale
126
156
4,616
4,938
Write-offs taken to other operating expenses in the Group income statement were £134 million (2023: £250 million; 2022: £250 million).
As mentioned in note 33, in 2023, 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
316
21 Cash and cash equivalents
2024
£m
2023
£m
Cash and bank balances
3,428
3,247
Cash equivalents
1,869
1,412
5,297
4,659
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:
2024
£m
2023
£m
Functional currency
4,392
4,147
US dollar
651
373
Euro
115
81
Other currencies
139
58
5,297
4,659
In the Group cash flow statement, net cash and cash equivalents are shown after deducting bank overdrafts and accrued interest where
applicable, as follows:
2024
£m
2023
£m
Cash and cash equivalents as above
5,297
4,659
Less overdrafts and accrued interest
(193)
(142)
Net cash and cash equivalents
5,104
4,517
Cash and cash equivalents also include £49 million (2023: £38 million) of cash that is held as a hedging instrument.
Accrued interest of £55 million (2023: £39 million) is primarily due to high cash and cash equivalent balances in certain markets, including
the UK, where in 2024 the excess cash was driven by the sale of 12% of the Group's equity stake in its associate ITC. In 2023, Brazil
accumulated cash was temporarily higher than normal due to the recognition of tax credits being offset against tax liabilities payable.
Restricted cash
Cash and cash equivalents include restricted amounts of £2,072 million (2023: £1,904 million) due to subsidiaries in CCAA protection
(note 32 and note 24), as well as £339 million (2023: £392 million) principally due to exchange control restrictions.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
317
22 Capital and reserves
(a) Share capital
Ordinary
shares of 25p each
Number of shares
£m
Allotted and fully paid
1 January 2024
2,456,941,909
614
Changes during the year
– share option schemes
275,824
—
– shares bought back and cancelled
(27,392,429)
(7)
– treasury shares cancelled
(87,000,000)
(22)
31 December 2024
2,342,825,304
585
Allotted and fully paid
1 January 2023
2,456,867,420
614
Changes during the year
– share option schemes
74,489
—
31 December 2023
2,456,941,909
614
Allotted and fully paid
1 January 2022
2,456,617,788
614
Changes during the year
– share option schemes
249,632
—
31 December 2022
2,456,867,420
614
Share capital
The Company’s ordinary shares are fully paid and no further contribution of capital may be required by the Company from the
shareholders. All ordinary shares rank equally with regard to participation in dividends and to share in the proceeds of the Company’s
residual assets upon a winding up of the Company. Shareholders may, by ordinary resolution, declare final dividends, but not in excess
of the 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 shares 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’s Annual General Meeting voting is undertaken by way of a poll.
All rights attached to the Company’s 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
£m
Capital
redemption
reserves
£m
Merger
reserves
£m
Total
£m
31 December 2024
121
130
26,414
26,665
31 December 2023
115
101
26,414
26,630
31 December 2022
113
101
26,414
26,628
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 £6 million (2023: £2 million; 2022: £5 million) in respect of ordinary shares issued under the Company’s share option
schemes. In 2022, the £1 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 awards, 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. During 2024, 87 million shares purchased
under previous share buy-back programmes were cancelled.
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 shares issued and their nominal value of £3,748 million 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
£22,666 million was credited to merger reserves.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
318
(c) Equity attributed to owners of the parent − movements in other reserves and retained earnings (which are after deducting
treasury shares) comprise:
Retained earnings
Translation
reserve
(i)
£m
Hedging
reserve
(ii)
£m
Fair
value
reserve
(iii)
£m
Revaluation
reserve
(iv)
£m
Other
(v)
£m
Total
other
reserves
£m
Treasury
shares
(vi)
£m
Other
£m
1 January 2024
(1,470)
(194)
18
179
573
(894) (7,096) 31,627
Comprehensive income and expense
Profit for the year
—
—
—
—
—
—
— 3,068
Foreign currency translation and hedges of net
investments in foreign operations
– differences on exchange from translation of
foreign operations
(193)
—
—
—
—
(193)
—
—
– reclassified and reported in profit for the year
—
—
—
—
—
—
—
—
– net investment hedges − net fair value
gains on derivatives
20
—
—
—
—
20
—
—
– net investment hedges − differences on exchange
on borrowings
17
—
—
—
—
17
—
—
Cash flow hedges
– net fair value gains
—
65
—
—
—
65
—
—
– reclassified and reported in profit for the year
—
36
—
—
—
36
—
—
– tax on net fair value gains in respect of cash flow
hedges (note 10(f))
—
(23)
—
—
—
(23)
—
—
Investments held at fair value
– net fair value losses
—
—
(6)
—
—
(6)
—
—
Associates
− share of OCI, net of tax (note 9)
(32)
19
—
—
—
(13)
—
—
− differences on exchange reclassified to profit or loss
(note 9)
43
—
—
—
—
43
—
—
Retirement benefit schemes
– net actuarial losses (note 15)
—
—
—
—
—
—
—
(19)
– surplus recognition (note 15)
—
—
—
—
—
—
—
(14)
– tax on actuarial losses in respect of subsidiaries
(note 10(f))
—
—
—
—
—
—
—
(1)
Associates − share of OCI, net of tax (note 9)
—
—
33
—
—
33
—
—
Other changes in equity
Cash flow hedges reclassified and
reported in total assets
—
13
—
—
—
13
—
—
Employee share options
– value of employee services
—
—
—
—
—
—
—
70
– treasury shares used for share option schemes
—
—
—
—
—
—
8
(8)
Dividends and other appropriations
– ordinary shares
—
—
—
—
—
—
— (5,209)
Purchase of own shares
– held in employee share ownership trusts
—
—
—
—
—
—
(94)
—
– share buy-back programme
—
—
—
—
—
—
—
(698)
Treasury shares cancelled
—
—
—
—
—
— 2,685 (2,685)
Perpetual hybrid bonds
– coupons paid
—
—
—
—
—
—
—
(56)
– tax on coupons paid
—
—
—
—
—
—
—
14
Other movements
—
—
—
—
—
—
89
(71)
31 December 2024
(1,615)
(84)
45
179
573
(902) (4,408) 26,018
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
319
Retained earnings
Translation
reserve
(i)
£m
Hedging
reserve
(ii)
£m
Fair
value
reserve
(iii)
£m
Revaluation
reserve
(iv)
£m
Other
(v)
£m
Total
other
reserves
£m
Treasury
shares
(vi)
£m
Other
£m
1 January 2023
2,200
(327)
30
179
573
2,655
(7,116) 51,197
Comprehensive income and expense
Loss for the year
—
—
—
—
—
—
— (14,367)
Foreign currency translation and hedges of net
investments in foreign operations
– differences on exchange from translation of
foreign operations
(4,007)
—
—
—
—
(4,007)
—
—
– reclassified and reported in profit for the year
552
—
—
—
—
552
—
—
– net investment hedges – net fair value gains on
derivatives
236
—
—
—
—
236
—
—
– net investment hedges – differences on exchange
on borrowings
9
—
—
—
—
9
—
—
Cash flow hedges
– net fair value gains
—
59
—
—
—
59
—
—
– reclassified and reported in profit for the year
—
12
—
—
—
12
—
—
– tax on net fair value gains in respect of cash flow
hedges (note 10(f))
—
(23)
—
—
—
(23)
—
—
Investments held at fair value
– net fair value losses
—
—
(6)
—
—
(6)
—
—
Associates – share of OCI, net of tax (note 9)
(165)
58
—
—
—
(107)
—
—
Retirement benefit schemes
– net actuarial losses (note 15)
—
—
—
—
—
—
—
(106)
– surplus recognition (note 15)
—
—
—
—
—
—
—
24
– tax on actuarial gains in respect of subsidiaries
(note 10(f))
—
—
—
—
—
—
—
30
Associates − share of OCI, net of tax (note 9)
—
—
(6)
—
—
(6)
—
1
Other changes in equity
Cash flow hedges reclassified and reported in
total assets
—
27
—
—
—
27
—
—
Employee share options
– value of employee services
—
—
—
—
—
—
—
71
– treasury shares used for share option schemes
—
—
—
—
—
—
14
(14)
Dividends and other appropriations
– ordinary shares
—
—
—
—
—
—
— (5,071)
Purchase of own shares
– held in employee share ownership trusts
—
—
—
—
—
—
(110)
—
Perpetual hybrid bonds
– coupons paid
—
—
—
—
—
—
—
(58)
– tax on coupons paid
—
—
—
—
—
—
—
14
Reclassification of equity in respect of assets
classified as held-for-sale
(295)
—
—
—
—
(295)
—
—
Other movements
—
—
—
—
—
—
116
(94)
31 December 2023
(1,470)
(194)
18
179
573
(894) (7,096) 31,627
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
320
Retained earnings
Translation
reserve
(i)
£m
Hedging
reserve
(ii)
£m
Fair
value
reserve
(iii)
£m
Revaluation
reserve
(iv)
£m
Other
(v)
£m
Total
other
reserves
£m
Treasury
shares
(vi)
£m
Other
£m
1 January 2022
(6,427)
(363)
6
179
573
(6,032)
(5,122) 49,334
Comprehensive income and expense
Profit for the year
—
—
—
—
—
—
— 6,666
Foreign currency translation and hedges of net
investments in foreign operations
– differences on exchange from translation of
foreign operations
8,920
—
—
—
—
8,920
—
—
– reclassified and reported in profit for the year
5
—
—
—
—
5
—
—
– net investment hedges – net fair value
loss on derivatives
(578)
—
—
—
—
(578)
—
—
– net investment hedges – differences on exchange
on borrowings
(21)
—
—
—
—
(21)
—
—
Cash flow hedges
– net fair value gains
—
81
—
—
—
81
—
—
– reclassified and reported in profit for the year
—
101
—
—
—
101
—
—
– tax on net fair value gains in respect of cash flow
hedges (note 10(f))
—
(17)
—
—
—
(17)
—
—
Investments held at fair value
– net fair value gains
—
—
6
—
—
6
—
—
Associates – share of OCI, net of tax (note 9)
6
—
—
—
—
6
—
—
Retirement benefit schemes
– net actuarial gains (note 15)
—
—
—
—
—
—
—
316
– surplus recognition (note 15)
—
—
—
—
—
—
—
(39)
– tax on actuarial gains in respect of subsidiaries
(note 10(f))
—
—
—
—
—
—
—
(95)
Associates - share of OCI, net of tax (note 9)
—
—
18
—
—
18
—
1
Other changes in equity
Cash flow hedges reclassified and reported in total
assets
—
(129)
—
—
—
(129)
—
—
Employee share options
– value of employee services
—
—
—
—
—
—
—
81
– treasury shares used for share option schemes
—
—
—
—
—
—
14
(15)
Dividends and other appropriations
– ordinary shares
—
—
—
—
—
—
— (4,915)
Purchase of own shares
– held in employee share ownership trusts
—
—
—
—
—
—
(80)
—
– share buy-back programme
—
—
—
—
—
— (2,012)
—
Perpetual hybrid bonds
– coupons paid
—
—
—
—
—
—
—
(59)
– tax on coupons paid
—
—
—
—
—
—
—
11
Non-controlling interests − acquisitions (note 27(c))
—
—
—
—
—
—
—
(1)
Reclassification of equity in respect of assets
classified as held-for-sale
295
—
—
—
—
295
—
—
Other movements
—
—
—
—
—
—
84
(88)
31 December 2022
2,200
(327)
30
179
573
2,655
(7,116) 51,197
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
321
(i) Translation reserve:
The translation reserve is explained in the accounting policy on foreign currencies in note 1.
In 2024, included within the differences on exchange from translation of foreign operations and associates is £43 million (2023: £552
million; 2022: £5 million) which has been reclassified from reserves to the income statement and recognised in other operating expenses
as an adjusting item. This relates to the Group's divestment of 12% of its equity stake in ITC. In 2023, this amount included £554 million in
respect of the sale of the Russian and Belarusian subsidiaries and a loss of £2 million in respect of the move to above market business
models and Quantum-related initiatives. In 2022, £4 million was in respect of the exit from Egypt and £2 million from other Quantum-
related initiatives involving market exits. Also, in 2022, as a result of the exit from Yemen, the Group reclassified to the income statement
the foreign exchange previously recognised in associates other comprehensive income. This resulted in a credit of ££1 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 £33 million (2023: £51 million loss;
2022: £16 million loss) and a gain of £6 million (2023: £4 million loss; 2022: £2 million loss) were reported within revenue and raw materials
and consumables, respectively, together with a loss of £6 million (2023: £17 million loss; 2022: £46 million gain) reported in other
operating expenses, and a gain of £69 million (2023: £84 million gain; 2022: £73 million 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 ‘cost of hedging’ 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 2024 is an accumulated loss of £2 million
(2023: £6 million loss; 2022: £5 million 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) £483 million 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’s 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 £90 million 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 £4,114 million
(2023: £6,807 million; 2022: £6,821 million) for shares repurchased and not cancelled and £294 million (2023: £289 million; 2022: £295
million) in respect of the cost of own shares held in employee share ownership trusts.
On 18 March 2024, the Group announced a proposed programme to buy-back shares using the proceeds from the sale of shares in ITC
Limited, refer to note 27(b)(i). The programme will buy-back £1.6 billion of ordinary shares starting with £700 million in 2024 and with the
remaining £900 million in 2025. The purpose of this programme is to reduce the issued share capital of the Company and the shares
purchased in 2024 were cancelled on purchase. In respect of the share buy-back programme announced in 2024, during the year the
Group bought back and cancelled 27,392,429 shares, for a total consideration of £698 million inclusive of transaction costs of £3 million
that have been deducted from equity. Additionally, in 2024, 87 million shares held in the Company’s treasury share account previously
purchased under prior year share buy-back programmes were cancelled.
The previous share buy-back programme was in 2022 where the Board approved on 10 February 2022 the proposed buy-back of
£2 billion shares. In respect of the share buy-back programme announced in 2022, during 2022 the Group bought back 59,541,862 shares
and incurred transaction costs of £10 million that have been deducted from equity.
As at 31 December 2024, treasury shares include 7,113,821 (2023: 5,951,979; 2022: 5,920,638) shares held in trust and 133,266,206 (2023:
220,533,855; 2022: 221,000,192) shares repurchased and not cancelled as part of the Company’s 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
322
(d) Perpetual hybrid bonds
On 27 September 2021, the Group issued two €1 billion perpetual hybrid bonds amounting to £1,703 million, which have been classified
as equity. Issuance costs of these bonds, amounting to €26 million (£22 million), have been recognised within equity, net of £4 million of
tax on issuance costs.
These bonds include redemption options exercisable at the Group’s 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 the event 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’s
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 £31 million in September 2024
(September 2023: £33 million) on the 3.75% September 2029 bond and £25 million in December 2024 (December 2023: £26 million)
on the 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 the cash 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 2024 is £1,211 million (2023: £1,512 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 2023 of 235.52p per ordinary share (31 December 2022: 230.88p
per ordinary share) was payable in four equal instalments: amounts payable in May 2024 of £1,316 million (May 2023: £1,282 million),
August 2024 of £1,303 million (August 2023: £1,284 million), November 2024 of £1,302 million (November 2023: £1,293 million) and £1,296
million in February 2025 (February 2024: £1,287 million), respectively. The total dividends recognised as an appropriation from reserves in
2024 was £5,209 million (2023: £5,071 million; 2022: £4,915 million).
The Board has declared an interim dividend of 240.24p per ordinary share of 25p, for the year ended 31 December 2024, payable
in four equal quarterly instalments of 60.06p per ordinary share in May 2025, August 2025, November 2025 and February 2026.
These payments will be recognised as appropriations from reserves in 2025 and 2026. The total amount payable is estimated to
be £5,308 million based on the number of shares outstanding at the date of these accounts.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
323
23 Borrowings
Currency
Maturity dates
Interest rates
2024
£m
2023
£m
Eurobonds
Euro
2025 to 2045
1.3% to 5.4%
5,236
5,569
UK sterling
2025 to 2055
2.1% to 6.0%
2,291
3,097
Swiss franc
2026
1.4%
221
234
Bonds issued pursuant to Rules under
the U.S. Securities Act (as amended)
US dollar
2025 to 2053
1.7% to 8.1%
28,268
29,913
Bonds and notes
36,016
38,813
Commercial paper
—
—
Other loans
—
100
Bank loans
211
216
Bank overdrafts
138
103
Lease liabilities
585
498
36,950
39,730
Perpetual hybrid bonds issued by the Group have been classified as equity (note 22(d)) and are therefore excluded from borrowings.
Other loans comprise £nil million (2023: £100 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 £565 million at 31 December 2024 (2023: £573 million). Included
within borrowings are £8,750 million (2023: £5,935 million) of borrowings subject to fair value hedges where their amortised cost has
been decreased by £215 million (2023: £110 million decrease).
The fair value of borrowings is estimated to be £34,596 million (2023: £36,000 million) of which £33,663 million (2023: £35,083 million)
has been calculated using quoted market prices and is within level 1 of the fair value hierarchy and £933 million (2023: £917 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 2024 are
£nil million (2023: £nil million). The majority of lease liabilities are secured against the associated assets.
Borrowings are repayable as follows:
Per balance sheet
Contractual gross maturities
2024
£m
2023
£m
2024
£m
2023
£m
Within one year
4,312
4,324
5,276
5,359
Between one and two years
2,644
3,319
4,084
4,784
Between two and three years
3,012
2,558
4,522
3,920
Between three and four years
3,435
2,947
4,695
4,393
Between four and five years
1,725
3,410
2,899
4,600
Beyond five years
21,822
23,172
32,232
35,163
36,950
39,730
53,708
58,219
The contractual gross maturities in each year include the borrowings maturing in that year together with forecast interest payments
on all borrowings which are outstanding for all or part of that year.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
324
Borrowings are denominated in the functional currency of the subsidiary undertaking or other currencies as shown below:
Functional
currency
£m
US
dollar
£m
UK
sterling
£m
Euro
£m
Other
currencies
£m
Total
£m
31 December 2024
Total borrowings
28,830
3,754
302
3,800
264
36,950
Effect of derivative financial instruments
– cross-currency swaps
609
(148)
—
(533)
—
(72)
– forward foreign currency contracts
68
(901)
—
435
395
(3)
29,507
2,705
302
3,702
659
36,875
31 December 2023
Total borrowings
32,215
3,656
302
3,301
256
39,730
Effect of derivative financial instruments
– cross-currency swaps
1,214
(451)
(300)
(559)
—
(96)
– forward foreign currency contracts
(57)
(892)
—
537
414
2
33,372
2,313
2
3,279
670
39,636
The exposure to interest rate changes when borrowings are re-priced is as follows:
Within
1 year
£m
Between
1-2 years
£m
Between
2-3 years
£m
Between
3-4 years
£m
Between
4-5 years
£m
Beyond
5 years
£m
Total
£m
31 December 2024
Total borrowings
4,312
2,644
3,012
3,435
1,725
21,822
36,950
Effect of derivative financial instruments
– interest rate swaps
6,494
—
(1,815)
—
—
(4,679)
—
– cross-currency swaps
459
—
(72)
—
(459)
—
(72)
11,265
2,644
1,125
3,435
1,266
17,143
36,878
31 December 2023
Total borrowings
4,324
3,319
2,558
2,947
3,410
23,172
39,730
Effect of derivative financial instruments
– interest rate swaps
2,798
(229)
(786)
—
(1,783)
—
—
– cross-currency swaps
448
—
6
—
(98)
(452)
(96)
7,570
3,090
1,778
2,947
1,529
22,720
39,634
Lease liabilities are repayable as follows:
Per balance sheet
Contractual gross maturities
2024
£m
2023
£m
2024
£m
2023
£m
Within one year
141
131
171
155
Between one and two years
133
103
165
122
Between two and three years
87
77
103
91
Between three and four years
49
59
61
70
Between four and five years
38
29
47
38
Beyond five years
137
99
176
140
585
498
723
616
For more information on leasing arrangements, refer to note 13.
As at 31 December 2024, the Group’s undrawn committed borrowing facilities (note 26) amount to £7,748 million (2023: £7,923 million)
with £5,056 million maturing within one year (2023: £5,077 million maturing within one year), £154 million maturing between one and two
years (2023: £154 million maturing between one and two years), £2,538 million maturing between two and three years (2023: £154 million
maturing between two and three years), £nil million maturing between three and four years (2023: £2,538 million maturing between
three and four years) and £nil million maturing between four and five years (2023: £nil million maturing between four and five years).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
325
The Group’s composition and movements in net debt are presented below along with a reconciliation to the financing activities in the
Group Cash Flow Statement:
2024
£m
Notes
Opening
balance
Cash flow
Foreign
exchange
Fair value,
accrued
interest and
other
Held for Sale
Closing
balance
Borrowings (excluding lease liabilities)
*
39,232
(2,387)
231
(711)
—
36,365
Lease liabilities
498
(165)
(27)
279
—
585
Derivatives in respect of net debt
19
170
(133)
106
(30)
—
113
Cash and cash equivalents
21
(4,659)
(907)
323
(54)
—
(5,297)
Current investments held at fair value
18
(601)
99
41
(52)
—
(513)
34,640
(3,493)
674
(568)
—
31,253
2023
£m
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
—
39,232
Lease liabilities
517
(162)
(25)
168
—
498
Derivatives in respect of net debt
19
167
(238)
564
(323)
—
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)
—
(601)
39,281
(3,161)
(1,338)
226
(368)
34,640
Note:
*
Borrowings as at 31 December 2024 include £670 million (2023: £700 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’ movements in lease liabilities in 2024 mainly comprise additions of £279 million (2023: £168 million)
(net of reassessments, modifications and terminations), see note 13(a). Included within the £279 million (2023: £168 million) are new lease
liabilities of £12 million (2023: £nil million) mainly arising from sale and leaseback transactions. The movement of £52 million
(2023: £49 million) in current investments held at fair value represents the fair value gains for these investments.
2024
£m
2023
£m
Cash flows per net debt statement
(3,493)
(3,161)
Non-financing cash flows included in net debt
773
1,126
Interest paid
(1,703)
(1,682)
Interest element of lease liabilities
(37)
(30)
Remaining cash flows relating to derivative financial instruments
5
(242)
Purchases of own shares held in employee share ownership trusts
(94)
(110)
Purchase of own shares
(698)
—
Coupon paid on perpetual hybrid bonds
(56)
(59)
Dividends paid to owners of the parent
(5,213)
(5,055)
Dividends paid to non-controlling interests
(121)
(105)
Other
5
4
Net cash used in financing activities per cash flow statement
(10,632)
(9,314)
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
326
24 Provisions for liabilities
Restructuring
of existing
businesses
£m
Employee-
related
benefits
£m
Fox River
£m
Proposed
Plans in
Canada
£m
Other
provisions
£m
Total
£m
1 January 2024
139
42
44
—
774
999
Differences on exchange
(5)
(2)
—
—
(57)
(64)
Provided in respect of the year*
(15)
15
—
6,203
111
6,314
Utilised during the year
(54)
(13)
—
—
(67)
(134)
31 December 2024
65
42
44
6,203
761
7,115
Analysed on the balance sheet as
– current
33
11
2
2,456
542
3,044
– non-current
32
31
42
3,747
219
4,071
65
42
44
6,203
761
7,115
Restructuring
of existing
businesses
£m
Employee-
related
benefits
£m
Fox River
£m
DOJ and OFAC
investigations
£m
Other
provisions
£m
Total
£m
1 January 2023
297
44
54
450
676
1,521
Differences on exchange
(32)
(4)
—
—
(46)
(82)
Provided in respect of the year*
(21)
13
—
(450)
240
(218)
Utilised during the year
(105)
(11)
(10)
—
(96)
(222)
31 December 2023
139
42
44
—
774
999
Analysed on the balance sheet as
– current
96
13
3
—
356
468
– non-current
43
29
41
—
418
531
139
42
44
—
774
999
Note:
*
Amounts provided above are shown net of reversals of unused provisions which include reversals of £21 million (2023: £42 million) for restructuring of existing businesses,
£12 million (2023: £14 million) for employee benefits and £412 million (2023: £128 million) for other provisions. Included in the £412 million is an amount of £270 million which relates to
interest provision for FII GLO and which was reclassified to trade and other payables in 2024. For the DOJ and OFAC investigations, the £450 million that was provided for in 2022 was
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 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. Since 2022, no further Quantum
restructuring charges have been recognised as adjusting 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 additional risk has been incorporated in the discounting. While some elements of the non-current provisions
of £32 million will unwind over several years, as termination payments are made over extended periods in some countries, it is estimated
that approximately 98% of these 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, ‘jubilee’ 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 £31 million will unwind within five years.
Fox River
A provision of £274 million was made in 2011 for a potential claim under a 1998 settlement agreement entered into by a Group subsidiary
in respect 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. Under this agreement, payments of less than
£1 million were made in 2024 and 2023. In 2023, the Group incurred legal costs of £10 million which were also charged against the
provision. It is expected that the non-current provision will unwind within five years.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
327
Proposed Plans in Canada
CCAA Proceedings
In March 2019, ITCAN obtained an Initial Order from the Ontario Superior Court of Justice granting it protection under the Companies’
Creditors Arrangement Act (CCAA). Under a confidential court supervised mediation process, ITCAN has been negotiating a possible
settlement of all of its outstanding tobacco litigation in Canada while continuing to run its business in the normal course. On 17 October 2024,
the court-appointed mediator and monitor filed a proposed plan of compromise and arrangement in the Ontario Superior Court of
Justice. Substantially similar proposed plans were also filed for Rothmans, Benson & Hedges Inc. (RBH, a subsidiary of Philip Morris
International Inc.) and JTI-Macdonald Corp. (JTIM, a subsidiary of Japan Tobacco International) (collectively, the Proposed Plans).
Under the Proposed Plans, if ultimately sanctioned and implemented, ITCAN, RBH and JTIM (the Companies) would pay an aggregate
settlement amount of CAD$32.5 billion (£18.0 billion). This amount would be funded by:
– an upfront payment equal to all the Companies' cash and cash equivalents on hand (including investments held at fair value) plus
certain court deposits (subject to an aggregate industry withholding of CAD$750 million (£416 million)) plus 85% of any cash tax
refunds that may be received by the Companies on account of the upfront payments; and
– annual payments based on a percentage (initially 85%, reducing over time) of each of the Companies’ net income after taxes, based
on amounts generated from all sources, excluding New Categories, until the aggregate settlement amount is paid. The performance
of ITCAN’s New Categories (including vapour products and nicotine pouches) is not included in the basis for calculating the
annual payments.
These Proposed Plans, if ultimately sanctioned and implemented, would resolve ITCAN’s outstanding tobacco litigation in Canada and
provide a full and comprehensive release to ITCAN, BAT p.l.c. and all related companies for all tobacco claims in Canada.
On 31 October 2024, the court hearing to rule on the Claims Procedure Orders and Meeting Orders took place and these were granted.
In accordance with the Meeting Order, a creditors' meeting was held on 12 December 2024 and the Proposed Plans were approved by
the requisite majorities of the creditors. A sanction hearing took place between 29-31 January 2025. During the sanction hearing, the
Court was asked to sanction the Proposed Plans. The Court’s decision is currently pending and the stays are extended until 3 March
2025, or such time as the Court's decision on the sanction order is released.
Upfront payment
If the Proposed Plans to settle all outstanding and future Canadian tobacco litigation are sanctioned and implemented, ITCAN will be
required to pay into the settlement fund cash and cash equivalents on hand and investments held at fair value in Canada plus certain
court deposits (subject to an aggregate withholding of CAD$750 million (£416 million) for the Companies working capital inclusive of
cash pledged as collateral). At 31 December 2024, a provision of CAD$4,423 million (£2,456 million) has been recognised in relation to this
liability. Subject to the sanction order, the cash is expected to be paid in 2025.
Future payments
As the terms of the Proposed Plans dictate, there is no predetermined amount that ITCAN or any of the Companies individually are
required to pay. ITCAN and the other Companies are required to make annual payments based on a percentage of net income after tax
generated from all sources, excluding New Categories, until the Companies settle the liability in full. In accordance with IAS 37, a
provision has been recognised to reflect management's best estimate of ITCAN's total payments under the Proposed Plans. The
provision is based on Management’s best estimate using a five-year cash flow forecast that incorporates certain assumptions used in
the value-in-use model and which are used to support the carrying value of the Canadian CGU for goodwill impairment testing purposes,
such as the rate at which volumes will decline, future pricing plans and terminal decline. In addition, certain assumptions specific to the
provision have been incorporated including the future financial performance of each of the Companies (excluding New Categories),
enacted tax laws and the pre-tax discount rate. A pre-tax discount rate of 3.27% reflecting the risk free rate specific to Canada and
aligned with the anticipated timeline for the payments has been used to calculate the present value of the provision. At 31 December
2024, the provision is CAD$6,750 million (£3,747 million).
Management uses judgement to determine the key assumptions used to calculate the present value of the provision. Changes to key
assumptions can significantly impact the amount expected to be paid and the years over which payments are expected to be made.
The key assumptions used to calculate the provision are the rate at which volumes will decline and future pricing plans. The impact of
reasonably possible changes to these key assumptions on an individual basis has been outlined below.
– Rate at which volumes will decline: If volumes were to decline by an additional 3% then the provision would decrease by £568 million.
However, if the rate at which volumes decline is lower by 3% the provision would increase by £176 million; and
– Execution of future pricing plans: ITCAN’s future pricing plans are incorporated into the calculation of the provision. Pricing delivery
is subject to competitive actions and the relative pricing positions of brands and may vary depending on the competitive market
conditions. If ITCAN’s pricing delivery is between 60% to 120% of the base assumptions, the provision would decrease by £434 million
or increase by £71 million, respectively.
The above sensitivities have been considered in isolation and a combination of changes in several assumptions, including the future
financial performance of each of the Companies (excluding New Categories), may materially impact the provision.
The first payment of the annual contribution will be calculated using the 2025 financial results of ITCAN and a payable will be recognised
with a corresponding release of the provision. The annual contribution payable will be settled within the second half of the following
year. The payments will continue until the aggregate settlement amount is paid. It is expected that payments will continue for the next
20-30 years.
The provision will be reviewed on a bi-annual basis and revised to reflect changes resulting from reversals, the unwinding of the discount
and changes in assumptions. The revisions of the provision will be recognised in the income statement as an adjusting item.
Refer to note 31 for further information in relation to Canada litigation.
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 total amount payable to the U.S. authorities of US$635 million plus interest. Having recognised an initial provision of £450 million
(US$540 million) in 2022, the Group has recognised an additional charge of £75 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. Refer to note 25.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
328
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 nature 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 2024, the sales return provision, included in other provisions, was £106 million (2023: £55 million).
Included within other provisions was a provision for interest of £270 million (2023: £244 million) in relation to the Franked Investment
Income Group Litigation Order (FII GLO). As a result of the Group agreeing to repay £0.8 billion to HMRC, as mentioned in note 10(b),
the interest provision has been transferred to payables.
In 2024, the Group recognised a provision of £51 million for deferred consideration in relation with the acquisition of Beni Oral Nicotine
LLC. The consideration is up to US$200 million (£160 million), deferred for five years and subject to the achievement of certain
milestones. The fair value of the contingent consideration has been determined using a Monte Carlo simulation for the different
scenarios and discounted. Refer to note 27(a) for more details.
Other provisions also include:
(i) provisions of £113 million for interest on tax exposures;
(ii) a provision of £77 million recognised by BAT Brazil (2023: £89 million) in relation to litigation-related deposits as explained in note 17
and an amount of £37 million (2023: £40 million) recognised by BAT Brazil 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)); and
(iii) a provision of £59 million related to an excise assessment of activities undertaken in the Ploiesti factory in Romania.
25 Trade and other payables
2024
£m
2023
£m
Trade payables
1,709
1,707
Master settlement agreement (U.S.)
1,520
1,788
Duty, excise and other taxes
2,893
2,994
Accrued charges and deferred income
2,725
2,608
FII GLO (note 10(b))
1,118
863
Social security and other taxation
34
46
Sundry payables
236
587
10,235
10,593
Current
9,550
9,700
Non-current
685
893
10,235
10,593
Supplier Financing Arrangements
The Group has certain supplier financing arrangements or ‘reverse factoring’ 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’s 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’s perspective, remain unaltered, with only the ultimate
payee being changed. Non-cash movements were immaterial. The cash outflows in respect of these arrangements have been
recognised within operating cash flows.
2024
£m
2023
£m
Supplier Financing Arrangements
Total
Amounts available for financing reported within trade payables
180
204
Amounts accepted by financial institutions for early financing
179
201
Amounts for which suppliers have received payment
157
71
Analysed as:
Leaf payables
Amounts available for financing reported within trade payables
90
110
Amounts accepted by financial institution for early financing
90
110
Amounts for which suppliers have received payment
84
—
Other payables
Amounts available for financing reported within trade payables
90
94
Amounts accepted by financial institution for early financing
89
91
Amounts for which suppliers have received payment
73
71
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
329
2024
2023
Range of payment due dates
Lower
Upper
Lower
Upper
Leaf suppliers (note 1)
Trade payables part of the arrangement
90 days
150 days
Note 1
Trade payables that are not part of the arrangement
1 day
120 days
Note 1
Logistics suppliers
Trade payables part of the arrangement
45 days
135 days
—
*
Trade payables that are not part of the arrangement
1 day
180 days
—
*
Raw materials and consumables
suppliers (excl. leaf)
Trade payables part of the arrangement
60 days
180 days
—
*
Trade payables that are not part of the arrangement
1 day
240 days
—
*
Other suppliers
Trade payables part of the arrangement
30 days
180 days
—
*
Trade payables that are not part of the arrangement
1 day
270 days
—
*
Note:
Suppliers are subject to various payment due dates depending on the jurisdiction and standard practices. The Group’s payment terms commence from the invoice date. However,
for certain categories of external suppliers and in alignment with industry standards, payment terms begin from the date a valid invoice is received.
*
The Group applied transitional relief available under Supplier Finance Arrangements – Amendments to IAS 7 and IFRS 7 and has not provided comparative information in the first year
of adoption.
Note 1: Leaf suppliers are subject to various payment due dates depending on the jurisdiction and standard practices. In certain
countries, the leaf suppliers who are not part of supplier financing arrangements are paid in advance or on the next working day. In 2023,
the standard payment due date for the leaf supplier utilising supplier financing arrangements was 150 days.
Accrued charges and deferred income
Accrued charges and deferred income include £20 million of deferred income (2023: £18 million) relating to certain customer deposits
in advance of shipments and £29 million (2023: £82 million) in respect of interest payable mainly related to tax matters.
FII GLO
FII GLO includes £813 million (2023: £863 million) relating to receipts in 2015, in respect of the Franked Investment Income Government
Litigation Order (note 10(b)).
During 2024, as a result of the Group agreeing to repay £0.8 billion to HMRC, as mentioned in note 10(b), interest accrued has been
transferred from provisions to payables. The interest accrued at 31 December 2023 was £244 million and when combined with the
current year interest charge of £61 million (refer to note 8(b)), the total interest payable recognised in relation to FII GLO is £305 million.
The interest will be payable from 2026 and has been classified as a non-current payable. The interest is calculated based on the UK
central bank base rate plus 2% and has been charged to net finance costs.
In line with the repayment schedule, £479 million of FII GLO has been recognised as a current payable.
Sundry payables
As explained in note 17, the Group acts as a collection agent for banks and other financial institutions in certain debtor factoring
arrangements. The cash collected in respect of these arrangements that has not yet been remitted amounts to £124 million
(2023: £138 million) and is included in sundry payables.
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 was US$326 million (£263 million) plus interest representing the third
and final payment due. This was paid in the first half of 2024. Refer to notes 6(h) and 24 for more information.
Other
Included in borrowings is £65 million (2023: £71 million) transferred from trade and other payables.
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 7%
in other currencies (2023: less than 10% in other currencies).
Amounts payable to related parties including associated undertakings are shown in note 30.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
330
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’s underlying
operations. Specifically, Treasury manages, within an overall
policy framework set by the Group’s Main Board and Corporate
Finance Committee (CFC), the Group’s exposure to funding and
liquidity, interest rate, foreign exchange and counterparty risks.
The Group’s treasury position is monitored by the CFC which
meets regularly throughout the year and is chaired by the Chief
Financial Officer. 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’s 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’s
average cost of debt in 2024 is 4.9% (2023: 5.2%; excluding
adjusting items, of which the Group incurred a £151 million fair
value loss on debt-related derivatives in relation to the early
repurchase of bonds, the average cost of debt was 4.8%).
The Group manages its financial risks in line with the classification
of its financial assets and liabilities in the Group’s balance sheet
and related notes. The Group’s 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 2024,
the average centrally managed debt maturity was 9.5 years (2023:
10.5 years) and the highest proportion of centrally managed debt
maturing in a single rolling year was 14.8% (2023: 15.7%). 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+ and BBB+)
@. Moody’s, S&P's and Fitch's
current ratings for the Group are Baa1 (stable outlook), BBB+
(stable outlook), BBB+ (stable 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 2024,
the Group had £433 million invested in money market funds
(2023: £173 million).
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 billion U.S. commercial
paper (U.S. CP) programme and the Group £3 billion 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 2024, commercial paper
of £nil million was outstanding (2023: £nil million). Cash flows
relating to commercial paper that have maturity periods of three
months or less are presented on a net basis in the Group’s cash
flow statement.
At 31 December 2024, the Group had access to a £5.4 billion
revolving credit facility. With effect from March 2024, the Group
exercised the first of the one-year extension options on the
£2.5 billion 364-day tranche of the revolving credit facility, with the
second one-year extension subsequently exercised in February
2025. Effective March 2025, therefore, the £2.5 billion 364-day
tranche will be extended to March 2026. Additionally, £2.85 billion
of the five-year tranche remains available until March 2025, with
£2.7 billion extended to March 2026 and £2.5 billion extended to
March 2027.
During 2024, the Group extended short-term bilateral facilities
totalling £2.4 billion. As at 31 December 2024, £nil million was
drawn on a short-term basis with £2.4 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’s cash flow statement.
In January 2025, the Group entered into a medium-term facility of
£503 million (equivalent) which was fully drawn.
Issuance, drawdowns and repayments in current year:
– In February 2024, the Group accessed the US dollar market under
the SEC Shelf Programme, raising a total of US$1.7 billion across
two tranches;
– In March 2024, the Group repaid a £229 million bond at maturity;
– In April 2024, the Group accessed the Euro market under its
EMTN Programme, raising a total of €900 million;
– To optimise the Group’s debt capital structure using available
liquidity and to reduce gross and net debt, the Group completed
capped cash debt tender offers in May 2024, targeting series of
low-priced, long-dated GBP-, EUR- and USD-denominated
bonds, pursuant to which the Group repurchased bonds prior to
their maturity in a principal amount of £1.8 billion (equivalent); and
– In August, September and October 2024, the Group repaid
US$1.9 billion, US$1 billion and €850 million of bonds at
maturity, respectively.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
331
Available facilities in prior year:
At 31 December 2023, the Group had access to a £5.4 billion
revolving credit facility. In March 2023, the Group refinanced the
£2.7 billion 364-day tranche of the revolving credit facility at the
reduced amount of £2.5 billion, maturing in March 2024 with two
one-year extension options, and a one-year term out option.
Additionally, £2.85 billion of the five-year tranche remains available
until March 2025, with £2.7 billion extended to March 2026 and
£2.5 billion extended to March 2027.
During 2023, the Group extended short-term bilateral facilities
totalling £2.65 billion. As at 31 December 2023, £100 million was
drawn on a short-term basis with £2.55 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’s cash flow statement.
Issuance, drawdowns and repayments in prior year:
– In January 2023, the Group repaid a €750 million bond at maturity;
– In February 2023, the Group accessed the Euro market under its
EMTN Programme, raising a total of €800 million;
– In May 2023, the Group repaid a total of US$48 million of bonds
at maturity;
– 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 billion 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 £3.1 billion; and
– In September, October and November 2023, the Group repaid
US$550 million, €800 million and €750 million of bonds at
maturity, respectively.
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’s primary balance sheet
translation exposures are to the US dollar, Euro, Australian dollar,
Indian rupee, Canadian dollar, South African rand, Indonesian
rupiah, Danish krone, Singaporean dollar and Swiss franc. These
exposures are kept under continuous review. The Group’s policy on
borrowings is to broadly match the currency of these borrowings
with the currency of cash flows arising from the Group’s
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 2024,
the currency profile of the Group’s gross debt, after taking into
account derivative contracts, was 74% US dollar (2023: 72%),
14% euro (2023: 14%), 8% sterling (2023: 9%) and 4% other
currencies (2023: 5%).
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 income 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’s 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 a 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
£94 million lower (2023: £61 million lower; 2022: £49 million lower)
and items recognised directly in other comprehensive income
being £342 million higher (2023: £273 million higher; 2022:
£445 million higher). A 10% weakening of functional currencies
against non-functional currencies would result in pre-tax
profit being £114 million higher (2023: £72 million higher;
2022: £60 million higher) and items recognised directly
in other comprehensive income being £418 million lower
(2023: £333 million lower; 2022: £543 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 respect of future transactions, but do not include sensitivities
in respect of exchange on non-financial assets or liabilities.
Interest rate risk
The objectives of the Group’s 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 2024, the relevant ratio of floating
to fixed rate borrowings after the impact of derivatives was 22:78
(2023: 10:90). On a net debt basis, after offsetting liquid assets and
excluding cash and other liquid assets (including investments held
at fair value) in Canada, which are subject to certain restrictions
under CCAA protection, the ratio of floating to fixed rate borrowings
was 13:87 (2023: 2:98).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
332
IFRS 7 requires a sensitivity analysis that shows the impact on
the income statement and on items recognised directly in other
comprehensive income of hypothetical changes of interest rates
in respect 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 not included. The Group considers a 100 basis point change
in interest 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 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 100 basis point increase in interest rates would result in pre-tax
profit being £13 million higher (2023: £5 million lower;
2022: £50 million lower). A 100 basis point decrease in interest rates,
or less where applicable, would result in pre-tax profit being
£13 million lower (2023: £5 million higher; 2022: £50 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.
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 with the impacted derivatives maturing in
October 2023.
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 the countries concerned.
Certain territories have bank guarantees, other guarantees or
credit insurance provided in the Group’s 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 the 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’s 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 £52 million (2023: £51 million).
In addition, 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 £1 million (2023: £1 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 consolidated balance sheet, but the quantum of such is
not material.
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 an 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’s risk management strategy has been explained in
further detail under the interest rate risk and currency risk sections
of this note.
Fair value estimation
The fair values of financial assets and liabilities with maturities
of less 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 fair values is described below.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
333
Fair value hierarchy
In accordance with IFRS 13 classification hierarchy, the following table presents the Group’s financial assets and liabilities that are
measured at fair value:
2024
2023
Notes
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Assets at fair value
Investment held at fair value
18
447
—
212
659
527
—
192
719
Derivatives relating to
– interest rate swaps
19
—
11
—
11
—
10
—
10
– cross-currency swaps
19
—
100
—
100
—
115
—
115
– forward foreign currency contracts
19
—
185
—
185
—
165
—
165
Assets at fair value
447
296
212
955
527
290
192
1,009
Liabilities at fair value
Derivatives relating to
– interest rate swaps
19
—
270
—
270
—
187
—
187
– cross-currency swaps
19
—
16
—
16
—
13
—
13
– forward foreign currency contracts
19
—
131
—
131
—
195
—
195
– embedded derivative relating to
associates
19
—
7
—
7
—
—
—
—
Liabilities at fair value
—
424
—
424
—
395
—
395
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’s 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’s 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:
2024
2023
Amount
presented in
the Group
balance
sheet*
£m
Related
amounts not
offset in the
Group
balance
sheet
£m
Net amount
£m
Amount
presented in
the Group
balance
sheet*
£m
Related
amounts not
offset in the
Group
balance
sheet
£m
Net amount
£m
Financial assets
– Derivative financial instruments (note 19)
296
(184)
112
290
(199)
91
Financial liabilities
– Derivative financial instruments (note 19)
(424)
184
(240)
(395)
199
(196)
(128)
—
(128)
(105)
—
(105)
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 default, the non-defaulting party will calculate the sum of the replacement cost of outstanding transactions and amounts owed to
it by 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
334
The hedged items by risk category are presented below:
2024
Carrying amount of
the hedged item
£m
Accumulated amount
of fair value hedge
adjustments on the
hedged item included
in the carrying
amount of the
hedged item
£m
Line item in the
statement of
financial position
where the hedged
item is included
Changes in fair
value used for
calculating hedge
ineffectiveness
£m
Cash flow hedge
reserve (gross
of tax)
£m
Fair value hedges
Interest rate risk
– borrowings (liabilities)
8,750
215
Borrowings
63
—
Cash flow hedges
Interest rate risk
– borrowings (liabilities)
734
—
Borrowings
(18)
(268)
2023
Carrying amount of
the hedged item
£m
Accumulated amount
of fair value hedge
adjustments on the
hedged item included
in the carrying
amount of the
hedged item
£m
Line item in the
statement of
financial position
where the hedged
item is included
Changes in fair
value used for
calculating hedge
ineffectiveness
£m
Cash flow hedge
reserve (gross
of tax)
£m
Fair value hedges
Interest rate risk
– borrowings (liabilities)
5,935
110
Borrowings
(81)
Cash flow hedges
Interest rate risk
– borrowings (liabilities)
858
Borrowings
26
(362)
£363 million (2023: £380 million) of the Group’s borrowings are designated as net investment hedge instruments of the Group’s net
investments in foreign operations. In line with the Group’s 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 £17 million (2023: £9 million).
As at 31 December 2024, the accumulated balance of the cash flow hedge reserve was a loss of £84 million (2023: loss of £194 million)
including an accumulated loss of £268 million (2023: loss of £362 million) in relation to interest rate exposure and foreign currency
exposure arising from borrowings held by the Group, and an accumulated gain of £54 million (2023: gain of £77 million) in relation to
deferred tax arising from cash flow hedges. The remainder related to the Group’s foreign currency exposure on forecasted transactions
and cost of hedging (note 22(c)(ii)).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
335
27 Changes in the Group
The Group acquired certain businesses and other 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.
(a) Acquisitions
Beni Oral Nicotine LLC
On 15 July 2024, the Group acquired Beni Oral Nicotine LLC, a U.S.
company owning rights to a portfolio of tobacco-free oral use
synthetic nicotine pouches, for upfront consideration of
US$30 million (£23 million), and deferred payments of contingent
consideration of up to US$200 million (£160 million) deferred for
5 years, subject to the achievement of certain milestones. The
transaction has been accounted for as an asset acquisition, rather
than as a business combination, as the intellectual property
acquired does not represent an integrated set of activities required
by IFRS for business combination accounting. Consequently, the
best estimate of consideration payable has been allocated to the
acquired assets by relative fair value.
(b) Associated undertakings
(i) ITC Limited
On 13 March 2024, the Group announced the divestment of 12%
of its equity stake in ITC Limited (the equivalent of 3.5% of ITC's
ordinary shares) to institutional investors by way of an accelerated
bookbuild process (Block Trade). The Block Trade sale generated
net proceeds after transaction costs and taxes of INR166.9 billion
(£1.6 billion) which were then repatriated to the UK in a series of
foreign exchange transactions in the days following the sale. The
transaction was subject to applicable tax laws in India and the UK,
and proceeds were remitted net of withheld Indian Capital Gains
Tax of INR5.7 billion (£54 million). Following completion of the
transaction, BAT has remained a significant shareholder of ITC,
with a 25.45% holding, and has continued to account for ITC as an
associated undertaking using the equity method of accounting.
On 24 July 2023, ITC announced a proposed demerger of its
‘Hotels Business’ 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. In January
2025, ITC Hotels Limited was listed and commenced trading on the
National Stock Exchange of India (NSE) and Bombay Stock Exchange
(BSE). The Group's direct stake in ITC Hotels Limited is 15%.
(ii) Organigram Holdings Inc
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 the largest shareholder, with the ability to appoint
two directors and representation on its investment committee.
The Group accounts for the investment as an associate.
As a result of certain acquisitions made by Organigram during
2021, the Group’s shareholding was reduced to 18.8%. In 2022, the
Group exercised its top-up rights and invested a further £4 million
to maintain its ownership stake.
In 2023, the Group announced the signing of an agreement for a
further investment of CAD$125 million (£74 million) in Organigram,
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 million (£24 million) acquiring a further 12,893,175
common shares of Organigram at a price of CAD$3.22 per share.
On 30 August 2024, BAT made the second tranche investment of
CAD$42 million (£24 million) acquiring a further 4,429,740
common shares and 8,463,435 preferred shares of Organigram at
a price of CAD$3.22 per share. Subject to certain conditions, the
final 12,893,175 shares subscribed for shall be issued at the same
price as the previous two tranches by the end of February 2025.
The additional investment in 2024 increased the Group's interest
in Organigram at that time to 35.09%. Under the terms of the
agreement, the Group’s voting rights are restricted
to 30%.
Part of the proceeds from the Group’s reinvestment have been
earmarked for “Jupiter”, a strategic investment pool designed to
expand Organigram’s geographic footprint and capitalise on
emerging growth opportunities. During the year, Organigram has
made certain investments, largely in the form of convertible loan
notes, into Sanity Group GmbH and Steady State LLC, both of
which are associated undertakings of the Group.
On 6 December 2024, Organigram announced the 100% acquisition
of Motif Labs Ltd. and the consideration included CAD$40 million
of Organigram common shares. As a result, the Group's interest
in Organigram reduced to c.30.6%.
(iii) Other investments
In April 2023, the Group announced a strategic joint venture
agreement between a Group subsidiary, AJNA BioSciences PBC,
and Charlotte’s Web. Under the terms of the transaction, a Group
subsidiary acquired a 19.9% stake in the new entity, DeFloria LLC,
at a cost of £8 million (US$10 million). During 2024, the Group
made a further investment of £4 million in the form of a convertible
loan note.
In 2022, the Group announced a £32 million investment in exchange
for 16% of Sanity Group GmbH (Sanity Group) which the Group
accounts for as an associate. In addition, during 2022, the Group
made an investment in Steady State LLC (trading as Open Book
Extracts) for £4 million, followed by a second investment of
£4 million in May 2023. The Group accounts for the investment
as an associate. A further investment of £8 million was made in
October 2023 by way of a convertible loan note, which is currently
accounted for as an investment at fair value through profit and loss.
In 2022, the Group announced that it had invested in Charlotte’s
Web, via a convertible debenture of £48 million. The debenture is
convertible at the Group's discretion into a non-controlling equity
stake in Charlotte’s Web of approximately 19.9%. The investment
is 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 investment.
(c) Non-controlling interests
During 2023, the Group acquired a further 1.31% in Hrvatski
Duhani d.d., at a cost of less than £1 million, following the
acquisitions in 2022 (3.3% at a cost of £1 million).
BAT Annual Report and Form 20-F 2024
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Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
336
(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’s Management team, in compliance with
local and international laws. As previously announced, due to
operational dependencies between BAT Russia and the Group’s
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 now 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 £554 million and associated costs of
£58 million were recognised in 2022 as adjusting items. Upon
completion, the businesses were deconsolidated from the Group's
balance sheet. Proceeds of £425 million were received in 2023,
resulting in a partial reversal of £195 million of the previously
recognised impairment. In addition to this, £554 million of foreign
exchange previously recognised in the statement of other
comprehensive income was reclassified to the income statement
upon completion of the transaction. This resulted in a net charge
to the income statement of £353 million which included disposal-
related costs of £3 million and £9 million of foreign exchange gains
on proceeds received. Management concluded that the disposal of
the Russian and Belarusian businesses did not qualify to be
presented as discontinued operations.
As part of the disposal agreements, the Group holds call options
to reacquire the ITMS Group entities. No value has been ascribed
to these 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 Group
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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
337
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) and net
turnover (20% of grant). Total shareholder return combines the share price and dividend performance of the Company by reference to
a comparator group.
For 2024, 2023 and 2022 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).
Performance measurements are tested based on performance during the three-year period beginning on 1 January in the year of 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 and September 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 up to three years from date of grant, subject to a continuous
employment condition during the 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 March
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 cash-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 which include:
Sharesave Scheme (SAYE)
The UK tax advantaged scheme where 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 the options. The maximum amount that can be saved by a participant in this way is £6,000
in any tax year. All UK employees at the time of invitation are eligible to participate.
Share Reward Scheme (SRS)
The UK tax advantaged scheme where free shares are granted in April each year (up to an equivalent of £3,600 in any year) under the
equity-settled schemes and are subject to a three-year holding period. Participants receive dividends during the holding period which
are reinvested to buy further shares. The shares are held in a UK-based trust and are normally capable of transfer to participants tax-free
after a five-year holding period. All UK employees employed as at 1 December in the year prior to grant are eligible to participate.
International Share Reward Scheme (ISRS)
Conditional shares are granted in April each year (up to an equivalent of £3,600 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
The UK tax advantaged scheme where employees can allocate part of their pre-tax salary to purchase shares in British American
Tobacco p.l.c. (maximum £1,800 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 period. All UK employees are eligible to participate.
The amounts recognised in the income statement in respect of share-based payments were as follows:
2024
2023
2022
Notes
Equity-
settled
£m
Cash-
settled
£m
Equity-
settled
£m
Cash-
settled
£m
Equity-
settled
£m
Cash-
settled
£m
PSP & RSP
28(a)
34
2
27
2
38
1
DSBS
28(b)
30
2
38
1
36
3
Other schemes
6
—
6
—
7
—
Total recognised in the income statement
3
70
4
71
3
81
4
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
338
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 2024 and 2023:
2024
2023
Vested
£m*
Unvested
£m
Vested
£m*
Unvested
£m
PSP & RSP
(0.9)
2.0
(0.4)
0.8
DSBS
—
3.0
—
3.1
Total liability
(0.9)
5.0
(0.4)
3.9
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 2024 and 31 December
2023, were as follows:
2024
2023
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
7,806
198
8,960
196
Granted during the period
5,128
135
3,379
94
Exercised during the period
(1,765)
(64)
(2,401)
(51)
Forfeited during the period
(1,221)
(55)
(2,132)
(41)
Outstanding at end of year
9,948
214
7,806
198
Exercisable at end of year
369
11
513
24
As at 31 December 2024, the Group has 9,948,000 shares (2023: 7,806,000 shares) outstanding which includes 1,804,531 shares
(2023: 1,527,898 shares) which are related to Reynolds American LTI awards from which nil shares (2023: nil shares) are exercisable
at the 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 £24.56 (2023: £27.65; 2022: £32.84) for equity-settled and £24.51 (2023: £25.85; 2022: £33.01) 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$35.68 (2023: US$39.39;
2022: US$38.37).
The outstanding shares for the year ended 31 December 2024 had a weighted average remaining contractual life of 1.5 years
(2023: 1.5 years; 2022: 1.8 years) for the equity-settled scheme, 1.8 years for Reynolds American equity-settled scheme (2023: 1.8 years;
2022: 1.8 years) and 1.6 years (2023: 1.5 years; 2022: 1.7 years) for the cash-settled share-based payment arrangements.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
339
(b) Deferred Share Bonus Scheme
Details of the movements for the equity- and cash-settled DSBS scheme during the years ended 31 December 2024 and 31 December
2023, were as follows:
2024
2023
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
3,851
261
4,015
141
Granted during the period
1,053
48
1,675
211
Exercised during the period
(1,287)
(103)
(1,743)
(81)
Forfeited during the period
(81)
(21)
(96)
(10)
Outstanding at end of year
3,536
185
3,851
261
Exercisable at end of year
—
1
—
1
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 £24.57 (2023: £27.39; 2022: £32.20) for equity-settled and £24.47 (2023: £25.56; 2022: £32.50) for cash-settled options.
The outstanding shares for the year ended 31 December 2024 had a weighted average remaining contractual life of 1.2 years
(2023: 1.3 years; 2022: 1.3 years) for the equity-settled scheme and 1.2 years (2023: 1.3 years; 2022: 1.1 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:
2024
2023
PSP & RSP
DSBS
PSP & RSP
DSBS
Expected volatility (%)
25.0
25.0
27.0
27.0
Average expected term to exercise (years)
3.0
3.0
3.0
3.0
Risk-free rate (%)
4.0
4.0
3.5
3.5
Expected dividend yield (%)
9.8
9.8
7.7
7.7
Share price at date of grant (£)
23.84
23.84
29.71
29.71
Fair value at grant date (£)
*
15.92 / 17.75
17.75
23.15/23.61
23.61
Fair value at grant date (£)
* - Management Board
13.38 / 17.75
17.75
20.46/23.61
23.61
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 determining fair value at grant date. Assumptions used in these models were as follows:
2024
2023
PSP
PSP
Average share price volatility FMCG comparator group (%)
24
24
Average correlation FMCG comparator group (%)
30
29
Fair values determined from the Black-Scholes and Monte-Carlo models use assumptions revised at the end of each reporting period
for cash-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 same periods. The average expected term to exercise used in the models has been adjusted, based on management’s 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’ forecasts.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
340
29 Group employees
The average number of persons employed by the Group and its associates during the year, including Directors, was 74,617 (2023: 75,452).
2024
Number
2023
Number
U.S.
4,021
3,861
AME
31,090
32,948
APMEA
13,098
13,030
Subsidiary undertakings
48,209
49,839
Associates
26,408
25,613
74,617
75,452
Included within the employee numbers for AME are certain employees in the UK in respect of central functions. Some of the costs
of these employees are allocated or charged to the various regions and markets in the Group.
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 which are 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 and the provision of IT
services. Other investments in associates, in the form of convertible loan notes, are not included in the table below. The Group’s share
of dividends from associates, included in other income in the table below, was £447 million (2023: £559 million; 2022: £438 million).
2024
£m
2023
£m
2022
£m
Transactions
– revenue
492
523
494
– purchases
(179)
(178)
(190)
– other income
448
560
441
– other expenses
(13)
(6)
(1)
Amounts receivable at 31 December
39
48
51
Amounts payable at 31 December
(12)
(4)
(4)
The following related party transactions occurred in 2024, 2023 and 2022.
Transactions with associates
ITC
As explained in note 27(b)(i), on 13 March 2024, the Group announced the divestment of 12% of its equity stake in ITC Limited (the
equivalent of 3.5% of ITC's ordinary shares) to institutional investors by way of an accelerated bookbuild process which generated net
proceeds after transaction costs and taxes of INR166.9 billion (£1.6 billion). Following completion of the transaction, the Group has
remained a significant shareholder of ITC with a 25.45% investment and has continued to account for ITC as an associated undertaking
using the equity method of accounting.
Organigram
In 2023, the Group announced the signing of an agreement for a further investment of CAD$125 million (£74 million) in Organigram,
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 million (£24 million) acquiring a further 12,893,175 common shares
of Organigram at a price of CAD$3.22 per share. On 30 August 2024, BAT made the second tranche investment of CAD$42 million
(£24 million) acquiring a further 4,429,740 common shares and 8,463,435 preferred shares of Organigram at a price of CAD$3.22 per
share. Subject to certain conditions, the remaining 12,893,175 shares subscribed for shall be issued at the same price as the previous two
tranches by the end of February 2025. The additional investment in 2024 increased the Group's interest in Organigram to 35.09%. Under
the terms of the agreement, the Group’s voting rights are restricted to 30%.
The Group and Organigram also have a Product Development Collaboration Agreement following which a Centre of Excellence was
established to focus on developing the next generation of cannabis products with an initial focus on cannabidiol (CBD).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
341
Other associates
The following transactions occurred during 2024:
– On 11 September 2024, VST Industries Ltd (VST) allotted 154,419,200 equity shares of INR10 each as fully paid-up bonus equity shares.
The bonus equity shares were allotted in the proportion of 10 new fully paid-up equity shares for every one existing fully paid up equity
share. The Group's interest in VST remains unchanged at 32.16%.
The following transactions occurred during 2023, when the Group:
– acquired 19.9% of DeFloria for £8 million; and
– increased its ownership in Steady State LLC (trading as Open Book Extracts) from 5.76% to 10.8% for £4 million along with a further
investment of £8 million by way of a convertible loan note.
The following transactions occurred during 2022, when the Group:
– made a £32 million investment in exchange for 16% of Sanity Group GmbH;
– increased its ownership of a wholesale producer and distributor operating in the agriculture sector based in Uzbekistan, FE 'Samfruit'
JSC to 45.40% for £1 million;
– made a non-controlling investment in Steady State LLC for £4 million; and
– invested in Charlotte's Web via a convertible debenture of £48 million which is currently convertible into a non-controlling equity stake
of approximately 19.9% (as explained in note 27(b)(iii)).
Non-controlling interests
During 2023, the Group acquired a further 1.31% in Hrvatski Duhani d.d., at a cost of less than £1 million, following the acquisitions in 2022
(3.3% at a cost of £1 million).
Other related party transactions
As explained in note 15, in 2022 the Group provided a temporary liquidity facility to the main UK pension fund. The facility was undrawn
as at 31 December 2023 and on 28 March 2024 the facility was cancelled.
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 included in note 33.
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.
2024
£m
2023
£m
2022
£m
The total compensation for key management personnel, including Directors, was:
– salaries and other short-term employee benefits
21
17
19
– post-employment benefits
1
1
1
– share-based payments
12
13
17
34
31
37
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
2024
£'000
2023
£'000
2022
£'000
2024
£'000
2023
£'000
2022
£'000
2024
£'000
2023
£'000
2022
£'000
2024
£'000
2023
£'000
2022
£'000
Salary; fees; benefits;
incentives
– salary
1,907 1,644 2,129
1,907 1,644
2,129
– fees
711
688
670
1,112 1,059 1,027
1,823
1,747
1,697
– taxable benefits
617
395
449
17
17
59
79
31
78
713
443
586
– short-term incentives
3,496 1,650 3,761
3,496 1,650
3,761
– long-term incentives
1,474
1,371 7,888
1,474
1,371 7,888
– buy-out
2,969
—
—
2,969
—
—
Sub-total
10,463 5,060 14,227
728
705
729
1,191 1,090
1,105
12,382 6,855 16,061
Pension; other
emoluments
– pension
276
248
320
276
248
320
– other emoluments
6
2
6
6
2
6
Sub-total
282
250
326
282
250
326
Total emoluments
10,745 5,310 14,553
728
705
729
1,191 1,090
1,105
12,664
7,105 16,387
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
342
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’
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’s 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 ‘offer
of judgment’ statutes and Filter Cases, as defined below. An
‘offer of judgment,’ if rejected by the plaintiff, preserves the
Group’s right to recover attorneys’ 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 billion
(£4.2 billion) 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’s companies have valid
bases for appeals of adverse verdicts, 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 December
2024 and the increase or decrease from the number of cases
pending against Group companies as at 31 December 2023.
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 three-year basis. Where no quantum is identified, either
no judgment has been awarded against a Group company,
or where 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 88, et seq.
BAT Annual Report and Form 20-F 2024
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Financial Statements
Other Information
343
Case Type
Notes
Case Numbers as at
31 December 2024
(note 31(a))
Case Numbers as at
31 December 2023
(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
19
No change
Individual smoking and health cases
31(d)
197
202
(5)
Engle Progeny Cases
31(e)
91
305
(214)
Broin II Cases
31(f)
69
1,171
(1,102)
Filter Cases
31(g)
29
35
(6)
State Settlement Agreements – Enforcement and Validity
31(h)
5
4
1
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)
50
54
(4)
(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 to 23.
(Note 31(c)) See note 31, paragraphs 24 to 36.
(Note 31(d)) See note 31, paragraphs 37 to 38.
(Note 31(e)) See note 31, paragraphs 27 to 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 to 56.
(Note 31(i)) Outside the United States, there were 12 class actions being brought against Group companies as at 31 December 2024.
These include class actions in the following jurisdictions: Canada (11) and Venezuela (one). For a description of the Group companies’
non-U.S. class actions, see note 31, paragraphs 74 to 86. For a description of the Québec Class Actions, see note 31, paragraph 80.
All of the class actions in Canada are currently stayed pursuant to a court order. See note 31, paragraph 59.
(Note 31(j)) As at 31 December 2024, the jurisdictions with the most active individual cases against Group companies were, in descending
order: Chile (18), Brazil (12), Italy (six), 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 87.
11.
Certain terms and phrases used in this note 31 may require some explanation.
a) ‘Judgment’ or ‘final judgment’ 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) ‘Damages’ 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. ‘Compensatory damages’ 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 higher burden of proof than is required for a finding of liability for compensatory damages, a plaintiff also may be awarded
‘punitive damages’. Although damages may be awarded at the trial court stage, a losing party may be protected from paying
any damages 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) ‘Settlement’ 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
and/or appeal.
d) All sums set out in note 31 have been converted to GBP and US$ using the following end closing rates applicable for 31 December 2024,
which differ from the rates at the time any related provision was recorded on the balance sheet: GBP 1 to US$ 1.2524, GBP 1 to
CAD$ 1.8012, GBP 1 to EUR 1.2095, GBP 1 to BDT 149.6618 (Bangladeshi Thaka), GBP 1 to BRL 7.7371 (Brazilian Real), GBP 1 to
AOA 1,155.5237 (Angolan Kwanza), GBP 1 to ARS 1,291.2244 (Argentine Peso), GBP 1 to MZN 80.0346 (Mozambican Metical),
GBP 1 to NGN 1,933.7056 (Nigerian Naira), GBP 1 to KRW 1,843.7200 (South Korean Won), GBP 1 to JPY 196.8272 (Japanese Yen),
GBP 1 to SAR 4.7058 (Saudi Riyal), and GBP 1 to TRY 44.2855 (Turkish Lira). In addition, due to the adoption of the euro by the
Croatian State, the European Central Bank has set a conversion rate of EUR to HRK on 1 January 2023 as 1 EUR to HRK 7.5345
(Croatian Kuna).
BAT Annual Report and Form 20-F 2024
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Other Information
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Notes on Accounts
Continued
344
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 2024 involving RJRT, B&W, Santa
Fe Natural Tobacco Company, Inc. (SFNTC) and/or Lorillard
Tobacco was approximately 423.
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.,SFNTC, R.J. Reynolds Vapor
Company (RJR Vapor), 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 pending 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., as at
31 December 2024, there are 42 cases, exclusive of Engle
progeny cases, scheduled for trial through 31 December 2025,
for the Reynolds Defendants: 31 individual smoking and health
cases, eight Filter Cases and three other cases. There are also
approximately 26 Engle progeny cases against RJRT
(individually and as successor to Lorillard Tobacco) and B&W
scheduled for trial through 31 December 2025. It is not known
how many of these cases will actually be tried.
17.
Trial results. From 1 January 2022 through 31 December 2024,
60 trials occurred in individual smoking and health, Engle
progeny, and patent cases in which the Reynolds Defendants
were defendants, including 14 where mistrials were declared.
Verdicts in favour of the Reynolds Defendants and, in some
cases, other defendants, were returned in 17 cases, tried in
Florida (nine), Oregon (one), Massachusetts (five), Illinois (one)
and New Mexico (one). Verdicts in favour of the plaintiffs were
returned in 25 cases, tried in Florida (17), Massachusetts (four),
New Mexico (one), Oregon (two) and North Carolina (one).
Two of the cases (in Florida) were dismissed during trial. Two
of the cases (in Florida) were punitive damages re-trials that
were retried twice (the first retrials resulted in plaintiff
verdicts; the second retrials resulted in defense verdicts).
(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 2024, one U.S. medical reimbursement
suit (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 of 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 county 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
British American Tobacco (Investments) Limited
(Investments) (United States v. Philip Morris USA Inc.).
The DOJ initially sought (i) recovery of certain federal funds
expended in providing 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 billion (£223.6 billion) in profits allegedly
earned from a purported racketeering ‘enterprise’ - a remedy
the U.S. Court of Appeals for the DC Circuit ruled in February
2005 was not available - and (b) certain ‘corrective
communications’. 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 order 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 ‘low tar’, ‘light’, ‘ultra-light’, ‘mild’
and ‘natural’. The Remedial Order also required the
defendants to issue ‘corrective communications’ on five
subjects, including smoking and health and addiction, and
to comply 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’ 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’s order.
22. The parties appealed and cross-appealed and, on 22 May
2009, the DC Circuit affirmed the district court’s RICO
liability judgment but vacated the Remedial Order in part
and remanded for further factual findings and clarification
as to whether liability should be imposed against B&W,
based on changes in the nature of B&W’s business operations
(including the extent of B&W’s control over tobacco
operations). The DC Circuit also remanded three other
discrete issues relating to the injunctive remedies, including
for the district court ‘to reformulate’ the injunction on the use
of low-tar descriptors ‘to exempt foreign activities that have
no substantial, direct, and foreseeable domestic effects,’
and for 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.
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23. On 22 December 2010, the district court dismissed B&W
from the litigation. Due to intervening changes in controlling
law, on 28 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 the remaining injunctive remedies.
In November 2012, the district 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 various proceedings and appeals, the
district court in October 2017 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’
websites, and in onserts 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 2024, (1) RJRT, B&W and Lorillard Tobacco
were named as defendants in one action asserting claims
on behalf of putative classes of persons allegedly injured or
financially impacted by their smoking, and (2) as detailed in the
next paragraph, RJRT, and SFNTC (a subsidiary of Reynolds
American) were named in 17 putative class actions relating to
the use of the words ‘natural’, ‘100% additive-free’ or ‘organic’
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’
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 million (£4.0 million)
and one alleged that the plaintiffs were seeking less than
US$75,000 (£59,885) 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
‘natural’, ‘organic’ and ‘100% additive-free’ in the marketing,
labelling, advertising and promotion of SFNTC’s 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’ 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’
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’ 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 is complete and oral
argument is expected in the first half of 2025.
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’
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 billion (approximately £115.8 billion) in
punitive damages, apportioned US$36.3 billion (£29.0 billion)
to RJRT, US$17.6 billion (£14.1 billion) to B&W, and
US$16.3 billion (£13.0 billion) to Lorillard Tobacco and Lorillard
Inc. The three class representatives in the Engle class action
were awarded US$13 million (£10.4 million) 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’s 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 ‘Engle progeny cases’, against the Engle
defendants, within one year of the Supreme Court’s decision
(subsequently extended to 11 January 2008).
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346
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 million (approximately
£79.8 million) divided as follows: RJRT US$42.5 million (£33.9 million); PM USA US$42.5 million (£33.9 million); and Lorillard Tobacco
US$15 million (£12.0 million). 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 2024, there were approximately 91 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 125 plaintiffs. In addition, as at
31 December 2024, RJRT was aware of two 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 ‘offer of judgment’ from RJRT and/or RJRT’s affiliates and indemnitees. An offer of judgment,
if rejected by the plaintiff, preserves the offering party's right to seek attorneys’ fees under Florida law in the event of a favourable
verdict. Such offers are sometimes made through court-ordered mediations.
32. 32 trials occurred in Engle progeny cases in Florida state courts against RJRT, B&W and/or Lorillard Tobacco from 1 January 2022
through 31 December 2024, and additional state court trials are scheduled for 2025.
33. The following chart identifies the number of trials in Engle progeny cases as at 31 December 2024 and additional information about
the adverse judgments entered:
Trials/verdicts/judgments of individual Engle progeny cases from 1 January 2022 through 31 December 2024:
Total number of trials
32
Number of trials resulting in plaintiffs’ verdicts
16
*
Total damages awarded in final judgments against RJRT
US$102,900,000 (£82 million)
Amount of overall damages comprising ‘compensatory
damages’ (approximately)
US$63,700,000 (of overall US$102,900,000 )
(£51 million of £82 million)
Amount of overall damages comprising ‘punitive damages’ (approximately)
US$39,200,000 (of overall US$102,900,000)
(£31 million of £82 million)
Note:
*
Of the 16 trials resulting in plaintiffs’ verdicts 1 January 2022 to 31 December 2024 (note 31(k)):
Number of adverse judgments appealed by RJRT (note 31(l))
10
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 32 trials include one case that was tried twice (Miller v R. J. Reynolds Tobacco Co.). The first trial resulted in mistrial, while
the second resulted in a verdict for the plaintiff. The 32 trials also include two cases with two punitive damages retrials, both within the
time period and both prior to the time period (Ledo v R. J. Reynolds Tobacco Co., Spurlock v. R. J. Reynolds Tobacco Co.).
(Note 31(l)) Of the 10 adverse verdicts appealed by RJRT as a result of judgments arising in the period 1 January 2022 to 31 December 2024:
a.5 appeals remain undecided in the District Courts of Appeal; and
b.5 judgments were affirmed and paid.
34. By statute, Florida applies a US$200 million (£159.7 million) 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 2024.
35. In 2024, RJRT paid judgments in four Engle progeny cases. Those payments totalled approximately US$4.7 million (approximately
£3.8 million) in compensatory or punitive damages. Additional costs were paid in respect of attorneys’ fees and statutory interest.
36. In addition, accruals for damages and statutory interest for two cases (Konzelman v. R. J. Reynolds Tobacco Co., Blackwood v. R. J.
Reynolds Tobacco Co.), two pre-trial case resolutions and the remaining amounts of two resolution bundles were recorded in
Reynolds American’s consolidated balance sheet as at 31 December 2024 to the value of approximately US$25.0 million
(approximately £20.0 million).
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347
(c) Individual Cases
37. As at 31 December 2024, 197 individual cases were pending in the United States against RJRT, B&W and/or Lorillard Tobacco.
This category of cases includes smoking and health cases alleging personal injuries caused by tobacco use or exposure brought
by or 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’ 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. Three 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 2024 as against the number pending as at
31 December 2023, 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
2024
U.S.
Case Numbers
31 December
2023
Change in
Number
Increase /
(Decrease)
Individual Smoking and Health Cases (note 31(m))
197
202
(5)
Engle Progeny Cases (Number of Plaintiffs) (note 31(n))
91 (125)
305 (380)
(214) ((255))
Broin II Cases (note 31(o))
69
1,171
(1,102)
Filter Cases (note 31(p))
29
35
(6)
(Note 31(m)) Out of the 197 pending individual smoking and health cases, four have received adverse verdicts or judgments in
the court of first instance or on appeal, and the total amount of those verdicts or judgments is approximately US$140.5 million
(approximately £112.2 million), of which US$85 million (£67.9 million) is the result of the jury’s verdict in the Marvin Manious v. R. J.
Reynolds Tobacco Co. case.
(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 million (£239.5 million) in three annual US$100 million (£79.8 million) instalments, allocated among the companies by market
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 million (£39.1 million) for the plaintiffs’ counsel’s fees and expenses. RJRT’s portion of these payments was
approximately US$86 million (approximately £68.7 million); B&W’s was approximately US$57 million (approximately £45.5 million);
and Lorillard Tobacco’s was approximately US$31 million (approximately £24.8 million). 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 ‘general causation’. With
respect to all other liability issues, including whether an individual plaintiff’s disease was caused by his or her exposure to ETS in
airplane cabins, referred to as ‘specific causation’, 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. In 2024, RJRT resolved approximately half of the remaining Broin II cases.
RJRT sought and obtained dismissal of nearly all of the remaining cases due to inactivity on the files, leaving 69 cases pending as of
31 December 2024.
(Note 31(p)) Includes claims brought against Lorillard Tobacco and Lorillard Inc. by individuals who seek damages resulting from
their alleged exposure to asbestos fibres that were incorporated into filter material used in one brand of cigarettes manufactured
by a predecessor to Lorillard Tobacco for a limited period of time ending more than 60 years ago. Pursuant to a 1952 agreement
between P. Lorillard 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 of 31 December 2024, Lorillard Tobacco and/or Lorillard
Inc. was a defendant in 29 Filter Cases. Since 1 January 2022, Lorillard Tobacco and RJRT have paid, or have reached agreement to
pay, a total of approximately US$19.4 million (approximately £15.5 million) in settlements to resolve 87 Filter Cases.
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348
(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 ‘State Settlement Agreements’).
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 billion (£4.2 billion) 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, net operating profit (NOP) and inflation. Reynolds American’s operating subsidiaries’ expenses and
payments under the State Settlement Agreements for 2021, 2022, 2023 and 2024 and the projected expenses and payments for 2025
and onwards are set forth below (in millions of US dollars)
*:
2021
2022
2023
2024
2025
2026 and
thereafter
Settlement expenses
$3,420
$2,951
$2,516
$2,160
Settlement cash payments
$3,744
$3,129
$2,874
$2,535
Projected settlement expenses
>$2,000
>$1,900
Projected settlement cash payments
>$2,200
>$1,900
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’s 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 U.S.
cigarette sales in the premium and value categories, RJRT’s 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 the other signatories to the MSA, known as ‘Participating Manufacturers’ (PMs). Certain requirements, collectively referred to as
the ‘Adjustment Requirements’, 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 ‘Qualifying Statute’ 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’s 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 2024.
In 2012, 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 13 states have joined. In 2024, an additional state, Massachusetts, entered a separate settlement of the NPM
Adjustment dispute covering the years 2005-2011. The arbitration panels ruled in September 2021 that two states, Washington and
Missouri, had not diligently enforced their qualifying statutes in the year 2004. On 30 November 2021, Missouri moved to vacate the
2004 NPM Adjustment Arbitration Panel’s award finding in favour of RJRT. A hearing was held on 27 February 2024. On 30 September
2024, the Missouri Circuit Court denied Missouri’s motion to vacate the 2004 award and the PMs’ motion to vacate the Panel’s order
regarding reallocation. On 14 January 2025, the Missouri Circuit Court revised its 30 September 2024 order to denominate the order
a judgment and to confirm the 2004 Award. The State filed a notice of appeal on 21 January 2025. Briefing has not yet commenced.
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 notice of appeal was filed on 27 September 2023;
briefing is complete and oral argument was held on 28 January 2025. A ruling on the appeal has not yet been issued. In December
2023, a panel ruled that Washington had also not diligently enforced its qualifying statute in the years 2005, 2006 and 2007. On 28
March 2024, Washington filed a motion to vacate the arbitration panel’s award determining it was non-diligent in 2005, 2006, and
2007. RJRT filed its opposition brief on 10 May 2024. Washington filed its reply brief on 31 May 2024. A hearing was held on 26 July
2024 and the court issued an order denying Washington’s motion to vacate on the same date. On 23 August 2024, Washington filed
a notice of appeal from the order denying vacatur. On 9 September 2024, Washington requested direct review of its appeal by the
Washington Supreme Court. RJR Tobacco filed its opposition to Supreme Court review on 23 September 2024. On 6 November 2024,
the Supreme Court rejected Washington’s request for direct review and transferred the appeal to the Court of Appeals. Washington
filed its opening appeal brief on 30 January 2025. RJRT’s answer brief is due 3 March 2025. NPM proceedings are ongoing and could
result in further reductions of the companies’ MSA-related payments.
BAT Annual Report and Form 20-F 2024
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349
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 Florida State Settlement Agreement, which
motion sought payment under the Florida State Settlement
Agreement of approximately US$45 million (approximately
£35.9 million) 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 ‘Acquired Brands’. The motion also claimed
future annual losses of approximately US$30 million per year
(approximately £24.0 million) absent the court’s enforcement
of the Florida State Settlement Agreement. The State’s
motion sought, among other things, an order declaring that
RJRT and ITG are in breach of the Florida State Settlement
Agreement and are required, jointly and severally, to make
annual payments to the State under the Florida State
Settlement Agreement with respect to the Acquired Brands.
By order dated 30 March 2017, ITG was joined into the
enforcement 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 order 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 Acquired Brands under the terms of the asset purchase
agreement relating to the Divestiture. The court declined
to enter 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 a 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 USA filed a notice of appeal with respect to the court's
ruling as to ITG. These appeals were consolidated pursuant
to RJRT'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 million (£149.9 million) for its appeal. RJRT’s 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 £154 million)
and paid approximately US$3.2 million (approximately
£2.6 million) of Florida’s attorneys’ fees. RJRT's appellate
bonds were released to RJRT by order dated 5 November
2020. As explained below, RJRT has secured an order in the
Delaware action requiring ITG to indemnify it for 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 the 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’s 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 the 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) that 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 any 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 30 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 October 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’s indemnification obligation should be reduced to account
for how NOP adjustment payments (NOP Adjustment) would
have been allocated if ITG had joined the Florida State
Settlement Agreement. Trial was held 8-9 July 2024, and the
court held a post-trial hearing on 6 November 2024. A
decision is expected in the first half of 2025. ITG has agreed,
subsequent to the Chancery Court’s decision on past
payments, that it will indemnify every settlement payment
that RJRT makes in the future to Florida based on ITG’s sales
of Acquired Brands cigarettes (subject to the issues
addressed at 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 enforce the settlement agreement against RJRT and ITG
alleging RJRT and ITG failed to act in good faith in calculating
the base year NOP for the Acquired Brands, claiming
damages of approximately US$6 million (approximately
£4.8 million) through 2017. On 21 February 2019, the Chancery
Court of Jackson County, Mississippi held a scheduling
conference and issued a discovery schedule order. A hearing
on PM USA’s motion to enforce, originally scheduled for
3-6 May 2021, was adjourned on consent of the parties to
11-12 August 2021. On 8 June 2021, PM USA and RJRT entered
into a settlement agreement resolving the outstanding
payment calculation issues. On 11 June 2021, the Mississippi
Chancery Court entered an order withdrawing PM USA’s
motion to enforce. On 14 June 2021, RJRT made a payment of
US$5.1 million (£4.1 million) to PM USA. 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 NOP to be used
in calculating the NOP Adjustment was not affected by the
change in the federal corporate tax rate in 2018 from 35% to
21%, and an order requiring RJRT to pay the approximately
US$5 million (approximately £4.0 million) difference in its 2018
payment because of this issue. Determination of this issue
may affect RJRT’s annual payment thereafter. A hearing on
Mississippi’s 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 NOP
to be used in calculating the NOP Adjustment was not
affected by the change in the federal corporate tax rate in
2018. RJRT appealed the motion to enforce.
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On 29 July 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. On 13 February 2024,
the Chancery Court awarded the State attorneys’ fees of
approximately US$1.3 million (approximately £1 million).
On 7 May 2024, the court entered a Final Judgment awarding
the State compensatory damages of approximately
US$23.5 million (approximately £18.8 million) plus 8%
prejudgment interest, and approximately US$1 million
(approximately £798,467) in additional attorneys’ fees against
RJRT. On 17 May 2024, the court entered an Amended Final
Judgment correcting a scrivener’s error. On 5 June 2024, RJRT
filed a Notice of Appeal. On 6 June 2024, PM USA filed a
Notice of Appeal. On 19 June 2024, the State filed a Notice of
Appeal from the amount of attorneys’ fees awarded and post-
judgment interest on the prejudgment interest awarded. On
3 October 2024, following a settlement between PM USA
and the State, the Mississippi Supreme Court dismissed PM
USA’s appeal and the State’s appeal as it relates to PM USA.
RJRT continues to appeal the Final Judgment.
50. In January 2021, RJRT reached an agreement with several MSA
states to waive RJRT’s 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’ escrow
statutes. In consideration for waiving claims, RJRT, together with
SFNTC, received approximately US$55.4 million (approximately
£44.2 million) 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 NOP for the Acquired Brands and this
improperly shifted approximately US$80 million
(approximately £63.9 million) in MSA payment obligations
from RJRT to PM USA, to date. On 7 June 2022, RJRT and
PM USA negotiated a resolution of the MSA claims, in which
RJRT agreed to, among other things, pay PM USA the sum
of approximately US$37 million (approximately £29.5 million).
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 million
(£103.8 million) in damages, as well as treble damages. The PMs
filed their resistance to Iowa’s motion and a motion to compel
arbitration on 26 September 2022. Iowa filed its resistance to the
PMs’ 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’s motion to enforce pending the arbitration, and
ordered a status conference for 9 February 2024. On 7 March
2023, Iowa filed a withdrawal of its motion to enforce, mooting
the need for a status conference.
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 New Mexico’s Unfair
Practices Act. New Mexico seeks compensatory damages in an
amount to be determined at trial, as well as treble damages,
punitive damages, and declaratory and injunctive relief. The PMs’
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 Mexico filed its response to the motion on
20 December 2022 and the PMs filed their reply on 30 December
2022. On 13 January 2023, the court granted the PMs’ motion to
extend their deadline to file their response to 10 February 2023.
On 10 February 2023, the PMs filed a motion to compel arbitration
or, in the alternative, motion to dismiss New Mexico’s complaint
and alternative motion to enforce. The State’s response to the
PMs’ motion to compel was filed on 27 March 2023, and the PMs’
reply was filed on 14 April 2023; a hearing was held on 30 October
2023. On 29 December 2023, the New Mexico District Court
granted the PMs’ motion to compel arbitration. On 29 January
2024, New Mexico filed a notice of appeal. Briefing is complete.
On 29 March 2024, RJRT filed a motion to dismiss New Mexico’s
appeal. On 28 August 2024, RJRT filed a motion to stay briefing
on the appeal while its motion to dismiss the appeal is
pending. On 12 September 2024, New Mexico opposed RJRT’s
motion to stay. The motion was denied on 24 September
2024, with RJRT’s motion to dismiss held in abeyance pending
submission of the appeal to a panel of judges.
54. On 21 February 2024, New Mexico provided the PMs with a
30-day notice of its intent to initiate proceedings to seek from
the New Mexico District Court a declaratory judgment
interpreting the term “diligently enforce” as that term is to be
applied to New Mexico. On 22 March 2024, New Mexico filed
a complaint with the New Mexico District Court seeking a
declaratory judgment interpreting the term “diligently
enforce.” RJRT filed a motion to compel arbitration and to
dismiss the complaint on 19 April 2024. New Mexico filed its
response brief on 21 May 2024, and RJRT filed its reply brief on
10 June 2024. The New Mexico District Court set a hearing
date of 23 September 2024. On 20 June 2024, New Mexico
filed a motion for leave to file a sur-reply to RJRT’s motion to
compel arbitration and to dismiss the complaint. RJRT filed its
opposition on 8 July 2024. New Mexico filed its reply on 26 July
2024. A hearing occurred on 23 September 2024, at which the
New Mexico District Court granted RJRT's motion to compel
arbitration and dismissed the complaint from the bench. The
New Mexico District Court issued an order to that effect on
13 November 2024. New Mexico filed a notice of appeal on
9 December 2024 and a docking statement on 8 January
2025. Briefing has not yet commenced. On 23 February 2024,
PM USA sent New Mexico a 30-day notice of intent to initiate
a proceeding against New Mexico, giving notice that it intends
to bring an action in the New Mexico District Court seeking an
enforcement order compelling New Mexico to participate in a
proceeding before a firm to resolve a dispute over whether
New Mexico’s statutes requiring escrow deposits on certain
Cigarettes sold in New Mexico constitute a Qualifying Statute
as required by the MSA.
55. 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 Texas for
years 2019 through 2022 and a change in the calculation going
forward, asserting that RJRT, PM USA and ITG issued
payments to Texas that were based on unauthorized changes
to the base year 1997 NOP 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 million (£91 million) 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 calculate settlement
payments due under the previously settled State Settlement
Agreements, PricewaterhouseCoopers LLC (PwC LLC) dated 3
March 2023, Texas requested that PwC LLC’s calculation of
the NOP 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 NOP 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.
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On 24 March 2023, PwC LLC’s 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 May 2023, Texas filed its opposition and cross-motion
to enforce the settlement agreement. On 30 May 2023,
PM USA 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’s reply in
support of cross-motion to enforce the settlement
agreement. On 15 March 2024, the court granted the state’s
cross-motion to enforce and denied the motion to enforce
filed by PM USA and RJRT. The court ordered that each party
shall have thirty (30) days to present a respective memorandum
on damages and interest. The parties filed their briefs on
damages and interest on 15 April 2024. The parties also filed
supplemental briefs. The Court held a hearing on 17 July 2024.
56. On 16 March, 2023, the State of Minnesota sent a letter to
PwC LLC, joining in the positions taken by the States of Texas
and Florida that PwC LLC’s calculation of the NOP
Adjustment due Minnesota for the years 2018 and after be
based on the value fixed in the Mississippi decision that found
the base year 1997 NOP to be used in calculating the NOP
Adjustment was not affected by the change in the federal
corporate tax rate in 2018. On 24 March 2023, PwC LLC’s
calculation of the NOP Adjustment due Minnesota for 2022
did not use the value fixed in the Mississippi decision. On
2 July 2024, the State filed a motion to enforce the Settlement
Agreement. A hearing was held 26 September 2024. On
9 December 2024, the Minnesota court granted the State of
Minnesota’s Motion to Enforce the Settlement Agreement
and granted the parties 30 days (until 8 January 2025) to meet
and confer on the issue of damages, interest, and civil
penalties including attorneys’ fees. The Minnesota court also
directed that within 30 days, PwC LLC shall calculate all future
Minnesota NOP Adjustments using US$3,115.1 million as the
Base Net Operating Profit. On 8 January 2025, the parties
informed the court that they have not resolved all remaining
issues and will need to brief them. On 16 January 2025, the
court directed the parties to mediation of the remaining issues.
Tobacco-Related Litigation Outside the U.S.
57. As at 31 December 2024:
a) medical reimbursement actions are being brought
in Angola, 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’s
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
58. 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 Associação Angolana dos
Direitos do Consumidor (AADIC). The lawsuit seeks damages
of AOA800 million (£692,327) 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
59. On 1 March 2019, the Québec Court of Appeal handed down
a judgment which largely upheld and endorsed the lower
court’s previous decision in two Québec class actions (the
Québec Class Actions), as further described below. The share
of the judgment for Imperial Tobacco Canada Limited
(Imperial), the Group’s operating company in Canada, is
approximately CAD$9.2 billion (approximately £5.1 billion).
As a result of this judgment, there were attempts by the
Quebec plaintiffs to obtain payment out of the
CAD$758 million (£420.8 million) on deposit with the court.
JTI-MacDonald Corp ((JTIM) a subsidiary of Japan Tobacco
International (JTI) and a co-defendant in the cases) filed for
creditor protection under the Companies’ Creditors
Arrangement Act (the CCAA) on 8 March 2019. A court 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 April 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. ((RBH) a subsidiary of Philip Morris International
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 3 March 2025 or until
such time as the Court’s decision on the Sanction Order is
released (see paragraph 62 below). 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.
60. On 17 October 2024, the court-appointed mediator and
monitor filed a proposed plan of compromise and
arrangement for Imperial in the Ontario Superior Court of
Justice. Substantially similar proposed plans were also filed
for RBH and JTIM (collectively, the Proposed Plans).
61.
Under the Proposed Plans, if they are ultimately sanctioned
and implemented, Imperial, RBH and JTIM (the Companies)
would pay an aggregate settlement amount of
CAD$32.5 billion (£18.0 billion) to settle all claims and litigation
relating to tobacco in Canada including, the Quebec Class
Actions, the Provincial Actions (as described in paragraphs 65
to 66 below), outstanding Class Actions (as set out in more
detail in paragraphs 74 to 84 below with the exception of the
Danver Bauman action described in paragraph 85, which is
not tobacco-related) and individual actions. This amount
would be funded by:
a) an upfront payment equal to all the Companies' cash and
cash equivalents on hand (including investments held at
fair value) plus certain court deposits (subject to an
aggregate industry withholding of CAD$750 million (£416
million)) plus 85% of any cash tax refunds that may be
received by the Companies on account of the upfront
payments; and
b) annual payments based on a percentage (initially 85%,
reducing over time) of each of the Companies’ net income
after taxes, based on amounts generated from all sources,
excluding New Categories, until the aggregate settlement
amount is paid. The performance of Imperial’s New
Categories (including Vapour products and nicotine
pouches) is not included in the basis for calculating the
annual payments.
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62. On 31 October 2024, the court hearing to rule on the Claims
Procedure Orders and Meeting Orders took place and these
were granted. In accordance with the Meeting Order, a
creditors' meeting was held on 12 December 2024 and the
Proposed Plans were approved by the requisite majorities of
the creditors. A Sanction Hearing took place between 29-31
January 2025. During the Sanction Hearing, the Court was
asked to sanction the Proposed Plans. The Court’s decision is
currently pending and the Stays are extended until 3 March
2025, or until such time as the Court decision on the Sanction
Order is released.
63. If the Proposed Plans are sanctioned and implemented,
Imperial will be required to pay into the settlement fund cash
and cash equivalents on hand (including investments held at
fair value) plus certain court deposits (subject to an aggregate
industry withholding of CAD$750 million (£416 million)). At
31 December 2024, a provision has been recognised in relation
to this liability - see note 24. Subject to the sanction order, the
cash is expected to be paid in 2025.
64. If the Proposed Plans are sanctioned and implemented,
Imperial and the other Companies will be required to make
annual payments based on a percentage of net income after
tax based on amounts generated from all sources, excluding
New Categories, until they settle the liability in full. At
31 December 2024, a provision has been recognised to reflect
management's best estimate of Imperial’s total payments
under the Proposed Plans - see note 24.
The below represents the state of the referenced litigation
as at the advent of the Stays.
65. 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 various Group companies as defendants, including the
UK Companies and Imperial as well as the RJR Companies
(the Provincial Actions). Pursuant to the terms of the 1999 sale
of RJRT’s international tobacco business to 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.
66. The 10 cases were proceeding in the provinces of British
Columbia, New Brunswick, Newfoundland and Labrador,
Ontario, Québec, Manitoba, Alberta, Saskatchewan, Nova
Scotia and Prince Edward Island. The enabling legislation is in
force in all 10 provinces. 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 damages in the amount of CAD$118 billion (£65.5 billion).
No trial date has been set. The federal government is seeking
CAD$5 million (£2.8 million) 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 billion (£6.2 billion) and
CAD$23.2 billion (£12.9 billion), including expected future costs.
Following a motion to set a trial date, the New Brunswick
Court of Queen’s Bench ordered that the trial commence on 4
November 2019. On 7 March 2019, the New Brunswick Court
of Queen’s 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 2017 and discoveries commenced in the autumn of 2018.
On 15 June 2018, the Province delivered an expert report
quantifying its damages in the range of CAD$280 billion
(£155 billion) – CAD$630 billion (£350 billion) in 2016/2017
dollars for the period 1954 – 2060, and the Province amended
the damages sought in its Statement of Claim to
CAD$330 billion (£183.2 billion). On 31 January 2019, the
Province delivered a further expert report claiming an
additional amount between CAD$9.4 billion (£5.2 billion)
and CAD$10.9 billion (£6.1 billion) in damages in respect 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 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 began
its document 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 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 has delivered
a test shipment of documents. Damages have not been
quantified by the Province. No trial date has been set.
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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 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 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’s Right
of 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 Province commenced
its document production. The Province has stated its claim to
be worth CAD$10 billion (£5.6 billion). No trial date has been
set.
Canadian province: Québec
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 billion (£33.3 billion). 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
67. 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 May 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 trillion (approximately £5.5 billion) in damages,
including special, anticipatory and punitive damages,
restitution and disgorgement of profits, as well as
declaratory and injunctive relief.
68. 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 another’s duty to the public.
69. 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’s and Investments’ jurisdictional challenges
were successful in the Court of Appeal and the issuance
of the writ of summons was set aside.
South Korea
70. In April 2014, Korea’s 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 billion (approximately £29.3 million) 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 September 2014. On 20 November 2020, the court issued
a judgment in favour of the defendants and dismissing all of
the plaintiff’s claims. The NHIS filed an appeal of the judgment
on 11 December 2020. Appellate proceedings commenced
in June 2021 and remain ongoing.
Brazil
71.
On 21 May 2019, the Federal Attorney’s Office (AGU) in Brazil
filed an action in the Federal Court of Rio Grande do Sul
against the Company, the BAT Group’s Brazilian subsidiary
Souza Cruz LTDA (Souza Cruz), Philip Morris International,
Philip Morris Brazil Indústria e Comércio 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 tobacco-related diseases over the last five years from
the filing 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 claim for moral damages allegedly suffered by Brazilian
society to be paid into a public welfare fund. The action is
for an unspecified amount of monetary compensation, as
the AGU seeks a bifurcated action in which liability would be
determined in the first phase followed by an evidentiary phase
to ascertain damages.
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72. 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 August 2019, Souza Cruz refused to receive service
on behalf of the Company due to Souza Cruz’s lack of power
to do so. On 7 August 2019, Souza Cruz was served with the
complaint. Following further proceedings in 2019 and 2020
in both 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 May 2020.
73. On 19 February 2021, the Associação de Controle do
Tabagismo, Promoção da Saúde (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 March
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’s Office (MPF) regarding the
AGU’s 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 ‘inspector of the law’,
which enables MPF to express its opinion on case matters.
On 10 October 2022, the MPF submitted an opinion on
preliminary issues and evidence, which called for rejection of
the defendants’ 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’s opinion on 14 November 2022,
18 November 2022, 2 March 2023 and 3 March 2023,
respectively. On 6 December 2023, the Fundação Oswaldo
Cruz (FIOCRUZ), a research and development arm of the
Brazilian Ministry of Health, filed a petition 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
74. As described in paragraph 59, the Canadian tobacco litigation is
currently stayed subject to court-ordered stays of proceeding
(the Stays). The Stays are currently in place until 3 March 2025
or until such time as the Court’s decision on the Sanction Order
is released (see paragraph 62 above). 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. As described
in paragraphs 60 to 64, the Proposed Plans have received
creditor approval and a sanction hearing to approve the
Proposed Plans took place between 29-31 January 2025.
During the Sanction Hearing, the Court was asked to approve
the Proposed Plans in view of its implementation. The Court’s
decision is currently pending. Under the Proposed Plans,
if they are ultimately sanctioned and implemented, the
Companies (including Imperial) would be required to pay
an aggregate settlement amount of CAD$32.5 billion
(£18 billion) to settle all claims and litigation relating to
tobacco in Canada including, the outstanding Class Actions
listed below (with the exception of the Danver Bauman action
described in paragraph 85, which is not tobacco-related).
75. The below represents the state of the referenced litigation
as at the advent of the Stays.
76. There are 11 class actions being brought in Canada against
Group companies.
77. Knight Class Action: the Supreme Court of British Columbia
certified a class of all consumers who purchased Imperial
cigarettes in British Columbia bearing ‘light’ or ‘mild’
descriptors since 1974. The plaintiff is seeking compensation
for amounts spent on ‘light and mild’ 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.
78. On appeal, the appellate court confirmed the certification of
the class, but limited any financial liability, if proven, to 1997
onward. Imperial’s 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 million (£2.8 million) 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 June 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.
79. Growers’ 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’
Marketing Board. The plaintiffs allege that Imperial and the
Canadian subsidiaries of PMI 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 136 to 137). The plaintiffs seek damages
in the amount of CAD$50 million (£27.8 million). 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 at the date of the
Stays, the claim was in abeyance pending further action from
the plaintiffs.
80. Québec Class Actions: there are currently two smoking
and health class actions in Québec, certified by the Québec
Superior Court on 21 February 2005 against Imperial and
two other 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 PMI and JTI
in the amount of CAD$15.6 billion (£8.7 billion), most of which
was on a joint and several basis, of which Imperial’s share was
CAD$10.4 billion (£5.8 billion). An appeal of the judgment was
filed on 26 June 2015. The court also awarded provisional
execution pending appeal of CAD$1,131 million (£628 million),
of which Imperial’s share was approximately CAD$742 million
(£412 million). 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 billion (£2.8 billion) to guarantee, in whole or
in part, the payment of costs of the appeal and the judgment.
On 27 October 2015, the Court of Appeal ordered the parties
to post security for the judgment in the amount of
CAD$984 million (£546 million), of which Imperial’s share was
CAD$758 million (£421 million) which amounts have been paid
into court. Imperial's share was later recalculated by the Court
of Appeal as CAD$759 million (£421 million).
On 1 March 2019, the trial judgment was upheld by a
unanimous decision of the five-member panel of the Court
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of Appeal, with one exception being an amendment to the
original interest calculation applied to certain portions of the
judgment. The interest adjustment has resulted in the
reduction of the total maximum award in the two cases to
CAD$13.7 billion (£7.6 billion) as at 1 March 2019, with
Imperial’s share being reduced to approximately
CAD$9.2 billion (approximately £5.1 billion).
81.
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 Companies,
in various Canadian provinces. In these cases, none of which
have quantified their asserted damages, the plaintiffs 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 a ‘special duty’ 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’s 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).
82. 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 Companies, Imperial and the RJR Companies. In
Saskatchewan, the Company, Carreras Rothmans Limited
and Ryesekks p.l.c. have been released from Adams, and
the RJR Companies have brought a motion challenging the
jurisdiction of the court. There are service issues in relation
to Imperial and the UK Companies in Alberta and in relation
to the UK Companies in Manitoba. The plaintiffs did not serve
their certification motion materials and no dates for
certification motions were set.
83. In June 2010, two further smoking and health class actions
were filed 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 UK 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.
84. 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 Companies. The claim has been in abeyance.
85. 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., Imperial, 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 Stays,
is subject to the Stays, and has not been served.
Venezuela
86. In April 2008, the Venezuelan Federation of Associations
of Users 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 class 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 January 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
87. As at 31 December 2024, the jurisdictions with the most
active individual cases against Group companies were, in
descending order: Chile (18), Brazil (12), Italy (six), Canada (five),
Argentina (five) and Ireland (two). There were a further two
jurisdictions with one active case only. Out of these 50 active
individual cases, as at 31 December 2024 there were two
cases in Argentina that have resulted in pending unfavourable
judgments. In one case, damages were awarded totalling
ARS685,976 (£531) in compensatory damages and
ARS2,500,000 (£1,936) in punitive damages, plus post-
judgment interest. This judgment was reversed via an
appellate court ruling issued 19 September 2023. The
plaintiff’s 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 December 2023, which appeal remains
pending. In the other case, compensatory damages were
awarded totalling ARS2,850,000 (£2,207), with post-judgment
interest totalling approximately ARS285,842,620 (£221,373).
This judgment is currently on appeal. In addition, on 25 August
2023, an adverse written judgment was served in an individual
action in Türkiye awarding TRY10,000 (£226) in compensatory
damages against British American Tobacco Tütün Mam. San.
ve Tic. A.Ş (BAT Türkiye) and Philip Morris Sabancı Pazarlama
ve Satış A.Ş, now known as Philip Morris Pazarlama ve Satış
A.Ş (PMP). The judgment was reversed against BAT Türkiye
via an appellate court ruling served on 7 January 2025, on the
basis that BAT Türkiye does not have standing to be sued. The
judgment was upheld against PMP, with the amount of the
award increased to TRY500,000 (£11,290). PMP has appealed
the judgment against it, and the plaintiff has appealed both
rulings. The appeals remain pending.
Croatian Distributor Dispute
88. 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 August
2017 and brought before the commercial court of Zagreb,
Croatia. Mr Perica seeks damages of HRK408 million
(€54 million / £45 million) 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 Perica
received on 30 April 2018 and brought before the commercial
court of Zagreb, Croatia. Mr. Perica seeks payment in the
amount of HRK408 million (€54 million / £45 million) 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
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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 May 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 decided that the claims by Mr Perica initiated
on 22 August 2017 and 30 April 2018 shall be heard as one
case in front of the Municipal Court of Zagreb. After the two
hearings were held, the Municipal Court of Zagreb appointed
the court financial and auditing appraisal to determine the
value of Mr Perica’s claim, which it determined in the amount
of €15,850,579 (£13 million). BAT Hrvatska d.o.o, British
American Tobacco Investments (Central and Eastern Europe)
Ltd and TDR d.o.o, are able to challenge this valuation as part
of the legal proceedings.
Florence Proceedings
89. 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. The charges have been dismissed at the
preliminary hearing, concluded in December 2024, along with
the charges against all other defendants. This is subject to
any appeal by the prosecutor, the time limit for which has
not yet passed.
Patents and Trademark Litigation
90. 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’ patents.
91.
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’s
Japanese patents. Damages for the glo device and NeoStiks
were claimed in the court filing, to the amount of JPY100 million
(£508,060). The PMI affiliate also filed a request for injunction
with respect to the glo device. BAT Japan denied infringement
and challenged the validity of the two PMI affiliate’s Japanese
patents. On 30 November 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 November 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. Pursuant to a global
settlement agreement between Nicoventures and the PMI
affiliate dated 1 February 2024 that resolves all ongoing patent
infringement litigation between the parties related to the
Group's Heated Tobacco and Vapour products (PMI
Settlement), the PMI affiliate withdrew all the claims of this
litigation on 5 February 2024.
92. On 11 February 2022, Nicoventures commenced an action in
the England and Wales High Court (Patents Court) against Philip
Morris Products S.A. (PMP) for revocation against one of PMP’s
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 ‘glo’ 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 counterclaim in respect of the other patent having been
abandoned). Thus, PMP's counterclaim for patent
infringement against Nicoventures and Investments failed.
Pursuant to the PMI Settlement, these proceedings were
dismissed on 5 February 2024.
93. On 28 May 2020, Altria Client Services LLC (Altria) and U.S.
Smokeless Tobacco Company LLC commenced proceedings
against RJR Vapor 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 January 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 April 2021, and the court issued its claim
construction ruling on 12 May 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 September 2022. The jury found infringement by all accused
products and awarded approximately US$95 million
(approximately £75.9 million) in damages. On 27 January 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 5.25%.
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 the Federal Circuit.
On 19 December 2024, the Federal Circuit affirmed the lower
court’s judgment.
94. 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., PMI and Philip Morris Products S.A. (collectively,
Philip Morris) for infringement of six patents based on the
importation and commercialization within the United States of
IQOS. On 8 May 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 June 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 4 December 2020,
the magistrate judge issued an order staying RJR Vapor and Philip
Morris’s patent claims pending a decision 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
(£8,591,309), which was supplemented by the Court to a total of
US$14,062,742 (£11,228,635) to account for additional sales of Solo
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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 March 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’s motion for entry of judgment under Fed. R. Civ. P. 54(b)
and denied Philip Morris’s cross motion to lift the stay as to
RJR Vapor’s offensive patent case. The RJR Vapor offensive patent
case remained 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 the 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 cross-appeal relating to the denial of its request for a
permanent injunction and the 17 August 2023 amended judgment
on the verdict. As part of the PMI Settlement, the case has been
settled, and the court entered an order granting the parties’ joint
stipulation of dismissal on 5 February 2024.
95. 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 decision on the matter was promulgated on 30 November
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. Pursuant
to the PMI Settlement, these proceedings were dismissed on
5 February 2024.
96. 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 NeoStiks 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 November
2021. The court promulgated its decision on 21 December 2021
and decided that the above-mentioned products infringe the
patent. The decision was appealed by BAT Germany on
21 December 2021 to the Higher Regional Court Dusseldorf.
The oral hearing of these appeal proceedings took place on
24 November 2022. On 15 December 2022, the Higher
Regional Court Dusseldorf reversed the trial court decision
and dismissed Philip Morris’s complaint in its entirety.
In addition, 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. Pursuant to the PMI Settlement, these
proceedings were dismissed on 6 February 2024.
97. 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 motion to dismiss the action in its entirety. On 18 September
2024, RJR Vapor filed an IPR challenging the patentability
of the ‘788 patent before the U.S. Patent Trial and Appeal
Board (PTAB). On 27 November 2024, the court granted
RJR Vapor’s motion to stay the litigation pending the PTAB’s
institution decision in the IPR. The IPR decision is expected
in March 2025.
Mozambican IP Litigation
98. On 19 April 2017, Sociedade Agrícola de Tabacos, Limitada
(SAT) (a BAT Group company in Mozambique) filed a complaint
to the National Inspectorate for Economic Activities (INAE),
the government 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’s intellectual property rights. Following
INAE’s 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 (£584,893) as well as a 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 August 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, and rejected the damages claim. This decision
was appealed by SAT (Infringement Appeal). GST filed an
application for review against INAE’s initial decision directly to
the Minister of Trade and Industry, which reversed the decision
of INAE. On 31 December 2018, SAT was notified of GST’s
counterclaim against SAT at the Judicial Court of Nampula for
damages allegedly sustained as a result of SAT’s complaint to
INAE (and INAE’s decision). GST is seeking damages in the
amount of approximately MZN14.5 billion (approximately
£181 million). On 31 January 2019, SAT filed a formal response to
the counterclaim. A preliminary hearing was held on 2 April
2019, when the court heard arguments on the validity of GST’s
counterclaim. On 2 September 2019, SAT received notification
of an order which provided that (i) SAT’s invalidity arguments
had been dismissed by the court; and (ii) the GST counterclaim
would proceed to trial. On 9 September 2019, SAT responded
to the order by appealing the dismissal of the SAT invalidity
arguments (Invalidity Appeal). 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’s
complaint has been appreciated favourably and the process
was remitted to the High Court of Appeal for Nampula. The
Court of Appeal handed down its judgment in respect of SAT’s
Infringement Appeal and SAT’s Invalidity Appeal. In respect of
the Invalidity Appeal, the Court found that the requirements
for GST’s counterclaim had not been met, and accordingly
found that the counterclaim could not proceed. In respect of
the Infringement Appeal, the Court partially upheld the main
appeal brought by SAT, finding that there had been a partial
reproduction of SAT’s trademarks by GST. Consequently, it
ordered GST to abstain from producing and commercializing
products using packaging similar to that of SAT. However, as
regards SAT’s claim for compensation for damage caused by
the conduct of GST the Court found that this loss had not
been proven. SAT did not appeal the judgment and has not yet
been made aware of an appeal by GST.
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Malawi Group Action
99. In December 2020, the Company and British American Tobacco
(GLP) Limited (GLP) were named as defendants in a claim made
in the English High Court by around 7,500 Malawian tobacco
farmers and their family members. The claim also names Imperial
Brands plc and five affiliates as defendants. 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
100. On 6 November 2023, Walid Ahmed Mohammed Al Naghi for
Trading Establishment (Al Naghi), a former distributor for the
Group’s operating companies in the Middle East, filed a claim
in the Commercial Court in Jeddah, Saudi Arabia, seeking
SAR2,105,356,121 (£447 million) for reimbursement of funds
allegedly due under contract. The claim named British American
Tobacco Middle East W.L.L. as the defendant. At a hearing on 13
May 2024, the Court of First Instance gave an oral decision
dismissing Al Naghi’s claim on the merits. That decision was
confirmed in a written judgment issued on 24 May 2024. On 23
June 2024, Al Naghi filed an appeal against the Court of First
Instance Judgment. At a hearing on 17 July 2024, the Appellate
Court gave an oral decision dismissing Al Naghi’s appeal and
upholding the Court of First Instance’s judgment. Al Naghi
appealed to the Saudi Supreme Court, and on 12 November 2024,
the Supreme Court dismissed the appeal.
101. In late December 2023, B.A.T. (U.K. and Export) Limited (BAT
UKE) received a request for arbitration proceedings from a
customer/distributor in the Middle East. In February 2024, the
claimants joined British American Tobacco ME DMCC (BAT
ME DMCC) to the arbitration proceedings. The claimants filed
their Statement of Claim in August 2023, seeking damages of
approximately US$118 million (approximately £94 million). BAT
UKE and BAT ME DMCC filed their Statement of Defence in
February 2025 and the proceedings are continuing.
Asbestos Litigation
102. As of 31 December 2024, there were five active asbestos personal
injury cases served and pending against BATUS Holdings Inc.
(Lowis, Weber, Hardaway, Horsfield, and Harshberger). During
the financial year 2024, BATUS Holdings Inc. was served with four
new asbestos personal injury cases, and was dismissed from
12 asbestos personal injury cases (Phillips, Cooke, Dove, Gibbs,
Westropp, Knight, Steggles, Doonan, Oakenfold, Redgewell,
Caswell, and Adams). On 30 January 2025, BATUS Holdings Inc.
was dismissed from Harshberger, filed in the Court of Common
Pleas, Philadelphia County, Pennsylvania.The plaintiffs in each
case allege exposure to the defendants’ 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 four active cases, one case (Lowis) is filed in the Supreme
Court of the State of New York (New York County), another
(Weber) is filed in the Circuit Court of the 17th Judicial Circuit in
and for Broward County, Florida, another (Hardaway) was filed
in the District Court for Bexar County, Texas, and subsequently
transferred to the District Court for Harris County, Texas, and
another (Horsfield) is filed in the Circuit Court of the 11th Judicial
Circuit in and for Miami-Dade, Florida. In each of these cases,
BATUS Holdings Inc. has filed motions to dismiss for lack of
personal jurisdiction, which remain pending.
Cigarette Filter Litter Litigation
103. 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 USA, Altria
Group, Liggett Group LLC and a Maryland-based distributor,
as defendants. RJRT was served on 13 December 2022, and the
Company received the complaint on 18 January 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 state
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 USA 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 March 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. On 19 March 2024, the Company filed a
motion to dismiss the complaint for lack of personal jurisdiction
and for failure to state a legal claim. That same date,
defendants RJRT, PM USA, Liggett Group LLC, and a Maryland-
based distributor moved to dismiss the complaint for failure
to state a legal claim. The Company was voluntarily dismissed
from the action without prejudice via a stipulation of dismissal
filed 2 May 2024. The case remains pending against RJRT and
other defendants. Briefing on those defendants’ pending
motion to dismiss is completed, oral argument was held on
17 July 2024, and a decision is pending.
U.S. Securities Putative Class Action
104. 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 purchasers of publicly traded Company
securities between 9 February 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 American
cash-generating units or its brand intangibles. The complaint
does not quantify the claimed damages. The plaintiff
voluntarily dismissed the complaint on 18 December 2024.
Fox River
Background to environmental liabilities arising out of
contamination of the Fox River:
105. U.S. authorities identified potentially responsible parties
(PRPs), including NCR Corporation (NCR) (now called NCR
Voyix Corporation), 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’ 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.
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106. 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 District Court of Wisconsin approved (on 23 August 2017)
a form of settlement with the U.S. Government known as a
Consent Decree.
107. A key term of that Consent Decree is that NCR was obliged
to perform and fund all of the remaining Fox River remediation
work by itself.
108. 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 million (£1,075 million).
109. A further Consent Decree between the U.S. Government,
P.H. Glatfelter 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 arbitral tribunal awarded approximately US$10 million
(approximately £8.0 million) 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 stated (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%.
110. 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’
involvement with environmental liabilities arising out of the
contamination of the Fox River:
111. NCR's position is that, under the terms of a 1998 Confidential
Settlement Agreement (CSA) 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 Fox
River PRPs’ contribution claims. BAT has not acknowledged
any such liability to NCR and has defences to such claims.
112. Until May 2012, Appvion and Windward Prospects Limited
(Windward) (another former Group subsidiary) which
indemnified Industries, 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
113. 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 Funding 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 level
of 50% of NCR’s share of the ongoing clean-up related
costs of the Fox River (rather than the 60% referenced
above). This remains subject to an ability to litigate at a
later stage the extent of Industries’ liability (if any) in
relation to Fox River clean-up-related costs (including
in respect of the 50% of costs that Industries has paid
with express reservation under the Funding Agreement
to date).
114. Additionally, Windward has contributed US$10 million
(£8.0 million) of funding. Appvion has contributed
US$25 million (£20.0 million) for Fox River and agreed to
contribute US$25 million (£20.0 million) for the Kalamazoo
River (see further below). Appvion entered Chapter 11
bankruptcy protection on 1 October 2017.
115. 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 €443 million (approximately
£366 million) in 2008 and €135 million (£112 million) 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’s creditors (including Industries) (the BAT section
423 Claim) (together, the Sequana Proceedings).
116. Pursuant to a judgment of the High Court handed down on
11 July 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 million (approximately £147.7 million). The
Court dismissed the Windward Dividend Claim (the Judgment).
117. The parties pursued cross-appeals on the Judgment
and payments in respect of the Judgment were stayed. On
6 February 2019 the Court of Appeal gave judgment upholding
the High Court’s findings, with one immaterial change to
the method of calculating the damages awarded. Sequana
remains liable to make some payment in respect of the Judgment.
118. On 15 May 2019, the Nanterre Commercial Court made an
order placing Sequana into formal liquidation proceedings.
To date, Sequana has made no payments to Industries.
Because of Sequana’s ongoing insolvency process,
execution of the Judgment has been and is stayed.
119. BTI subsequently appealed to the Supreme Court in respect
of the Windward Dividend Claims against the former
Windward Directors. On 5 October 2022, the Supreme Court
handed down its judgment, dismissing BTI's appeal.
120. BTI brought claims against Windward’s former auditors and
advisers (which claims were also assigned to BTI under the
Funding Agreement). BTI commenced a claim against
PricewaterhouseCoopers LLP (PwC) in the High Court in
respect of its role as Windward’s auditor at the time of the
dividend payments. Trial commenced on 4 June 2024. The
claims were settled on 21 June 2024, pursuant to the terms set
out in a confidential settlement agreement entered into by BTI,
PWC and the joint administrators of Windward (who were a
nominal party to the proceedings). An agreed stay is in place in
respect of BTI’s separate assigned claim against Freshfields
Bruckhaus Deringer.
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121. The sums Industries has paid under the Funding Agreement
are subject to the reservation as set out in paragraph 113(c)
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 £32 million in respect of clean-up
costs. In 2020, Industries paid £2 million in respect of clean-up
costs. In 2021, Industries paid a further £2 million in respect of
clean-up costs. In 2022, Industries has paid an additional
£1 million in respect of clean-up costs. Industries is potentially
liable for further costs associated with the clean-up. Industries
has a provision of £44 million which represents the current
best estimate of its exposure – see note 24.
Kalamazoo
122. Georgia-Pacific, a designated PRP in respect of the
Kalamazoo River in Michigan, also pursued NCR in relation
to remediation 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).
123. Following further litigation, on 11 December 2019, NCR
announced that it had entered into a Consent Decree with
the U.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 million (approximately £195.6 million).
The Consent Decree also provides for the payment by NCR
of an outstanding judgment against it of approximately
US$20 million (approximately £16.0 million) to Georgia-Pacific.
124. The quantum of the clean-up costs for the Kalamazoo River
is presently unclear. It seems likely to exceed the amounts
payable on the face of the Consent Decree.
125. 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 ‘Future Site’ for the
purposes of the CSA. The Funding Agreement described
above does not resolve the claims. On 23 June 2023, Industries
filed its defence and counterclaims in the proceedings. On
2 October 2023, NCR filed a motion for declaratory judgment
on its Complaint and to strike out Industries’ affirmative
defences and dismiss Industries’ counterclaims. Industries
opposed this motion. On 14 September 2024, the court issued
a judgment in respect of the motion, striking out one of
Industries’ eight affirmative defences and dismissing three of
Industries’ five counterclaims. A pre-trial conference occurred
on 30 October 2024, following which a case management
order was issued. The parties are scheduled to complete all
fact discovery by 11 July 2025.
126. In summary, in respect of Fox River and Kalamazoo River,
Industries is and has been taking active steps to protect its
interests. These include preparation of all its defences and
counterclaims, seeking to obtain the repayment of sums
representing the Windward dividends, pursuing the other
valuable claims that are now within its control, obtaining
settlement in respect of some of those and working with
the other parties to the Funding Agreement to obtain and
maximise recoveries from third parties. This has been done
to ensure amounts funded by Industries towards clean-up
related costs are later recouped under the agreed repayment
mechanisms under the Funding Agreement.
Other environmental matters
127. 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 release or presence
of hazardous or toxic substances. In addition, third parties
may make claims against owners or operators 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
128. The Group investigates, and becomes aware of governmental
authorities’ 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.
129. Competition Investigations. There are instances where the
Group investigates or where Group companies are
cooperating with relevant national competition authorities in
relation to competition law investigations and/or engaged in
legal proceedings at the appellate level, including (amongst
others) in the Netherlands. In regards to the previously
disclosed consent order entered into with the Nigerian
Federal Competition and Consumer Protection Commission
(FCCPC) by British American Tobacco (Holdings) Limited,
British American Tobacco (Nigeria) Limited and British
American Tobacco Marketing (Nigeria) Limited in December
2022, the two-year monitorship remains ongoing following its
formal commencement in 2023.
130. On 25 April 2023, the Group announced that it had reached
agreement with DOJ and the United States Department of
the Treasury’s 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’s Republic of Korea
between 2007 and 2017. The Company entered into a three-
year deferred prosecution agreement (DPA) with DOJ and a
civil settlement agreement with OFAC. DOJ’s charges against
the Company—one count of conspiring to commit bank fraud
and one count of conspiring to violate sanctions laws—were
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 total amount
payable to the U.S. authorities is approximately US$635 million
plus interest, which has been paid by the Company.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
361
Closed litigation matters
131. The following matters on which the Company reported in the contingent liabilities and financial commitments note 31 to the
Company’s 2023 financial statements have been dismissed, concluded or resolved as noted below and shall not be included in
future reports:
Matter
Jurisdiction
Companies named as Defendants
Description
Disposition
Middle Eastern Litigation
Saudi Arabia
British American Tobacco
Middle East W.L.L.
Commercial Litigation
Court judgment in
favour of Defendants
Middle Eastern Litigation
Saudi Arabia
B.A.T (U.K. and Export)
Limited
Commercial Litigation
Court judgment in
favour of Defendants
Stuck, Mannooch,
Phillips, Cooke, Dove,
Gibbs, Westropp, Knight,
Steggles, Doonan,
Oakenfold, Redgewell,
Caswell, Adams, and
Harshberger (asbestos
litigation)
U.S.
BATUS Holdings Inc
Personal Injury
Court judgment
dismissing Defendant
(Stuck and Manooch) /
Voluntary dismissal by
plaintiffs
Bernston
U.S.
Reynolds American, RJR
Vapor
Vuse litigation
Voluntary dismissal by
plaintiffs
Chastain
U.S.
RJR Vapor
Vuse litigation
Voluntary dismissal by
plaintiffs
U.S. Securities Putative
Class Action
U.S.
British American Tobacco
p.l.c.
Class action
Voluntary dismissal by
plaintiffs
Modoral / Swedish
Match
U.S.
Modoral Brands Inc
Patent litigation
Joint stipulation of
dismissal
U.S. PM patent
counterclaim (Alto and
Solo)
U.S.
RAI Strategic Holdings, Inc.,
RJR Vapor
Patent litigation
Joint stipulation of
dismissal
Philip Morris Products
S.A. counterclaim (2-part
heater)
England and
Wales
Nicoventures Trading
Limited, British American
Tobacco (Investments)
Limited
Patent litigation
Joint stipulation of
dismissal
Vype Epod litigation
Germany
British American Tobacco
(Germany) GmbH
Patent litigation
Joint stipulation of
dismissal
(Klagerücknahme)
Glo litigation
Germany
British American Tobacco
(Germany) GmbH
Patent litigation
Joint stipulation of
dismissal
(Klagerücknahme)
Glo litigation
Japan
British American Tobacco
Japan, Ltd.
Patent litigation
Joint stipulation of
dismissal
General Litigation Conclusion
132. 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’s companies to all these various claims are meritorious on both the law and the facts, and
a vigorous defence is being made everywhere.
133. If adverse judgments are entered against any of the Group’s companies in any case, avenues of appeal will be pursued. Such appeals
could require the appellants to post appeal bonds or substitute security in amounts which could in some cases equal or exceed the
amount of the judgment.
134. At least in the aggregate, and despite the quality of defences available to the Group, it is possible that the Group’s 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 appeal, or any final outcome of any
particular litigation, or governmental investigation.
135. Having regard to all these matters, with the exception of the Proposed Plans and Fox River (see note 24), the Group does not
consider it appropriate to make any provision in respect of any pending 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. 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 and the DOJ medical reimbursement/corrective statement case.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
362
Other contingencies
136. JTI Indemnities. By a purchase agreement dated 9 March
1999, amended and restated as at 11 May 1999, referred to
as the 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 imposition 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’s or RJRT’s 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.
137. 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 1999 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 resolve their differences at a later date.
138. 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 June 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 defend and indemnify, subject to certain conditions
and limitations, Reynolds American and its affiliates in
connection with claims relating to the purchase or use of ‘blu’
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 June 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.
139. 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 ‘Separation Agreement’. 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’ 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’
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’s obligations under
the Separation Agreement as was required under the
Separation Agreement.
140. 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 International Holding BV (JTI Holding),
each of SFNTC, R. J. Reynolds Global Products, Inc., and
R. J. Reynolds Tobacco B.V. agreed to indemnify JTI Holding
against, among other things, any liabilities, costs, and
expenses relating to actions (i) commenced on or before
(a) 13 January 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 European Directive 2014/40/EU or (b) consumers or a
consumer association; and (iii) arising out of any statement
or claim (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.
141. 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’s 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.
142. Except as otherwise noted above, Reynolds American is not
able to estimate the maximum potential of future payments,
if any, related to these indemnification obligations.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
363
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 taxes.
The estimated costs of known tax obligations have been provided in
these accounts in accordance with the Group’s 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’s 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 BRL1,858 million
(£240 million) to cover tax, interest and penalties.
Souza Cruz appealed all reassessments. Regarding the first
assessments (2004-2006), Souza Cruz’s 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 have been 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. In June 2024, the
Brazilian tax authorities initiated a tax audit specifically focused
on the exclusion of the VAT incentives from corporate income tax.
Consideration of the defence strategy led Management to file a
petition to withdraw its judicial claims in order to be able to defend
the company’s position in the administrative courts. The Brazilian
Federal Tax authority filed an appeal challenging the withdrawal of
the judicial claim. The Brazil Tax Authorities' appeal was
unsuccessful and they have confirmed that they do not intend to
appeal further. This has resulted in a reversal of the benefit
recognised for the company’s claim for the period 2016-2019 of
BRL327 million (£42 million) and a provision for potential exposure
to tax, interest and penalties of BRL969 million (£125 million) for
the 2020-2023 period, reflecting the tax assessment received and
a binding Supreme Court decision which reduces the value of
these incentives by 10% (as described in note 6(k)).
Indonesia
Indonesia’s Directorate General of Taxes has filed assessments
against Bentoel group companies mainly relating to domestic and
other intra-group transactions during the years 2016-2021.
Provisions totalling IDR2,151 billion (£107 million) have been made in
respect of claims totalling IDR6,641 billion (£329 million) including
interest and penalties. Objection letters have been filed with the
Tax Office and these assessments are being challenged at various
levels in court.
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
£1,140 million 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 £7 million), the Court of Appeal Amsterdam
issued judgments on 8th October 2024. The appeal against the
assessments was upheld, with the court finding for the Group. The
Dutch tax authority have appealed to the Supreme Court.
In relation to the periods from 2008-2013 (with an aggregate
potential net liability of £183 million), 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 Court of Appeal.
On the 15 December 2023, the Dutch District Court issued its
judgement covering the period 2014-2016 (with an aggregate
potential net liability of £950 million). 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 against
items lost to the Court of Appeal.
Having considered the judgment and the Dutch judicial and
international proceedings available to it, the Group recognised a
further adjusting charge of £70 million in 2023, with a total
provision of £144 million recognised at 31 December 2024.
As part of the 15 December 2023, judgement the assessed fine
of £108 million for the filing of an intentionally incorrect tax return
was upheld but reduced to £92 million. The Group has appealed
in full to the Court of Appeal and considers no provision is
appropriate. Appeal hearings took place in the second half of 2024,
with the Court of Appeal judgment expected in the first half of
2025.
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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
364
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’ 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 million (£163 million) 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 million (£137 million). 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.
BAT Bangladesh has also received show cause notices from the
NBR alleging that the company has avoided excise payment
amounting to BDT3,794 million (£25 million) during 2020 to 2024.
The notices claimed that the excise avoidance occurred due to the
supply of cigarettes stored in BAT Bangladesh’s warehouse to its
distributors at increased prices. BAT Bangladesh formally
responded to the show cause notices, asserting that it has always
acted within the law and hence the basis of the allegation and
claim is unfounded. A hearing took place regarding the first show
cause notice for BDT1,687 million (£11 million) on 13 November
2024 following which the NBR has issued a demand for the
£11 million. Subsequently, on 13 January 2025, BAT Bangladesh filed
a writ in the High Court, challenging the demand on point of law.
The remaining show cause notices are currently pending hearing.
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 billion
(£44 million) charge by Group subsidiaries, Rothmans Far East B.V.
Korea Branch Office and BAT Korea Manufacturing Ltd.
Management deems the tax to be unfounded and has appealed to
the tax tribunal against the assessment. On grounds of materiality
and the likelihood of the tax being reversed in future, the Group
classified the tax and penalties charge as an adjusting item in 2016.
For the VAT portion of the assessments of KRW6.7 billion
(£4 million), the trial court ruled in favour of Rothmans Far East B.V.
Korea Branch Office in 2019. The Korean government appealed the
ruling immediately thereafter but the appellate court affirmed the
ruling of the trial court. The decision was finally affirmed by the
Supreme Court in 2021 and Rothmans Far East B.V. Korea Branch
Office duly received the amount litigated (VAT portion) including
statutory interests shortly thereafter in 2021.
For the local and national excise portion of the assessments, the
trial court ruled in favour of the Korean government in June 2020
and the decision was affirmed by the appellate court in September
2023. British American Tobacco Korea Manufacturing Ltd.
appealed to the Supreme Court in October 2023. The Supreme
Court has not set a hearing date yet and the case is currently
pending at the Supreme Court.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
365
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:
2024
£m
2023
£m
Service contracts
Within one year
63
41
Between one and five years
30
46
Beyond five years
—
—
93
87
Financial commitments arising from short-term leases and leases of low-value assets that are not capitalised under IFRS 16 Leases are
£10 million (2023: £26 million) for property and £2 million (2023: £9 million) for plant, equipment and other assets.
32 Interests in subsidiaries
Subsidiaries with material non-controlling interests
Non-controlling interests principally arise from the Group’s listed investment in Bangladesh (British American Tobacco Bangladesh
Company Limited) where the Group held 72.91% in 2024, 2023 and 2022. 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
2024
£m
2023
£m
2022
£m
Revenue
673
680
732
Profit for the year
118
133
153
– Attributable to non-controlling interests
32
36
41
Total comprehensive income
94
91
132
– Attributable to non-controlling interests
25
25
36
Dividends paid and other appropriations made to non-controlling interests
(25)
(11)
(32)
Summary net assets:
Non-current assets
281
299
322
Current assets
432
437
253
Non-current liabilities
73
71
78
Current liabilities
257
284
166
Total equity at the end of the year
383
381
331
– Attributable to non-controlling interests
104
103
90
Net cash generated from operating activities
142
167
164
Net cash generated/(used) in investing activities
7
(51)
(46)
Net cash used in financing activities
(76)
(41)
(147)
Differences on exchange
(4)
1
4
Increase/(decrease) in net cash and cash equivalents
69
76
(25)
Net cash and cash equivalents at 1 January
52
(24)
1
Net cash and cash equivalents at 31 December
121
52
(24)
Subsidiaries subject to restrictions:
As a result of the Group’s Canadian subsidiary, Imperial Tobacco Canada (ITCAN), entering CCAA protection, the assets of ITCAN
are subject to restrictions. For further information refer to note 24 and 31. The table below summarises the assets and liabilities of ITCAN:
Summarised financial information
2024
£m
2023
£m
Non-current assets
3,946
2,471
Current assets
2,904
2,621
Non-current liabilities
(3,814)
(103)
Current liabilities
(2,811)
(494)
225
4,495
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
366
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 2024 and 2023 is goodwill of £2.2 billion subject
to impairment reviews (note 12) and deferred tax assets of £1.7 billion. Included in non-current liabilities is the Proposed Plans provision of
£3,747 million recognised in 2024 and explained in note 24. Included in current liabilities is the Proposed Plans provision of £2,456 million
and trade and other payables of £341 million (2023: £333 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.
2024
£m
2023
£m
Cash and cash equivalents
*
2,249
2,042
Inventory
120
103
Investments held at fair value
437
446
Other
98
30
2,904
2,621
Note:
*
Cash and cash equivalents above include £2,072 million (2023: £1,904 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 Québec Class Actions.
33 Sustainability costs
Notes
2024
£m
2023
£m
2022
£m
Sustainability expenditures
Recycling/waste costs
66
27
Renewable energy attribute certificates
2
2
Severe weather events and other natural conditions
10
9
Sustainability costs - expenses to the income statement*
78
38
—
Sustainability costs expenditures
30
34
27
Sustainability costs - capital expenditures
13(a)
30
34
27
Note:
*
No meaningful comparative numbers are available for the sustainability costs to the income statement for the year 2022.
Recycling/waste costs
We incur recycling costs in relation to our Take-Back schemes as well as waste collection costs mandated by Extended Producer
Responsibility (EPR) schemes and similar schemes. EPR schemes are where the producer’s responsibility for a product is extended
to the post-consumer stage of a product’s life cycle. In 2024, these costs amounts to £66 million (2023: £27 million).
Renewable energy attribute certificates
We purchase renewable energy and associated renewable energy attribute certificates. The costs of these certificates are £2 million
(2023: £2 million). Most of the certificates are purchased at the same time as the electricity and therefore the costs are booked as an
expense to the income statement.
Severe weather events and other natural conditions
In 2024, a severe weather event damaged machinery equipment. The impact of the impairment and repair costs in relation to these
machines is £11 million. This is partially offset by a reversal of prior year write-offs of £1 million as some of the inventory was salvaged.
In 2023, a severe weather event caused the destruction of a stock of tobacco leaves in a warehouse. The impact of the write-off of this
inventory was £9 million.
Sustainability capital expenditures
The sustainability capital expenditures mentioned above are 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.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
367
34 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:
– US$6.89 billion 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);
– US$10.12 billion of outstanding bonds issued by BATCAP pursuant to the Shelf Registration Statement on Form F-3 filed on July 17, 2019,
and US$6.3 billion 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
– US$2.50 billion of outstanding bonds issued by BATIF pursuant to the Shelf Registration Statement on Form F-3 filed on July 17, 2019,
and US$1 billion 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 billion (2023: US$6.7 billion)
of Reynolds American unsecured notes and US$22.1 million (2023: US$22.1 million) 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’s 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’s 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’s
most recent publicly released interim or annual consolidated financial statements.
Reynolds American’s guarantee may be released notwithstanding Reynolds American guaranteeing other indebtedness, provided
Reynolds American’s guarantee of outstanding notes issued under the EMTN Programme is released. If Reynolds American’s 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’s 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’s or RAI’s
(and/or the Reynolds Group’s) primary U.S. GAAP based financial statements and information.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
368
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 ‘BAT p.l.c.’ 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 ‘BATCAP’ 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 ‘BATIF’ in the financials
below;
d.B.A.T. Netherlands Finance B.V. (as a subsidiary guarantor), referred to as ‘BATNF’ in the financials below;
e.Reynolds American Inc. (as a subsidiary guarantor), referred to as ‘RAI’ 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 ‘BATHTN’
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 excluded from non-current assets as shown in the balance sheet table below. The ‘BATHTN’ column in the summarised financial
information is only applicable in the context of the 2017 Bonds. British American Tobacco Holdings (The Netherlands) B.V. (BATHTN)
is not an issuer nor guarantor of any of the other securities referenced in this note. None 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 2024
BAT p.l.c.
£m
BATCAP
£m
BATIF
£m
BATNF
£m
RAI
£m
BATHTN
£m
Income Statement
Revenue
—
—
—
—
—
—
(Loss)/profit from operations
(149)
(9)
(20)
—
—
1
Dividend income
6,477
—
—
—
5,263
185
Net finance income/(costs)
501
(81)
1,062
1
(496)
(34)
Profit/(loss) before taxation
6,829
(90)
1,042
1
4,767
152
Taxation on ordinary activities
(9)
(9)
(5)
—
111
(89)
Profit/(loss) for the year
6,820
(99)
1,037
1
4,878
63
Intercompany Transactions – Income Statement
Transactions with non-issuer/non-guarantor subsidiaries
(expense)/income
(152)
(9)
(17)
—
31
(1)
Transactions with non-issuer/non-guarantor subsidiaries net
finance income
316
563
1,234
—
24
—
Dividend income from non-issuer/non-guarantor subsidiaries
6,477
—
—
—
5,263
185
Summarised Financial Information
Year ended 31 December 2023
BAT p.l.c.
£m
BATCAP
£m
BATIF
£m
BATNF
£m
RAI
£m
BATHTN
£m
Income Statement
Revenue
—
—
—
—
—
—
(Loss)/profit from operations
(642)
3
4
—
—
5
Dividend income
4,950
—
1
—
5,234
424
Net finance income/(costs)
488
(204)
857
1
(538)
—
Profit/(loss) before taxation
4,796
(201)
862
1
4,696
429
Taxation on ordinary activities
(25)
22
17
—
127
(1)
Profit/(loss) for the year
4,771
(179)
879
1
4,823
428
Intercompany Transactions – Income Statement
Transactions with non-issuer/non-guarantor subsidiaries
(expense)/income
(120)
(1)
—
—
30
—
Transactions with non-issuer/non-guarantor subsidiaries net
finance income
293
768
1,445
—
26
—
Dividend income from non-issuer/non-guarantor subsidiaries
4,950
—
—
—
5,234
424
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
369
Summarised Financial Information
As at 31 December 2024
BAT p.l.c.
£m
BATCAP
£m
BATIF
£m
BATNF
£m
RAI
£m
BATHTN
£m
Balance Sheet
Non-current assets
1,917
18,996
2,292
1,358
292
77
Current assets
9,736
18,504
46,197
48
1,221
15
Non-current liabilities
1,577
18,503
11,526
1,358
7,707
20
Non-current borrowings
1,571
18,257
11,227
1,358
7,657
—
Other non-current liabilities
6
246
299
—
50
20
Current liabilities
72
19,010
32,984
47
3,257
129
Current borrowings
37
18,967
32,708
46
1,751
1
Other current liabilities
35
43
276
1
1,506
128
Intercompany Transactions – Balance Sheet
Amounts due from non-issuer/non-guarantor
subsidiaries
9,690
15,082
50,595
—
1,478
15
Amounts due to non-issuer/non-guarantor
subsidiaries
2
3,942
32,707
—
2
1
Investment in subsidiaries (that are not issuers
or guarantors)
27,234
—
718
—
25,659
1,466
Summarised Financial Information
As at 31 December 2023
BAT p.l.c.
£m
BATCAP
£m
BATIF
£m
BATNF
£m
RAI
£m
BATHTN
£m
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
—
Other non-current liabilities
9
165
239
—
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 - Balance Sheet
Amounts due from non-issuer/non-guarantor
subsidiaries
9,074
16,837
43,279
—
1,229
10
Amounts due to non-issuer/non-guarantor
subsidiaries
—
3,735
25,686
—
18
1
Investment in subsidiaries (that are not issuers
or guarantors)
27,234
—
718
—
25,185
1,537
Perpetual hybrid bonds
BAT p.l.c. has issued two €1 billion 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.’s unconsolidated contribution to the Group’s consolidated equity results is shown below:
BAT p.l.c.
As at 31 December
2024
£m
2023
£m
Total equity
37,238
36,360
Share capital
585
614
Share premium
121
112
Perpetual hybrid bonds
1,685
1,685
Other equity
34,848
33,949
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
Continued
370
This disclosure is made in accordance with Section 409 of the Companies Act 2006 and The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008, as amended by The Companies, Partnerships and Groups (Accounts and Reports)
Regulations 2015. A full list of subsidiary undertakings, associates and joint ventures and joint operations as defined by IFRS (showing
the country of incorporation, effective percentage of equity shares held and full registered office addresses) as at 31 December 2024
is disclosed below.
The subsidiary undertakings that are held directly by British American Tobacco p.l.c. (the ultimate Parent Company) are indicated thus *;
all others are held by sub-holding companies.
Unless otherwise stated, the equity shares held are in the form of ordinary shares or common stock, except for those indicated thus
#,
which include preference shares. The effective percentage of equity shares held in subsidiary undertakings is 100% unless otherwise
stated. Further, where the effective percentage of equity shares held by the sub-holding company is different from that held by British
American Tobacco p.l.c., the percentage of equity shares held by British American Tobacco p.l.c. is indicated thus ^ and is shown after
the percentage interest held by the sub-holding company.
The results of a number of these subsidiary undertakings principally affect the financial statements of the Group. These principal
subsidiary undertakings are highlighted in grey and are considered to be the main corporate entities in those countries which,
in aggregate, contributed 91% of the Group revenue in 2024.
Subsidiary Undertaking
Albania
Rruga e Kavajes, Ish Kombinati Ushqimor, Tirana, Albania
British American Tobacco - Albania SH.P.K.
Algeria
Zone d’activité El Omran, Route de Ouled Fayet, Ilot 789- Lot 04,
Cheraga, Alger, Algeria
British American Tobacco (Algérie) S.P.A. (51%)
4
Angola
Viana Park, Polo Industrial, Viana, Luanda, Angola
British American Tobacco - B.A.T. Angola, Limitada
(99.80%)(99.93%)^
Sociedade Industrial Tabacos Angola LDA (71.60%)
Sociedade Unificada Tabacos Angola LDA (62.67%)
Argentina
San Martín 140, Floor 14, City of Buenos Aires, C1004AAD,
Argentina
BAT Operaciones S.A.U.
British American Tobacco Argentina S.A.I.C.y F. (99.43%)
Australia
Level 25, 210 George Street, Sydney, NSW 2000
BAT Australasia Ltd
BAT Australia Ltd
BAT Australia Overseas Pty Ltd
BAT Australia Services Ltd
BAT South Pty Ltd
Rothmans Asia Pacific Limited
#
The Benson & Hedges Company Pty. Limited
W.D. & H.O. Wills Holdings Limited
Austria
Dr.-Karl-Lueger-Platz 5/Top 7, 1010, Wien, Austria
British American Tobacco (Austria) GmbH
Bahrain
Flat 2115, Building 2504, Road 2832, Block 428 Al Seef Area,
Kingdom of Bahrain
British American Tobacco Middle East W.L.L.
Bangladesh
New DOHS Road, Mohakhali, Dhaka 1206, Bangladesh
British American Tobacco Bangladesh Company Limited (72.91%)
Barbados
Chancery Chambers, Chancery House, High Street, Bridgetown,
Barbados
Southward Insurance Ltd.
Belgium
Nieuwe Gentsesteenweg 21, 1702 Groot-Bijgaarden, Belgium
British American Tobacco Belgium N.V.
Benin
Ilot: 202, Quartier: Sèdjro St Michel, Parcelle: D, Maison: COMTEL
IMMEUBLE
British American Tobacco Benin SA (In Liquidation)
Bolivia
Av. Ballivián entre calles 11 y 12 No. 555, Edificio El Dorial, Piso 19,
Oficina E, zona de Calacoto, La Paz, Bolivia
BAT Bolivia S.R.L.
Bosnia and Herzegovina
Fra Dominka Mandića 24A, 88220 Široki Brijeg, Bosnia and
Herzegovina
IPRESS d.o.o.
Ul. Fra Andela Zvizdovica 1, 71000 Sarajevo-Novo Sarajevo, Bosnia
and Herzegovina
TDR d.o.o. Sarajevo
ul. Kolodvorska 12, 71000 Sarajevo-Novo Sarajevo, Bosnia and
Herzegovina
iNovine BH d.o.o.
Botswana
Plot 2482B, Tshekidi Crescent, Extension 9, Gabarone, Botswana
British American Tobacco Botswana (Pty) Limited
Brazil
Avenida República do Chile, nº 330, Bloco 1, salas 3001, 3101, 3201,
3301 e 3402, 30º andar, Centro, Rio de Janeiro/RJ - CEP
20.031-170, Brazil
Souza Cruz LTDA
Avenida República do Chile, nº 330, Bloco 1, Torre Leste, 30º
andar, Centro, Rio de Janeiro/RJ - CEP 20.031-170, Brazil
Instituto Souza Cruz
11
Avenida República do Chile, 330, Bl. I, Salas 3001 a 3301, parte,
Torre leste, Centro, Zip Code 20031170, Rio de Janeiro/ RJ, Brazil
Yolanda Participacoes S.A.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Group Companies and Undertakings
371
Subsidiary Undertaking continued
Bulgaria
115 M, Tsarigradsko Shose Blvd., Building D, Floor 5, Sofia,
Mladost Municipality, 1784, Bulgaria
British American Tobacco Trading EOOD
Cambodia
Unit 2F-03, 2
nd Floor of the Central Car Park Building, No. 64,
Preah Monivong Boulevard (Street 93), Village 1, Sangkat Wat
Phnom, Khan Daun Penh, Phnom Penh, Cambodia
British American Tobacco (Cambodia) Limited (71%)
Cameroon
BP 259 Douala 620, Rue du Gouverneur Carras (1064), Immeubles
Grassfield 9ème Etage, Douala- Bonanjo
British American Tobacco Cameroun S.A. (99.86%)
Canada
30 Pedigree Court, Brampton, Ontario, L6T 5T8, Canada
Imperial Tobacco Canada Limited
Imperial Tobacco Company Limited
3711 St-Antoine West, Montreal, Québec, H4C 3P6, Canada
Allan Ramsay and Company Limited
Cameo Inc.
Genstar Corporation
# 2
Imperial Brands Limited
Imperial Tobacco Products Limited
Imperial Tobacco Services Inc.
John Player & Sons Ltd
Liggett & Myers Tobacco Company of Canada Limited (70%) (50%)^
3
Marlboro Canada Limited
Medaillon Inc.
Suite 1500, 45 O'Connor Street, Suite 1500, Ottawa, Ontario, K1P
1A4, Canada
2004969 Ontario Inc.
Cayman Islands
Trident Trust Company (Cayman) Ltd., One Capital Place, PO Box
847, Grand Cayman KY1-1103, Cayman Islands
R.J. Reynolds Tobacco (CI), Co.
Chile
Avenida Isidora Goyenechea 3000, Piso 19, Las Condes, Santiago, Chile
British American Tobacco Chile Operaciones S.A. (99.51%)
Avenida Suiza 244, Cerrillos, Santiago, Chile
BAT Chile S.A.
China
Room 3101, Tower A, Gemdale Viseen Tower, No. 16, Gaoxin
South 10
th Road, High-tech Park, Nanshan District, Shenzhen,
People's Republic of China
Nicoventures Technical (Shenzhen) Co., Ltd.
Room 436, No. 1000, Zhenchen Road, Baoshan District, Shanghai,
People's Republic of China
British American (Shanghai) Enterprise Development Co., Ltd
British American Nico Business Consulting (Shanghai) Co., Ltd
Unit 1001 in 901, 9/F, Building 3, No.8 Guanghuadongli, Chaoyang
District Beijing, People’s Republic of China
British American Consulting (Beijing) Co., Ltd
8
Colombia
Avenida Cra. 72 # 80-94 Piso 10. Bogotá, Colombia
British American Tobacco Colombia S.A.S.
Congo (Democratic Republic of)
1er étage, Immeuble du Centenaire, Gombe, Kinshasa,
Democratic Republic of Congo
British American Tobacco Congo SARL (In Liquidation)
1
st floor Immeuble L’horizon sis avenue Colonel Lukusa n°50,
Gombe, Kinshasa, Democratic Republic of Congo
British American Tobacco Import SARL
British American Tobacco Services Congo SARL
Costa Rica
325 Metros este del Puente de la Firestone, Llorente, Flores,
Heredia, Costa Rica
BASS Americas S.A.
BATCCA Park Inversiones Immobiliarias, S.A.
BATCCA Servicios S.A.
Croatia
16, Avenija Dubrovnik, 10000 Zagreb, Croatia
BAT HRVATSKA d.o.o. u likvidaciji (In Liquidation)
Draškovićeva 27, 10000 Zagreb, Croatia
iNovine d.d. (93.42%)
Obala V. Nazora 1, 52210 Rovinj, Croatia
TDR d.o.o.
Osječka 2, 33000 Virovitica, Croatia
Hrvatski Duhani d.d.
Cuba
Parcela nº 2 a noroeste do terminal de contêineres de Mariel, a
2,2 km do vértice nº 4, Município de Mariel, Província de
Artemisa, Republic of Cuba
Brascuba Cigarrillos S.A. (50%)
Cyprus
8 Stasinou Avenue, Photiades Business Centre, 5
th Floor, Nicosia,
CY-1060, Cyprus
B.A.T (Cyprus) Limited
Rothmans (Middle East) Limited
Czech Republic
Karolinská 654/2, Prague 8 – Karlín, 186 00, Czech Republic
British American Tobacco (Czech Republic), s.r.o.
Denmark
Bernstorffsgade 50, 1577 Copenhagen, Denmark
British American Tobacco Denmark A/S (House of Prince A/S)
Precis (1789) Denmark A/S
Djibouti
Rue de Magadiscio, Lot No. 133, Djibouti City, Djibouti
British American Tobacco Djibouti SARL
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Group Companies and Undertakings
Continued
372
Egypt
1017 Korniche El Nil, El Malek El Saleh, Old Cairo, Cairo, Egypt
BETCO for General Services and Marketing LLC
BETCO for Trade and Distribution LLC
British American Tobacco Egypt LLC
British American Tobacco North Africa LLC (In Liquidation)
Eritrea
P.O. Box 749, 62 Fel Ket Street, Asmara, Eritrea
British American Tobacco (Eritrea) Share Company
#
Estonia
Tornimäe 7-10, 10145 Tallinn, Estonia
British American Tobacco Estonia AS
Fiji
Lady Maraia Road, Nabua, Suva, Fiji
Central Manufacturing Company Pte Limited
Rothmans of Pall Mall (Fiji) Pte Limited
Finland
Eteläesplanadi 2 00130 Helsinki, Finland
British American Tobacco Finland Oy
France
111 Avenue Victor Hugo, 75016 Paris, France
Carreras France SAS
Tour Légende, 20 place de la Défense, CS 80289, 92050 Paris La
Défense Cedex, France
British American Tobacco France SAS
Germany
Alsterufer 4, 20354 Hamburg, Germany
BATIG Gesellschaft fur Beteiligungen m.b.H.
British American Tobacco (Germany) GmbH
British American Tobacco (Industrie) GmbH
Schutterwälder Straße. 23, 01458 Ottendorf-Okrilla, Germany
Quantus Beteiligungs-und Beratungsgesellschaft mbH i.L (In
Liquidation)
Ghana
4
th Floor, Volta Place, Airport Residential Area, Patrice Lumumba
Street, Accra, Ghana
British American Tobacco Ghana Limited (97.09%)
Greece
27, Ag. Thoma Street, Maroussi, 151 24, Greece
British American Tobacco Hellas S.A.
Guernsey
P.O. Box 155, Mill Court, La Charroterie, St Peter Port, GY1 4ET,
Guernsey
Belaire Insurance Company Limited
Guyana
Lot 122 Parade Street, Kingston, Georgetown, Guyana
Demerara Tobacco Company Limited (70.25%)
Honduras
Boulevard del Sur, Zona El Cacao,Depart. San Pedro Sula, de
Cortés, Honduras
Tabacalera Hondureña S.A. (83.64%)
Hong Kong
11/F, One Pacific Place, 88 Queensway, Hong Kong, China
British American Tobacco China Investments Limited
Lehman, Lee & XU Corporate Services, Suite 3313, Tower One, Times
Square, 1 Matheson Street, Causeway Bay, Hong Kong, China
Reynolds Asia-Pacific Limited
Level 24, Six Pacific Place, 50 Queen's Road East, Wanchai, Hong
Kong, China
BAT Global Travel Retail Limited
Level 30, 3 Pacific Place, 1 Queen’s Road East, Wanchai, Hong
Kong, China
Nicoventures Business Consulting (Hong Kong) Co., Ltd.
24/F., Six Pacific Place, 50 Queen’s Road East, Hong Kong
British American Tobacco Asia-Pacific Region Limited
British-American Tobacco Company (Hong Kong) Limited
Hungary
HU 1117 Budapest, Alíz utca 3. 6. floor
BAT Pécsi Dohánygyár Korlátolt Felelosségu Társaság
Indonesia
Capital Place Office Tower 6
th Floor, Jl. Gatot Subroto Kav. 18
Jakarta Selatan 12710
PT Bentoel Internasional Investama (99.96%)
JI. Raya Karanglo, 1st Floor, Desa Banjararum, Kecamatan
Singosari, Jawa Timur 65153, Indonesia
PT Bentoel Prima (99.99%)(99.96%)
^4
Jl. Susanto No. 2B, Ciptomulyo, Sukun, Malang, Jawa Timur
65148, Indonesia
PT Bentoel Distribusi Utama (100%) (99.96%)
^
Iraq
Empire Business Tower, Building C5, 2
nd floor, Erbil, Kurdistan
Region of Iraq
B.A.T. Iraqia Company for Tobacco Trading Limited
Ireland
Suite D, 2
nd Floor, The Apex Building, Blackthorn Road, Sandyford
Industrial Estate, Dublin 18, Republic of Ireland
Carroll Group Distributors Limited
P.J. Carroll & Company Limited
Rothmans of Pall Mall (Ireland) Limited
#5
Isle of Man
2
nd Floor, St Mary’s Court, 20 Hill Street, Douglas, IM1 1EU,
Isle of Man
Abbey Investment Company Limited
The Raleigh Investment Company Limited
Tobacco Manufacturers (India) Limited
Italy
Località Bagnoli della Rosandra, snc, 34018 San Dorligo della Valle
(TS), 34018, Italy
BAT Trieste S.p.A.
Viale Giorgio Ribotta 35, 00144 Rome, Italy
British American Tobacco Italia S.p.A.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
373
Subsidiary Undertaking continued
Ivory Coast
Rue des Jardins -Immeuble Sayegh-Mezzanine, Abidjan, Cocody
2 plateaux, Côte d'Ivoire
British American Tobacco RCI SARL
Jamaica
13A Ripon Road, Kingston 5, Jamaica
Sans Souci Development Limited (100%) (50.40%)
(In Liquidation)
^13
Sans Souci Limited (100%) (50.40%) (In Liquidation)
^13
8 Automotive Parkway, Kingston 20, Jamaica
Carreras Limited (50.40%)
Japan
Midtown Tower 20F, 9-7-1 Akasaka, Minato-ku, Tokyo, Japan
British American Tobacco Japan, Ltd.
10
Jersey
22 Grenville Street, St Helier, JE4 8PX, Jersey
Pathway 5 (Jersey) Limited
Jordan
Airport Road, Al Qastal Industrial Area, Air Cargo Road, Amman,
Jordan
British American Tobacco – Jordan Private Shareholding
Company Limited
Kazakhstan
Republic of Kazakhstan, ZIP Code A25T6M9, the City of Almaty,
Medeu District, 47 Kabanbay batyr street
British American Tobacco Kazakhstan Trading LLP
1
Kenya
8 Likoni Road, Industrial Area, P.O. Box 30000-00100, Nairobi, Kenya
BAT Kenya Tobacco Company Limited (100%) (60%)
^
British American Tobacco Area Limited
British American Tobacco Kenya plc (60%)
Korea, Republic of
141, Gongdan 1-ro, Sanam-myeon, Sacheon-si, Gyeongsangnam-
do, Republic of Korea
British American Tobacco Korea Manufacturing Limited
21
st FL. West Tower, Mirae Asset CENTER1, 26, Eulji-ro 5-gil,
Jung-gu, Seoul, Korea, republic of
British American Tobacco Korea Limited
Kosovo, Republic of
Llapllaselle p.n., 10500 Gracanicë, Kosovo, republic of
British American Tobacco Kosovo SH.P.K.
Kuwait
Unit 21, 35
th Floor, Al Hamra Tower, Al Shuhada St. Kuwait City, Kuwait
BAT Kuwait for Wholesale and Retail Trading Company (S.P.C)
Latvia
Mukasalas iela 101, Riga LW-1004, Latvia
British American Tobacco Latvia SIA
Lesotho
Mohokare Industrial Estate, Florida Area Extention, Ha Hoohle,
Maseru, 100, Lesotho
British American Tobacco Lesotho (Pty) Ltd
Lithuania
J. Galvydžio g. 11-7, LT-08236 Vilnius, Lithuania
UAB British American Tobacco Lietuva
Luxembourg
1, Rue Jean Piret, 2350 Luxembourg, Grand Duchy of Luxembourg
British American Tobacco Brands (Switzerland) Limited
Malawi
Northgate Arcade Complex, Masauko Chipembere Highway,
Blantyre, Malawi
British American Tobacco (Malawi) Limited
Malaysia
12
th Floor, Menara Symphony, No. 5, Jalan Prof Khoo Kay Kim,
Seksyen 13, 46200, Petaling Jaya, Selangor Darul Ehsan, Malaysia
British American Tobacco GSD (Kuala Lumpur) Sdn Bhd
Level 11, Sunway Geo Tower, Jalan Lagoon Selatan, Sunway
South Quay, Bandar Sunway, 47500 Subang Jaya, Selangor
Darul Ehsan, Malaysia
BAT Aspac Service Centre Sdn Bhd
Level 19, Guoco Tower, Damansara City, No. 6 Jalan Damanlela,
Bukit Damansara, 50490 Kuala Lumpur, Malaysia
British American Tobacco (Malaysia) Berhad (50%)
British American Tobacco Malaysia Foundation
11
Commercial Marketers and Distributors Sdn. Bhd. (100%) (50%)
^
Tobacco Importers and Manufacturers Sdn. Bhd. (100%)(50%)
^
Mali
Hamdallaye ACI 2000, Immeuble Atlantique Assurances,
Bamako, MALI, B.P E 3633, Mali
British American Tobacco (Mali) Sarl
Malta
PM Building, Level 2, Bone Street, Zone 1, Central Business
District, Birkirkara, CBD 1060, Malta
British American Tobacco (Malta) Limited
Central Cigarette Company Limited
Rothmans of Pall Mall (Malta) Limited
Mexico
Avenida Francisco I Madero 2750 Poniente, Colonia Centro,
Monterrey, Nuevo León, C.P. 64000, Mexico
British American Tobacco Mexico Comercial, S.A. de C.V.
British American Tobacco Mexico, S.A. de C.V.
Cigarrera La Moderna, S.A. de C.V.
Constitucion 411, piso 22, 23 y 24, Colonia Centro, Monterrey,
Nuevo Leon, C.P. 64000, Mexico
BAT DBS Mexico S.A De C.V.
4
Predio Los Sauces Sin número, Colonia Los Sauces, C.P. 63197,
Tepic, Nayarit, Mexico
Procesadora de Tabacos de Mexico, S.A. de C.V. (93%)
Rio Missouri 555, Colonia del Valle, San Pedro Garza García,
Nuevo León, C.P. 66220, Mexico
British American Tobacco Servicios S.A. de C.V.
Mozambique
2289 Avenida de Angola, Maputo, Mozambique
British American Tobacco Mozambique Limitada (95%)
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Group Companies and Undertakings
Continued
374
Namibia
Shop 48, Second Floor Old Power Station Complex, Armstrong
Street, Windhoek, Namibia
British American Tobacco Namibia (Pty) Limited
Netherlands
Handelsweg 53 A, 1181 ZA, Amstelveen, Netherlands
Aruba Properties B.V.
B.A.T. Nederland B.V.
B.A.T. Netherlands Finance B.V.
British American Tobacco European Operations Centre B.V.
British American Tobacco Exports B.V.
British American Tobacco Holdings (Australia) B.V.
British American Tobacco Holdings (Malaysia) B.V.
British American Tobacco Holdings (South Africa) B.V.
British American Tobacco Holdings (The Netherlands) B.V.
British American Tobacco Holdings (Venezuela) B.V.
British American Tobacco Holdings (Vietnam) B.V.
British American Tobacco International (Holdings) B.V.
Molensteegh Invest B.V.
Precis (1790) B.V.
Rothmans Far East B.V.
Rothmans International Holdings B.V.
Rothmans Tobacco Investments B.V.
Rothmans UK Holdings B.V.
New Zealand
2 Watt Street, Parnell, Auckland, 1052, New Zealand
BAT (New Zealand) Limited
BAT Holdings (New Zealand) Limited
Mint Advisory Limited, Suite 6, 8 Turua Street, St Heliers,
Auckland, 1071, New Zealand
New Zealand (UK Finance) Limited
#
Nigeria
No. 1 Tobacco Road, Oluyole Toll Gate, Ibadan, Oyo State, Nigeria
British American Tobacco (Nigeria) Limited
No 2, Olumegbon Road, Ikoyi, Lagos, Nigeria
British American Tobacco Marketing Nigeria Limited
British American Tobacco Nigeria Foundation
11
North Macedonia, Republic of
Blvd. 8-mi SEPTEMVRI No. 18, 1000 Skopje, Republic of North
Macedonia
TDR SKOPJE DOOEL Skopje
Norway
Dronning Eufemias gate 42. 0191 Oslo, Norway
British American Tobacco Norway AS
Pakistan
Building 4, Packages Mall Office Complex, Packages Mall,
Shahrah-e-Roomi, Lahore
Pakistan Tobacco Company Limited (94.65%)
Bun Khurma Chichian Road, Mirpur Azad Jammu & Kashmir, Pakistan
British American Tobacco SAA Services (Private) Limited
Serena Business Complex. Khayaban-e-Suhrwardy, Islamabad,
Pakistan
Phoenix (Private) Limited (100%) (94.65%)
^
Panama
Calle 54, Obarrio, PH Twist Tower, Piso 22, Oficina E-22,
Corregimiento Bella Vista, Ciudad de Panamá, Panama
British American Tobacco Central America S.A. (87.65%)
British American Tobacco Panama S.A.
Tabacalera Istmeña S.A.
Vía Fernández de Córdoba, Corregimiento of Pueblo Nuevo,
Panama City, Panama
BAT Caribbean, S.A.
Papua New Guinea
Ashurst Png, Level 11 Mrdc Haus, Cnr Of Musgrave Street And
Champion Parade, Port Moresby, National Capital District, Papua
New Guinea
British American Tobacco (PNG) Limited
Rothmans of Pall Mall (P.N.G.) Limited
Paraguay
Roque Centurion Miranda 1635, AYMAC II, Piso 2, Asunción, Paraguay
British American Tobacco Productora de Cigarrillos S.A.
Peru
Av. El Derby N° 055, Torre 3, Oficinas 405-406-407-408, Urb.
Lima Polo and Hunt Club, Santiago de Surco, Lima, Peru
British American Tobacco del Peru Holdings S.A. (98.55%)
#6
British American Tobacco del Peru, S.A.C.
Poland
Aleja Wojska Polskiego 23c, 63-500, Ostrzeszow, Poland
CHIC sp. z o.o
ESMOKING LIQUIDS SP. Z O.O
Krakowiakow 48, 02-255, Warszawa, Poland
British American Tobacco Polska Trading sp. zo.o.
Puławska 180, 02-670, Warszawa, Poland
BAT DBS Poland sp. Z.o.o.
Rubiez 46, 61-612, Poznan, Poland
eSMOKING INSTITUTE sp. z o.o.
ul. IŁŻECKA 26E, 02-135WARSZAWA, Poland
Nicoventures Poland sp. Z.o.o. (In Liquidation)
Ul. Tytoniowa 16, 16-300, Augustow, Poland
British-American Tobacco Polska S.A.
Portugal
Edificio Amoreiras Square, Rua Carlos Alberto da Mota Pinto 17,
3e A, 1070-313, Amoreiras, Lisboa, Portugal
COTAPO Empreendimentos Commerciais e Industriais S.A.
Sociedade Unificada de Tabacos Limitada (76.40%)
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
375
Subsidiary Undertaking continued
Qatar
61 Al Dafna, 814 Balmasan St. 8
th floor – AL Fardan Office Tower,
Office No 12, Doha, Qatar
BAT Gulf for Trading LLC
P.O. Box 6689, 41 Floor, Tornado Tower, West Bay, Doha, Qatar
British American Tobacco Q LLC
Réunion
5, Immeuble Cap, Avenue Théodore Drouhet, ZAC Horizon 2000,
Le Port, 97420, IIe de la Réunion
B.A.T. La Réunion SAS
Romania
44 Srg. Nutu Ion Street, One Cotroceni Park Building, floor 6-9
(entrance C), District 5, Bucharest, Romania
British American Shared Services (Europe) S.R.L.
44 Srg. Nutu Ion Street, One Cotroceni Park Building, floor 7
(entrance C), District 5, Bucharest, Romania
British American GBS Recruitment S.R.L.
Bucharest Business Park, Building A (3
rd floor) and Building B2
( floors 3-4), 1A Bucuresti - Ploiesti (DN1) Road, Sector 1,
Bucharest 013681, Romania
British American Tobacco (Romania) Trading SRL
Laboratorului St., no. 17-19, Ploiesti, Prahova County, 100070,
Romania
British-American Tobacco Romania Investment S.R.L.
Rwanda
SORAS Building, Boulevard de la Revolution P.O Box 650 Kigali,
Rwanda
British American Tobacco Rwanda Limited
Saint Lucia
c/o ADCO Incorporated, 10 Manoel Street, Castries, Saint Lucia
Carisma Marketing Services Ltd
Pointe Seraphine, Castries, Saint Lucia
Rothmans Holdings (Caricom) Ltd.
Samoa
Vaitele Estate, Vaitele, Samoa
British American Tobacco Company (Samoa) Limited
Saudi Arabia, Kingdom of
Building No:7051 Al Amir Sultan-Al Salamah District, Zahran
Business Center 6
th Floor, Unit 601. Jeddah 23525 - 2661, Saudi
Arabia
BAT Arabia for Trading
Building No:7051 Al Amir Sultan-Al Salamah District, Zahran
Business Center 13
th Floor, Unit 1302. Jeddah 23525 - 2661, Saudi
Arabia
BAT Saudia for Trading
Building No:7051 Al Amir Sultan-Al Salamah District, Zahran
Business Center 13
th Floor, Unit 1303. Jeddah 23525 - 2661, Saudi
Arabia
Regional HQ of British American Tobacco Middle East - Single
Person Company
Serbia
Kralja Stefana Provenčanog 209, Vranje, 17500, Serbia
British American Tobacco Vranje a.d. Vranje
Singapore
8 Marina Boulevard, #10-01 Marina Bay Financial Centre Tower 1,
Singapore 018981
British American Tobacco Sales & Marketing Singapore Pte. Ltd.
British-American Tobacco Marketing (Singapore) Private Limited
15 Senoko Loop, 758168, Singapore
British-American Tobacco (Singapore) Private Limited
Shenton Way, #33-00 OUE Downtown, 068809, Singapore
RHL Investments Pte Limited
# (In Liquidation)
Solomon Islands
Kukum Highway, Ranadi, Honiara, Honiara, Solomon Islands
Solomon Islands Tobacco Company Limited
South Africa
Waterway House South, 3 Dock Road, V&A Waterfront, Cape
Town, Western Cape 8002, South Africa
American Cigarette Company (Overseas) (Pty) Ltd
Benson and Hedges (Pty) Ltd (In Liquidation)
British American Tobacco Holdings South Africa (Pty) Ltd
#
British American Tobacco Properties South Africa (Pty) Ltd.
British American Tobacco Services South Africa (Pty) Ltd
British American Tobacco South Africa (Pty) Ltd
British American Tobacco Sub-Saharan Africa (Pty) Ltd
Tobacco Research and Development Institute (Pty) Ltd
Twisp (Pty) Ltd
Spain
Edificio Torreo Espacio, Paseo de la Castellana 259-D, 25th floor,
Comunidad de Madrid 28046 Madrid, Spain
British American Tobacco España, S.A.
Sri Lanka
178 Srimath Ramanathan Mawatha, Colombo, 15, Sri Lanka
Ceylon Tobacco Company Plc (84.13%)
Sudan
Byblos Tower, Al-Muk Nemer Street, Postal Code 11111, P.O Box
1381, Khartoum, Sudan
Blue Nile Cigarette Company Limited
Swaziland
213 King Mswati III Avenue West, Matsapha Industrial Site,
Matsapha, Swaziland
British American Tobacco Swaziland (Pty) Limited
Sweden
Hyllie Boulevard 32, 215 32 Malmö, Sweden
Niconovum AB
Stenåldersgatan 23, 213 76 Malmö, Sweden
Fiedler & Lundgren AB
Västra Trädgårdsgatan 15, 11153 Stockholm, Sweden
British American Tobacco Sweden AB
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Group Companies and Undertakings
Continued
376
Switzerland
c/o Bright Law AG, Bundesplatz 9, 6302 Zug, Switzerland
British American Tobacco International Limited (In Liquidation)
Route de France 17, 2926 Boncourt, Switzerland
American-Cigarette Company (Overseas) Limited
BAT Switzerland Vending SA
Rothmans of Pall Mall Limited
British American Tobacco Switzerland S.A.
Nicoventures Communications (Switzerland) SA
Tanzania
c/o IMMMA Advocates, Plot 357, United Nations Road, Upanga
Region Dar Es Salaam,11103, Tanzania
BAT Distribution Tanzania Limited
International Cigarette Distributors Limited (99%) (In Liquidation)
Plot No 57, Uporoto Street, Ursino Estate, Dar Es Salaam, Tanzania
British American Tobacco (Tanzania) Limited (In Liquidation)
P.O. Box 868, Maruhubi Road, Zanzibar, Zanzibar
Zanzibar Distribution Company Limited (99%) (In Liquidation)
Trinidad and Tobago
Corner Eastern Main Road and Mt. D’or Road, Champs Fleurs,
Trinidad and Tobago
The West Indian Tobacco Company Limited (50.13%)
Türkiye
Orjin Maslak İş Merkezi, Eski Büyükdere Caddesi No.27, Kat 9-10,
Maslak, Sarıyer, İstanbul, Türkiye
British American Tobacco Tütün Mamulleri Sanayi ve Ticaret
Anonim Sirketi
Uganda
Plot 16, Mackinnon road, Nakasero. Kampala Uganda, Kampala,
7100, Uganda
British American Tobacco Uganda Limited (90%)
Ukraine
13-15 Bolsunovska Str, Kyiv, 01014, Ukraine
LLC “British American Tobacco Sales and Marketing Ukraine”
1
21 Nezalezhnosti Str, Chernihiv Oblast, Prylucky, 17502, Ukraine
PJSC “A/T B.A.T. – Prilucky Tobacco Company”
United Arab Emirates
2302-08, Smart Heights, Al Thanyah First, Dubai, United Arab
Emirates
BAT Middle East For Trading L.L.C.
Jumeirah Business Centre 3, 37
th Floor, Jumeirah Lake Towers,
Dubai, P.O. Box 337222, United Arab Emirates
British American Tobacco GCC DMCC
Jumeirah Business Centre 3, 38
th Floor, Jumeirah Lake Towers,
Dubai, P.O. Box 337222, United Arab Emirates
British American Tobacco ME DMCC
Unit # 2680, DMCC Business Center- Level # 1, Jewellery &
Gemplex 3, Dubai, United Arab Emirates
British American Tobacco International DMCC
United Kingdom
212-218 Upper Newtownards Road, Belfast, BT4 3ET, Northern Ireland
Murray, Sons & Company, Limited
7 More London, Riverside, London, SE1 2RT, United Kingdom
Ryesekks P.L.C. (50%) (In Liquidation)
Building 7, Chiswick Business Park, 566 Chiswick High Road,
London, W4 5YG, United Kingdom
10 Motives Limited
British American Tobacco UK Limited
Nicoventures Retail (UK) Limited
Ten Motives Limited (Proposal for strike off)
Globe House, 1 Water Street, London, WC2R 3LA, United Kingdom
Allen & Ginter (UK) Limited
B.A.T (U.K. and Export) Limited
B.A.T Cambodia (Investments) Limited
B.A.T Services Limited
B.A.T Uzbekistan (Investments) Limited
B.A.T Vietnam Limited
B.A.T. China Limited
BAT Finance COP Limited
BATIF Dollar Limited
BATUS Limited
Big Ben Tobacco Company Limited
British American Shared Services (GSD) Limited
British American Shared Services Limited
British American Tobacco (AIT) Limited
British American Tobacco (GLP) Limited
British American Tobacco (Investments) Limited
British American Tobacco (Philippines) Limited
British American Tobacco (South America) Limited
British American Tobacco China Holdings Limited
British American Tobacco Exports Limited
British American Tobacco Georgia Limited
British American Tobacco Global Travel Retail Limited
British American Tobacco International Holdings (UK) Limited
British American Tobacco Investments (Central & Eastern
Europe) Limited
British American Tobacco Korea (Investments) Limited
British American Tobacco Peru Holdings Limited
British American Tobacco UK Pension Fund Trustee Limited
13
British-American Tobacco (Mauritius) p.l.c.
Carreras Rothmans Limited
#
Chelwood Trading & Investment Company Limited
KBio Holdings Limited
Myddleton Investment Company Limited
Nicovations Limited
Nicoventures Holdings Limited
Nicoventures Trading Limited
Powhattan Limited
Ridirectors Limited
Rothmans Exports Limited
Rothmans International Limited
Rothmans International Tobacco (UK) Limited
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
377
Subsidiary Undertaking continued
United Kingdom continued
Ryservs (1995) Limited
Ryservs (No.3) Limited
The Water Street Collective Limited
Tobacco Exporters International Limited
Tobacco Marketing Consultants Limited
Venezuela Property Company Limited
Westanley Trading & Investment Company Limited
Westminster Tobacco Company Limited
Globe House, 4 Temple Place, London, WC2R 2PG, United Kingdom
Amalgamated Tobacco Company Limited
American Cigarette Company (Overseas) Limited
Ardath Tobacco Company Limited
B.A.T Additional Retirement Benefit Scheme Trustee Limited
B.A.T Industries p.l.c.
B.A.T. International Finance p.l.c.
*
B.A.T. Operating Finance Limited
BAT Finance Australia Ltd
BAT Finance Brazil Ltd
BAT Finance Chile Ltd
BAT Finance South Africa Ltd
BATMark Limited
*
BATLaw Limited
BATS Limited
Benson & Hedges (Overseas) Limited
British American Global Shared Services Limited
British American Tobacco (1998) Limited
*
British American Tobacco (2009 PCA) Limited
British American Tobacco (2009) Limited
#
British American Tobacco (2012) Limited
British American Tobacco (Brands) Limited
British American Tobacco (Corby) Limited
British American Tobacco (NGP) Limited
British American Tobacco Healthcare Trustee Limited
British American Tobacco Taiwan Logistics Limited
British-American Tobacco (Holdings) Limited
Brown & Williamson Tobacco Corporation (Export) Limited
Btomorrow Ventures Limited
Carreras Limited
Courtleigh of London Limited
Dunhill Tobacco of London Limited
John Sinclair Limited
Louisville Securities Limited
Moorgate Tobacco Co. Limited
Peter Jackson (Overseas) Limited
Precis (1789) Limited
Precis (1814) Limited
#
Rothmans International Enterprises Limited
Rothmans of Pall Mall Limited
Senior Service (Overseas) Limited
The London Tobacco Company Limited
Weston (2009) Limited
Weston Investment Company Limited
#
United States
251 Little Falls Drive, Wilmington, DE 19808, United States
B.A.T Capital Corporation
BATUS Holdings Inc.
BATUS Japan, Inc.
BATUS Retail Services, Inc.
British American Tobacco (Brands), Inc.
Brown & Williamson Holdings, Inc.
BT DE Investments Inc.
BTI 2014 LLC
1
BTomorrow Services Inc.
Imasco Holdings Group, Inc.
Imasco Holdings, Inc.
ITL (USA) Limited
Louisville Corporate Services, Inc.
Nicoventures U.S. Limited
Beni Oral Nicotine LLC
1
3700 Airpark Dr., Owensboro, KY 42301, United States
KBio Inc.
401 N. Main Street, Winston-Salem, NC 27101, United States
Conwood Holdings, Inc.
EXP Homes, LLC
1
Lorillard Licensing Company LLC
1
Lorillard, LLC
1
Modoral Brands Inc.
Northern Brands International, Inc.
R. J. Reynolds Global Products, Inc.
R. J. Reynolds Tobacco Company
R. J. Reynolds Tobacco International, Inc.
R. J. Reynolds Vapor Company
R.J. Reynolds Tobacco Co.
R.J. Reynolds Tobacco Holdings, Inc.
RAI Innovations Company
RAI International, Inc.
RAI Services Company
RAI Strategic Holdings, Inc.
Reynolds American Inc.
Reynolds Brands Inc.
Reynolds Marketing Services Company
Reynolds Technologies, Inc.
RJR Realty Relocation Services, Inc.
RJR Vapor Co., LLC
1
Rosswil LLC
1
S.F. Imports, Inc.
Santa Fe Natural Tobacco Company, Inc.
Spot You More, Inc.
The Water Street Collective LLC
1
Vuse Stores LLC
1
4583 Guthrie Highway, Clarksville, TN 37040, United States
American Snuff Company, LLC
1
CSC-Lawyers Incorporating Service, 2710 Gateway Oaks Drive,
Suite 150N, Sacramento CA 95833-3505, United States
Genstar Pacific Corporation
Farmers Bank Building, Suite 1402, 301 N. Market Street,
Wilmington, DE 19801, United States
Reynolds Finance Company
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Group Companies and Undertakings
Continued
378
Uruguay
Juncal 1392, Montevideo, Uruguay
Kellian S.A.
Uzbekistan
77 Minor Passage, Tashkent, 100084, Uzbekistan
JSC JV “UZBAT A.O.” (97.38%)
Venezuela
Avenida Francisco de Miranda, Edif. Torre Chacao 1902, Piso PB,
Of. PB, Urb. Chacao, Caracas - Estado Miranda, 1060, Venezuela
Proyectos de Inversion BAT 1902 C.A.
Avenida Francisco de Miranda, Edificio Bigott, Los Ruices,
Caracas – Estado Miranda, 1070, Venezuela
Agrobigott, C.A.
Compania Anonima Cigarrera Bigott Sucesores
Distribuidora Bigott, C.A.
Fundacion Bigott
11
Av. del Centro, Edificio Mega IV, Piso 9, Ofic. 9-A/9-B, Los Dos
Caminos, Caracas, Venezuela, 1070, Venezuela
Agrega de Venezuela, Agreven, C.A. (50%) (In Liquidation)
Vietnam
Area 8, Long Binh Ward, Bien Hoa City, Dong Nai Province,
Vietnam
British American Tobacco – Vinataba (JV) (70%)
18
th Floor, Tower A, Commercial and service area combined with high-
rise residential Lot 1-13, 15 Tran Bach Dang Street, Thu Thiem Ward,
Thu Duc City, Ho Chi Minh City, Vietnam
East Asia Area Services Company Limited
8
Lot 45C/I, Road #7, Vinh Loc Industrial Park, Binh Chanh District,
Ho Chi Minh City, Vietnam
VINA-BAT Joint Venture Company Limited (49%)
Zambia
Plot No. PH1 IND & 53 & 54, LS-MFEZ, Chifwema Road, Lusaka, Zambia
British American Tobacco (Zambia) plc (75.10%)
Zimbabwe
Manchester Road 1, Southerton, Harare, Zimbabwe
American-Cigarette Company (Overseas) (Private) Ltd
British American Tobacco Zimbabwe (Holdings) Limited (42.98%)
Rothmans Limited (In Liquidation)
Associated Undertakings and Joint Ventures
Canada
2800 Park Place, 666 Burrard Street, Vancouver, BC, V6C 2Z7,
Canada
Charlotte's Web Holdings, Inc. (19.90%)
17,18
35 English Drive, Moncton, New Brunswick, E1E 3X3, Canada
Organigram Holdings Inc. (30.59%)
15
Czech Republic
Na strži 1702/65, Nusle, 140 00 Praha 4, Czech Republic
NEVAJGLUJ a.s. (28%)
4,18
Finland
c/o YTL-Palvelu Oy Eteläranta 10 00130 Helsinki
Suomen SUP-Tuottajayhteisö Oy (Finnish SUP Producer Group
Ltd) (20%)
9,18
France
164 rue du Faubourg Saint-Honoré, 75008 Paris
Alcome SAS (24%)
9,18
Germany
Jägerstraße 28-31, 10117 Berlin, Germany
Sanity Group GmbH (16.32%)
12
Greece
25, Vrana, Athens, Greece, 115 25
Alternative Management of Tobacco Products Filters Societe
Anonyme (17.50%)
9,18
Hungary
H-6800 Hódmezóvásárhely, Erzsébeti út 5/b, Hungary
Országos Dohányboltellátó Korlátolt Felelosségu Társaság (49%)
9
India
1-7-1063/1065, Azamabad, Andhra Pradesh, Hyderabad, 500 020,
India
VST Industries Limited (32.16%)
13
Virginia House, 37, J.L. Nehru Road, Kolkata, 700071, India
ITC Limited (25.44%)
13
Italy
Via Scarsellini, 14, 20161 Milan, Italy
Erion Care (25%)
9,18
Netherlands
Koeweistraat 14 4181CD Waardenburg, Netherlands
Coöperatie Primera B.A.
16
Coöperatie Volado U.A.
16
Slovakia
Vajnorská 100B, 831 04 Bratislava - mestská časť -Nové Mesto,
Slovenská republika
SPAK-EKO, a.s. (25%)
9,18
Sweden
Box 74123-103, 741 40 Knivsta, Stockholm, Sweden
SUP Filter Producentansvar Sverige AB (33%)
9,18
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
379
Associated Undertakings and Joint Ventures continued
Switzerland
c/o NBA Fiduciaire S.A., Route de la Glâne 107, 1752 Villars-sur-
Glâne, Switzerland
Intertab S.A. (50%)
United Kingdom
4a Station Parade, Uxbridge Road, London, W5 3LD, United
Kingdom
AYR Limited (13.14%)
14
United States
12 Timber Creek Land, Newark, Delaware, 19711, United States
Steady State LLC (9.92%)
12
11760 Sorrento Valley Road, Suite A, San Diego, CA 92121
ZabBio, Inc (49%)
7
8022 Southpark Circle Suite 500, Littleton, CO 80120, United
States
DeFloria LLC (19.90%)
12
Uzbekistan
Gulobod Village, Samarkand Region, 140100, Uzbekistan
FE "Samfruit" JSC (45.40%)
Yemen
P.O. Box 14, Sanna, Yemen
Kamaran Industry and Investment Company (31%)
17
P.O. Box 5302, Hoban, Taiz, Yemen
United Industries Company Limited (32%)
17
Joint Operations
Hong Kong
29/F, Oxford House, 979 King’s Road, Taikoo Place, Quarry Bay,
Hong Kong, China
CTBAT International Co. Limited (50%)
Notes:
1.
Ownership held in Membership Interest.
2.
Ownership held in the class of Series F and 2nd Preferred Shares.
3.
Ownership held in the class of A Shares (50%) and class of B Shares (100%).
4.
Ownership held in class of A Shares and B Shares.
5.
Ownership held solely in class of Preference Shares.
6.
Ownership held in class of Ordinary and Investment Shares.
7.
Ownership held in 49% Share Capital and 39% Voting Rights.
8.
Ownership held in Registered Capital.
9.
Ownership held in Voting Shares.
10. Ownership held in Equity Units.
11.
Entity type: Foundation, Non-Profit or Limited by Guarantee.
12. Ownership held in Preferred Shares.
13. 31 March year-end.
14. 31 May year-end.
15. 30 September year-end.
16. 16 July year-end.
17. Refer to Accounting Note 14: Investments in associates and joint ventures.
18. Accounted for as an investment at fair value through profit and loss.
19. Voting interest.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Group Companies and Undertakings
Continued
380
Notes
2024
£m
2023
£m
Assets
Fixed assets
Investments in Group undertakings
2
27,727
27,747
Current assets
Debtors
3
12,464
11,986
Cash at bank and in hand
5
5
Total current assets
12,469
11,991
Total assets
40,196
39,738
Equity
Capital and reserves
Called up share capital
4a
585
614
Share premium account, capital redemption and merger reserves
4b
23,368
23,333
Other reserves
4c
90
90
Profit and loss account including profit for the financial year of £6,820 million (2023: £4,803 million)
4d
11,798
10,950
Total shareholders’ funds
35,841
34,987
Perpetual hybrid bonds
4e
1,685
1,685
Total equity
4
37,526
36,672
Liabilities
Creditors
5
2,670
3,060
Derivative financial instruments liabilities
—
6
Total liabilities
2,670
3,066
Total equity and liabilities
40,196
39,738
The accompanying Notes on the Accounts are an integral part of the Parent Company financial statements.
On behalf of the Board
Luc Jobin
Chair
12 February 2025
@ denotes section, including accompanying text and tables, that does not form part of BAT’s Annual Report on Form 20-F as filed with the SEC.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Balance Sheet
@
British American Tobacco p.l.c. – at 31 December
381
Called up
share
capital
£m
Share
premium
account,
Capital
redemption
and Merger
Reserve
£m
Other
Reserves
£m
Profit
and
loss
account
£m
Total
Shareholders’
funds
£m
Perpetual
hybrid
bonds
£m
Total
Equity
£m
1 January 2024
614
23,333
90
10,950
34,987
1,685
36,672
Increase in share capital - share options
—
6
—
—
6
—
6
Profit for the financial year
—
—
—
6,820
6,820
—
6,820
Dividends – declared on equity shares
—
—
—
(5,209)
(5,209)
—
(5,209)
Consideration paid for share buy-back
programme
—
—
—
(698)
(698)
—
(698)
Consideration paid for purchase of own
shares held in Employee Share Ownership
Trusts
—
—
—
(92)
(92)
—
(92)
Shares bought back and cancelled
(7)
7
—
—
—
—
—
Treasury shares cancelled
(22)
22
—
—
—
—
—
Perpetual hybrid bonds
Coupons paid (net of tax)
—
—
—
(42)
(42)
—
(42)
Other movements*
—
—
—
69
69
—
69
31 December 2024
585
23,368
90
11,798
35,841
1,685
37,526
Called up
share
capital
£m
Share
premium
account,
Capital
redemption
and Merger
Reserve
£m
Other
Reserves
£m
Profit
and
loss
account
£m
Total
Shareholders’
funds
£m
Perpetual
hybrid
bonds
£m
Total
Equity
£m
1 January 2023
614
23,331
90
11,302
35,337
1,685
37,022
Increase in share capital - share options
—
2
—
—
2
—
2
Profit for the financial year
—
—
—
4,803
4,803
—
4,803
Dividends - declared on equity shares
—
—
—
(5,071)
(5,071)
—
(5,071)
Consideration paid for share buy-back
programme
—
—
—
—
—
—
—
Consideration paid for purchase of own
shares held in Employee Share Ownership
Trusts
—
—
—
(105)
(105)
—
(105)
Perpetual hybrid bonds
Coupons paid (net of tax)
—
—
—
(44)
(44)
—
(44)
Other movements*
—
—
—
65
65
—
65
31 December 2023
614
23,333
90
10,950
34,987
1,685
36,672
Note:
*
Other movements includes share-based payments.
There was no difference between profit and loss for the period and total comprehensive income for the period.
The profit and loss account is stated after deducting the cost of treasury shares which was £4,396 million at 31 December 2024
(31 December 2023: £7,086 million).
@ denotes section, including accompanying text and tables, that does not form part of BAT’s Annual Report on Form 20-F as filed with the SEC.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Statement of Changes in Equity
@
British American Tobacco p.l.c. – for the year ended 31 December
382
1 Accounting Policies
Basis of accounting
The financial statements of the Company have been prepared
in accordance with the Companies Act 2006 (‘the Act’) and in
accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (’FRS 101’).
In preparing these financial statements, the Company applies
the recognition, measurement and disclosure requirements
of UK-adopted international accounting standards, but makes
amendments where necessary in order to comply with the Act
and has set out below where advantage of the FRS 101 disclosure
exemptions has been taken, including those relating to:
– a cash flow statement and related notes;
– comparative period reconciliations;
– disclosures in respect of transactions with wholly
owned subsidiaries;
– disclosures in respect of capital management;
– the effects of new but not yet effective IFRS Accounting
Standards; and
– disclosures in respect of the compensation of key
management personnel.
As the consolidated financial statements of the Group include
equivalent disclosures, the Company has also taken the
exemptions under FRS 101 available in respect of disclosures under
IFRS 2 related to group settled share-based payments.
The 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. After
reviewing the annual budget, plans and financing arrangements,
the Directors consider that the Company has adequate resources
to continue in operational existence for a period of at least
12 months from the date of signing the financial statements,
and that it is therefore appropriate to continue to adopt the going
concern basis in preparing the financial statements.
The preparation of the financial statements requires the Directors
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
on the Accounts.
The critical accounting judgements include determination as to
whether the issue of perpetual hybrid bonds should be classified
as equity instead of borrowings (see note 4) and the determination
as to whether to recognise provisions and the exposures to
contingent liabilities (see note 7). Judgement is necessary to
assess the likelihood that a pending claim is probable (more likely
than not to succeed), possible or remote.
There are no critical accounting estimates which would have
a significant risk of a material adjustment within the next
financial year.
As permitted by Section 408 of the Act, the profit and loss of the
Company has not been presented in these financial statements.
The Company is a public limited company which is listed on the
London Stock Exchange and the Johannesburg Stock Exchange
and is incorporated and domiciled in the UK. In addition, the
Company’s shares are traded on the New York Stock Exchange
in the form of American Depository Shares (ADSs).
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
Company’s 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 Company
are recognised at the proceeds received, net of issuance costs.
On 27 September 2021, the Company issued two €1 billion
perpetual hybrid bonds. As the Company 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 financial statements.
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.
Dividends declared
The Company recognises the interim dividend as an appropriation
of reserves in the period in which it is paid.
Financial instruments
Financial assets and financial liabilities are recognised when the
Company becomes a party to the contractual provisions of the
relevant instrument and derecognised when it ceases to be a party
to such provisions. Such assets and liabilities are classified as
current if they are expected to be realised or settled within
12 months after the balance sheet date. If not, they are classified
as non-current.
Financial instruments are initially recognised at fair value.
The Company’s non-derivative financial assets, including debtors,
are held in order to collect contractual cash flows and are
subsequently carried at amortised cost. Non-derivative financial
liabilities, including creditors, are subsequently carried at
amortised cost using the effective interest method. Financial
guarantees are initially recorded at fair value, and subsequently
carried at this fair value less accumulated amortisation within
other creditors. Fees receivable in respect of these guarantees
are carried at discounted present 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 in profit and loss.
Provisions and contingent liability
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. Potential exposures,
including litigation and performance guarantees are regularly
reviewed on an on-going basis and provision for these exposures
(including legal costs) would be made at such time as an
unfavourable outcome becomes probable and the amount can be
reasonably estimated.
Foreign currencies
The functional currency of the Company is sterling. Transactions
arising in currencies other than sterling are translated at the rate
of exchange prevailing on the date of the transaction.
Monetary assets and liabilities expressed in currencies other than
sterling are translated at rates of exchange prevailing at the end of
the financial year. All exchange differences are taken to the profit
and loss account in the year. Amounts recognised in equity are
not retranslated.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Notes on Accounts
@
383
Investments in Group companies
Investments in Group companies are stated at cost, together
with subsequent net capital contributions, less provisions for any
impairment in value, where appropriate.
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 the initial
recognition of the underlying asset. Allowances in respect of loans
and other receivables (debtors) are initially recognised at an
amount equal to 12-month expected credit losses. Where the
credit risk on the receivables has increased significantly since initial
recognition, allowances are measured at an amount equal to the
lifetime expected credit loss.
Share-based payments
The Company has equity-settled share-based compensation plans
in respect of Group employees.
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’s 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.
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’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
The cost of these awards, less any direct recharges made to Group
companies, are recognised as capital contributions to investments
in subsidiaries.
Historically, the Company has used the British American Tobacco
Group Employee Trust (BATGET), which operates as an extension
of the Company, as the vehicle to obtain shares on market and
hold them in trust to satisfy outstanding awards. In addition, from
March 2020, the Company has utilised treasury shares acquired in
the share buy-back programme to satisfy shared-based payment
awards made to certain employees.
Related parties
The Company has taken advantage of the exemption under
FRS 101 from disclosing transactions with related parties that
are wholly-owned subsidiaries of British American Tobacco p.l.c.
Other accounting policies:
Income
Income consists of dividend income from Group undertakings,
fee income from financial guarantees and interest income. These
are included in the profit and loss account when all contractual
or other applicable conditions for recognition have been met.
Dividend income is recognised at the same time as the paying
company recognises the liability to pay a dividend.
Taxation
Taxation is that chargeable on the profits for the period, together
with deferred taxation. Income tax charges, where applicable,
are calculated on the basis of tax laws enacted or substantively
enacted at the balance sheet date. 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.
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. As required under IAS 12
Income Taxes, deferred tax assets and liabilities are not discounted.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
@
Continued
384
2 Investments in Group Companies
The Company’s directly-owned subsidiaries are British American Tobacco (1998) Limited, B.A.T. International Finance p.l.c. and BATMark
Limited. A full list of indirect subsidiaries and other undertakings as required by Section 409 of the Companies Act 2006 is shown from
page 371 of the Group’s financial statements.
Movements in investments relate to Group share-scheme costs net of recharges to subsidiaries as well as amounts recognised
in relation to financial guarantees issued by the Company on behalf of Group subsidiaries.
As shown in the Group Financial Statements, significant impairment charges have been recognised in 2023 in relation to goodwill and
trademarks associated with Reynolds American, an indirectly held subsidiary of the Company. These non-cash charges are not expected
to impact the ability of the Company’s direct subsidiaries to declare and remit dividends.
The Directors are of the opinion that the individual investments in the subsidiary undertakings have a value not less than the amount
at which they are shown in the Balance Sheet.
Shareholdings at cost less provisions and other fixed asset investments
2024
£m
2023
£m
1 January
27,747
27,798
Movements
(20)
(51)
31 December
27,727
27,747
@ Denotes phrase, paragraph or similar that does not form part of BAT's Annual Report on Form 20-F as filed with the SEC.
3 Debtors
2024
£m
2023
£m
Amounts due from Group undertakings
12,464
11,986
Current
9,864
9,273
Non-current
2,617
2,748
Allowance account
(17)
(35)
31 December
12,464
11,986
2024
£m
2023
£m
Allowance account
1 January
35
38
Released during the year
(18)
(1)
Foreign exchange
—
(2)
31 December
17
35
Current
17
35
Non-current
—
—
31 December
17
35
Included within amounts due from Group undertakings is an amount of £9,687 million (2023: £9,067 million) which is unsecured, interest-
bearing and repayable on demand.
Amounts due from Group undertakings also include £1,095 million (2023: £1,251 million) representing the discounted value of the fees
receivable from the parental guarantees issued by the Company, of which £159 million (2023: £184 million) is due within one year and
£936 million (2023: £1,067 million) is due after more than one year.
Other amounts due from Group undertakings include:
– a balance of £841 million (2023: £841 million) which is unsecured, interest bearing and repayable in 2026, with an interest rate based
on SONIA + 1.070%; and
– a balance of £841 million (2023: £841 million) which is unsecured, interest bearing and repayable in 2029, with an interest rate based
on SONIA + 1.340%.
All other amounts owed by Group undertakings are unsecured, interest free and repayable on demand.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
385
4 Total Equity
(a) Called up Share Capital
Called up Share Capital
Ordinary Shares
of £0.25 each
Number of shares
£m
Allotted and fully paid
1 January 2024
2,456,941,909
614
Changes during the year
– share option schemes
275,824
—
- shares bought back and cancelled
(27,392,429)
(7)
- treasury shares cancelled
(87,000,000)
(22)
31 December 2024
2,342,825,304
585
Called up Share Capital
Ordinary Shares
of £0.25 each
Number of shares
£m
Allotted and fully paid
1 January 2023
2,456,867,420
614
Changes during the year
– share option schemes
74,489
—
31 December 2023
2,456,941,909
614
The Company’s ordinary shares are fully paid and no further contribution of capital may be required by the Company from the
shareholders. All ordinary shares rank equally with regard to participation in dividends and to share in the proceeds of the Company’s
residual assets upon a winding up of the Company. Shareholders may, by ordinary resolution, declare final dividends, but not in excess of
the 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
shares 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’s Annual General Meeting voting is undertaken by way of a poll. All rights attached
to the Company’s shares held by the Group as Treasury shares are suspended until those shares are reissued.
Please refer to page 457 for further detail of the provisions contained within the Articles of Association.
(b) Share premium account, capital redemption reserves and merger reserves
Share premium
account
£m
Capital
redemption
reserves
£m
Merger
reserves
£m
Total
£m
31 December 2024
122
130
23,116
23,368
31 December 2023
116
101
23,116
23,333
31 December 2022
114
101
23,116
23,331
Share premium
£6 million (2023: £2 million) of the increase in share premium relates to ordinary shares issued under the Company's share option
schemes. These schemes are described in the Remuneration Report.
Capital redemption reserve
For own shares which are purchased as part of the share buy-back programme and 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.
On 18 March 2024, the Group announced a £1.6 billion share buy-back programme starting with £700 million in 2024 and with the
remaining £900 million in 2025. Shares purchased under this programme in 2024 were cancelled on purchase. Additionally, in 2024, 87
million shares held in the Company’s treasury shares account previously purchased under prior years share buy-back programmes were
cancelled.
Merger reserve
In 2017, the Company announced the completion of the acquisition of the remaining 57.8% of Reynolds American Inc. it did not already
own. Pursuant to the Merger Agreement, the Company, on behalf of its indirect subsidiary BATUS Holdings Inc (’BATUS’), agreed to issue
new shares, represented by American Depositary Shares, for the benefit of Reynolds American Inc. shareholders. In consideration for the
Company issuing new shares, BATUS agreed to issue to the Company an assignable obligation owed by BATUS to issue shares to the
holder of that obligation. As a consequence, the Company issued 429,045,762 new shares with a nominal value of £107,261,441.
In accordance with Section 612 of the Companies Act 2006, the excess of the fair value of the shares issued over the nominal value
of the shares has been treated as a merger reserve.
(c) Other reserves
As part consideration for the acquisition of Rothmans International BV in 1999, convertible redeemable preference shares were issued
by the Company. The discount on these shares was amortised by crediting other reserves and charging retained earnings. The balance
of £90 million in other reserves comprises the accumulated balance in respect of the preference shares converted during 2004.
@ Denotes phrase, paragraph or similar that does not form part of BAT's Annual Report on Form 20-F as filed with the SEC.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
@
Continued
386
(d) Profit and loss account
As permitted by Section 408 of the Companies Act 2006, the profit and loss of the Company has not been presented in these Financial
Statements. The profit for the year ended 31 December 2024 was £6,820 million (2023: £4,803 million).
As disclosed in note 6 to the Group Financial Statements, on 25 April 2023, the Group announced that it had reached an agreement
with the U.S. Department of Justice (DOJ) and Department of the Treasury's Office of Foreign Assets Control (OFAC) for a total amount
payable to the U.S. authorities of US$635 million plus interest. In 2023, the Company recognised a charge of £511 million (US$635 million)
and interest of £14 million (US$17 million). An amount of £4 million (US$5 million) was paid in April 2023, and an amount of £258 million
(US$321 million including interest) was paid in September 2023. Additional interest of £4 million (US$6 million) was recognised in 2024
and a final payment of £267 million (US$332 million including interest) was made in June 2024.
Dividend distributions to the Company’s shareholders are recognised in the period in which these are paid. The Company makes four
interim quarterly dividend payments.
Details of Directors’ remuneration, share options and retirement benefits are given in the Remuneration Report in the Group Annual
Report and Accounts. Details of key management compensation are included in note 30 of the Group financial statements. The
Company had two employees at 31 December 2024 (2023: one). These employees are Tadeu Marroco and Soraya Benchikh (2023: Tadeu
Marroco). The details of their remuneration are shown on page 228 of the Group’s Annual Report and Accounts for the year ended
31 December 2024. The costs of these employees are borne by another Group company.
Shareholders' funds are stated after deducting the cost of treasury shares which include £4,114 million (2023: £6,807 million) for shares
repurchased and not cancelled and £282 million (2023: £277 million) in respect of the cost of own shares held in Employee Share
Ownership Trusts.
As at 31 December 2024 treasury shares include 6,763,796 (2023: 5,613,369) shares held in trust and 133,266,206 (2023:
220,533,855) shares repurchased and not cancelled as part of the Company's share buy-back programmes. From March 2020, the
Company has utilised shares acquired in the share buy-back programme to satisfy share-based payment awards made to certain
employees. The Company bought back and cancelled 27,392,429 shares, for a total consideration of £698 million inclusive of transaction
costs of £3 million that have been deducted from equity. Additionally, in 2024, 87 million shares held in the Company’s treasury shares
account previously purchased under prior year share buy-back programmes were cancelled. Other movements in shareholders’ funds
relate to the recognition of share-based payments and the release of treasury shares as a result of the exercise of share options.
(e) Perpetual hybrid bonds
On 27 September 2021, the Company issued two €1 billion perpetual hybrid bonds, which have been classified as equity. Issuance costs
of these bonds, amounting to €26 million (£22 million), have been recognised in equity, net of tax of £4 million. These bonds include
redemption options exercisable at the Company’s 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 the event 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 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 Company to defer
coupon payments, however certain contingent events could trigger mandatory payments of such deferred coupons, including the
payment of dividends on and repurchase of ordinary shares, subject to certain exceptions in each case. As the Company has the
unconditional right to avoid transferring cash or another financial asset in relation to these bonds, they are classified as equity
instruments in these financial statements. The Company has not deferred any eligible coupon payments to date.
During the year, the Company did not defer any eligible coupon payments and paid a coupon of £31 million in September 2024
(September 2023: £33 million) on the 3.75% September 2029 bond and £25 million in December 2024 (December 2023: £26 million)
on the 3% December 2026 bond which has been recognised within equity. The fair value of these bonds at 31 December 2024 is
£1,211 million (2023: £1,512 million).
5 Creditors
2024
£m
2023
£m
Amounts due to Group undertakings
39
38
Loans due to Group undertakings
1,571
1,571
Other creditors
1,053
1,443
Deferred income
7
7
2,670
3,059
Current
217
453
Non-current
2,453
2,607
2,670
3,060
Amounts due to Group undertaking of £39 million (2023: £38 million) are unsecured, interest free and repayable on demand. Loans due
to Group undertakings of £1,571 million (2023: £1,571 million) are unsecured, bear interest at rates based on SONIA between 4.70% and
5.20% (2023: 3.43% and 5.19%), and are repayable in 2027. Included in other creditors are amounts in respect of subsidiary undertaking
borrowings guaranteed by the Company of £989 million (2023: £1,154 million). Out of this amount, a total of £112 million (2023: £124
million) represents amounts to be released within one year.
In 2023, the Company reached an agreement with the DOJ and OFAC to resolve previously disclosed investigations into suspicions of
sanctions breaches. Included within other creditors in 2023 was an amount of £263 million which was settled in June 2024.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
387
6 Audit Fees
2024
2023
Fees payable to KPMG
– Audit fees (borne by another Group Company)
£ 30,000 £ 30,000
7 Contingent Liabilities
British American Tobacco p.l.c. has guaranteed borrowings by subsidiary undertakings of £65.4 billion (2023: £47.9 billion) and total
borrowing facilities of £73.3 billion (2023: £56.1 billion).
The Company has cross-guaranteed the liabilities of the British American Tobacco UK Pension Fund (“Fund”), which had a surplus
according to the last formal triennial valuation in March 2023 of £111 million on a Technical Provisions basis, in accordance with the
statutory funding objective. On an IAS 19 basis, the Fund had a surplus at 31 December 2024 of £169 million (2023: £184 million).
No contributions are expected to be made by the principal employer to the Fund in 2025.
The Company has provided certain guarantees to other Group entities or in respect of certain of their obligations.
In addition, there are contingent liabilities in respect of litigation in various countries (note 31 in the Notes on the Accounts).
8 Post Balance Sheet Events
On 3 February 2025, the fourth quarterly interim dividend of 58.88p (£1,296 million) declared by the Directors in February 2024, and
reconfirmed to the market prior to 31 December 2024, was paid to shareholders. The impact of this on the Company was to reduce
the level of profit and loss reserve from £11,798 million to £10,502 million.
In addition, on 13 February 2025, the Company announced that the Board had declared an interim dividend of 240.24p per ordinary share
of 25p for the year ended 31 December 2024, payable in four equal quarterly instalments of 60.06p per ordinary share in May, August,
November 2025 and February 2026. These payments will be recognised as appropriations from reserves in 2025 and 2026. The total
amount payable is estimated to be £5,308 million based on the number of shares outstanding at the date of these accounts.
@ Denotes section, including accompanying text and tables, that does not form part of BAT’s Annual Report on Form 20-F as filed with the SEC.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
Notes on Accounts
@
Continued
388
Information on the Group
390
Selected Financial Information
394
Non-Financial Measures
391
Non-GAAP Measures
395
Employees
411
Additional Disclosures on
Liquidity and Capital Resources
412
Summary of Group Risk Factors
414
Group Risk Factors
415
Regulation of the
Group’s Business
436
Material Contracts
441
Property, Plant and Equipment
443
Raw Materials
443
U.S. Corporate Governance
Practices
444
Controls and Procedures
445
Statements Regarding
Competitive Position
445
Directors’ Report Information
446
Cautionary Statement
447
Share Prices and Listings
448
Dividends
449
Shareholder Taxation
Information
451
Share Capital and
Security Ownership
455
Articles of Association
457
Purchase of Shares
460
Group Employee Trust
461
American Depositary Shares
462
Shareholding Administration
and Services
463
Exhibits
464
Glossary
467
Cross-Reference to Form-20F
468
389
Additional
Disclosures
Shareholder
Information
Other
Information
In this section
Overview
British American Tobacco p.l.c. is the parent holding company of
the Group, a leading multi-category consumer goods business that
provides tobacco and nicotine products to millions of adult
consumers around the world.
The Group, excluding the Group’s associated undertakings,
is organised into three regions:
– the United States of America (Reynolds American Inc.);
– Americas and Europe (AME); and
– Asia-Pacific, the Middle East and Africa (APMEA).
The Group’s range of combustible products covers all segments,
from value-for-money to premium, with a portfolio of international,
regional and local tobacco brands to meet a broad array of adult
tobacco consumer preferences wherever the Group operates.
The Group has also built a portfolio of smokeless tobacco and
nicotine products – including Vapour products, Heated Products
(HPs) and Modern Oral products, which are collectively termed
the New Categories, as well as Traditional Oral products.
The Group manages a globally-integrated supply chain and its
products are distributed to retail outlets worldwide.
History and development of BAT
The Group has had a significant global presence in the tobacco
industry for over 100 years. BAT Ltd. was incorporated in 1902,
when the Imperial Tobacco Company and the American Tobacco
Company agreed to form a joint venture company. BAT Ltd.
inherited companies and quickly expanded into major markets,
including India, Ceylon, Egypt, Malaya, Northern Europe and East
Africa. In 1927, BAT Ltd. expanded into the U.S. market through its
acquisition of B&W.
During the 1960s, 1970s and 1980s, the Group diversified its
business under the umbrella of B.A.T Industries p.l.c., with
acquisitions in the paper, cosmetics, retail and financial services
industries, among others. Various business reorganisations
followed as the business was eventually refocused on the Group’s
core cigarette, cigars and tobacco products businesses with BAT
becoming a separately listed entity on the LSE in 1998.
The following is a summary of the significant mergers, acquisitions
and disposals undertaken since 1998:
– 1999 – global merger with Rothmans International;
– 2000 – acquisition of Imperial Tobacco Canada;
– 2003 – acquisition of Ente Tabacchi Italiani S.p.A., Italy’s state-
owned tobacco company, Tabacalera Nacional in Peru and
Duvanska Industrija Vranje in Serbia;
– 2004 – the U.S. assets, liabilities and operations, other than
certain specified assets and liabilities, of BAT’s wholly-owned
subsidiary, B&W, were combined with RJR Tobacco Company
to form Reynolds American Inc. As a result of the B&W business
combination, B&W acquired beneficial ownership of
approximately 42% of the Reynolds American Inc. shares;
– 2008 – acquisition of Tekel, the Turkish state-owned tobacco
company and the cigarette and snus business of Skandinavisk
Tobakskompagni A/S;
– 2009 – acquisition of an effective 99% interest in Bentoel
in Indonesia;
– 2011 – acquisition of Protabaco in Colombia;
– 2012 – acquisition of CN Creative Limited in the UK;
– 2013 – entered into joint operations in China;
– 2015 – acquisition of the shares not already owned by the Group
in Souza Cruz in Brazil, the acquisition of the CHIC Group in
Poland, the acquisition of TDR d.o.o., a cigarette manufacturer in
Central Europe. Also in 2015, the Group increased its investment
in Reynolds American Inc. by US$4.7 billion to maintain the
Group’s approximate 42% equity position following Reynolds
American Inc.’s purchase of Lorillard Inc.;
– 2016 – acquisition of Ten Motives in the UK;
– 2017 – acquisition of the remaining 57.8% of Reynolds American
Inc. the Group did not already own. Following completion of the
acquisition, Reynolds American Inc. became an indirect, wholly-
owned subsidiary of BAT and is no longer a publicly-held
corporation. In 2017, the Group also acquired certain tobacco
assets from Bulgartabac Holding AD in Bulgaria and Fabrika
Duhana Sarajevo (FDS) in Bosnia, acquired Winnington Holdings
AB in Sweden and acquired certain assets from Must Have
Limited in the UK, including the electronic cigarette brand ViP;
– 2018 – acquisition of Quantus Beteiligungs-und
Beratungsgesellschaft mbH in Germany;
– 2019 – acquisition of Twisp Proprietary Limited in South Africa
and 60% of VapeWild Holdings LLC in the U.S.;
– 2020 – acquisition of the nicotine pouch product assets of Dryft
Sciences, LLC (Dryft) in the U.S. and the acquisition of Eastern
Tobacco Company for Trading in Saudi Arabia;
– 2021 – entry into a strategic research and product development
collaboration agreement with Organigram Inc., a licensed
producer of cannabis and cannabis-derived products in Canada
and a wholly-owned subsidiary of publicly-traded Organigram
Holdings Inc. and acquisition of a 19.9% equity stake in
Organigram Holdings Inc.. Also in 2021, the Group disposed of its
Iranian subsidiary, BAT Pars Company PJSC;
– 2022 – acquisition of a 16% equity stake in Sanity Group
GmbH, a German cannabis company. In 2022, the Group also
made an investment, via a convertible debenture in the amount
of c.£48 million, into Charlotte’s Web Holdings, Inc., a U.S.-based
hemp extract wellness products business;
– 2023 – disposal of the Group's businesses in Russia and
Belarus; and
– 2024 – partial sale of the Group's investment in ITC Ltd in India,
after which the Group's shareholding has reduced to 25.45%.
Also in 2024, further investments in Organigram Holdings Inc. in
Canada, increasing the Group's equity stake to c. 30.6%, and the
acquisition of Beni Oral Nicotine LLC in the U.S.
British American Tobacco p.l.c. was incorporated in July 1997 under
the laws of England and Wales as a public limited company and is
domiciled in the United Kingdom.
Seasonality
The Group’s business segments are not significantly affected
by seasonality although in certain markets cigarette consumption
trends rise during summer months due to longer daylight time
and tourism.
Patents and trademarks
Our trademarks, which include the brand names under which our
products are sold, are key assets which we consider, in the
aggregate, to be important to the business as a whole. As well as
protecting our brand names by way of trademark registration, we
also protect our innovations by means of patents and designs in
key global jurisdictions.
Board oversight of M&A transactions
The Company’s Board has strategic oversight of significant
M&A transactions (determined by value or strategic nature of
transaction), which are referred to it for noting under the Group
Statement of Delegated Authorities (SoDA).
Other M&A transactions are referred for strategic oversight to the
Management Board or other applicable senior forum or persons,
under the Group SoDA. Those referral requirements under the
Group SoDA apply alongside any requirement for corporate
approval of M&A transactions by or within a Group company.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Information on the Group
390
Volume
Volume is defined as the number of units sold. Units may vary
between categories. This can be summarised for the principal
metrics as follows:
– Factory-made cigarettes (FMC) – sticks, regardless of weight or
dimensions;
– Roll-Your-Own/Make-Your-Own – kilos, converted to a stick
equivalent based upon 0.8 grams (per stick equivalent) for Roll-
Your-Own and between 0.5 and 0.7 grams (per stick equivalent)
for Make-Your-Own;
– Traditional Oral – pouches (being 1:1 conversion to stick
equivalent) and kilos, converted to a stick equivalent based upon
2.8 grams
(per stick equivalent) for Moist Snuff, 2.0 grams (per stick
equivalent) for Dry Snuff and 7.1 grams (per stick equivalent) for
other oral;
– Modern Oral – pouches, being 1:1 conversion to stick equivalent;
– Heated sticks – sticks, being 1:1 conversion to stick equivalent; and
– Vapour – units, being pods, bottles and disposable units. There is
no conversion to a stick equivalent.
Volume is recognised in line with IFRS 15 Revenue from Contracts
with Customers, based upon transfer of control. It is assumed that
there is no material difference, in line with the Group’s recognition
of revenue, between the transfer of control and shipment date.
Volume is used by management and investors to assess the
relative performance of the Group and its brands within
categories, given volume is a principal determinant of revenue.
Volume Share
Volume share is the estimated number of units bought by adult
consumers of a specific brand or combination of brands, as a
proportion of the total estimated units bought by adult consumers
in the industry, category or other sub-categorisation. Sub-
categories include, but are not limited to, Heated Products (HP),
Modern Oral, Traditional Oral, Total Oral or Cigarettes. Except
when referencing particular markets, volume share is based on our
Top markets. Management note that the markets that form the
definition of Top markets may change between periods as this will
reflect the development of the category within markets including
their relative sizes.
Where possible, the Group utilises data provided by third-party
organisations, including NielsenIQ, based upon retail audit of sales
to adult consumers. In certain markets, where such data is not
available, other measures are employed which assess volume
share based upon other movements within the supply chain, such
as sales to retailers. This may depend on the provision of data by
customers including distributors/wholesalers.
Volume share is used by management to assess the relative
performance of the Group and its brands against the performance
of its competitors in the categories and geographies in which the
Group operates. The Group’s management believes that this
measure is useful to the users of the financial statements to
understand the relative performance of the Group and its brands
against the performance of its competitors in the categories and
geographies in which the Group operates. This measure is also
useful to understand the Group’s performance when seeking to
grow scale within a market or category from which future financial
returns can be realised. Volume share provides an indicator of the
Group’s relative performance in unit terms versus competitors.
Volume share in each period compares the average volume share
in the period with the average volume share in the prior year. This
is a more robust measure of performance, removing short-term
volatility that may arise at a point in time. Due to the timing of
available information, volume share for 2024 is year-to-date
December 2024 unless otherwise stated.
However, in certain circumstances, related to periods of
introduction to a market, in order to illustrate the latest
performance, data may be provided as at the end of the period
rather than the average in that period. In these instances, the
Group states these at a specific date (for instance, December
2024).
Value Share
Value share is the estimated retail value of units bought by adult
consumers of a particular brand or combination of brands, as a
proportion of the total estimated retail value of units bought by
adult consumers in the industry, category or other sub-
categorisation in discussion. Except when referencing particular
markets, value share is based on our Top markets. Management
note that the markets that form the definition of Top markets may
change between periods as this will reflect the development of the
category within markets including their relative sizes.
Where possible, the Group utilises data provided by third-party
organisations, including NielsenIQ, based upon retail audit of sales
to adult consumers. In certain markets, where such data is not
available, other measures are employed which assess value share
based upon other movements within the supply chain, such as
sales to retailers. This may depend on the provision of data by
customers (including distributors and wholesalers).
Value share is used by management to assess the relative
performance of the Group and its brands against the performance
of its competitors in the categories and geographies in which the
Group operates, specifically indicating the Group’s ability to realise
value relative to the market. The measure is particularly useful
when the Group’s products and/or the relevant category in the
market in which they are sold has developed or achieved scale from
which value can be realised. The Group’s management believes
that this measure is useful to the users of the financial statements
to comprehend the relative performance of the Group and its
brands against the performance of its competitors in the
categories and geographies in which the Group operates,
specifically indicating the Group’s ability to realise value relative to
the market.
Value share in each period compares the average value share in
the period with the average value share in the prior year. This is a
more robust measure of performance, removing short-term
volatility that may arise at a point of time. Due to the timing of
available information, value share for 2024 is year-to-date
December 2024 unless otherwise stated.
However, in certain circumstances, related to periods of
introduction to a market, in order to illustrate the latest
performance, data may be provided as at the end of the period
rather than the average in that period. In these instances the
Group states these are at a specific date (for instance, December
2024).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Non-Financial Measures
391
Price/Mix
Price mix is a term used by management and investors to explain the movement in revenue between periods. Revenue is affected by
the volume (how many units are sold) and the price (how much is each unit sold for). The Group may achieve a movement in revenue due
to the relative proportions of higher price volume sold compared to lower price volume sold (price/mix).
This term is used to explain the Group’s relative performance between periods only. It is calculated as the difference between the
movement in revenue (between periods) and volume (between periods). For instance, the marginal increase in combustibles revenue
(excluding translational foreign exchange movements and the impact of the sale of the Group’s businesses in Russia and Belarus) of 0.1%
in 2024, with a decline in combustibles volume (also excluding the impact of the sale of the Group’s businesses in Russia and Belarus) of
5.2% in 2024, leads to a price mix of +5.3% in 2024. No assumptions underlie this metric as it utilises the Group’s own data.
Consumers of Smokeless Products
The number of consumers of Smokeless products is defined as the estimated number of legal age (minimum 18 years) consumers of the
Group’s Smokeless products - which does not necessarily mean these users are solus consumers of these products. In markets where
regular consumer tracking is in place, this estimate is obtained from adult consumer tracking studies conducted by third parties
(including Kantar). In markets where regular consumer tracking is not in place, the number of consumers of Smokeless products is
derived from volume sales of consumables and devices in such markets, using consumption patterns obtained from other similar
markets with consumer tracking (utilising studies conducted by third parties, including Kantar). The number of consumers is adjusted for
those identified (as part of the consumer tracking studies undertaken) as using more than one BAT brand.
The number of Smokeless products consumers is used by management to assess the number of consumers regularly using the Group’s
New Categories products as the increase in Smokeless products is a key pillar of the Group’s Sustainability ambition and is integral to the
sustainability of our business.
The Group’s management believes that this measure is useful to the users of the financial statements given the Group’s sustainability
ambition and alignment to the sustainability of the business with respect to the Smokeless portfolio.
During 2024, in line with standard practice, Kantar has made enhancements to their adult consumer tracking studies to more accurately
capture market trends across categories. To ensure that the data is comparable between periods, Kantar has back-trended the data to
prevent any trend break, with the revised historical data provided below:
Million consumers
2023
2022
2021
As previously reported
23.9
20.7
17.1
Back trended to reflect enhanced adult consumer tracking
25.5
22.3
18.2
% of farms monitored for child labour; % of farms with incidents of child labour identified; Number of child labour
incidents identified; % incidents of child labour identified and reported as resolved by end of the growing season
Our definition of child labour is aligned to how the International Labour Organization (ILO) defines the term, namely that the work that
deprives children of their childhood, their potential and their dignity, and that is harmful to their physical and mental development
(www.ilo.org/ipec/facts/lang--en/index.htm).
Reported via our Thrive annual reports covering all BAT directly-contracted farmers and farmers supplying our third-party suppliers,
representing more than 93% of total tobacco purchased in 2024. As tobacco-growing seasons vary around the world, data is based on
the most recent crop cycle at the time of reporting, instead of the crop grown in the calendar year.
Data in relation to our contracted farmers is collected by BAT Field Technicians who visit our contracted farmers approximately once a
month during the growing season. Details of each visit are recorded in our Farmer Sustainability Management (FSM) digital app by the
Field Technician and are formally acknowledged by the farmer. If any child labour case is identified, it is reported in the system and
treated as a critical prompt action. For the case to be resolved, this is followed by an unannounced visit shortly after to observe whether
this is repeated and a remediation plan agreed with the farmer. The remediation plan varies from case to case, considering the individual
circumstances.
Our third-party Leaf suppliers collect data via their own farm monitoring system. All Leaf suppliers report their results via Thrive.
Once the data is collected in the field, the country team analyse the data and approves it or reopens the questions for discussion with the
farmers. After that, the data is reported in Thrive and made available to the Global Leaf ESG team. The data is also reviewed by an
independent third party.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-Financial Measures
Continued
392
Ethnically Diverse
For the purposes of the ethnicity agenda, six global ‘Ethnically Diverse’ groups were determined considering BAT's global market
footprint: Asian, Black, Hispanic/Latin American, Indigenous, Mixed and Other Ethnic groups. Individuals identified as White, those that
have ‘Preferred not to Disclose’ and individuals that have ‘Not Disclosed’ i.e. their ethnicity field remains blank, are not captured in the
data set 'Ethnically Diverse’ groups. Employees performing the same work or work of equal value are paid equitably and any differences in
pay are for objective reasons and not influenced by factors such as gender and/or ethnicity.
For the purposes of our International Pay Equity Analysis, ‘Ethnically Diverse’ groups in the respective countries are defined as ethnic
groups who, because of their physical or cultural characteristics, are/were historically and systematically under-represented. Being a
numerical minority is not a characteristic of being an Ethnically Diverse group; sometimes larger groups can be considered Ethnically
Diverse groups. ‘Non-ethnically Diverse’ groups in the respective countries are defined as ethnic groups who, because of their physical or
cultural characteristics, are/were historically and systematically represented.
Senior Leadership Teams
Members of senior leadership teams are defined as employees in Management grades 37-41.
% Female Representation in Management Roles
Management-grade employees include all employees at job grade 34 (excluding the Management Board) or above, as well as any global
graduates. The gender of each employee is typically recorded at the point of hire. The percentage of female representation in
Management roles is calculated by dividing the number of female Management-grade employees by the total number of Management-
grade employees.
% of Key Leadership teams with at least a 50% spread of distinct nationalities
The number of Management Board (MB) members that have at least a 50% spread of nationalities within their Key Leadership teams
(MB-1 members only), as a percentage of the total number of Management Board members. A Key Leadership team is categorised as
the group of direct reports that report into a Management Board member.
The 50% spread of distinct nationalities is satisfied if at least half of a given Management Board's Key Leadership team members are of
distinct nationalities. The nationality of each employee is typically recorded at the point of hire. U.S. employees hired by Reynolds
American Companies prior to its merger with BAT did not disclose nationality at point of hire and therefore these employees are
excluded from the calculation.
% packaging recyclable, reusable or compostable
This KPI measures the share of materials used in primary and secondary packaging that is either reusable, recycle ready or compostable
across sold products in each reference reporting year. By packaging we mean materials used to wrap or protect our goods.
Examples of primary and secondary packaging are all the cigarette pack elements, film used to wrap cigarette packs or closing tapes of
shipment boxes applied by BAT factories, the boxes our devices come in or the pulp trays used to secure a device in a box.
Tertiary packaging items applied by logistics partners or retailers outside our control, for example plastic pallets, are out of scope.
Reusable packaging - Packaging which has been designed to accomplish, or proves its ability to accomplish, a number of trips or
rotations in a system for reuse.
Recycle-ready packaging - Packaging that is intentionally designed and produced to enable recycling where infrastructure exists based
on material choices and global guidance.
Composting - A packaging or packaging component is compostable if it is in compliance with relevant international compostability
standards and if its successful post-consumer collection, sorting and composting is proven to work in practice and at scale. We use a
composting aerobic process designed to produce compost from packaging.
While there are no means to trace what happens with packaging materials at their end of life due to the number of end markets in which
our products are sold, variations in consumer behaviour and local infrastructure to process waste at end of life, this KPI focuses on the
potential for reuse, recycling or composting of our packaging.
To calculate the share of recyclable, reusable and compostable packaging (in %), we sum the volume (in tonnes) of reusable, recyclable,
recycle ready or compostable packaging materials that have been used in our factories for sold products and divide it by the overall
volume (in tonnes) of all packaging materials used in sold products for the reporting period.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
393
This information set out below has been derived from, in part, the audited consolidated financial statements of the Group commencing
on page 262. This selected financial information should be read in conjunction with the consolidated financial statements and the
Strategic Report.
As of and for the Year Ended 31 December
All items shown in £m except per share information
2024
2023
2022
2021
2020
Income statement data
Revenue
2
25,867
27,283
27,655
25,684
25,776
Raw materials and consumables used
(4,565)
(4,545)
(4,781)
(4,542)
(4,583)
Changes in inventories of finished goods and work in progress
129
(96)
227
160
445
Employee benefit costs
(2,831)
(2,664)
(2,972)
(2,717)
(2,744)
Depreciation, amortisation and impairment costs
(3,101) (28,614)
(1,305)
(1,076)
(1,450)
Other operating income
340
432
722
196
188
Loss on reclassification from amortised cost to fair value
(10)
(9)
(5)
(3)
(3)
Other operating expenses
(13,093)
(7,538)
(9,018)
(7,468)
(7,667)
Profit/(loss) from operations
2,736
(15,751)
10,523
10,234
9,962
Net finance costs
(1,098)
(1,895)
(1,641)
(1,486)
(1,745)
Share of post-tax results of associates and joint ventures
1,900
585
442
415
455
Profit/(loss) before taxation
3,538
(17,061)
9,324
9,163
8,672
Taxation on ordinary activities
(357)
2,872
(2,478)
(2,189)
(2,108)
Profit/(loss) for the year
3,181
(14,189)
6,846
6,974
6,564
Per share data
Basic weighted average number of ordinary shares, in millions
2,214
2,229
2,256
2,287
2,286
Diluted weighted average number of ordinary shares, in millions
3
2,225
2,237
2,267
2,297
2,295
Earnings/(loss) per share-basic (pence)
136.7p
-646.6p
293.3p
296.9p
280.0p
Earnings/(loss) per share-diluted (pence)
3
136.0p
-646.6p
291.9p
295.6p
278.9p
Dividends per share (pence)
4
240.24p
235.52p
230.88p
217.80p
215.60p
Balance sheet data
Assets
Non-current assets
104,605 104,530 138,137 124,558
124,078
Current assets
14,294
14,186
15,409
12,807
13,612
Total assets
118,899
118,716 153,546 137,365
137,690
Liabilities
Non-current liabilities
50,161
50,109 59,983 54,820
59,257
Current liabilities
18,743
15,673
17,853
15,144
15,478
Total borrowings
36,950
39,730
43,139 39,658
43,968
Equity
Share capital
585
614
614
614
614
Total equity
49,995
52,934
75,710
67,401
62,955
Cash flow data
Net cash generated from operating activities
10,125
10,714
10,394
9,717
9,786
Net cash generated from/(used in) investing activities
1,375
(296)
(705)
(1,140)
(783)
Net cash used in financing activities
(10,632)
(9,314)
(8,878)
(8,749)
(7,897)
Notes:
1. All of the information above is in respect of continuing operations, revised for the fully retrospective adoption of IFRS 15.
2. Revenue is net of duty, excise and other taxes of £33,818 million, £36,917 million, £38,527 million, £38,595 million and £39,172 million for the years ended 31 December 2024, 2023, 2022,
2021, and 2020, respectively.
3. 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 are therefore excluded, for 2023, from the
calculation of diluted earnings per share, calculated in accordance with IFRS. However, for consistency across periods, the presentation of the diluted weighted number of ordinary
shares above includes those that are potentially dilutive. The diluted number of shares, less those that are deemed to be anti-dilutive under IAS33, used in the calculation of diluted
earnings per share in compliance with IFRS was 2,229 million.
4. In February 2025, the BAT Directors declared an interim dividend of 240.24 pence per share for the year ended 31 December 2024, payable in four equal instalments of 60.06 pence per
ordinary share. The interim dividend will be paid to BAT shareholders in May 2025, August 2025, November 2025 and February 2026. The equivalent quarterly dividends receivable by
holders of ADSs in US dollars will be calculated based on the exchange rate on the applicable payment date.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Selected Financial Information
394
To supplement the presentation of the Group’s results of operations and financial condition in accordance with IFRS, we also present
several non-GAAP measures used by management to monitor the Group’s performance. The Group’s management regularly reviews
the measures used to assess and present the financial performance of the Group and, as relevant, its geographic segments.
Changes to Non-GAAP measures in 2024
In 2024, the Group introduced adjusted Gross Profit, adjusted Gross Margin and Category Contribution Margin as non-GAAP measures.
These measures demonstrate the Group's profitability (before adjusting items and translational foreign exchange) from the principal
product categories, illustrating the category profitability development as the Group realises the transition from combustibles to
Smokeless products in line with the Group's strategy to Build a Smokeless World. Accordingly, New Categories adjusted Gross Margin
and New Categories Contribution Margin will be used within the Group's incentive schemes from January 2025.
The following tables include, where relevant, reconciliations to the Group's non-GAAP measures, from the most comparable
IFRS equivalent.
Revenue at Constant Rates of Exchange and Organic Revenue at Current and Constant Rates of Exchange
Definition – revenue before the impact of foreign exchange and also presented excluding the inorganic performance of certain
businesses bought or sold in the period.
To supplement BAT’s revenue presented in accordance with IFRS, the Group’s Management Board, as the chief operating decision-
maker, reviews revenue at constant rates of exchange to evaluate the underlying business performance of the Group and its geographic
segments. The Group’s Management Board defines this measure as revenue retranslated at the prior periods rate of exchange.
The Group’s Management Board believes that revenue at constant rates of exchange provides information that enables users of the
financial statements to compare the Group’s business performance across periods without the impacts of translational foreign
exchange. This measure has limitations as an analytical tool. The most directly comparable IFRS measure to revenue at constant rates
of exchange is revenue. Revenue at constant rates of exchange is not a presentation made in accordance with IFRS, and is not a measure
of financial condition or liquidity and should not be considered as an alternative to revenue as determined in accordance with IFRS.
Revenue at constant rates of exchange is not necessarily comparable to similarly titled measures used by other companies. As a result,
you should not consider this performance measure in isolation from, or as a substitute analysis for, BAT’s results as determined in
accordance with IFRS.
As Management assesses revenue at constant rates also on an organic basis within the Group's incentive schemes, as reported within
the Remuneration Report beginning in page 205, these measures are also presented excluding the inorganic performance of certain
businesses bought or sold in the period.
Refer to note 2 in the Notes on the Accounts for further discussion of the segmental results and for the reconciliation of revenue
at current and constant rates of exchange to segmental revenue and to Group revenue for the years ended 31 December 2024, 2023
and 2022.
For the year ended 31 December (£m)
2024
2023
2022
Revenue
25,867
27,283
27,655
Impact of translational foreign exchange
1,284
813
(1,382)
2024 revenue re-translated at 2023 exchange rates
27,151
2023 revenue re-translated at 2022 exchange rates
28,096
2022 revenue re-translated at 2021 exchange rates
26,273
Change in revenue at prior year’s exchange rates (constant rates)
-0.5%
1.6%
2.3%
Inorganic adjustments re-translated at prior year's exchange rates (constant rates)
—
(550)
Organic revenue re-translated at prior year's exchange rates (constant rates)
27,151
27,546
For the year ended 31 December (£m)
2024
2023
2022
Revenue
25,867
27,283
27,655
Inorganic adjustments
—
(479)
(935)
Organic revenue
25,867
26,804
26,720
In 2022, our businesses in Russia and Belarus generated £935 million of revenue. During 2023, while still owned by the Group (as they
were sold in September 2023), revenue from these business was £479 million. Accordingly, the sale of our businesses in Russia and
Belarus was a negative drag on reported revenue by £456 million in 2023 (compared to 2022) and a further £479 million in 2024
(compared to 2023).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Non-GAAP Measures
395
Revenue by Product Category or Geographic Segment – Including Revenue from New Categories, at Constant
Rates of Exchange and on an Organic Basis
Definition – revenue by product category, and at the prior year’s prevailing exchange rate and also presented excluding the
inorganic performance of certain businesses bought or sold in the period, derived from the principal product categories of
Combustibles, New Categories (being comprised of revenue from Vapour, HP and Modern Oral), and Traditional Oral, including
by the geographic segments of the United States, Americas and Europe, and Asia-Pacific, Middle East and Africa.
To supplement BAT’s revenue presented in accordance with IFRS, the Group’s Management Board, as the chief operating decision-
maker, reviews revenue growth from the principal product categories of combustibles, New Categories and Traditional Oral, including
from the geographic segments of the United States, Americas and Europe, and Asia-Pacific, Middle East and Africa, to evaluate the
underlying business performance of the Group reflecting the focus of the Group’s investment activity. The Group’s Management Board
assesses revenue by product category, including by geographic segment, at constant rates of exchange, translated to the Group’s
reporting currency at the prior period’s prevailing exchange rate, derived from the Group’s combustible portfolio (including but not
limited to Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans, Camel (U.S.), Newport (U.S.), Natural American Spirit (U.S.)), the Group’s New
Category portfolio (being Vapour, HP and Modern Oral) and the Group’s Traditional Oral portfolio and the Group’s operations in the
United States, Americas and Europe, and Asia-Pacific, Middle East and Africa.
The Group’s Management Board also believes that the revenue performance by product category, including by geographic segment, provides
information that enables users of the financial statements to compare the Group’s business performance across periods and by reference to
the Group’s investment activity. Revenue by product category, including by geographic segment, have limitations as analytical tools. The most
directly comparable IFRS measure to revenue by product category, including by geographic segment, is revenue. Revenue by product category,
including by geographic segment, are not presentations made in accordance with IFRS, are not measures of financial condition or liquidity
and should not be considered as alternatives to revenue as determined in accordance with IFRS. Revenue by product category, including by
geographic segment, are not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider
these performance measures in isolation from, or as a substitute analysis for, BAT’s results as determined in accordance with IFRS.
As Management assesses New Categories revenue growth on an organic basis within the Group's incentive schemes, as reported within the
Remuneration Report beginning in page 205, this measure is also presented excluding the inorganic performance of certain businesses bought
or sold in the period. The organic figures shown for the relevant product categories are provided to show the build-up towards revenue from
New Categories and what Management is working towards.
Reconciliation of revenue by product category to revenue by product category at constant rates of exchange
and on an organic basis (2024 - 2023)
2024
Reported
£m
vs 2023
%
Impact of
exchange
£m
Reported
at cc
£m
Reported at
cc vs 2023
%
Inorganic
adjustments
£m
Organic
at cc
£m
Organic at
cc vs 2023
%
New Categories:
Vapour
1,721
-5.1%
44
1,765
-2.6%
—
1,765
-2.5%
HP
921
-7.6%
51
972
-2.5%
—
972
+5.8%
Modern Oral
790
+46.6%
24
814
+51.0%
—
814
+53.2%
Total New Categories
3,432
+2.5%
119
3,551
+6.1%
—
3,551
+8.9%
Traditional Oral
1,092
-6.0%
31
1,123
-3.4%
—
1,123
-3.4%
Combustibles
20,685
-6.4%
1,063
21,748
-1.6%
—
21,748
+0.1%
Other
658
-1.0%
71
729
+9.7%
—
729
+10.1%
Revenue
25,867
-5.2%
1,284
27,151
-0.5%
—
27,151
+1.3%
Inorganic adjustments
—
—
—
Organic revenue
25,867
-3.5%
1,284
27,151
+1.3%
Reconciliation of revenue by product category to revenue by product category at constant rates of exchange (2023 - 2022)
and on an organic basis – 2023
2023
2022
Reported
£m
vs 2022
%
Impact of
exchange
£m
Reported
at cc
£m
Reported
at cc vs 2022
%
Inorganic
adjustments
at cc
£m
Organic
at cc
£m
Reported
£m
New Categories:
Vapour
1,812
+26.2%
11
1,823
+26.9 %
(2)
1,821
1,436
HP
996
-6.0%
37
1,033
-2.5 %
(89)
944
1,060
Modern Oral
539
+35.3%
15
554
+39.0 %
(7)
547
398
Total New Categories
3,347
+15.6%
63
3,410
+17.8 %
(98)
3,312
2,894
Traditional Oral
1,163
-3.8%
9
1,172
-3.1 %
—
1,172
1,209
Combustibles
22,108
-4.0%
738
22,846
-0.8 %
(450)
22,396
23,030
Other
665
+27.6%
3
668
+28.4 %
(2)
666
522
Revenue
27,283
-1.3%
813
28,096
+1.6 %
(550)
27,546
27,655
Inorganic adjustments
(479)
(71)
(550)
(935)
Organic revenue
26,804
+0.3%
742
27,546
26,720
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-GAAP Measures
Continued
396
Reconciliation of revenue by product category to revenue by product category at constant rates of exchange
2024
2023
U.S.
Reported
£m
vs 2023
%
Impact of
exchange
£m
Reported
at cc
£m
Reported at
cc vs 2023
%
Reported
£m
New Categories:
Vapour
998
-3.5 %
27
1,025
-0.8 %
1,033
HP
—
—
—
—
—
—
Modern Oral
80
+223.3 %
2
82
+232.3 %
25
Total New Categories
1,078
+1.8 %
29
1,107
+4.6 %
1,058
Traditional Oral
1,058
-6.1 %
30
1,088
-3.4 %
1,127
Combustibles
9,094
-6.7 %
253
9,347
-4.1 %
9,744
Other
48
-25.3 %
2
50
-22.7 %
65
Revenue
11,278
-6.0 %
314
11,592
-3.4 %
11,994
2023
2022
U.S.
Reported
£m
vs 2022
%
Impact of
exchange
£m
Reported
at cc
£m
Reported
at cc vs 2022
%
Reported
£m
New Categories:
Vapour
1,033
+13.1%
6
1,039
+13.8 %
913
HP
—
—%
—
—
— %
—
Modern Oral
25
-32.2%
—
25
-31.8 %
36
Total New Categories
1,058
+11.3%
6
1,064
+12.0 %
949
Traditional Oral
1,127
-4.0%
7
1,134
-3.4 %
1,174
Combustibles
9,744
-6.9%
58
9,802
-6.4 %
10,470
Other
65
+44.1%
—
65
+45.2 %
46
Revenue
11,994
-5.1%
71
12,065
-4.5 %
12,639
Note:
cc: constant currency – measures are calculated based on a re-translation of the current year’s results of the Group at the prior year’s exchange rates and, where applicable,
its geographical segments or product categories.
Reconciliation of revenue by product category to revenue by product category at constant rates of exchange
2024
2023
AME
Reported
£m
vs 2023
%
Impact of
exchange
£m
Reported
at cc
£m
Reported at
cc vs 2023
%
Reported
£m
New Categories:
Vapour
611
-10.8 %
14
625
-8.8 %
686
HP
443
-12.2 %
10
453
-10.4 %
505
Modern Oral
676
+40.3 %
21
697
+44.4 %
482
Total New Categories
1,730
+3.5 %
45
1,775
+6.1 %
1,673
Traditional Oral
34
-5.8 %
1
35
-3.6 %
36
Combustibles
7,039
-7.5 %
447
7,486
-1.7 %
7,614
Other
438
-6.7 %
30
468
+0.2 %
468
Revenue
9,241
-5.6 %
523
9,764
-0.3 %
9,791
2023
2022
AME
Reported
£m
vs 2022
%
Impact of
exchange
£m
Reported
at cc
£m
Reported
at cc vs 2022
%
Reported
£m
New Categories:
Vapour
686
+47.6%
(4)
682
+46.9 %
465
HP
505
+2.3%
3
508
+3 %
494
Modern Oral
482
+41.5%
11
493
+44.6 %
341
Total New Categories
1,673
+28.8%
10
1,683
+29.6 %
1,300
Traditional Oral
36
+1.7%
2
38
+7.9 %
35
Combustibles
7,614
+0.3%
196
7,810
+2.9 %
7,588
Other
468
+28.2%
(10)
458
+25.2 %
364
Revenue
9,791
+5.4%
198
9,989
+7.6 %
9,287
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
397
2024
2023
APMEA
Reported
£m
vs 2023
%
Impact of
exchange
£m
Reported
at cc
£m
Reported at
cc vs 2023
%
Reported
£m
New Categories:
Vapour
112
+19.6 %
3
115
+23.7 %
93
HP
478
-2.8 %
41
519
+5.6 %
491
Modern Oral
34
+5.7 %
1
35
+10.0 %
32
Total New Categories
624
+1.0 %
45
669
+8.6 %
616
Traditional Oral
—
—
—
—
—
—
Combustibles
4,552
-4.2 %
363
4,915
+3.5 %
4,750
Other
172
+31.1 %
39
211
+59.8 %
132
Revenue
5,348
-2.7 %
447
5,795
+5.4 %
5,498
2023
2022
APMEA
Reported
£m
vs 2022
%
Impact of
exchange
£m
Reported
at cc
£m
Reported
at cc vs 2022
%
Reported
£m
New Categories:
Vapour
93
+60.5%
9
102
+74.6 %
58
HP
491
-13.2%
34
525
-7.3 %
566
Modern Oral
32
+50.3%
4
36
+70.8 %
21
Total New Categories
616
-4.5%
47
663
+2.6 %
645
Traditional Oral
—
—
—
—
—
—
Combustibles
4,750
-4.5%
484
5,234
+5.2 %
4,972
Other
132
+18.9%
13
145
+32.0 %
112
Revenue
5,498
-4.0%
544
6,042
+5.5 %
5,729
Note:
cc: constant currency – measures are calculated based on a re-translation of the current year’s results of the Group at the prior year’s exchange rates and, where applicable,
its geographical segments or product categories.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-GAAP Measures
Continued
398
Adjusted Gross Profit and Adjusted Gross Margin, each on an Organic basis and at Constant Rates of Exchange
Definition – Profit from operations before the impact of adjusting items and translational foreign exchange, and before all non
production/attributable distribution costs and presented excluding the inorganic performance of certain businesses bought or
sold in the period, in £ and as a proportion of organic revenue (at constant rates).
@To supplement BAT’s performance presented in accordance with IFRS, the Group’s Management Board, as the chief operating
decision‑maker, reviews gross profit and gross margin (before the impact of adjusting items, non-production/attributable distribution
costs and translational foreign exchange). The measures are reviewed in absolute £ values and as a proportion of organic revenue. This
reflects the focus of the Group's strategic ambition and investment activity.
@ New Category adjusted gross margin (being a sub-set of
Group adjusted gross margin) will be included within the Group's incentive schemes, as reported within the Remuneration Report
beginning on page 205.
Costs are incurred by the products either directly as incurred by the product or category, or via an allocation of shared distribution costs
in a market, based upon each categories revenue as a proportion of total revenue from that market.
@
The Group’s Management Board believes that these additional measures provides information that enables users of the financial
statements to compare the Group's business performance across periods and by reference to the Group's investment activity and
strategic development.
@ Adjusted gross profit and adjusted gross margin have limitations as analytical tools. They are not presentations
made in accordance with IFRS, are not measures of financial condition or liquidity and should not be considered as alternatives to profit
from operations as determined in accordance with IFRS. Adjusted gross profit and adjusted gross margin are not necessarily comparable
to similarly titled measures used by other companies.
@As a result, you should not consider such performance measures in isolation from,
or as a substitute analysis for, BAT’s results of operations as determined in accordance with IFRS.
@
Please refer to page 401 for the reconciliation of Group profit from operations to adjusted gross profit and adjusted gross margin,
included as part of a wider reconciliation of non-GAAP measures.
Category Contribution and Category Contribution margin, each on an Organic basis and at Constant Rates of Exchange
Definition – Profit from operations before the impact of adjusting items and translational foreign exchange, having allocated
costs that are attributable to a product category and presented excluding the inorganic performance of certain businesses
bought or sold in the period, in £ and as a proportion of revenue (at constant rates).
@To supplement BAT’s performance presented in accordance with IFRS, the Group’s Management Board, as the chief operating
decision‑maker, reviews the contribution to Group profit from operations (before the impact of adjusting items and translational foreign
exchange) of the principal product categories, reflecting the focus of the Group's investment activity. The measure is reviewed in
absolute £ values and as a proportion of revenue.
@New Category contribution is, and New Category contribution margin will be in the
future, assessed by management within the Group's incentive schemes, as reported within the Remuneration Report beginning on
page 205.
Costs are incurred by the products either directly as incurred by the product or category, or via an allocation of shared distribution costs
in a market, based upon each categories revenue as a proportion of total revenue from that market.
@
The Group’s Management Board believes that this additional measure provides information that enables users of the financial
statements to compare the Group's business performance across periods and by reference to the Group's investment activity.
@
Category contribution and Category contribution margin by products as measures of the Group’s performance have limitations as
analytical tools. They are not presentations made in accordance with IFRS, are not measures of financial condition or liquidity and should
not be considered as alternatives to profit from operations as determined in accordance with IFRS. Category Contribution and Category
Contribution margin are not necessarily comparable to similarly titled measures used by other companies.
@As a result, you should not
consider such performance measures in isolation from, or as a substitute analysis for, BAT’s results of operations as determined in
accordance with IFRS.
@
Please refer to page 401 for the reconciliation of Group profit from operations to category contribution, included as part of a wider
reconciliation of non-GAAP measures.
The reconciliation provided reflects the marginal contribution of the Group principal product categories to the Group’s financial
performance. This measure includes all attributable revenue and costs. This measure is provided in aggregate as certain costs are
incurred across all New Categories and are not product specific. However, certain overhead costs that are not category specific are
excluded from Category Contribution.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
399
Adjusted Profit From Operations, Adjusted Operating Margin and Adjusted Organic Profit From Operations
Definition – profit from operations before the impact of adjusting items and adjusted profit from operations as a percentage
of revenue, and also presented excluding the inorganic performance of certain businesses bought or sold in the period.
To supplement BAT’s results from operations presented in accordance with IFRS, the Group’s Management Board, as the chief operating
decision‑maker, reviews adjusted profit from operations to evaluate the underlying business performance of the Group and its geographic
segments, to allocate resources to the overall business and to communicate financial performance to users of the financial statements.
The Group also presents adjusted operating margin, which is defined as adjusted profit from operations as a percentage of revenue.
Adjusted profit from operations and adjusted operating margin are not measures defined by IFRS. The most directly comparable IFRS
measure to adjusted profit from operations is profit from operations.
Adjusting items, as identified in accordance with the Group’s accounting policies, represent certain items of income and expense which the
Group considers distinctive based on 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 and provides details of items that are
specifically excluded from being classified as adjusting items. Adjusting items in profit from operations include restructuring and integration
costs, amortisation of trademarks and similar intangibles, impairment of goodwill and charges in respect of certain litigation. The definition
of adjusting items is explained in note 1 in the Notes on the Accounts.
The Group’s Management Board believes that these additional measures are useful to the users of the financial statements and are used by
the Group’s Management Board as described above, because they exclude the impact of adjusting items which have less bearing on the
routine ongoing operating activities of the Group, thereby enhancing users’ understanding of underlying business performance. The Group’s
Management Board also believes that adjusted profit from operations provides information that enables users of the financial statements to
compare the Group’s business performance across periods. Additionally, the Group’s Management Board believes that similar measures are
frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to the Group, many
of which present an adjusted operating profit-related performance measure when reporting their results. Adjusted profit from operations
and adjusted operating margin have limitations as analytical tools. They are not presentations made in accordance with IFRS, are not
measures of financial condition or liquidity and should not be considered as alternatives to profit for the year, profit from operations
or operating margin as determined in accordance with IFRS. Adjusted profit from operations and adjusted operating margin are not
necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider these performance
measures in isolation from, or as a substitute analysis for, BAT’s results of operations as determined in accordance with IFRS.
As Management assesses adjusted profit from operations at constant rates also on an organic basis within the Group's incentive schemes,
as reported within the Remuneration Report beginning in page 205, this measure is also presented excluding the inorganic performance of
certain businesses bought or sold in the period. The table below reconciles the Group’s profit from operations to adjusted profit from
operations, and to adjusted profit from operations at constant rates based on a re-translation of adjusted profit from operations for each year,
at the previous year’s exchange rates, and provides adjusted operating margin for the periods presented. Refer to note 2 in the Notes on the
Accounts for further discussion of the segmental results and for the reconciliation of adjusted profit from operations at current and constant
rates of exchange to segmental profit from operations and to Group profit for the years ended 31 December 2024, 2023 and 2022.
For the year ended 31 December (£m)
2024
2023
2022
Profit/(loss) from operations
2,736
(15,751)
10,523
Restructuring and integration costs
—
(2)
771
Amortisation and impairment of trademarks and similar intangibles
2,279
23,202
285
Charges in respect of an excise assessment in Romania
449
—
—
Charges in respect of the ongoing litigation in Canada
6,203
—
—
Impairment charges in respect of fixed assets, including the Group's head office in London
149
—
—
Impairment of goodwill
39
4,614
—
Charges in connection with disposal of associate
6
—
—
Credit in respect of calculation of excise on social contributions in Brazil
—
(148)
—
Credit in respect of partial buy-out of the pension fund in the U.S.
—
—
(16)
Charges in connection with planned disposal of subsidiaries
—
—
612
Charges in connection with disposal of subsidiaries
—
351
(6)
Charges in respect of contributions on investment grants in Brazil
—
47
—
Credit in respect of recovery of VAT on social contributions in Brazil
—
(19)
(460)
Charges in respect of DOJ investigation and OFAC investigation
4
75
450
Credit in respect of settlement of historic litigation in relation to the Fox River
(132)
—
—
Charges in respect of Nigeria FCCPC case
—
—
79
Other adjusting items (including Engle)
157
96
170
Adjusted profit from operations
11,890
12,465
12,408
Operating margin
10.6%
-57.7%
38.1%
Adjusted operating margin
46.0%
45.7%
44.9%
Impact of translational foreign exchange
549
324
(782)
Adjusted profit from operations re-translated at constant rates
12,439
12,789
11,626
Change in adjusted profit from operations re-translated at constant rates
-0.2%
+3.1%
+4.3%
Inorganic adjustments retranslated at constant rates
—
(223)
(276)
Adjusted organic profit from operations re-translated at constant rates
12,439
12,566
11,350
Adjusted organic measures above are re-translated at constant rates. Adjusted organic profit from operations in 2023, translated at 2023
rates was £12,272 million. The movement in adjusted organic profit from operations, at constant rates of exchange in 2024 was up 1.4%.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-GAAP Measures
Continued
400
Reconciliations of Profit from Operations to Adjusted Organic Profit from Operations, Adjusted Organic Operating
Margin, Category Contribution, Category Contribution Margin, Adjusted Gross Profit and Adjusted Gross Margin,
at constant rates of exchange.
The following reconciliations are provided to support the definitions of the above measures as explained on pages 396 to 401.
They are also provided to demonstrate the reconciliation from respective IFRS measures to the non-GAAP equivalents, being measures
used
@by Management and used
@within the incentives schemes in 2024 and proposed to be used in 2025.
Adjusted gross profit and adjusted gross margin are new measures, introduced in 2024, with comparative movements to 2023 only.
2024
Group
reported
£m
New
Categories
£m
Combustibles
£m
Traditional
Oral
£m
Other
£m
Revenue
25,867
3,432
20,685
1,092
658
Impact of translational FX
1,284
119
1,063
31
71
Organic revenue (see page 395)
27,151
3,551
21,748
1,123
729
Profit from Operations
2,736
Operating margin
10.6%
Adjusting items (see page 400)
9,154
Impact of translational FX
549
Inorganic adjustments
—
Adjusted organic profit from operations
12,439
Adjusted organic operating margin
45.8%
Other costs that are not attributable to categories
1,907
Category Contribution
14,346
251
13,012
863
220
Category Contribution margin
52.8%
7.1%
59.8%
76.8%
30.2%
Category spend (Marketing Investment and R&D)
3,900
1,725
2,052
60
63
Adjusted Gross profit
18,246
1,976
15,064
923
283
vs 2023
2.2%
19.8%
0.3%
-1.6%
14.6%
Adjusted Gross margin
67.2%
55.7%
69.3%
82.2%
38.9%
Adjusted Gross profit at current rates
17,485
1,932
14,398
898
257
2023
Group
reported
£m
New
Categories
£m
Combustibles
£m
Traditional
Oral
£m
Other
£m
Revenue
27,283
3,347
22,108
1,163
665
Inorganic adjustments
(479)
(87)
(389)
0
(3)
Organic revenue (see page 395)
26,804
3,260
21,719
1,163
662
Loss from Operations
(15,751)
Operating margin
-57.7%
Adjusting items (see page 400)
28,216
Inorganic adjustments
(193)
Adjusted organic profit from operations
12,272
Adjusted organic operating margin
45.8%
Other costs that are not attributable to categories
1,904
Category Contribution
14,176
0
13,084
880
212
Category Contribution margin
52.9%
0.0%
60.2%
75.7%
32.0%
Category spend (Marketing Investment and R&D)
3,674
1,649
1,933
57
35
Adjusted Gross profit
17,850
1,649
15,017
937
247
Adjusted Gross margin
66.6%
50.6%
69.1%
80.6%
37.2%
at Constant FX
As reconciled on page 396, organic revenue from New Categories at constant rates of exchange in 2023 was £3,312 million. New
Categories adjusted gross profit in 2023 was £1,649 million, however when translated at 2022 rates of exchange (to be on a constant
rate basis) this would have been £1,779 million. Accordingly, New Categories adjusted gross margin at constant rates of exchange was, in
2023, 53.7%.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
401
Adjusted Net Finance Costs and Adjusted Net Finance Costs at constant rates of exchange
Definition – Net finance costs before the impact of adjusting items and translational foreign exchange.
To supplement BAT’s performance presented in accordance with IFRS, the Group’s net finance costs are also presented before adjusting
items (as defined in note 1 in the Notes on the Accounts) and before the impact of translational foreign exchange. The Group’s
Management Board believes that adjusted net finance costs provides information that enables users of the financial statements to
compare the Group’s business performance across periods. The Group’s Management Board uses adjusted net finance costs as part of
the total assessment of the underlying performance of all the Group’s business interests. Adjusted net finance costs has limitations as
an analytical tool. It is not a presentation made in accordance with IFRS, is not a measure of financial condition or liquidity, and should not
be considered as an alternative to the Group’s net finance costs as determined in accordance with IFRS. Adjusted net finance costs is
not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider this performance
measure in isolation from, or as a substitute analysis for, BAT’s results of operations as determined in accordance with IFRS.
The most directly comparable IFRS measure to adjusted net finance costs is net finance costs.
The table below reconciles the Group’s net finance costs to adjusted net finance costs, and to adjusted net finance costs at constant
rates based on a re-translation of adjusted net finance costs for each year, at the previous year’s exchange rates.
For the year ended 31 December (£m)
2024
2023
2022
Finance costs
(1,349)
(2,081)
(1,733)
Finance income
251
186
92
Net finance costs
(1,098)
(1,895)
(1,641)
Less: Adjusting items in net finance costs
(491)
96
34
Adjusted net finance costs
(1,589)
(1,799)
(1,607)
Comprising:
Interest payable
(1,759)
(1,835)
(1,648)
Interest and dividend income
251
186
92
Fair value changes - derivatives
(90)
(599)
473
Exchange differences
9
449
(524)
Adjusted net finance costs
(1,589)
(1,799)
(1,607)
Impact of translation foreign exchange
(27)
5
Adjusted net finance costs, at prior year’s exchange rates (constant rates)
(1,616)
(1,794)
Adjusted Share of Post-Tax Results of Associates and Joint Ventures
Definition – share of post-tax results of associates and joint ventures before the impact of adjusting items.
To supplement BAT’s performance presented in accordance with IFRS, the Group’s share of post-tax results of associates and joint
ventures is also presented before adjusting items (as defined in note 1 in the Notes on the Accounts). The Group’s Management Board
believes that adjusted share of post-tax results of associates and joint ventures provides information that enables users of the financial
statements to compare the Group’s business performance across periods. The Group’s Management Board uses adjusted share of post-
tax results from associates and joint ventures as part of the total assessment of the underlying performance of all the Group’s business
interests. Adjusted share of post-tax results of associates and joint ventures has limitations as an analytical tool. It is not a presentation
made in accordance with IFRS, is not a measure of financial condition or liquidity, and should not be considered as an alternative to the
Group’s share of post-tax results of associates and joint ventures as determined in accordance with IFRS. Adjusted share of post-tax
results of associates and joint ventures is not necessarily comparable to similarly titled measures used by other companies. As a result,
you should not consider this performance measure in isolation from, or as a substitute analysis for, BAT’s results of operations as
determined in accordance with IFRS.
The most directly comparable IFRS measure to adjusted share of post-tax results of associates and joint ventures is share of post-tax
results of associates and joint ventures.
For the year ended 31 December (£m)
2024
2023
2022
Group’s share of post-tax results of associates and joint ventures
1,900
585
442
Issue of shares and changes in shareholding
(18)
(40)
3
Other exceptional items in ITC
—
(2)
—
Gain on partial divestment of shares held in ITC
(1,361)
—
—
Impairment of the Group’s associate in Yemen
—
—
18
Impairment in relation to Organigram (net of tax)
—
34
59
Other
—
—
12
Adjusted Group’s share of post-tax results of associates and joint ventures
521
577
534
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-GAAP Measures
Continued
402
Adjusted Taxation
Definition – Taxation before the impact of adjusting items.
BAT management monitors the Group’s adjusted taxation to assess BAT’s underlying tax (as defined in note 1 in the Notes on the
Accounts). Adjusted taxation is not a measure defined by IFRS. The table below provides the calculation of the Group’s adjusted taxation.
The Group’s Management Board believes that this additional measure is useful to the users of the financial statements, and is used by
BAT management as described above, because it excludes the tax on adjusting items and adjusting tax, thereby enhancing users’
understanding of underlying business performance.
Adjusted taxation has limitations as an analytical tool. It is not a presentation made in accordance with IFRS and should not be
considered as an alternative to the taxation as determined in accordance with IFRS. Adjusted taxation is not necessarily comparable to
similarly titled measures used by other companies. As a result, you should not consider this measure in isolation from, or as a substitute
analysis for, the Group’s taxation as determined in accordance with IFRS. The table below provides the calculation of the Group’s
adjusted taxation for the periods presented.
For the year ended 31 December (£m)
2024
2023
2022
UK corporation tax
– current year tax expense
15
20
2
– adjustments in respect of prior periods
9
12
(5)
Overseas tax
– current year tax expense
2,571
2,804
2,675
– adjustments in respect of prior periods
108
(25)
46
Current tax
2,703
2,811
2,718
Pillar Two income tax
79
—
—
Total current tax
2,782
2,811
2,718
Deferred tax
(2,425)
(5,683)
(240)
Taxation on ordinary activities
357
(2,872)
2,478
Adjusting items in taxation
157
73
27
Taxation on adjusting items
2,049
5,415
176
Adjusted tax charge
2,563
2,616
2,681
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
403
Underlying Tax Rate and Underlying Tax Rate at constant rates of exchange
Definition – Tax rate incurred before the impact of adjusting items and translational foreign exchange and to adjust for
the inclusion of the Group’s share of post-tax results of associates and joint ventures within the Group’s pre-tax results.
BAT management monitors the Group’s underlying tax rate to assess the tax rate applicable to the Group’s underlying operations,
excluding the Group’s share of post-tax results of associates and joint ventures in BAT’s pre-tax results and adjusting items (as defined
in note 1 in the Notes on the Accounts). Underlying tax rate is not a measure defined by IFRS. The table below provides the calculation
of the Group’s effective tax rate as determined in accordance with IFRS with underlying tax rate for the periods presented. The Group’s
Management Board believes that this additional measure is useful to the users of the financial statements, and is used by BAT
management as described above, because it excludes the contribution from the Group’s associates, recognised after tax but within the
Group’s pre-tax profits, and adjusting items, thereby enhancing users’ understanding of underlying business performance.
Underlying tax rate has limitations as an analytical tool. It is not a presentation made in accordance with IFRS and should not be
considered as an alternative to the effective tax rate as determined in accordance with IFRS. Underlying tax rate is not necessarily
comparable to similarly titled measures used by other companies. As a result, you should not consider this measure in isolation from,
or as a substitute analysis for, the Group’s effective tax rate as determined in accordance with IFRS. The table below shows the
computation of the Group’s underlying tax rate for the periods presented and underlying tax rate at constant rates based on a
re-translation of underlying tax rate for each year, at the previous year’s exchange rates and the related reconciliation of profit before
taxation to adjusted profit before taxation, excluding associates and joint ventures, and taxation on ordinary activities to adjusted
taxation and adjusted taxation at constant rates of exchange.
For the year ended 31 December (£m)
2024
2023
2022
Profit/(loss) before taxation
3,538
(17,061)
9,324
Less:
Share of post-tax results of associates and joint ventures
(1,900)
(585)
(442)
Adjusting items within profit from operations
9,154
28,216
1,885
Adjusting items within finance costs
(491)
96
34
Adjusted profit before taxation, excluding associates and joint ventures
10,301
10,666
10,801
Impact of translational foreign exchange
522
329
(642)
Adjusted PBT, excluding associates and joint ventures at constant rates of exchange
10,823
10,995
10,159
Taxation on ordinary activities
(357)
2,872
(2,478)
Adjusting items within taxation and taxation on adjusting items
(2,206)
(5,488)
(203)
Adjusted taxation
(2,563)
(2,616)
(2,681)
Impact of translational foreign exchange on adjusted taxation
(106)
(109)
131
Adjusted taxation at constant rates of exchange
(2,669)
(2,725)
(2,550)
Effective tax rate
10.1%
16.8%
26.6%
Underlying tax rate
24.9%
24.5%
24.8%
Underlying tax rate (at constant rates)
24.7%
24.8%
25.1%
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-GAAP Measures
Continued
404
Adjusted Diluted Earnings Per Share and Adjusted Organic Diluted Earnings Per Share, presented at both current
and constant rates of exchange
Definition – earnings per share before the impact of adjusting items and inorganic adjustments, after adjustments to the number
of shares outstanding for the impact of share option schemes whether they would be dilutive or not under statutory measures,
presented at the prior year’s rate of exchange.
BAT management monitors adjusted diluted EPS, a measure which removes the impact of adjusting items (as defined in note 1 in the
Notes on the Accounts) from diluted earnings per share. Adjusted diluted EPS is considered by the Group’s Management Board to be
useful to the users of the financial statements and is used by management within the Group’s incentive schemes, as reported within the
Remuneration Report beginning on page 205 and reported in note 11 in the Notes on the Accounts, as an indicator of diluted EPS before
adjusting items. Adjusted Diluted EPS is not necessarily comparable to similarly titled measures used by other companies. Adjusted
diluted EPS has limitations as an analytical tool and should not be used in isolation from, or as a substitute for, diluted EPS as determined
in accordance with IFRS. The most directly comparable IFRS measure to adjusted diluted EPS is diluted EPS.
As Management assesses adjusted diluted earnings per share (at both current and constant rates of exchange) on an organic basis
within the Group's incentive schemes, as reported within the Remuneration Report beginning in page 205, this measure is also presented
excluding the inorganic performance of certain businesses bought or sold in the period.
The table below shows the computation of adjusted diluted EPS and adjusted diluted EPS at constant exchange rates for the periods presented.
For the year ended 31 December (pence)
2024
2023
2022
Diluted earnings/(loss) per share
136.0
(646.6)
291.9
Effect of amortisation and impairment of goodwill, trademarks and similar intangibles
80.7
1,006.1
9.6
Effect of impairment charges in respect of fixed assets, including the Group's head office and
the decision to exit Cuba
4.5
—
—
Effect of settlement of historical litigation in relation to the Fox River
(4.9)
—
—
Net effect of Excise and VAT cases
—
(5.7)
(17.1)
Effect of the ongoing litigation in Canada
205.0
—
—
Effect of disposal of subsidiaries
—
24.5
(0.3)
Effect of Romania and Brazil other taxes
20.1
1.4
—
Effect of charges in respect of DOJ and OFAC investigations
0.2
3.4
19.9
Effect of planned disposal of subsidiaries
—
(8.7)
26.4
Effect of restructuring and integration costs
—
(0.2)
28.9
Effect of other adjusting items in operating profit
5.3
3.3
8.7
Effect of adjusting items in net finance costs
(17.0)
3.1
1.2
Effect of gains related to the partial divestment of shares held in ITC
(59.5)
—
—
Effect of associates’ adjusting items
(0.8)
(0.4)
4.1
Effect of adjusting items in respect of deferred taxation
(12.0)
(4.4)
(1.9)
Adjusting items in tax
4.9
1.2
—
Impact of dilution*
(1.4)
Adjusted diluted earnings per share
362.5
375.6
371.4
Impact of translational foreign exchange
19.4
10.8
(23.3)
Adjusted diluted earnings per share, at constant exchange rates
381.9
386.4
348.1
Inorganic adjustments, at constant rates
—
(8.3)
Adjusted organic diluted earnings per share, at constant exchange rates
381.9
378.1
For the year ended 31 December (pence)
2024
2023
2022
Adjusted diluted earnings per share (see above)
362.5
375.6
371.4
Inorganic adjustments
—
(7.1)
(12.1)
Adjusted organic diluted earnings per share
362.5
368.5
359.3
Adjusted organic diluted earnings per share in 2023, translated at 2023 rates was 368.5p. Adjusted organic diluted earnings per share in
2024, translated at the prior year's exchange rate was 381.9p. Accordingly, the movement in adjusted organic diluted earnings per share,
at constant rates of exchange in 2024 was an increase of 3.6%.
Adjusted organic diluted earnings per share in 2022, translated at 2022 rates was 359.3p. Adjusted organic diluted earnings per share in
2023, translated at the prior year's exchange rate was 378.1p. Accordingly, the movement in adjusted organic diluted earnings per share,
at constant rates of exchange in 2023 was an increase of 5.2%.
Note:
*
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 remuneration purposes, and reflective of the Group's positive earnings on an adjusted basis,
Management included the dilutive effect of share options in calculating adjusted diluted earnings per share.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
405
Operating Cash Flow Conversion Ratio and Organic Operating Cash Flow Conversion Ratio
Definition – net cash generated from operating activities before the impact of adjusting items and dividends from associates
and excluding taxes paid and net capital expenditure, as a proportion of adjusted profit from operations. It is also presented
excluding the inorganic performance of certain businesses bought or sold in the period.
@Operating cash flow conversion ratio is a measure of operating cash flow.
@Operating cash flow conversion ratio is used by
Management within the Group’s incentive schemes as reported within the Remuneration Report beginning on page 205@, as an
indicator of the Group's ability to turn profits into cash
@. Operating cash flow conversion ratio has limitations as an analytical tool. It is not
a presentation made in accordance with IFRS and should not be considered as an alternative to measures of liquidity or financial position
as determined in accordance with IFRS. Operating cash flow conversion ratio is not necessarily comparable to similarly titled measures
used by other companies.
@As a result, you should not consider this measure in isolation from, or as a substitute analysis for, the Group’s
results of operations or cash flows as determined in accordance with IFRS.
@
As Management assesses operating cash flow conversion ratio on an organic basis within the Group's incentive schemes, as reported
within the Remuneration Report beginning on page 205, this measure is also presented excluding the inorganic performance of certain
businesses bought or sold in the period.
The table below shows the computation of operating cash flow conversion ratio for the periods presented.
For the year ended 31 December (£m)
2024
2023
2022
Net cash generated from operating activities
10,125
10,714
10,394
Cash related to adjusting items
824
156
466
Dividends from associates
(406)
(506)
(394)
Tax paid
1,854
2,622
2,537
Net capital expenditure
(434)
(487)
(599)
Other
1
—
(1)
Operating cash flow
11,964
12,499
12,403
Adjusted profit from operations*
11,890
12,465
12,408
Cash conversion ratio**
370%
-68%
99%
Operating cash flow conversion ratio
101%
100%
100%
Operating cash flow
11,964
12,499
12,403
Inorganic adjustments
—
(72)
Organic operating cash flow
11,964
12,427
Adjusted profit from operations*
11,890
12,465
12,408
Inorganic adjustments
—
(193)
Adjusted organic profit from operations
11,890
12,272
Organic operating cash flow conversion ratio
101%
101%
Notes:
*
See page 400 for a reconciliation of profit from operations to adjusted profit from operations.
** Net cash generated from operating activities as a percentage of profit from operations.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-GAAP Measures
Continued
406
Adjusted Cash Generated from Operations (at Current and Constant Rates of Exchange) and Adjusted Organic Cash
Generated from Operations (at constant rates of exchange)
Definition – net cash generated from operating activities before the impact of adjusting items (litigation), excluding dividends
received from associates, and after dividends paid to non-controlling interests, net interest paid and net capital expenditure,
and translational foreign exchange. It is also presented excluding the inorganic performance of certain businesses bought
or sold in the period.
Adjusted cash generated from operations is a measure of cash flow which is used within the Group’s incentive schemes as reported
within the Remuneration Report beginning on page 205.
@The Group’s Management Board believes that this additional measure is useful
to the users of the financial statements in helping them to see the level of cash generated by the Group's operating activities (excluding
that received from associates) and after financing costs.
@Adjusted cash generated from operations has limitations as an analytical tool.
It is not a presentation made in accordance with IFRS and should not be considered as an alternative to measures of liquidity or financial
position as determined in accordance with IFRS. Adjusted cash generated from operations is not necessarily comparable to similarly
titled measures used by other companies.
@As a result, you should not consider this measure in isolation from, or as a substitute analysis
for, the Group’s results of operations or cash flows as determined in accordance with IFRS.
@
As Management assesses adjusted cash generated from operations (at constant rates of exchange) these measures also on an organic
basis within the Group's incentive schemes, as reported within the Remuneration Report beginning in page 205, this measure is also
presented excluding the inorganic performance of certain businesses bought or sold in the period.
The table below shows the computation of adjusted cash generated from operations for the periods presented.
For the year ended 31 December (£m)
2024
2023
2022
Net cash generated from operating activities
10,125
10,714
10,394
Dividends paid to non-controlling interests
(121)
(105)
(158)
Net interest paid
(1,669)
(1,763)
(1,588)
Net capital expenditure
(434)
(487)
(599)
Other
—
1
—
Effect of deferral of U.S. tax, in line with the federal disaster declaration in central and western
North Carolina
(700)
—
—
Cash related to adjusting items within adjusted cash generated from operations
360
(49)
231
Other costs excluding litigation and restructuring costs
399
19
3
Dividends from associates
(406)
(506)
(394)
Adjusted cash generated from operations
7,554
7,824
7,889
Impact of translational foreign exchange
401
97
(484)
Adjusted cash generated from operations, at constant exchange rates
7,955
7,921
7,405
Inorganic adjustments, at constant exchange rates
—
(2)
Adjusted organic cash generated from operations, at constant exchange rates
7,955
7,919
In 2024, the Group deferred tax payments in the U.S. from 2024 to 2025 totalling US$895 million (£700 million). For the purposes of the
2024 and 2025 adjusted cash generated from operations metric, which is included in the Group's incentive schemes, the impact of
deferral has not been included in the calculation as it does not reflect the cash generated by the normal operations of the Group.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
407
@Free Cash Flow – Before and After Dividends Paid to Shareholders
Definition – net cash generated from operating activities after dividends paid to non-controlling interests, net interest paid and
net capital expenditure. This measure is presented before and after dividends paid to shareholders.
To supplement BAT’s net cash generated from operating activities as presented in accordance with IFRS, the Group’s Management
Board, as the chief operating decision-maker, reviews free cash flow (before and after dividends paid to shareholders) generated by
the Group to evaluate the underlying business performance of the Group and its geographic segments. This is deemed by the Group
Management Board to reflect the Group’s ability to pay dividends (free cash flow before dividends paid to shareholders) or invest in other
investing activities (free cash flow after dividends paid to shareholders).
Free cash flow (before dividends paid to shareholders) and free cash flow (after dividends paid to shareholders) are not measures defined
by IFRS. The most directly comparable IFRS measure to free cash flow (before and after dividends paid to shareholders) is net cash
generated from operating activities. The Group’s Management Board believes that this additional measure is useful to the users of the
financial statements in helping them to see the level of cash generated by the Group prior to the payment of dividends or debt and prior
to other investing activities. Free cash flow (before and after dividends paid to shareholders) has limitations as an analytical tool. They are
not a presentation made in accordance with IFRS and should not be considered as an alternative to net cash generated from operating
activities as determined in accordance with IFRS. Free cash flow (before and after dividends paid to shareholders) are not necessarily
comparable to similarly titled measures used by other companies. As a result, you should not consider this measure in isolation from,
or as a substitute analysis for, the Group’s measures of financial position or liquidity as determined in accordance with IFRS. The table
below shows the reconciliation from net cash generated from operating activities to free cash flow (before and after dividends paid
to shareholders) for the periods presented.
For the year ended 31 December (£m)
2024
2023
2022
Net cash generated from operating activities
10,125
10,714
10,394
Dividends paid to non-controlling interests
(121)
(105)
(158)
Net interest paid
(1,669)
(1,763)
(1,588)
Net capital expenditure
(434)
(487)
(599)
Other
—
1
—
Free cash flow (before dividends paid to shareholders)
7,901
8,360
8,049
Dividends paid to shareholders
(5,213)
(5,055)
(4,915)
Free cash flow (after dividends paid to shareholders)
2,688
3,305
3,134
@
Net Debt
Definition – total borrowings, including related derivatives, less cash and cash equivalents and current investments
held at fair value.
The Group uses net debt to assess its financial capacity. Net debt is not a measure defined by IFRS. The most directly comparable IFRS
measure to net debt is total borrowings. The Group’s Management Board believes that this additional measure, which is used internally
to assess the Group’s financial capacity, is useful to the users of the financial statements in helping them to see how business financing
has changed over the year. Net debt has limitations as an analytical tool. It is not a presentation made in accordance with IFRS and
should not be considered as an alternative to total borrowings or total liabilities determined in accordance with IFRS. Net debt is not
necessarily comparable to similarly titled measures used by other companies. In addition, it does not exclude restricted cash (as set
out in note 21 in the Notes on the Accounts) in the calculation. As a result, you should not consider this measure in isolation from, or as
a substitute analysis for, the Group’s measures of financial position or liquidity as determined in accordance with IFRS. A reconciliation
of borrowings to net debt is provided in note 23 in the Notes on the Accounts.
@The table below reconciles the movement in net debt during each financial year:
For the year ended 31 December (£m)
2024
2023
2022
Opening net debt
(34,640)
(39,281)
(36,302)
Free cash flow (after dividends paid to shareholders)
2,688
3,305
3,134
Other cash payments
(74)
(303)
(635)
Net proceeds from the partial divestment of shares in ITC
1,577
—
—
Purchase of own shares
(698)
—
(2,012)
Receipt from disposal of subsidiaries
—
159
—
Transferred from/(to) held-for-sale
—
368
(352)
Other non-cash movements
568
(226)
(84)
Impact of foreign exchange
(674)
1,338
(3,030)
Closing net debt
(31,253)
(34,640)
(39,281)
@
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-GAAP Measures
Continued
408
@Adjusted Net Debt to Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (Adjusted EBITDA),
at both current and constant rates of exchange
Definition – net debt excluding the impact of the revaluation of Reynolds American Inc. acquired debt arising as part of the
purchase price allocation process, as a proportion of profit for the year (earnings) before net finance costs/income, taxation on
ordinary activities, depreciation, amortisation, impairment costs, the Group’s share of post-tax results of associates and joint
ventures, translational foreign exchange and other adjusting items.
To supplement BAT’s total borrowings as presented in accordance with IFRS, the Group’s Management Board, as the chief operating
decision‑maker, reviews adjusted net debt to adjusted EBITDA to assess its level of net debt (excluding the impact of the purchase price
allocation adjustment to Reynolds American Inc. acquired debt) in comparison to the underlying earnings generated by the Group to
evaluate the underlying business performance of the Group and its geographic segments. This is deemed by the Group’s Management
Board to reflect the Group’s ability to service and repay borrowings.
For the purposes of this ratio, adjusted net debt is net debt, as discussed and reconciled on page 408, adjusted for the uplift arising on
the Reynolds American Inc. debt as part of the purchase price allocation, as such an uplift in value is not reflective of the repayment value
of the debt. Adjusted EBITDA is not a measure defined by IFRS. The most directly comparable IFRS measure to adjusted EBITDA is profit
for the year. The Group’s Management Board believes that this additional measure, which is used internally to assess the Group’s
financial capacity, is useful to the users of the financial statements in helping them to see how the Group’s financial capacity has
changed over the year. Adjusted EBITDA has limitations as an analytical tool. It is not a presentation made in accordance with IFRS and
should not be considered as an alternative to profit from operations as determined in accordance with IFRS.
Adjusted net debt to adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies. As a result,
you should not consider this measure in isolation from, or as a substitute analysis for, the Group’s measures of financial position or
liquidity as determined in accordance with IFRS. The definition of adjusting items is provided in note 1 in the Notes on the Accounts.
The table below reconciles both total borrowings to adjusted net debt (including at constant rates of exchange) and profit for the year
to adjusted EBITDA (including at constant rates of exchange) for the periods presented.
As of the year ended 31 December (£m)
2024
2023
2022
Borrowings (excluding lease liabilities)
36,365
39,232
42,622
Lease liabilities
585
498
517
Derivatives in respect of net debt
113
170
167
Cash and cash equivalents
(5,297)
(4,659)
(3,446)
Current investments held at fair value
(513)
(601)
(579)
Net debt items included within asset held for sale
—
—
(352)
Purchase price allocation adjustment to Reynolds American Inc. debt
(670)
(700)
(798)
Adjusted net debt
30,583
33,940
38,131
Profit/(loss) for the year
3,181
(14,189)
6,846
Taxation on ordinary activities
357
(2,872)
2,478
Net finance costs
1,098
1,895
1,641
Depreciation, amortisation and impairment costs
3,101
28,614
1,305
Share of post-tax results of associates and joint ventures
(1,900)
(585)
(442)
Other adjusting items (not related to depreciation, amortisation and impairment costs)
6,687
360
1,380
Adjusted EBITDA
12,524
13,223
13,208
Adjusted net debt to adjusted EBITDA
2.44x
2.57x
2.89x
Impact of translational foreign exchange on adjusted net debt
(947)
1,358
(2,406)
Adjusted net debt at constant rates of exchange
29,636
35,298
35,725
Impact of translational foreign exchange on adjusted EBITDA
577
335
(811)
Adjusted EBITDA at constant rates of exchange
13,101
13,558
12,397
Adjusted net debt to adjusted EBITDA at constant rates of exchange
2.26x
2.60x
2.88x
As discussed on page 328, a possible settlement with respect to the ongoing litigation in Canada has been proposed. This would lead to
an outflow of cash, cash equivalents and investments held at fair value as part of the settlement, thereby increasing the level of adjusted
net debt. To aid the users of the financial statements, the below table has been provided to illustrate the Group’s leverage ratio of
adjusted net debt to adjusted EBITDA, after such a payment.
As of the year ended 31 December (£m)
2024
Adjusted net debt (above)
30,583
Provision recognised in respect of cash and cash equivalents and investments held at fair value in Canada
2,456
Adjusted net debt excluding the Canada provision
33,039
Adjusted EBITDA (above)
12,524
Adjusted EBITDA earned in Canada*
(525)
Adjusted EBITDA excluding the EBITDA earned in Canada*
11,999
Adjusted net debt to adjusted EBITDA excluding Canada*
2.75x
*
Excluding New Categories
@
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
409
Adjusted Return on Capital Employed
Definition – Profit from operations, excluding adjusting items and including dividends from associates and joint ventures,
as a proportion of average total assets less current liabilities in the period.
@To supplement BAT’s performance presented in accordance with IFRS, the Group provides adjusted return on capital employed
(adjusted ROCE) to provide users of the financial statements with an indication of the financial return (by reference to the financial
performance in a given period), with the assets less current liabilities (defined as Capital Employed) in the period.
@
Adjusted ROCE will be included within the Group's incentive schemes, as reported within the Remuneration Report beginning on
page 205.
Adjusted ROCE is not a measure defined by IFRS. The most directly comparable IFRS measure to adjusted ROCE is profit from
operations as a proportion of total assets less current liabilities.
@The Group’s Management Board believes that this additional measure
is useful to the users of the financial statements in helping them to see how the Group’s capital employed has generated a return in any
given period, by reference to Group’s performance as reported via the income statement.
@ Adjusted ROCE has limitations as an
analytical tool. It is not a presentation made in accordance with IFRS and should not be considered as an alternative to other measures
that may be derived from the financial statements prepared in accordance with IFRS.
Adjusted ROCE is not necessarily comparable to similarly titled measures used by other companies.
@As a result, you should not consider
this measure in isolation from, or as a substitute analysis for, the Group’s measures of financial performance or return as determined in
accordance with IFRS.
@ The definition of adjusting items is provided in note 1 in the Notes on the Accounts. The table below reconciles
profit from operations to adjusted profit from operations including dividends from associates and joint ventures and provides the
constituent parts of average capital employed.
As of the year ended 31 December (£m)
2024
2023
2022
Profit/(loss) from operations
2,736
(15,751)
10,523
Adjusting items
9,154
28,216
1,885
Dividends received from associates and joint ventures
406
506
394
Adjusted profit from operations, inclusive of dividends from associates and joint ventures
12,296
12,971
12,802
Total Assets
118,899
118,716
153,546
Current Liabilities
18,743
15,673
17,853
Capital employed at balance sheet date
100,156
103,043
135,693
Average capital
101,600
119,368
128,957
Adjusted ROCE
12.1%
10.9%
9.9%
Results on a Constant Translational Currency Basis
Movements in foreign exchange rates have impacted the Group’s financial results. The Group’s Management Board reviews certain
of its results, including revenue, revenue growth from New Categories, adjusted profit from operations and adjusted diluted earnings
per share, at constant rates of exchange. The Group calculates these financial measures at constant rates of exchange based on a
re-translation, at prior year exchange rates, of the current year’s results of the Group and, where applicable, its geographic segments.
The Group does not adjust for the normal transactional gains and losses in profit from operations that are generated by exchange
movements. Although the Group does not believe that these measures are a substitute for IFRS measures, the Group’s Management
Board does believe that such results excluding the impact of currency fluctuations and the performance of businesses sold or acquired
that may significantly affect the users understanding of the Group’s performance when compared across periods, as applicable provide
additional useful information to users of the financial statements regarding the Group’s operating performance on a local currency basis.
Accordingly, the constant rates of exchange financial measures appearing in the discussion of the Group results of operations (beginning
on page 48) should be read in conjunction with the information provided in note 2 in the Notes on the Accounts.
In 2024, 2023 and 2022, results were affected by translational exchange rate movements.
In 2024, at the prevailing exchange rates, reported revenue declined by 5.2%, revenue from New Categories increased by 2.5% and
adjusted profit from operations decreased by 4.6% versus 2023. At constant rates of exchange, reported revenue would have decreased
by 0.5%, revenue from New Categories would have increased by 6.1% and adjusted profit from operations would have decreased by
0.2%. This lower performance at prevailing exchange rates reflects the negative translational impact as a result of the relative strength of
sterling.
In 2023, at the prevailing exchange rates, revenue decreased by 1.3%, revenue from New Categories increased by 15.6% and adjusted
profit from operations increased by 0.5% versus 2022. At constant rates of exchange, revenue would have increased by 1.6%, revenue
from New Categories would have increased by 17.8% and adjusted profit from operations would have increased by 3.1%. This lower
performance at prevailing exchange rates reflects the negative translational impact as a result of the relative strength of sterling.
In 2024, 2023 and 2022, adjusted diluted earnings per share was affected by translational exchange rate movements.
In 2024, the adjusted diluted earnings per share of 362.5p, a decrease of 3.5%, would, when translated at 2023 exchange rates, have been
381.9p, an increase of 1.7%. This lower performance, in 2024, at prevailing exchange rates, reflects the negative translational impact as a
result of the relative strength of sterling.
In 2023, the adjusted diluted earnings per share of 375.6p, an increase of 1.1%, would, when translated at 2022 exchange rates, have been
386.4p, an increase of 4.0%. This lower performance, in 2023, at prevailing exchange rates, reflects the negative translational impact as a
result of the relative strength of sterling.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Non-GAAP Measures
Continued
410
As at 31 December 2024, the number of persons employed by the Group was 48,989 worldwide. The Group believes that its labour
relations are good.
Certain temporary employees are included in the below figures. The number of such temporary employees is approximately 464 in 2024
and largely relates to seasonal workers within operations.
The following table sets forth the number of Group employees by region in 2024, 2023 and 2022.
Region (number of employees worldwide)
As at 31 December
2024
2023
2022
U.S.
4,192
3,763
4,152
AME
31,347
30,100
33,175
APMEA
13,450
12,862
13,070
Total employees
48,989
46,725
50,397
Note:
1.
Included within the employee numbers for AME are certain employees in different locations in respect of central functions. Some of the costs of these employees are allocated
or charged to the various regions and markets in the Group.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Employees
411
Additional Disclosures on Liquidity and Capital Resources
The Group’s cash inflows derive principally from its operating activities. They are supplemented when required by cash flows from
financing activities, typically to support general corporate requirements but also, from time to time, to support acquisitions. The principal
sources of liquidity for the Group are cash flows generated from the operating business and proceeds from issuances of debt securities
described below under ‘capital resources’.
The Board reviews and agrees the overall treasury policies and procedures, delegating appropriate oversight to the Chief Financial
Officer and the treasury function. The treasury policies include a set of financing principles and key performance indicators. The Group’s
treasury position is monitored by a Corporate Finance Committee chaired by the Chief Financial Officer. Treasury operations are subject
to periodic independent reviews and audits, both internal and external.
Capital Expenditure
Gross capital expenditures include purchases of property, plant and equipment and purchases of certain intangibles. The Group’s gross
capital expenditures for 2024, 2023 and 2022 were £581 million, £541 million and £630 million, respectively, representing investment in
the Group’s global operational infrastructure (including, but not limited to, the manufacturing network, trade marketing and IT systems).
The Group expects gross capital expenditures in 2025 of approximately £650 million, representing the ongoing investment in the Group’s
operational infrastructure, including the continued investment in New Categories. This is expected to be funded by the Group’s cash
flows and existing facilities.
Hedging Instruments
As discussed in note 19 in the Notes on the Accounts, the Group hedges its exposure to interest rate movements and currency
movements. BAT’s 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. Interest rate swaps
have been used to manage the interest rate profile of external borrowings, while cross-currency swaps have been used to manage the
currency profile of external borrowings.
Capital Resources
Policy
The Group utilises cash pooling and zero balancing bank account structures in addition to intercompany loans and borrowings to ensure
that there is the maximum mobilisation of cash within the Group. The key objectives of treasury in respect of cash and cash equivalents
are to protect the principal value of the Group’s cash and cash equivalents, to concentrate cash at the centre to minimise the required
long-term debt issuance, including perpetual hybrid debt treated as an equity instrument, and to optimise the yield earned. The amount
of debt the Group issues is determined by forecasting the net debt requirement after the mobilisation of cash. 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. All contractual borrowing covenants have been met and none are expected
to inhibit the Group’s operations or funding plans.
Borrowings
The following table sets out the Group’s long- and short-term borrowings as of the dates indicated:
As of 31 December (£m)
1
Currency
Maturity dates
Interest rates at 31 December 2024
2024
2023
2022
Eurobonds
2
Euro
2025 to 2045
1.3% to 5.4%
5,236
5,569
7,149
UK sterling
2025 to 2055
2.1% to 6.0%
2,291
3,097
3,884
Swiss franc
2026
1.4%
221
234
226
Bonds issued pursuant
to rules under the U.S.
Securities Act
(as amended)
2
US dollar
2025 to 2053
1.7% to 8.1%
28,268
29,913
30,152
Commercial paper
2
—
—
27
Other loans
—
100
875
Bank loans
211
216
203
Bank overdrafts
138
103
106
Finance leases
585
498
517
Total
36,950
39,730
43,139
Notes:
1.
The financial data above has been extracted from the Group’s consolidated financial statements.
2. The issuers of these debt securities are B.A.T. International Finance p.l.c., B.A.T Capital Corporation, Reynolds American Inc., or R.J. Reynolds Tobacco Company, as applicable. British
American Tobacco p.l.c. is the ultimate guarantor in each case.
Perpetual hybrid bonds issued by the Company have been classified as equity and therefore excluded from borrowings.
*
Eurobond with a maturity date in 2021 that was repaid in 2021.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Additional Disclosures on
Liquidity and Capital Resources
412
Off-Balance Sheet Arrangements and Contractual Obligations
The Group has no significant off-balance sheet arrangements. The Group has contractual obligations to make future payments on debt
agreements. In the normal course of business, the Group enters into contractual arrangements where the Group commits to future
purchases of services from unaffiliated parties and related parties.
The Group’s undiscounted contractual obligations as of 31 December 2024 were as follows:
Payments due by period (£m)
Total
Less than
1 Year
1–3 Years
3–5 Years
Thereafter
Long-term notes and other borrowings, exclusive of interest
1
35,800
3,606
5,436
5,073
21,685
Interest payments related to long-term notes
1
565
565
—
—
—
Lease liabilities
585
141
220
87
137
Purchase obligations
2
863
792
71
—
—
Total cash obligations
37,813
5,104
5,727
5,160
21,822
Notes:
1.
For more information about the Group’s long-term debt, see note 23 in the Notes on the Accounts.
2. Purchase obligations primarily include commitments to acquire tobacco leaf. Purchase orders for the purchase of other raw materials and other goods and services are not included
in the table, as the Group’s operating subsidiaries are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders
typically represent authorisations to purchase rather than binding agreements.
The table above does not include any amounts that the Group may pay to fund its retirement benefit plans as the timing and amount
of any such future funding are unknown and dependent on, among other things, the future performance of defined benefit pension plan
assets, interest rate assumptions and other factors. The net retirement benefit scheme assets totalled £117 million as of 31 December
2024, which is net of pension assets of £6,612 million. The Group expects to be required to contribute £36 million to its defined benefit
plans during 2025. See note 15 in the Notes on the Accounts for further information.
The above table also excludes any amounts in relation to service contracts which are disclosed in note 31 in the Notes on the Accounts.
The Group has £67 million of future contractual commitments (2023: £60 million) related to property, plant and equipment and £5 million
of future contractual commitments (2023: £2 million) related to intangible assets.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
413
The following is a summary of some of the risks and uncertainties, the occurrence of any one of which, alone or in combination with other
events or circumstances, may materially adversely affect the Group’s results of operations and financial condition. You should read this
summary together with the Group Principal Risks section from pages 155 to 162 and the more detailed description of each risk factor
contained below. One of the principal risks "Inability to develop, commercialise and deliver the New Categories strategy" is an
amalgamation of various risk factors across all four Group Risk Factor categories of Business execution and supply chain, Legal,
regulatory and compliance, Economic and financial and Product pipeline, commercialisation and intellectual property.
Business execution and supply chain risks
– Competition from illicit trade.
– Geopolitical tensions that have the potential to disrupt the Group’s business in multiple markets.
– Injury, illness or death in the workplace.
– Disruption to the Group’s data and information technology systems, including by cyber attack or the malicious manipulation
or disclosure of confidential or sensitive information.
– Failure to meet current or future New Categories demand.
– Failure of a financial counterparty.
– Exposure to unavailability of, and price volatility, in raw materials and increased costs of employment.
– Failure to retain key personnel or to attract and retain skilled talent.
– Disruption to the supply chain and distribution channels.
– Failure to uphold the high standard of sustainability management, performance and reporting.
– Failure to successfully design, implement and sustain an integrated framework and operating model for Artificial Intelligence (AI).
– Inability to obtain adequate supplies of tobacco leaf.
– Exposure to product contamination.
– Failure to successfully design, implement and sustain an integrated technical landscape and ERP strategy.
– Failure to manage the Group’s climate change-related risk.
– Failure to manage the Group’s circular economy risk.
– Impact of a pandemic on the performance of the Group.
Legal, regulatory and compliance risks
– Exposure to, the enactment of, proposals for, or rumours of regulation that significantly impairs the Group’s ability to communicate,
differentiate, market or launch its products and/or the lack of appropriate regulation for New Categories.
– Adverse implications of EU legislation on single-use plastics that will result in on-pack environmental warnings and financial
implications relating to Extended Producer Responsibility (EPR).
– Exposure to litigation, regulatory action or criminal investigations on tobacco, nicotine, New Categories and other issues.
– Significant and/or unexpected increases or structural changes in tobacco and nicotine-related taxes.
– Failure to comply with health and safety and environmental laws.
– Exposure to unfavourable tax rulings.
– Exposure to potential liability under competition or antitrust laws.
– Failure to establish and maintain adequate controls and procedures to comply with applicable securities, corporate governance
and compliance regulations.
– Lack of external recognition and acceptance of the foundational science and inability to effectively communicate to stakeholders
about the potential health impact of our New Category products.
– Insufficient product stewardship and failure to comply with product regulations.
– Failure to uphold high standards of corporate behaviour, including through unintended or malicious breach of anti-bribery and anti-
corruption and other anti-financial crime laws.
– Unexpected legislative changes to corporate income tax laws.
– Imposition of sanctions under sanctions regimes or similar international, regional or national measures.
– Failure to uphold New Categories marketing practices.
– Loss or misuse of personal data through a failure to comply with the European General Data Protection Regulation, the UK Data
Protection Act 2018, e-Privacy laws and other privacy legislation governing the processing of personal data.
Economic and financial risks
– Foreign exchange rate exposures.
– Inability to obtain price increases and exposure to risks from excessive price increases and value chain erosion.
– Effects of declining consumption of legitimate tobacco products and a tough competitive environment.
– Funding, liquidity and interest rate risks.
– Failure to achieve growth through mergers, acquisitions, joint ventures, investments and other transactions.
– Unforeseen underperformance in key global markets.
– Increases in net liabilities under the Group’s retirement benefit schemes.
Product pipeline, commercialisation and Intellectual Property risks
– Inability to predict consumers’ changing behaviours and launch innovative products that offer adult tobacco and nicotine consumers
meaningful value-added differentiation.
– Exposure to risks associated with intellectual property rights, including the failure to identify, protect and prevent infringement of
the Group’s intellectual property rights and potential infringement of, or the failure to retain licences to use, third-party intellectual
property rights.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Summary of Group Risk Factors
414
Business Execution and Supply Chain Risks
Risk: Competition from illicit trade
Description
Illicit trade in the form of counterfeit products, diversion of genuine Group products, products that are smuggled illegally across borders,
and locally manufactured products, which do not comply with applicable regulations and/or in which applicable taxes are evaded,
represent a significant and growing threat to the legitimate tobacco industry, including New Categories products. Factors such as
increasing levels of taxation and inflation, economic downturn and increased cost of living, lack of law enforcement, appropriate penalties
and weak border control are encouraging more adult tobacco and New Categories consumers to switch to illegal cheaper tobacco and
New Categories products and are providing greater rewards for counterfeiters and smugglers. Regulatory restrictions such as plain
packaging or graphic health warnings, display bans, flavour or ingredient restrictions and increased compliance costs further
disadvantage legitimate industry participants by providing competitive advantages to illicit manufacturers and distributors of illicit
tobacco and New Categories products.
Impact
Illicit trade has an overall negative impact on society, deprives governments of revenues and encourages various forms of crime such as
terrorism, money laundering and human trafficking. Above all, illicit trade has an adverse effect on the Group’s overall business and
reputation. Illicit trade can damage brand equity, which could undermine the Group’s investment in Trade Marketing and Distribution,
increase operational costs where products may become commoditised, make it more difficult to adhere to underage prevention and
decrease volumes sold. Although our AIT policy is an integral part of our SoBC, representing our internal commitment in the fight
against illicit trade and sets out the controls all Group companies must have in place and adhere to, it cannot prevent all instances of
illicit trade.
Furthermore, counterfeit products (especially New Categories) and other illicit products could harm consumers, damages goodwill
and/or the category (with lower volumes and reduced profits), and could potentially lead to misplaced claims against BAT, further
regulation and a failure to deliver our corporate harm reduction objective.
Finally, as the Group has contractual and legislative obligations to prevent the diversion of our products into illicit channels, actual
breaches of the obligations to prevent product diversion into illicit channels can lead to substantial fines in the forms of seizure
payments and legislative penalties (including financial penalties). Additionally, actual and perceived breaches may result in the risk of
reputational damage (including negative perceptions of our governance and our ESG credentials) from Group products being found in
illicit channels. Although in practice, the proportion of illicit trade which can be traced back to BAT products is exceptionally low.
Risk: Geopolitical tensions that have the potential to disrupt the Group’s business in multiple markets
Description
The Group’s operations and financial condition are influenced by the economic and political situations in the markets and regions in
which it has operations, which are often unpredictable and outside of its control. Some markets in which the Group operates face the
threat of civil unrest and can be subject to frequent changes in regime. In others, there is a risk of terrorism, conflict, global health crisis,
war, organised crime or other criminal activity. The Group is also exposed to economic policy changes in jurisdictions in which it operates, for
example state nationalisation of assets and withdrawal from international / bilateral trade agreements including the introduction of tariffs or
trade embargoes. In addition, some markets maintain trade barriers or adopt policies that favour domestic producers, preventing or
restricting the Group’s sales.
Impact
Deterioration of socio-economic or political conditions could lead to injury or loss of life, restricted mobility, loss of assets and/or denial
of access to BAT sites that reduce the Group’s access to particular markets or may disrupt the Group’s operations, such as supply
chain, or manufacturing or distribution capabilities. Such disruptions, including attacks on shipping routes in the Red Sea, may result in
increased taxes and/or other costs due to the requirement for more complex supply chain and security arrangements, the need to build
new facilities or to maintain inefficient facilities, or in a reduction of the Group’s sales volume. Further, there may be reputational
damage, including negative perceptions of our governance and protection of our people and our ESG credentials.
Risk: Injury, illness or death in the workplace
Description
The Group considers the safety of its employees and other individuals working with it as of utmost importance and fundamental
concern. Loss of life, serious injury, disability or illness to employees or individuals due to accident, geopolitical tension or other events
may occur during the research, manufacturing, distribution or retail of the Group’s products.
Impact
Past events have led, and future events may lead to serious injuries, ill health, disability or loss of life to employees and individuals who
work with the Group. This may result in reputational damage, difficulties in recruiting and retaining staff, exposure to civil and criminal
liability, prosecution and fines and penalties. These impacts could have an adverse effect on the Group’s results of operations and
financial condition and have a negative impact on its ESG credentials.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Group Risk Factors
415
Business Execution and Supply Chain Risks continued
Risk: Disruption to the Group’s data and information technology systems, including by cyber attack or the malicious
manipulation or disclosure of confidential or sensitive information
Description
The Group relies on information and digital technology (IDT) systems and networks to conduct core activities, such as manufacturing,
distribution, marketing, customer service, R&D and financial and management reporting, amongst other core activities. There is a risk
that these systems (of the Group or of a third party within the Group's supply chain) may be disrupted by intentional or unintentional
actions that may compromise the confidentiality, integrity or availability of information, result in the inappropriate disclosure of
confidential information, disrupt the operations of the Group, or may lead to false or misleading statements being made about the Group.
The external threat levels continue to rise with attackers becoming increasingly sophisticated, equipped with AI-powered tools, and
collateral damage from nation state cyber-attacks becomes a leading cause of cyber incidents. The development and implementation of
AI in our products and/or supply chain will have an impact on the cyber security threat landscape and may increase the exposure to cyber
threats in general.
Impact
Management recognises that cyber security threats could pose significant risks to the Group’s business, reputation, financial condition,
and competitive position, and to the safety and privacy of our consumers, employees and other stakeholders.
Any disruption to IDT systems related to the Group’s operations could adversely affect its business and result in financial, legal and
reputational impacts. Any delays or failure to detect or respond to attempts to gain unauthorised access to the Group’s information
technology systems can lead to a loss in confidentiality, integrity or availability of systems and/or data.
A security incident with respect to IDT systems may result in:
– Loss or theft of confidential business information: Unauthorized access to trade secrets and sensitive commercial data can dilute the
Group's strategic influence, affecting investments and operations. This could materially impact regulatory compliance and lead to a
loss of competitive edge.
– Personal data breach incidents: Exposure of personally identifiable data can lead to legal, reputational, and compliance issues, along
with potential loss of sales, consumers, and market share.
– Operational disruption: Cyber incidents disrupting R&D, manufacturing, distribution, or technology services can cause business
interruptions and health and safety risks, leading to production halts and revenue loss.
– Inappropriate use of IDT systems to enable fraud, or theft of product, technology, or monetary resources.
– Loss of digital trust: Cyber incidents compromising the Group's digital presence can damage the brand and diminish consumer trust,
potentially affecting sales and strategic timelines.
– Third-party cyber risks: Cyber incidents within partner or supplier networks can lead to business interruptions, supply chain issues,
data loss, or the spread of malicious activities to the Group, necessitating robust third-party risk management.
Risk: Failure to meet current or future New Categories demand
Description
The New Categories supply chain is a multi-tiered and complex environment with reliance on multiple factors, such as third-party
suppliers’ ability to upscale production in order to meet demand while maintaining product quality, dependency on single suppliers at
various points in the chain and the Group’s ability to build adequate consumables production capacity in line with product demand.
The geographical spread of suppliers and customers exposes the Group to political and economic issues such as trade wars, which
may compromise the New Categories supply chain. Given the developing nature of the New Categories portfolio, there is also an
enhanced risk that some products may not meet product quality and safety standards or may be subject to regulatory changes, leading
to product recalls, which we have experienced in the past, or bans of certain ingredients or products. In addition, the New Categories
supply chain may be vulnerable to changes in local legislation related to liquid nicotine that could increase import duties. Furthermore,
the New Categories supply chain includes the development of sensitive trade secrets jointly with external design partners, which
carries the risk of exposure of innovations to competitors.
Impact
Vulnerabilities in the New Categories supply chain may impact the Group’s ability to maintain supply and meet the current and future
demand requirements across the New Categories portfolio, potentially resulting in significant reputational harm and financial impact
that may negatively affect the Group’s results of operations and financial condition and cause the Group to fail to deliver on its strategic
growth plans. Over-forecasting may also lead to write-offs and negatively impact working capital. The design of New Categories
devices may also prevent the scaling of commercial manufacturing, which will either restrict supply or increase the costs of production.
Further, there may be loss of investors’ confidence in sustainability performance, including failure to deliver our corporate purpose of
harm reduction.
In addition, changes in local legislation related to liquid nicotine import duties may increase New Categories production costs, which
may increase End Market pricing and reduce demand. Furthermore, the exposure of sensitive trade secrets can lead to competitive
disadvantages and further negatively impact the Group’s results of operations and financial condition and cause the Group to fail to
deliver on its strategic growth plans.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Group Risk Factors
Continued
416
Risk: Failure of a financial counterparty
Description
The Group relies on transactions with a variety of financial counterparties to manage the Group’s business and financial risks. In the
event that any of these counterparties fails, payments due from such counterparties, such as under hedging or insurance contracts,
may not be recovered. In addition, failure of a transactional banking party may lead to the loss of cash balances and disruption to
payment systems involving such counterparty.
Impact
The inability to recover payments due from one or more failed financial counterparties or the loss of cash balances may cause
significant financial loss and have an adverse impact on the Group’s results of operations, financial condition and financial risk profile.
In addition, the loss of cash balances or a disruption to payment systems may cause disruption to the Group’s ongoing operations
and ability to pay its creditors and suppliers.
Risk: Exposure to unavailability of, and price volatility in, raw materials and increased costs of employment
Description
The availability and price of various commodities required in the manufacture of the Group’s products fluctuate. Raw materials and
other inputs used in the Group’s business, such as wood pulp and energy, are commodities that are subject to price volatility caused
by numerous factors, including inflation, political influence, introduction of new or higher tariffs or trade embargos, market fluctuations
and natural disasters.
Similarly, the Group is exposed to the risk of an increase above inflation in employment costs, including due to governmental action
to introduce or increase minimum wages. Employment and health care law changes and the increase in inflation may also increase
the cost of provided health care and other employment benefits expenses.
Impact
Restricted availability and price volatility of commodities may result in supply shortages and unexpected increases in costs for raw
materials and packaging for the Group’s products, which may affect the Group’s results of operations and financial condition.
The Group has experienced some of these effects in the last several years, including higher cost of direct materials due to energy
scarcity, increase in transportation rates and commodity prices, as well as increases in utility costs, all of which have led to increases in
overall cost. While inflation also caused an increase in employment costs, this did not have a material adverse effect to the Group's
profitability. However, we cannot assure that this will not be materially affecting the Group's profitability in the future.
The Group has not always been able to, and in the future may not be able to, increase prices to offset increased costs without suffering
reduced sales volume and revenue. In the absence of compensating for increased costs through pricing, significant increases in raw
material, packaging and employment costs above inflation will impact product margins, leading to lower profits and negatively affecting
the Group’s results of operations and financial condition and cause the Group to fail to deliver on its strategic growth plans.
Risk: Failure to retain key personnel or to attract and retain skilled talent
Description
The Group relies on a number of highly experienced employees with detailed knowledge of the tobacco and nicotine industry, other
areas of focus for the Group (including New Categories and Beyond Nicotine). Similarly, the Group is dependent on its ability to identify,
attract, develop and retain such qualified personnel in the future. The Group is also dependent on external hires to ensure it is equipped
with the right new business-critical capabilities and knowledge to accelerate transformation. BAT anticipates that this trend will
continue and therefore the ability to continue to build awareness, increase reach and ultimately attract the new target audience
remains a primary focus.
There are shifts in the career development expectations of employees, from a traditional one company long tenure approach to a much
shorter tenure focused on critical experiences and challenges. Furthermore, broader economic and sustainability trends (e.g. Group
delivery against sustainability related ambitions, volatility in remuneration outcomes linked to Group’s share price) may impact the
Group’s ability to retain key employees and may increase competition for highly talented employees. Whilst the Group is enhancing its
effort on retaining critical capabilities and knowledge, building the right leadership behaviour and organisational culture, and focusing
on employee development and engagement, the retention risk of experienced employees remains an area requiring management
attention. Furthermore, the Group may fail to introduce appropriately leveraged and differentiated pay-for-performance for key
employees, which exacerbates the risk of not retaining such key personnel and attracting appropriately skilled talent in the future. This
also exposes the Group to the risk of not being able to conduct future succession planning successfully.
Impact
If the Group is unable to retain its existing key employees, fails to attract and retain skilled talent in the future, critical positions may be
left vacant, resulting in a failure to retain and advance critical business knowledge required for its transformation, as well as adversely impacting
the Group’s results of operations, financial condition and achieving broader business objectives, such as its sustainability ambitions.
High voluntary employee turnover may also reduce organisational performance and productivity, leading to further adverse impact
on the Group’s results of operations and financial condition and cause the Group to fail to deliver on its strategic growth plans.
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Business Execution and Supply Chain Risks continued
Risk: Disruption to the supply chain and distribution channels
Description
The Group has adopted an increasingly global approach to managing its supply chain, including distribution channels. Disruption to the
Group's supply chain may be caused by various factors, including, but not limited to, disruption to suppliers’ operations or to distribution
channels, and the deterioration in the financial condition of a trading partner. Such disruption may also be caused by a cyber event, a
global health crisis, political tensions, strikes, riots, civil commotion, a major fire, severe weather conditions or other natural disasters
which affect manufacturing or other facilities of the Group’s operating subsidiaries or those of their suppliers and distributors. In certain
geographic areas where the Group operates, insurance coverage may not be obtainable on commercially reasonable terms, if at all.
Coverage may be subject to limitations, or the Group may be unable to recover damages from its insurers. The Group foresees a
heightened level of risk of disruption in our New Categories supply chain because it is multi-tiered and complex in sourcing and
distribution.
Disruption may also be caused by spread of infectious disease (such as the COVID-19 pandemic) or by a deterioration/shortage in labour
or union relations, disputes or work stoppages or other labour-related developments within the Group or its suppliers and distributors.
In addition, the Group’s operating subsidiaries may not be able to establish or maintain relationships on favourable commercial terms
with their suppliers and distributors, or at all. In some markets, distribution of the Group’s products occurs through third-party monopoly
channels, often licensed by governments. The Group may be unable to renew these third-party supplier and distribution agreements
on satisfactory terms for many different reasons, including government regulations or sustainability considerations. There are also some
product categories for which the Group does not have surplus production capacity or where substitution between different production
plants is impractical - this may cause further disruption to our supply chain. Consolidation of global suppliers and certain distributors that
control large geographies may reduce the Group’s availability of alternatives and negatively impact the Group’s negotiating power with
key suppliers and distributors. These risks are particularly relevant in jurisdictions where the Group’s manufacturing facilities are more
concentrated or for certain product categories where production is more centralised.
Impact
Any disruption to the Group’s supply chain and distribution channels could have an adverse effect on the results of operations and
financial conditions of the Group through failures to meet shipment demand, contract disputes, increased costs, loss of market share
and inability to reinvest into New Category and support harm reduction agenda and cause the Group to fail to deliver on its strategic
growth plans.
Risk: Failure to uphold the high standard of sustainability management, performance and reporting
Description
Stakeholder expectations of, and regulatory requirements for, the Group’s sustainability management, performance and reporting are
continually evolving. For example, the EU Corporate Sustainability Reporting Directive (CSRD) has introduced new reporting obligations.
The Group is exposed to risks arising from failure to have the appropriate internal standards, strategic plans and governance, compliance,
monitoring and reporting mechanisms in place to ensure it can identify emerging issues, meet external expectations and comply with
applicable requirements. In addition, the Group relies on third-parties for sustainability performance monitoring, measurement and other
sustainability-related services. Such service providers may fail to perform these services to the specified or required standards or timeframes.
In addition, in order to meet its emission targets, the Group plans to rely in part on third-party technology, such as carbon capture, some of
which has not yet been developed to the required scale. If such developments are not available on commercially reasonable terms within the
Group's timeline for emission reduction, we may fail to meet those targets.
Impact
Failure to uphold high standards of sustainability management and performance or to provide transparent and consistent reporting, in
line with applicable requirements, could significantly impact the Group’s reputation or compliance position, and reduce investor
confidence. Poor performance across any aspect of sustainability, such as a failure to sufficiently address climate change-related risks,
expectations and requirements, or human rights impacts across the Group’s own operations and supply chain, could result in increased
costs and regulatory sanction, litigation, difficulty in attracting and retaining talent, or decrease in consumer demand for our products.
Poor performance could also result in a failure to achieve our sustainability targets.
Allegations of greenwashing and healthwashing, as a result of failure to responsibly and transparently market our products and
communicate our sustainability achievements and position, could result in reputational damage, litigation and regulatory sanction.
In addition, the Group’s association with any provider of sustainability-related services that fails to perform its services for the Group
or third-parties to the specified or required standard (or is alleged to have done so) could also result in reputational damage and
litigation impacts.
In addition, in order to meet its emission targets, the Group plans to rely in part on third-party technology, such as carbon capture,
some of which has not yet been developed to the required scale. If such developments are not available on commercially reasonable
terms within the Group's timeline for emission reduction, we may fail to meet those targets.
BAT Annual Report and Form 20-F 2024
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Other Information
Additional Disclosures
Group Risk Factors
Continued
418
Risk: Failure to successfully design, implement and sustain an integrated framework and operating model for Artificial
Intelligence (AI)
Description
Inability to effectively establish and maintain a cohesive and functional AI framework and operating model within the Group could result
in suboptimal utilisation of available AI technology, reduced efficiency and effectiveness, missed opportunities for innovation and value
creation, potentially harmful use of AI technology and violation of laws and regulations. Further, improper use of AI technology could
cause potential exposure regarding consumer privacy breaches. Additionally, the Group may be non-compliant regarding the
implementation of new technologies, including as a result of ambiguous legal requirements. The Group may also fail to ensure that the
design, implementation and ongoing management of the AI framework and operating model are well-planned, properly resourced and
effectively executed.
The Group defines “AI Systems” under Responsible & Ethical AI Framework as a computer system that generates content, predictions,
recommendations, decisions or other outputs, that functions with varying degrees of autonomy and that may exhibit adaptiveness after
deployment. The Group has implemented, and intends to further expand, the use of AI, including Generative AI.
Impact
Without a well-designed and properly functioning AI framework and operating model, the organisation may not be able to fully leverage
the potential of AI technology and improve operational efficiency and effectiveness, which could result in missed opportunities for
innovation and value creation, potentially putting the organisation at a competitive disadvantage. The lack of a cohesive and functional
AI framework and operating model could result in increased costs associated with suboptimal utilisation of AI technology, as well as the
potential need for additional resources to address issues and inefficiencies. Inability to adapt and adopt the technology in an effective
and compliant manner could result in reputational damage if the organisation is perceived as being unable to effectively leverage
emerging technologies and using data in a manner inconsistent with consumers' ethical expectations and company values. In addition,
use of discriminatory or unexplainable algorithms for decision making could potentially result in penalties for BAT and increased
attention from regulatory authorities, consumers and other stakeholders.
Risk: Inability to obtain adequate supplies of tobacco leaf
Description
The Group purchases significant volumes of packed leaf each year. Tobacco leaf, as any other agricultural commodity, can be impacted
by a variety of external factors. Like any other agricultural supply chain, it can be particularly vulnerable to a range of challenges,
including climate change, weather-related events, such as drought, flood and other natural disasters, increasing demand for land and
natural resources, rural poverty, social inequality, child labour and ageing farmer populations. Tobacco production in certain countries
is also subject to a variety of controls, including regulation affecting farming and production control programmes, and competition for
land use from other agriculture commodities. Such controls and competition can further constrain the production of tobacco leaf,
raising prices and reducing supply.
The Group recognises the above and any combination of those, including topics like child labour, as a risk to our tobacco leaf supply chain.
Impact
Restricted availability of tobacco leaf may prevent the Group from accessing sufficient tobacco leaf that meets its volume, quality and
sustainability requirements. This could lead to an impact in the quality of the Group's products to a level that may be perceptible by
consumers and may impact the Group's ability to deliver on consumer needs. The Group’s sustainability commitments may restrict the
sources we can buy from, which would result in an imbalance in supply and demand potentially causing incremental tobacco prices.
Higher tobacco leaf prices would result in increased raw material costs and have an adverse effect on the Group's financial condition.
The Group may also experience reputational damage from not adequately managing its sustainability priorities like climate change,
protection of natural resources, including forests, and human rights in our leaf supply chain, which may restrict suppliers willing to do
business with us.
Risk: Exposure to product contamination
Description
The Group may experience product contamination, whether by accident or deliberate malicious intent, during supply chain or manufacturing
processes, or may otherwise fail to comply with the Group’s quality standards. The Group may also receive threats of malicious tampering.
Impact
Product contamination or threats of contamination may expose the Group to significant costs associated with recalling products from
the market or temporarily ceasing production. In addition, adult tobacco consumers may lose confidence in the specific brand affected
by the contamination, resulting in reputational damage and a loss of sales volume and market share. The Group could be subject to
liability and costs associated with civil and criminal actions as well as regulatory sanctions brought in connection with a contamination
of the Group’s products. Each of these results may in turn have an adverse effect on the Group’s results of operations, financial
condition and reputation and cause the Group to fail to deliver on its strategic growth plans.
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Business Execution and Supply Chain Risks continued
Risk: Failure to successfully design, implement and sustain an integrated technical landscape and ERP strategy
Description
The Group aims to improve profitability and productivity through supply chain improvements and the continuous enhancements of an
integrated operating model and organisational structure, including standardisation of processes, centralised back-office services and a
common IT platform. The Group undertakes transformation initiatives periodically which aim to enhance the organisation and facilitate
growth, including the Group’s focus on New Categories and Beyond Nicotine. The Group’s efforts to achieve these goals are driven and
enabled through use of our TaO (central SAP ERP system) global template – an integrated set of standardised process used by the
Group within a central SAP instance common for the substantial majority of Group’s subsidiaries. These processes include, among
others, core back-office global processes, procurement, warehouse management, accounting and controlling.
Impact
Failure by the Group to successfully evolve the TaO global template to support a multi-category business model or not having a clear
future-fit ERP strategy, could lead to the Group’s inability to support BAT’s strategy and transformation, and realise anticipated
benefits. Additionally, this could lead to increased costs, disruption to operations, decreased trading performance, loss of institutional
knowledge and reduced market share. These results could in turn reduce profitability and funds available for investment by the Group in
long-term growth opportunities. Inability to develop governance process models in line with BAT’s evolving business strategy may
result in the failure to achieve sustainable multi-category growth including capturing additional productivity gains and achieving
sustainability goals which may in turn have an adverse effect on the Group’s results of operations and financial condition and cause the
Group to underperform on the delivery of its strategic growth plans.
Risk: Failure to manage the Group’s climate change-related risk
Description
The Group is exposed to direct and indirect adverse impacts associated with physical climate change-related risks, across its global
operations and supply chain. Climate change may cause acute physical risks (such as more frequent and severe weather events), or
chronic risks (such as those related to longer-term shifts in climate patterns and temperatures). These, alongside their direct impact on
Group operations, could lead to reductions in the supply and quality of tobacco leaf and other physical goods and cause transport and
logistics disruptions in our supply chains.
The Group may also experience adverse impacts associated with transition climate change risks, associated with the move to a low
carbon economy (such as emissions-related regulations and additional taxes applicable to its operations and its supply chain, changing
markets and emerging technologies).
As climate change policy, legislation and reporting requirements further evolve, companies need to effectively identify, assess, monitor
and mitigate associated risks. Failure to do so could lead to BAT scoring lower in sustainability ratings and indices used by financial
sector in making investment decisions.
As consumer and customer behaviours and expectations further evolve, the Group is exposed to the risk of failing to sufficiently adapt
its product portfolio and marketing strategy in response to stakeholders’ increasing sustainability expectations. Inadequate response to
climate change considerations may result in reduced demand for or rejection of the Group’s products, as well as reputational damage.
Impact
Disruption to the Group’s agricultural and/or non-agricultural supply chain or product distribution channels have had, and could have, an
adverse effect on its operations and financial condition through failures to meet product demand, contract disputes, increased costs
and loss of market share.
In recent periods, the Group experienced impacts from severe weather events. In 2023, a tornado in the U.S. caused the destruction of a
stock of tobacco leaves in a warehouse with a final loss of £8 million. The 2024 flood in the UAE caused an £11 million loss in machinery.
Consumer and customer expectations may influence their purchasing decisions and lead them to seek alternative product offerings. As
consumer behaviours evolve, the Group may fail to sufficiently adapt its product portfolio and market strategy in response to increasing
expectations on climate change considerations, potentially resulting in reduced demand for, or rejection of the Group’s products.
Besides increased costs associated with climate change regulation and additional reporting obligations, non-compliance with climate
change legislation (including reporting requirements) could reduce BAT’s ability to attract investors, result in reputational damage and
potentially regulatory sanctions. Poor results in ESG ratings and indices used by financial sector may impact their investment decisions,
and thereby increase the cost of capital or negatively impact share price.
Failure to meet current and future employees’ expectations concerning the Group’s actions to mitigate and adapt to climate change
may negatively impact the retention and attraction of high-quality employees.
BAT Annual Report and Form 20-F 2024
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Additional Disclosures
Group Risk Factors
Continued
420
Risk: Failure to manage the Group’s circular economy risk
Description
The Group is exposed to risks associated with the move towards an increasingly circular business model, driven by internal and external
factors. These include product-related regulatory risks, such as product design/disassembly requirements, market access, loss of
market share, sourcing risk and Extended Producer Responsibility (EPR) requirements.
As circular economy-related policy, legislation and reporting requirements further evolve, companies need to effectively identify,
assess, monitor and mitigate associated risks. Failure to do so could lead to BAT scoring lower in ESG ratings and indices used by
financial sector in making investment decisions.
As consumer and customer behaviours and expectations further evolve, the Group is exposed to the risk of failing to sufficiently adapt
its product portfolio and marketing strategy in response to stakeholders’ increasing sustainability expectations. Inadequate response to
product circularity considerations may result in reduced demand for or rejection of the Group’s products, as well as reputational damage.
Impact
Consumer and customer expectations may influence their purchasing decisions and lead them to seek alternative product offerings.
An inability to develop and commercialise products, packaging or value chain sustainability innovations in line with demand or less well
than competitors (including failures to adequately predict changes in consumer and societal behaviour and expectations and reflect
them in the product portfolio) could lead to missed commercial opportunities, under- or over-supply, loss of competitive advantage,
loss of market share, unrecoverable costs and the erosion of the Group’s consumer base or brand equity. Consumers failing to engage
in product recycling and/or Take-Back schemes could also have an impact on the Group’s EPR risks and obligations.
Non-compliance with product circularity legislation (including reporting requirements) could reduce BAT’s ability to attract investors,
result in reputational damage, potentially regulatory sanctions and loss of market access. Poor results in ESG ratings and indices used
by financial sector may impact their investment decisions, and thereby increase the cost of capital or negatively impact share price.
Failure to meet current and future employees’ expectations concerning the Group’s actions to address product circularity matters may
negatively impact the retention and/or attraction of high-quality employees.
Risk: Impact of a pandemic or other global health crises on the performance of the Group
Description
The Group continues to closely monitor the potential for disruption arising from pandemics, the most recent having been coronavirus
(COVID-19), or other global health crises. Consequences may include significant logistical challenges for employees and their ability to
perform their duties, potential loss of lives or significant level of illness in the workforce, inability to deliver revenue stream and market
share targets, impacting profits and cash flows, and disruption to the supply chain and third parties being unable to deliver contractual
goods and services. In addition, some countries in which the Group operates have in the past, and may adopt in the future, regulations
restricting the ability to manufacture, distribute, market and sell products.
Impact
The influence of COVID-19 was at that time, and the influence of future variants, other pandemics or other global health crises on the
Group's operations and financial condition is difficult to predict given the wide range of determining factors, not least the nature of the
pandemic/virus, its speed of infection, geographical scope and duration.
The impact of a pandemic or other global health crises on global economic activity and the nature and severity of measures adopted by
governments are numerous. The impact on the Group is not limited to:
– Reductions or volatility in consumer demand for one or more of our products due to illness, retail closures, quarantine or other travel
restrictions, health consciousness (quitting use of tobacco and nicotine products), government restrictions, the deterioration
of socio-economic conditions, economic hardship and customer-downtrading (switching to a cheaper brand), which may impact
the Group’s market share.
– Disruptions to the Group’s operations, such as its supply chain, or manufacturing or distribution capabilities, which may result in
increased costs due to the need for more complex supply chain arrangements, to expand existing facilities or to maintain inefficient
facilities, a reduction of the Group’s sales volumes or an increase in bad debts from customers.
– Disruption to the Group’s operations resulting from a significant number of the Group’s employees, including employees performing
key functions, working remotely for extended periods of time or becoming ill, which may reduce the employees’ efficiency and productivity
and cause product development delays, hamper new product innovation and have other adverse effects on the Group’s business.
– Significant volatility in financial markets (including exchange rate volatility) and measures adopted by governments and central banks
that further restrict liquidity, which may limit the Group’s access to funds, lead to shortages of cash and cash equivalents needed
to operate the Group’s business, and impact the Group’s ability to refinance its existing debt.
– Regulations restricting the ability to manufacture, distribute, market and sell products, and potentially increasing illicit trade.
– Governments seeking to increase revenues through increased corporate taxes and excise in combustible and/or New Category
products, increasing the cost and prices of our products – which could reduce volumes and margins, and/or increase illicit trade.
While some negative effects caused by COVID-19 took place in several End Markets over the last few years, including reduced demand
due to temporary smoking bans, lockdown restrictions, increased border checks and change in consumer behaviours, none of these
had a material effect on the Group’s overall profitability. However, all of the above factors may have material adverse effects on the
Group’s results of operations and financial condition and cause the Group to fail to deliver on its strategic growth plans. The difficulty in
predicting future pandemics exacerbates this risk.
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Legal, Regulatory and Compliance Risks
Risk: Exposure to, the enactment of, proposals for, or rumours of regulation that significantly impairs the Group’s ability to
communicate, differentiate, market or launch its products and/or the lack of appropriate regulation for New Categories
Description
The tobacco and nicotine industry is one of the most highly regulated in the world, with manufacturers required to comply with a
variety of different regulatory regimes across the globe. Most of these regulations, whether already in place or proposed, can be
categorised as follows:
– Category bans: Prohibitions on the sale, import, possession, or use of specific products, including New Categories;
– Product Regulations: On use of ingredients, product design and attributes (e.g. nicotine strength or flavours), as well as product
safety standards and product disclosure requirements;
– Packaging and labelling: Requirements for health warnings and other government-mandated messages to be printed on
packaging, as well as requirements around pack shape, size, weight and colour, plain packaging requirements or markings
required for single-use plastics;
– Advertising and sponsorship: Partial or total bans on advertising, promotions and sponsorships for products, as well as brand
stretching (the association between a tobacco and a non-tobacco product by using tobacco branding on the non-tobacco product);
– Retail: Restrictions on where tobacco and non-tobacco nicotine products can be sold, such as the types of outlets (e.g. supermarkets
and vending machines), restrictions on how they can be sold (e.g. above-the-counter versus beneath, or online), and restrictions on
adult purchase;
– Place: Bans on smoking or vaping in certain places;
– Price: Regulations which affect prices of tobacco and non-tobacco nicotine products, such as excise taxes and minimum pricing;
– Responsibility: Obligations under Extended Producer Responsibility schemes (e.g. cigarette waste clean-up) and measures to combat
illicit trade.
On top of legal requirements the Group also operates a number of global policies which may impose additional obligations or standards
beyond those required by local regulatory regimes. The Group recognises and supports the objectives of governments and
policymakers in reducing smoking rates and the associated health impacts, as well as the role of regulation in achieving these goals.
Accordingly, we endorse tobacco and nicotine regulations that are grounded in robust evidence, tailored to local circumstances,
effectively achieve intended policy objectives, and avoid unintended consequences, such as the expansion of illegal markets. However,
there is a risk that in some areas, the evolving regulatory environment may not follow these principles due to several key factors:
– Irresponsible behaviour or marketing practices by competitors, particularly in markets where appropriate regulation is lacking, or
actions that violate existing regulations, may cause reputational harm to the industry as a whole and result in disproportionate
regulation or bans.
– Pressure on governments from international organisations, agencies, tobacco control NGOs, influential national regulators, and the
private sector—including philanthropists, pharmaceutical companies, security technology firms, and social justice groups—may drive
the pursuit of regulatory policies intended to harm the tobacco and nicotine industry.
– Regulators may also have a limited understanding of New Category products and their potential role in tobacco harm
reduction. Concerns about underage access and the environmental impact of these products can further increase the risk
of inappropriate regulation.
From a compliance perspective, the Group may also fail to implement the appropriate level of control measures or maintain adequate
compliance standards with regulatory requirements. For example, the Group’s marketing activities may not fully comply with relevant
laws, regulations, or the Group’s Responsible Marketing Framework.
Inadequate information, instruction, and training in relevant areas, along with a lack of awareness or understanding of applicable
regulations—including those not just related to tobacco and nicotine but also to batteries or environmental regulations—may further
increase these risks. Additionally, failure to monitor, assess, and implement new or updated regulatory requirements could exacerbate
compliance challenges.
Finally, there may also be negative and disproportionate societal reactions to consumer misuse or abuse of tobacco and/or nicotine
products, particularly in New Categories, or toward certain product types.
Combustible Products
With respect to combustible tobacco products, many of the measures outlined in the Framework Convention on Tobacco Control
(FCTC) have been or are in the process of being implemented through national legislation in many markets in which the Group operates,
including some of the non-legally binding recommendations (e.g. plain packaging and flavour bans).
In November, the eleventh Conference of the Parties to the Framework Convention on Tobacco Control (COP11) will take place in Geneva, and
part of the discussions will focus on analysing forward-looking tobacco control measures beyond the current scope of the FCTC.
In the U.S., the Food and Drug Administration (FDA) announced its intention to ban menthol as a characterising flavour in cigarettes. The
Biden Administration’s Fall 2023 Unified Agenda anticipated issuance in March 2024 of a final rule to ban menthol as a characterising
flavour in cigarettes; however, in April 2024 the Biden Administration indicated that a final rule would take significantly more time. The
new Trump Administration has withdrawn the rule from the Office of Management and Budget and it is currently held pending the new
administration’s reconsideration of regulations advanced by Biden. Further, the FDA may seek to require the reduction of nicotine levels
in tobacco products. On 15 January 2025, in the final days of the outgoing Biden Administration, the FDA issued a proposed product
standard whereby the agency would limit nicotine level in cigarettes following a two-year effective date from publication of any final rule.
The proposed rule is currently subject to public comment, but may be de-prioritised by the new Trump Administration as it considers all
proposed regulations advanced by the Biden Administration. Thus, it is not known whether or when this proposed rule will be finalised,
and if adopted, whether the final rule will be the same or similar as the proposed rule.
BAT Annual Report and Form 20-F 2024
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Additional Disclosures
Group Risk Factors
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422
Traditional vanguard countries on tobacco control efforts, such as the UK, Australia, Norway, and the Netherlands, continue to push the
boundaries of tobacco regulation by exploring extreme measures like generational sales bans (GSB)—which would prohibit anyone born
after a certain date from purchasing tobacco products. This concept was initially proposed in New Zealand but later dismissed. There is a
risk that such regulations could also extend to New Category products. In the UK, for instance, the Labour Government's legislative
agenda includes plans to introduce a bill that would implement a GSB for both cigarettes and tobacco heated products (THPs).
Separately, the Intergovernmental Negotiation Committee (INC) on Plastic Pollution, mandated by the UN Environment Assembly, has
been tasked with developing an international legally binding treaty to combat plastic pollution. The fifth session of the Intergovernmental
Negotiation Committee (INC5) concluded on 1 December 2024 without countries reaching a consensus on the text. Countries agreed to
adjourn negotiations to a later date, expected during 2025. While cigarette filters made of plastic remain referenced in a list of products
to be made subject to eventual elimination in a proposed annex, single-use plastic vapour products – proposed as an addition by some
countries are absent from the current text that will be discussed.
Finally, preparations for a revised EU Tobacco Products Directive (TPD) are progressing. If an updated version (TPDs) is initiated, it is
anticipated that the regulations under discussion will consider measures such as plain packaging for combustible products and/or
stricter regulation of ingredients in tobacco and nicotine products, including Modern Oral (MO), which today is not included in TPD2.
Smokeless Products (including New Categories)
Progressive regulations, including forward-thinking policies for Smokeless products, are essential to build a smokeless world and deliver
governments’ smoke free ambitions.
The Group believes that the development of regulations for Smokeless products should follow the below principles:
– Be based on science and evidence and proportionate to the product's risks compared with those of combustible tobacco;
– Facilitate adult awareness of smokeless alternatives and allowing adult-only access;
– Ensure product quality, environmental sustainability, and consumer relevance;
– Enable effective enforcement.
From a global perspective, regulation is still evolving and frameworks for regulation vary from country to country. While some regulators
have implemented progressive regulations aligned with the previously described principles, others are considering applying the same
regulatory frameworks used for traditional tobacco products. Some jurisdictions have banned or are contemplating banning flavours
(e.g., flavours banned since May 2020 in the EU, extended to HP in 2023) or imposing unsatisfying nicotine limits, or directly banning
certain product categories (e.g. MO in Belgium).
The primary drivers behind many regulatory proposals targeting New Categories continue to be preventing youth appeal and addressing
environmental issues. These concerns are made explicit in the reasoning justifying many legislative efforts to ban flavours in vapour
products and, more recently, to ban disposables. Such regulatory proposals are particularly prevalent across Europe.
Regarding the USA, and considering the risks associated with the FDA process, on 12 October 2021, the FDA issued its first Marketing
Granted Orders (MGOs) for tobacco-flavoured Vuse Solo and Vuse Solo power units. On the same date, Reynolds American companies
received Marketing Denial Orders (MDOs) for the flavoured (non-menthol and non-tobacco) Vuse Solo products. R. J. Reynolds Vapour
Company has since filed an appeal against these MDOs, which remains pending. While a series of MGOs for tobacco-flavoured products
have been granted, including recent MGOs for Vuse Alto “Golden” and “Rich” tobacco-flavoured vapour products, MDOs have also been
issued (and may be issued in the future) for non-tobacco flavoured products, reflecting the risks associated with products that contain
flavours outside of tobacco, which are currently subject to court challenges.
In the specific case of Modern Oral products, the Group's Velo and Grizzly synthetic pouch products remain available in the USA, subject
to FDA enforcement policies, and there can be no assurance that these products’ pending marketing authorisations will be granted or
FDA’s enforcement policies will remain unchanged. If the FDA denies a marketing authorisation or takes enforcement action, the relevant
product(s) would need to be withdrawn from the market unless a court or the FDA intervenes.
Beyond the different market approaches toward the regulation of Smokeless products, the lack of harmonisation between markets also
presents a risk in the New Categories space. The harmonisation of standards and a consensus behind certain regulatory measures will
be critical from a business perspective, ensuring a more predictable and efficient operating environment.
Beyond Nicotine
As the Group also looks to Beyond Nicotine products including CBD and cannabis (in connection with its investments in Organigram,
Sanity Group and Charlotte's Web), it may be subject to additional regulation and these products might not be scalable on a global basis
given varying degree of regulation.
Please refer to the discussion of tobacco and nicotine regulatory regimes under which the Group’s businesses operate set out from page 436.
BAT Annual Report and Form 20-F 2024
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423
Legal, Regulatory and Compliance Risks continued
Risk: Exposure to, the enactment of, proposals for, or rumours of regulation that significantly impairs the Group’s ability to
communicate, differentiate, market or launch its products and/or the lack of appropriate regulation for New Categories continued
Impact
Extreme regulatory measures, impacting one or more New Categories (Smokeless) and/or combustible tobacco products and/or
Beyond Nicotine products, could adversely affect volume, revenue and profits, as a result of: restrictions on the Group’s ability to sell
and differentiate its products or brands, leverage price, innovate, make scientific claims, and make new market entries. In addition, new
regulations and lack of standards harmonisation among markets could lead to greater complexity, as well as higher production and
compliance costs.
As an example, through the acquisition of Reynolds American Inc., the Group acquired the Newport brand, the leading menthol
cigarette brand in the U.S., the Group’s largest single market. The sales of Newport, together with the other menthol brands of the
Group’s operating subsidiaries, represent a significant portion of the Group’s total net sales. Any action by the FDA or any other
governmental authority, including states and localities, banning or materially restricting the use of menthol in tobacco products (such
as the proposed FDA ban on menthol cigarettes) could have a significant negative impact on sales volumes which would, in turn, have
an adverse effect on the results of operations and financial position of the Group.
Disproportionate regulation of Smokeless products could significantly hinder our ability to deliver on our mission of Building a
Smokeless World as part of our transformative journey. Full category bans or regulations that jeopardise consumer acceptance would
have a significant impact on the Group's strategy for Smokeless products. These measures could both feed the illegal market (such as
in the case of the increase in illicit single-use vapour devices in the U.S. market) and undermine our ability to compete and develop our
products profitably while encouraging consumers to switch. As BAT always complies with regulations, such disproportionate regulation
that lacks robust enforcement measures reduces BAT’s ability to compete on equal terms with less responsible industry actors, who
disregard or deliberately don’t comply with local law and regulations.
California’s 2022 flavour ban on all tobacco and nicotine products disrupted the market along with discouraging adult combustible
consumers from switching to reduced-risk New Categories. Without heightened enforcement, illegal flavoured products will remain,
and the ban has not reduced FMC prevalence among youth and adults. Key findings from the 2022 Online CA Adult Tobacco Survey, CA
Tobacco Prevention Programme, updated for 2024, showed that the adult smoking prevalence in California pre-ban was 6.6%
compared to post-ban 7.1% in 2023. Although a visible increase in the prevalence and even though the data is not likely to be statistically
significant, it is clear that no decrease of the adult smoking prevalence has occurred following the introduction of the ban in 2022.
There is a risk that environmental and sustainability regulations, such as Extended Producer Responsibility (EPR) schemes for cigarette
manufacturers, will continue to impact New Category products, especially if the EU EPR schemes for New Category products are
picked up by more countries outside of EU,
Disproportionate regulation of our combustible products not only impacts our ability to execute the Group strategy for these products,
but also influences investor sentiment in the sector and the residual value of the Company. Emerging issues such as filter bans,
mandatory limits on nicotine products, and generational sales bans can significantly affect both our current business operations and
future expectations.
As a reflection of the real or perceived impact of stricter regulation of our business, the Group's share price has also experienced, and
could in the future experience, shocks upon the announcement, expectation or enactment of restrictive regulation. All these effects
may have an adverse effect on the Group's results of operations and financial conditions and cause the Group to fail to deliver on its
strategic growth plans.
Finally, and considering the significant number of regulations that may apply to the Group’s businesses across the world, the Group is
and may in the future be subject to claims for breach of such regulations. Government authorities (such as the FDA), organisations or
even individuals may allege that our marketing activities do not comply with the relevant laws and regulations, or with our Responsible
Marketing Framework. As such, the Group could be subject to liability and costs associated with civil and criminal actions as well as
regulatory sanctions, fines and penalties brought in connection with these allegations.
Even when proven untrue, there are often financial costs and reputational impacts in defending against such claims and allegations,
including potential adverse impact on the treatment by the FDA of the Group ‘s PMTAs in the U.S. Each of these results may in turn
have an adverse effect on the Group’s results of operations and financial condition and cause the Group to fail to deliver on its strategic
growth plans.
BAT Annual Report and Form 20-F 2024
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Other Information
Additional Disclosures
Group Risk Factors
Continued
424
Risk: Adverse implications of EU legislation on single-use plastics that will result in on-pack environmental warnings and
financial implications relating to the Extended Producer Responsibility (EPR)
Description
The EU adopted a Directive on single-use plastics in July 2019 (the "SUP Directive") which, among other products, targets tobacco
products with filters containing plastic. The Cellulose Acetate in our filters is defined as a single-use plastic under the Directive and, as
such, the Directive will have an impact on the Group’s cigarettes, filters for other tobacco products and consumables for THPs and
Heated Herbal Products (HHPs) (the latter, although not a tobacco product, has the same filter as THP, thus the Group’s decision is to
include it in the EPR scope).
Under the SUP Directive, the Group will be subject to (and in some cases already is subject to) EPR schemes, requiring the Group to
cover the costs of collecting, transporting, treating and cleaning-up of filters containing plastic, data gathering and reporting. The SUP
Directive also imposes on tobacco manufacturers the obligation to finance consumer awareness campaigns and to place
environmental markings on packs of products with filters containing plastic.
Member States had to transpose the SUP Directive into national law by 3 July 2021, with an implementation deadline of 5 January 2023
for EPR schemes. In practice, some Member States are still late on transposition and implementation, with the practical consequence
that EPR schemes will go live with several months delays in some member states. The European Commission is also late in its issuance
of guidelines on the criteria for the costs of cleaning up litter, which should have been issued prior to the anticipated implementation
deadline for EPR schemes. This introduces further difficulties and uncertainty in the design and setting-up of EPR schemes. When
transposing the SUP Directive into national law, EU member states could decide to expand the scope of EPR systems under their
respective national laws, which may expose the Group to additional regulations and financial obligations. This is the case in France,
where EPR implementation has already occurred with an expansion of the scope to include non-plastic filters for RYO products.
Proposed regulations are still being discussed in some countries, i.e. in Belgium, the Netherlands, and Romania.
It is noted that there is a growing level of scrutiny on the use of single-use plastic across the world and a number of other markets in
which the Group operates are considering ways to restrict (or ban) the use of filters made of plastic and/or introduce EPR schemes
covering other plastic elements in our products beyond filters for traditional products and/or New Categories products.
Impact
The financial implications of existing and future EPR schemes will increase administrative burdens and operating costs and may have
an adverse effect on the Group’s results of operations and financial condition and cause the Group to fail to deliver on its strategic
growth plans. Failure to deliver appropriate EPR schemes may lead to imposition of the schemes by the local authorities at a higher
cost to the Group, adversely impacting the Group’s results of operations, financial condition and reputation.
Risk: Exposure to litigation, regulatory action or criminal investigations on tobacco, nicotine, New Categories
and other issues
Description
The Group is involved in litigation related to its tobacco and nicotine products, including legal, regulatory and patent actions,
proceedings and claims, brought against it in a number of jurisdictions. Claims brought against the Group may be based on personal
injury (both individual claims and class actions), economic loss arising from the treatment of smoking and health-related diseases (such
as medical recoupment claims brought by local governments), patent infringement (please refer to the risk factor under “Product
pipeline, commercialisation and Intellectual Property risks, Exposure to risks associated with intellectual property rights, including the
failure to identify, protect and prevent infringement of the Group’s intellectual property rights and potential infringement of, or the
failure to retain licences to use, third-party intellectual property rights” below), negligence, strict tort liability, design defect, failure to
warn, fraud, misrepresentation, deceptive/unfair trade practices, conspiracy, medical monitoring, securities law violations and violations
of antitrust/racketeering laws. Sustainability-related litigation and regulatory action may also be brought against the Group.
Certain actions, such as those in the U.S. and Canada, involve claims in the tens or hundreds of billions in sterling. The Group is also
involved in proceedings that are not directly related to its tobacco and nicotine products, including proceedings based on
environmental pollution claims.
Additional legal and regulatory actions and investigations, proceedings and claims may be brought against the Group in the future. The
Group investigates, and becomes aware of governmental authorities’ 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.
Impact
The Group’s consolidated results of operations and financial position could be materially affected by any unfavourable outcome of
certain pending or future litigation. The Group could be exposed to substantial liability, which may take the form of ongoing payments,
such as is the case with the State Settlement Agreements in the U.S. that require substantial ongoing payments by Group subsidiary,
RJRT. Whether successful or not, the costs of the Group’s involvement in litigation could materially increase due to costs associated
with bringing proceedings and defending claims, which may also cause operational and strategic disruption by diverting management
time away from business matters. Liabilities and costs in connection with litigation could result in bankruptcy of one or more Group
entities, for example, following a judgement in Canada, certain of the Group's Canadian subsidiaries filed for protection under the CCAA.
Any negative publicity resulting from these claims may also adversely affect the Group’s reputation.
The occurrence of any of the above effects could in turn have an adverse effect on the Group’s results of operations and financial
condition and cause the Group to fail to deliver on its strategic growth plans. In connection with the case in Canada described above,
the court-appointed mediator and monitor filed a proposed plan of compromise and arrangement in the Ontario Superior Court of
Justice in 2024, which will require substantial ongoing payments by our Canada subsidiary, if sanctioned. Please refer to note 24 on
page 327 and note 31 on page 343 in the Notes on the Accounts for details of contingent liabilities respectively provisions applicable to
the Group.
BAT Annual Report and Form 20-F 2024
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425
Legal, Regulatory and Compliance Risks continued
Risk: Significant and/or unexpected increases or structural changes in tobacco and nicotine-related taxes
Description
Tobacco and nicotine products are subject to high levels of taxation, including excise taxes, sales taxes, import duties and levies in most
markets in which the Group operates. In many of these markets, taxes are generally increasing, but the rate of increase varies between
markets and between different types of tobacco and nicotine products. Increases in, or the introduction of new, tobacco and nicotine-
related taxes may be caused by a number of factors, including fiscal pressures, health policy objectives and increased lobbying pressure
from anti-tobacco advocates.
With respect to New Categories, although a common framework for regulation and taxation has yet to emerge, the manufacture, sale,
packaging and advertising of such products are increasingly being regulated and taxed.
The EU Tobacco Excise Directive is in the process of being revised. However, there is no set timetable. We expect to see a proposal
from the EU Commission in 2025. It will not, however, be agreed by member states and enshrined in law until 2028 or later.
Impact
Significant or unexpected increases in, or the introduction of new, tobacco-related taxes or minimum retail selling prices, changes in
relative tax rates for different tobacco and nicotine products or adjustments to excise have in the past resulted, and may in the future
result, in the need for the Group to absorb such tax increases due to limits in its ability to increase prices, an alteration in the sales mix
in favour of value-for-money brands or products, or growth in illicit trade, each of which could impact pricing, sales volume and profit
for the Group’s products. Significant or unexpected increases of tobacco-related taxes could also impact the Group's ability to deliver
the corporate purpose of harm reduction.
Risk: Failure to comply with health and safety and environmental laws
Description
The Group is subject to a variety of laws, regulations and operational standards relating to health and safety and the environment.
The Group may fail to assess certain risks and implement the right level of control measures or to maintain adequate standards of
health and safety or environmental compliance, which could cause injury, ill health, disability or loss of life to employees, contractors
or members of the public, or harm to the natural environment and local communities in which the Group operates. As a result of the
outcomes of the COP26, further future regulation is anticipated as governments look to meet their climate change ambitions.
Insufficient information, instruction and training in the relevant areas and a lack of knowledge of the existence and/or requirements
of relevant regulations, or a failure to monitor, assess and implement the requirements of new or modified legislation, may increase
these risks.
Impact
Any failure by the Group to comply with applicable health and safety or environmental laws, or the exposure to the consequences of
a perceived failure, could result in business disruption, reputational damage, difficulties in recruiting and retaining staff, increased
insurance costs, consequential losses, the obligation to install or upgrade costly pollution control equipment, loss of value of the Group’s
assets, remedial costs and damages, fines and penalties as well as civil or criminal liability. Each of these results could in turn adversely
impact the Group’s results of operations and financial condition and cause the Group to fail to deliver on its strategic growth plans.
Risk: Exposure to unfavourable tax rulings
Description
The Group is subject to tax laws in a variety of jurisdictions. The Group‘s interpretation and application of the tax laws could differ from
those of the relevant tax authority, which may subject the Group to claims for breach of such laws, including for late or incorrect filings
or for misinterpretation of rules. Tax authorities in a variety of jurisdictions, such as the Netherlands and Brazil, have assessed, and may
in the future assess, the Group for historical tax claims, including interest and penalties, arising from disputed areas of tax law.
The Group is currently party to tax disputes in a number of jurisdictions, some of which involve claims for amounts in the hundreds
of millions in sterling.
Please refer to note 31 on page 343 in the Notes on the Accounts for details of contingent liabilities applicable to the Group.
Impact
The Group’s failure to comply with the relevant tax authority’s interpretation and application of the tax laws could result in significant
financial and legal penalties, including the payment of additional taxes, fines and interest in the event of an unfavourable ruling by a tax
authority in a disputed area, as well as the payment of dispute costs, or in connection with settlements of such disputes. Disruption
to the business could occur as a result of management’s time being diverted away from business matters. Each of these results
could negatively affect the Group’s results of operations and financial condition and cause the Group to fail to deliver on its strategic
growth plans.
BAT Annual Report and Form 20-F 2024
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Other Information
Additional Disclosures
Group Risk Factors
Continued
426
Risk: Exposure to potential liability under competition or antitrust laws
Description
According to the Group’s internal estimates, the Group is a leader by volume and/or value in certain categories in a number of countries
in which it operates and/or is one of a small number of tobacco and/or New Categories companies in certain other categories in which
it operates. The Group has had antitrust infringement decisions imposed against it in the past and is subject to ongoing investigations
(please refer to note 31 on page 343 in the Notes on the Accounts for details of contingent liabilities applicable to the Group). The Group
may be subject to investigation, inquiry and/or litigation for alleged abuse of its position in categories in which it has significant
presence, alleged collusion/anti-competitive arrangements with other market participants, and/or for other alleged competition law
infringements and/or market features. Competition/antitrust laws continue to evolve globally with increasingly aggressive enforcement.
Impact
Investigations (and/or litigation) for alleged violation of competition or antitrust laws, and any adverse decision as a result of such
investigations and/or litigation, may result in significant legal liability, fines, penalties, repayment orders and/or damages actions;
criminal sanctions against the Group, its officers and employees; increased costs, prohibitions on conduct of the Group’s business;
forced changes in business practices, forced divestment of brands and businesses (or parts of businesses) to competitors or other
buyers; director disqualifications; commercial agreements being held void; and operational and strategic disruption (including by
diverting management time away from business matters). The Group may face increased public scrutiny and the investigation or
imposition of sanctions by antitrust regulation agencies and/or courts for violations of competition regimes which may subject the
Group to reputational damage and loss of goodwill, including negative perceptions of the Group’s governance and our ESG credentials.
The occurrence of any of the above effects could in turn have an adverse effect on the Group’s results of operations and financial
condition and cause the Group to fail to deliver on its strategic growth plans.
Risk: Failure to establish and maintain adequate controls and procedures to comply with applicable securities, corporate
governance and compliance regulations
Description
The Group’s operations are subject to a range of rules and regulations around the world. These include U.S. securities, corporate
governance and compliance laws and regulations, such as the Sarbanes-Oxley Act of 2002 and the U.S. Foreign Corrupt Practices Act
of 1977, and expanding sustainability reporting and disclosure requirements which apply to the Group’s worldwide activities. While the
Group continuously seeks to improve its systems of internal controls and to remedy any weaknesses identified, there can be no
assurance that the policies and procedures will be followed at all times or effectively detect and prevent violations of applicable laws. In
addition, the Group is subject to increasingly stringent reporting obligations under UK corporate reporting regulations.
Impact
The increased scope and complexity of applicable regulations to which the Group is subject may lead to higher costs for compliance.
Failure to comply with laws and regulations may result in significant legal liability, fines, penalties, class action suits and/or damages
actions, criminal sanctions against the Group, its officers and employees, and damage to the Group’s reputation. Non-compliance with
such regulations could also lead to a loss of the Group’s listing on one or more stock exchanges or a loss of investor confidence with a
subsequent reduction in share price.
Risk: Lack of external recognition and acceptance of the foundational science and inability to effectively communicate to
stakeholders about the potential health impact of our New Category products
Description
Scientific evidence to support the harm reduction potential of New Category products is essential for demonstrating and
communicating the risk reduction potential of these products to adult smokers. BAT conducts rigorous science to demonstrate the
potential reduced-risk outcomes when smokers switch to New Category products, and in the longer-term, epidemiological data will be
required to demonstrate the health impact at population levels. Consumer expectations and the rapid pace of innovation necessitate
the evolution of the product portfolio, which requires the Group to regularly re-assess and update the associated scientific evidence base.
Long-term epidemiological data requires decades to acquire. Therefore, the scientific data available today is by necessity shorter-term
data that provides a strong indication of the reduced-risk potential of New Category products relative to cigarettes. In terms of the
wider Tobacco Harm Reduction strategy, there is a risk that the long-term health impact of New Category products is not fully
understood at this time. There is also a risk of failure to communicate the scientific findings in a timely or effective manner.
Furthermore, there are challenges on the choice of standards, controls and/or experimental design and methodology used for
demonstrating the robustness of scientific research, together with regulation limiting risk communication to consumers.
Impact
Inability to fully demonstrate and communicate the Tobacco Harm Reduction abilities of New Category products in a timely manner
may lead to greater regulatory restrictions or outright bans, market share reduction, fines and penalties, reputational damage, and
inability to sustain our quality growth and sustainability strategy. These potential impacts could cause the Group to fail to deliver on its
strategic growth plans and objectives.
BAT Annual Report and Form 20-F 2024
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427
Legal, Regulatory and Compliance Risks continued
Risk: Insufficient product stewardship and failure to comply with product regulations
Description
The Group is subject to risks of safety incidents in pre-market testing or in market due to, for example, a lack of due caution and
appropriate response paid to pre-market product data, or toxicology information, inaccurate and unreliable information from suppliers
and/or compromise of data or other information through cybersecurity attacks.
The interpretation and application of regulations concerning the Group’s products, such as the Tobacco and Related Products Directive
(TPD2), may be subject to debate and uncertainty. This includes uncertainty over product classifications and restrictions on advertising.
In particular, with respect to the developing category of New Categories, which has grown in size and complexity in a relatively short
period of time, a consensus framework for the interpretation and application of existing regulation has yet to emerge.
The continuously changing and evolving landscape of regulation concerning the Group’s products contributes to the uncertainty
surrounding interpretation and application and creates a risk that the Group may misinterpret or fail to comply with developing
regulations in the various jurisdictions in which it operates, or becomes subject to enforcement actions from regulators. With the
continuous changing of product cycle plans and expansion to new markets and innovations, there is a risk that such changes and
launches fail to comply with the relevant regulations, including pre-approval and/or pre-registration requirements. For example, some
governments have intentionally banned or are seeking to ban novel tobacco products and products containing nicotine, while others
would need to amend their existing legislation to permit their sale. Even in countries where the sale of such products is currently
permitted, some governments have adopted, or are seeking to adopt, bans on New Categories or restrictions on certain flavours.
Impact
The significant number of emerging regulations and the uncertainty surrounding their interpretation and application may subject the
Group to claims for breach of such regulations. Financial costs of such enforcement actions include financial penalties, product recalls
and litigation costs, and entail a significant risk of adverse publicity and damage to the Group’s reputation and goodwill. In cases of
consumer injury or fatality due to a consumer product safety issue, this could also cause significant Group reputational damage, leading
to a negative impact on stakeholder confidence, including consumers, retailers, investors, and regulatory and public health organisations.
Risk: Failure to uphold high standards of corporate behaviour, including through unintended or malicious breach of anti-
bribery and anti-corruption and other anti-financial crime laws
Description
The Group is subject to various anti-corruption laws and regulations and other anti-financial crime laws including but not limited to
those relating to tax evasion, money laundering, terrorist financing and bribery (Anti-Corruption Laws, including the UK Proceeds of
Crime Acts (POCA)). All employees of BAT, its subsidiaries and joint ventures which it controls are expected to uphold a high standard
of corporate behaviour and comply with the Group Standards of Business Conduct (SoBC) which includes a requirement to comply
with Anti-Corruption Laws. Employees, associates, suppliers, distributors and agents are prohibited from engaging in improper
conduct to obtain or retain business or to improperly influence (directly or indirectly) a person working in an official capacity to decide
in the Group’s favour. The Group’s employees, contractors and service providers may fail to comply with our SoBC and/or may violate
applicable Anti-Corruption Laws.
The Group investigates, and becomes aware of governmental authorities’ investigations into, allegations of misconduct, including
allegations of corruption at Group companies. Some of these allegations are currently being investigated. The Group cooperates with
the authorities where appropriate. Please refer to note 24 on page 327 in the Notes on the Accounts.
Please refer to note 31 on page 343 in the Notes on the Accounts for details of contingent liabilities applicable to the Group.
Impact
Failure of the Group to comply with anti-corruption laws and regulations and other anti-financial crime laws, or to deploy and maintain
robust internal policies, procedures and controls may and have resulted in significant fines and penalties (reducing the Group’s ability to
reinvest in the future), a share price impact, criminal and/or civil sanctions against the Group and its officers and employees, increased
costs, prohibitions or other limitations or requirements (e.g. compliance requirements) on the conduct of the Group’s business and
reputational harm (including negative perceptions of the Group’s governance and our ESG credentials), and may subject the Group to
claims for breach of such regulations.
The occurrence of any of the above effects could in turn have an adverse effect on the Group’s results of operations and financial condition
and cause the Group to fail to deliver on its strategic growth plans. Even when proven untrue, there are often financial costs, time
demands and reputational impacts associated with investigating and defending against such claims.
Risk: Unexpected legislative changes to corporate income tax laws
Description
The Group is subject to corporate income tax laws in the jurisdictions in which it operates. These laws frequently change on a
prospective or retroactive basis.
Impact
Legislative changes to corporate income tax laws and regulations may have an adverse impact on the Group’s corporate income tax
liabilities and may lead to a material increase of the Group’s overall tax rate - these include changes in international tax laws following
the OECD project on base erosion and profit shifting. This could, in turn, negatively affect the Group’s results of operations and financial
such as any changes condition and cause the Group to fail to deliver on its strategic growth plans.
BAT Annual Report and Form 20-F 2024
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Other Information
Additional Disclosures
Group Risk Factors
Continued
428
Risk: Imposition of sanctions under sanctions regimes or similar international, regional or national measures
Description
National, international and supra-national sanctions regimes or similar international, regional or national measures are complex and
dynamic and may affect territories in which the Group operates or third parties with which it may have commercial relationships. There
may be unintended or malicious breaches of sanctions due to inappropriate or negligent behaviour by BAT employees, contractors,
customers, suppliers or service providers.
Operations in countries and territories subject to sanctions expose the Group to the risk of significant financial costs and disruption
in operations that may be difficult or impossible to predict or avoid or the activities could become commercially and/or operationally
unviable. In particular, the Group has operations in Cuba, which is subject to various sanctions in the United States. Sanctions can be
imposed quickly with the possibility of further territories the Group operates in becoming subject to sanctions at short notice.
The Group investigates, and becomes aware of governmental authorities’ investigations into, allegations of misconduct, including
alleged breaches of sanctions at Group companies. Some of these allegations are currently being investigated. The Group cooperates
with the authorities, where appropriate.
In 2023, the Group reached settlement agreements with the DOJ and OFAC in the United States related to breaches of sanctions
related to North Korea, which resulted in the imposition of fines against the Group totalling US$635 million plus interest.
National, international and supra-national sanctions regimes may also affect third parties with which the Group has commercial
relationships, e.g. through their banks (including possible risk aversion to being associated with a sanctioned territory), and could lead
to supply and payment chain disruptions.
Please refer to note 31 on page 343 in the Notes on the Accounts for details of contingent liabilities applicable to the Group.
Impact
As a result of the limitations imposed by sanctions, it may become commercially and/or operationally unviable for the Group and/or
its critical business partners to operate in certain territories or execute transactions related to them and the Group may be required
to exit existing operations in such territories. The Group may also experience difficulty in sourcing materials or importing products,
repatriating currency from a sanctioned country and finding financial institutions willing to transact with it, any of which may expose
the Group to increased costs. In addition, the costs of complying with sanctions may increase as a result of new, or changes to existing,
sanctions regimes.
In addition to the settlement agreements reached by the Group with the DOJ and OFAC in the United States, as detailed above,
any other failure of the Group to comply with sanctions regimes or similar international, regional, national or supra-national measures,
or to deploy and maintain robust internal policies, procedures and controls, could result in additional fines and penalties (reducing
the Group’s ability to reinvest in the future), a share price impact, criminal and/or civil sanctions against the Group and its officers
and employees, increased costs, prohibitions or other limitations or requirements (e.g. compliance requirements) on the conduct
of the Group’s business, reputational harm (including negative perceptions of the Group’s governance or our ESG credentials),
and damage to commercial or banking relationships, and may subject the Group to claims for breach of such regimes or measures.
Reputational harm (including negative perceptions of the Group’s governance and our ESG credentials) may result from the Group's
operations in a sanctioned country regardless of whether the Group complies with imposed sanctions.
The occurrence of any of the above effects could in turn have an adverse effect on the Group’s results of operations and financial
condition and cause the Group to fail to deliver on its strategic growth plans. Even when proven untrue, there are often financial costs,
time demands and reputational impacts associated with investigating and defending against such claims.
Risk: Failure to uphold New Categories marketing practices
Description
The regulatory landscape is constantly evolving with marketing practices being regulated differently in key New Categories markets.
The Group’s marketing activities may be found to be, or alleged (including in the media) to be, non-compliant with laws and regulations,
or with the Responsible Marketing Framework (RMF) on the marketing and sale of tobacco and nicotine products to consumers e.g. in
relation to age verification measures. On-line activities can also be found to be, or alleged to be, aimed at consumers in a country where
such activities are not permitted.
Impact
The Group is and may in the future be subject to claims for breach of marketing practices. In particular, national authorities (such as the
FDA), organisations or even individuals may allege that our marketing activities do not comply with the relevant laws and regulations, or
with our RMF. As such, the Group could be subject to litigation, regulatory sanctions, fines and penalties brought in connection with
these allegations. Even when proven untrue, there are often financial costs and reputational impacts in defending against such claims
and allegations which may ultimately also lead to stricter regulations impacting our business.
Future breaches may lead to a loss of investor confidence in sustainability performance and inability to meet our responsible marketing
focus area if our RMF are not followed, impacting our corporate purpose of delivering harm reduction.
BAT Annual Report and Form 20-F 2024
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Other Information
429
Legal, Regulatory and Compliance Risks continued
Risk: Loss or misuse of personal data through a failure to comply with the European General Data Protection Regulation,
the UK Data Protection Act 2018, e-Privacy Laws and other privacy legislation governing the processing of personal data.
Description
Personal data is a subset of data which attracts different risks and treatment under applicable law. Breaches of data privacy laws
include misuse of information which may not be confidential in nature. These include, for example, unsolicited marketing calls to a
publicly available number, or using an individual’s personal data in a way which was not authorised or in a way that the individual did not
reasonably expect through technologies such as online tracking or monitoring.
Various privacy laws, including the European General Data Protection Regulation (GDPR), UK Data Protection Act 2018 (UKDPA)
and e-Privacy Laws, govern the way in which organisations handle personal data of individuals (such as consumers, employees,
contractors, service providers and other authorised persons) including tracking or monitoring their online behaviour.
Unintended or malicious breaches of data privacy laws may occur through system vulnerabilities, cyber-attacks, and by inappropriate
or negligent behaviour by BAT employees, contractors, service providers or others.
Depending on the risk of harm to the individuals concerned, such breaches of data privacy laws (including mass personal data
unavailability) could trigger a formal notification to a local data protection supervisory authority. This, in turn, could subject Group
companies to not only regulatory scrutiny but also individual claims or even class action suits; and ePrivacy Laws state that any misuse
of consumer personal data or lack of transparency provided to consumers on how we use their data or track their online behaviours are
subject to regulatory scrutiny.
Legal requirements relating to the collection, storage, handling, and transfer of personal data continue to evolve. Following the entry
into force of the GDPR in May 2018, other jurisdictions in which the Group operates have enacted similar local legislation such as the
California Consumer Privacy Act U.S. and the “LGPD” in Brazil which further increases the risks surrounding the processing of personal
data especially in the consumer space. As part of the Group's digital transformation, and move towards a more consumer centric
approach, in particular related to New Categories, this could further increase these risks as the expectation is that the exposure to
consumer data volumes will increase as well. With the emergence of new technologies, including Artificial Intelligence, these risks
(particularly, personal data misuse in the context of automated decision making by leveraging AI) may be exacerbated.
Impact
Failure to comply with existing or future e-Privacy Laws and privacy legislation governing the processing of personal data may
adversely impact the Group’s results of operations and financial condition.
Loss or unlawful use of personal data may result in civil or criminal legal liability and prosecution by enforcement bodies, which may
subject the Group to the imposition of material fines and/or penalties and/or claims and costs associated with defending these claims
(which could include class action suits brought by consumers). The fine under the GDPR and UK data privacy laws for the most severe
infringements can be up to €20 million, or 4% of the Group’s worldwide annual revenue from the preceding financial year, whichever is
higher. In the event of a plurality of actions, with separate sanctionable conducts not caught by the principle of concurrence of conduct,
fines can be applied alongside each other, without being a single legal maximum applicable to the sum. The Group’s officers and
employees may also be subject to personal criminal sanctions in certain jurisdictions. Non-compliance with the EU AI Act can result in
fines up to EUR 35 million or 7% of a company's annual turnover. The Brazilian LGDP provides for fines up to 2% of a company's revenue
in Brazil, capped at BRL 50 million per violation. Under the California CCPA, the fines for non-compliance include up to USD 7,500 per
violation for intentional breaches.
Reputational damage could also potentially cause significant harm to the Group, including negative perceptions of the Group’s
governance and our ESG credentials.
Relevant data protection supervisory authority could also order certain Group legal entities to cease processing activities, which could
result in a significant operational disruption. Regulatory interest may also prompt interest from other compliance authorities/
governments, leading to further regulation or proceedings.
The occurrence of any of the above effects could in turn have an adverse effect on the Group’s results of operations and financial
condition and cause the Group to fail to deliver on its strategic growth plans.
BAT Annual Report and Form 20-F 2024
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Other Information
Additional Disclosures
Group Risk Factors
Continued
430
Economic and Financial Risks
Risk: Foreign exchange rate exposures
Description
The Group’s reporting currency is sterling. The Group is exposed to the risk of fluctuations in exchange rates affecting the translation of
net assets and earned profits of overseas subsidiaries into the Group’s reporting currency. These translational exposures are not
normally hedged.
Exposures also arise from the foreign currency denominated trading transactions undertaken by subsidiaries and dividend flows.
Where not offset by opposing flows, these exposures are generally hedged according to internal policies, but hedging of exposure
to certain currencies might not be possible due to exchange controls, limited currency availability or prohibitive costs, and errors
in hedging may occur. Monetary policy divergence in relation to interest rates between top markets may also increase these risks.
Impact
During periods of exchange rate volatility, the impact of exchange rates on the Group’s results of operations and financial condition can
be significant. Fluctuations in exchange rates of key currencies against sterling may result in volatility in the Group’s reported earnings
per share, cash flow and balance sheet. Furthermore, the dividend paid by the Group may be impacted if the payout ratio is not
adjusted. Differences in translation between earnings and net debt may also affect key ratios used by credit rating agencies, which may
have an adverse effect on the Group’s credit ratings.
In addition, volatility and/or increased costs in the Group’s business due to transactional foreign exchange rate exposures may
adversely affect operating margins and profitability and attempts to increase prices to offset such increases could adversely impact
sales volumes.
The increased volatility observed in recent years in commodity prices has contributed to additional volatility of exchange rates,
impacting the financial performance of the Group's subsidiaries. The global dynamic backdrop of monetary policy actions, the inflation
cycle, as well as the economic performance may also increase the exchange rate risk in the short term.
Risk: Inability to obtain price increases and exposure to risks from excessive price increases and value chain erosion
Description
Annual price increases by the Group are among the key drivers in increasing market profitability. However, the Group has in the past
been, and may in the future be, unable to obtain such price increases as a result of increased regulation; increased competition from
illicit trade; stretched consumer affordability arising from deteriorating political and economic conditions and rising prices; sharp
increases or changes in excise structures; and competitors’ pricing.
As the New Categories market continues to develop, the Group may face erosion in the value chain for New Categories through lower
market prices, excise taxes, high retail trade margins or high production costs that make New Categories less competitive versus
combustible tobacco products.
In addition, the Group faces the risk that price increases it has conducted in the past, and may conduct in the future, may be excessive
and not find adequate adult tobacco consumer acceptance.
Impact
If the Group is unable to obtain price increases or is adversely affected by impacts of excessive price increases, it may be unable to
achieve its strategic growth metrics, have fewer funds to invest in growth opportunities, and, in the case of excessive price increases,
be faced with quicker reductions in sales volumes than anticipated due to accelerated market decline, down-trading (switching to a
cheaper brand) and increased illicit trade. These in turn impact the Group’s market share, results of operations and financial condition
and cause the Group to fail to deliver on its strategic growth plans.
In addition, erosion in the value chain for New Categories could have a negative impact on the Group’s sales volume or pricing for these
products. High excise could dampen demand for New Categories or result in lower profit margins. Lower market prices, high retail
trade margins or increases in production costs could also negatively impact profit margins or lead to uncompetitive pricing.
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431
Economic and Financial Risks continued
Risk: Effects of declining consumption of legitimate tobacco products and a tough competitive environment
Description
Evidence of market contraction and the growth of illicit trade of tobacco products is apparent in several key global markets in which the
Group operates. This decline is due to multiple factors, including increases in excise taxes leading to continuous above-inflation price
rises, changes in the regulatory environment, the continuing difficult economic environment in many countries impacting consumers’
disposable incomes, the increase in the trade of illicit tobacco products, rising health concerns, a decline in the social acceptability of
smoking and an increase in New Category uptake.
The Group competes based on the strength of its strategic brand portfolio, product quality and taste, brand recognition loyalty,
innovation, trade marketing distribution activities and price. The Group is subject to highly competitive environments in all aspects of its
business, and its competitive position can be significantly influenced by the prevailing economic climate, consumers’ disposable
income, regulation, competitors’ introduction of lower-price or innovative products, higher tobacco and nicotine product taxes, higher
absolute prices, governmental action to increase minimum wages, employment costs, interest rates and increase in raw material costs.
Furthermore, the Group is subject to substantial payment obligations under the State Settlement Agreements, which adversely
affect the ability of the Group to compete in the U.S. with manufacturers of deep-discount cigarettes that are not subject to such
substantial obligations.
Impact
Any future decline in the demand for legitimate tobacco products could have an adverse effect on the Group’s results of operations and
financial conditions and cause the Group to fail to deliver on its strategic growth plans.
In a tough competitive environment, factors such as market size reduction, customer down-trading, illicit trade and competitors
aggressively taking market share through price re-positioning or price wars generally reduce the overall profit pool of the market and
may impact delivery of the Group’s profits. This may also lead to a decline in sales volume, loss of market share, impact delivery of the
Group’s sustainability agenda, erosion of its portfolio mix and reduction of funds available for investment in growth opportunities.
Risk: Funding, liquidity and interest rate risks
Description
The Group cannot be certain that it will have access to bank financing or to the debt and equity capital markets at all times and is
therefore subject to funding and liquidity risks. In addition, the Group’s access to funding may be affected by restrictive covenants to
which it is subject under some of its credit facilities. Furthermore, failure to appropriately engage with investors’ and lenders’
sustainability criteria and concerns may impact BAT’s credit ratings, access to funding, or may result in an increase in the cost of funding.
The Group is also exposed to increases in interest rates in connection with both existing floating rate debt and future debt refinancings.
Although, interest rates have started to be cut by main Central Banks, having reached their peak after few years of intense hikes, in the
attempt to tame inflation, further changes are strictly data dependent, inflation and labour market trends playing an important role in
central banks’ future actions.
Furthermore, the Group operates in several markets closely regulated by governmental bodies that intervene in foreign exchange
markets by imposing limitations on the ability to convert local currency into foreign currency and introducing other currency and capital
controls that expose cash balances to devaluation risks, increase costs to obtain hard currency, or are a barrier to the repatriation of
earnings. As a result, the Group’s operational entities in these markets may be restricted from using End Market cash resources to pay
for imported goods, dividend remittances, interest payments and royalties. The inability to access End Market cash resources in certain
markets contributes to the Group’s funding and liquidity risks.
Compliance with sanctions and the restrictive policies of banks to facilitate transactions that are sanctions sensitive, can also restrict
the ability to transfer and use cash that is sanctions sensitive. Anti-money laundering legislation can lead to additional restrictions
relating to the payment and receipt of funds for both BAT as well as its business partners.
In addition, the Group's further development into the cannabis sector may lead to inaccessible proceeds from this activity, and such
activity may expose the Group to further regulatory and legal risks due to different local and international laws. The Group may also face
reputation and compliance issues due to various levels of acceptance of the cannabis sector by stakeholders which may restrict bank
and/or investor access.
Impact
Adverse developments in the Group’s funding, liquidity and interest rate environment may lead to shortages of cash and cash
equivalents needed to operate the Group’s business and to refinance its existing debt. Inability to fund the business under the Group’s
current capital structure, failure to access funding and foreign exchange or increases in interest rates may also have an adverse effect
on the Group’s credit rating, which would in turn result in further increased funding costs and may require the Group to issue equity or
seek new sources of capital. Although the Group currently benefits from investment grade ratings from Moody's, S&P and Fitch, any
adverse impact in the activity may trigger a rating revision. Any downgrade of the Group's credit ratings or loss of investment grade
status could materially increase the Group's financing costs. Non-compliance with the Group’s covenants under certain credit facilities
could lead to an acceleration of its debt.
All these factors may have material adverse effects on the Group’s results of operations and financial conditions and cause the Group
to fail to deliver on its strategic growth plans. These conditions could also lead to underperforming bond prices and increased yields.
In the case of funding or liquidity constraints, the Group may also suffer reputational damage due to its perceived failure to manage the
financial risk profile of its business, which may result in an erosion of shareholder value reflected in an underperforming share price, and/
or underperforming bond prices and higher yields. In addition, the Group’s ability to finance strategic opportunities or respond to
threats may be impacted by limited access to funds.
BAT Annual Report and Form 20-F 2024
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Additional Disclosures
Group Risk Factors
Continued
432
Risk: Failure to achieve growth through mergers, acquisitions, joint ventures, investments and other transactions
Description
The Group’s growth strategy includes a combination of organic growth as well as mergers, acquisitions, joint ventures and
investments. The Group may be unable to acquire or invest in attractive businesses on favourable terms and may inappropriately value
or otherwise fail to identify or capitalise on growth opportunities. The Group may not be able to deliver strategic objectives and revenue
improvements from business combinations, successfully integrate businesses it acquires or establishes, or obtain appropriate
regulatory approvals for business combinations. Risks from integration of businesses also include the risk that the integration may
divert the Group’s focus and resources from its other strategic goals. Furthermore, transactions may include risks associated with an
unpredictable regulatory landscape, such as bans or more restrictive regulations which come into force after the acquisition.
Additionally, the Group could be exposed to financial, legal or reputational risks if it fails to appropriately consider and address any
compliance, antitrust or sustainability aspects of a transaction or planned transaction. Further, the Group has certain uncapped
indemnification obligations in connection with divestitures and could incur similar obligations in the future.
Impact
Any of the foregoing risks could result in increased costs, decreased revenues or a loss of opportunities and have an adverse effect
on the Group’s results of operations and financial condition, and in the case of a breach of compliance, product regulation or antitrust
regulation, could lead to reputational damage, fines and potentially criminal sanctions and an adverse impact on the Group's
sustainability priorities. This may impact the Group's ability to compete in the long-term.
Inability to execute planned divestments, or poorly executed divestments, may not deliver fair value, or may result in loss of potential
sale proceeds resulting in fewer resources to drive quality growth or meet other corporate targets.
The Group may become liable for claims arising in respect of conduct prior to any merger or acquisition of businesses if deemed to
be a successor to the liabilities of the acquired company or indemnification claims relating to divestitures, and any resulting adverse
judgment against the Group may adversely affect its results of operations and financial condition and cause the Group to fail to deliver
on its strategic growth plans.
Please refer to note 31 on page 343 in the Notes on the Accounts for details of contingent liabilities applicable to the Group.
Risk: Unforeseen underperformance in key global markets
Description
A substantial majority of the Group’s profit from operations is based on its operations in certain top markets, including the U.S.
A number of these markets are declining for a variety of factors, including price increases, restrictions on marketing activities and
promotions, smoking prevention campaigns, increased pressure from anti-tobacco groups, accelerated migration to reduced-risk
products and increasing prevalence of non-compliant New Categories competitors.
Economic and political factors affecting the Group’s key markets include the prevailing economic climate, governmental austerity
measures, levels of employment, inflation, governmental action to increase minimum wages, employment costs, interest rates, raw
material costs, consumer confidence and consumer pricing.
Impact
Change to the economic and political factors in any of the top markets in which the Group operates often affect consumer behaviour
and have an impact on the Group’s results of operations and financial condition. These could cause the Group to fail to deliver
on its strategic growth plans.
Risk: Increases in net liabilities under the Group’s retirement benefit schemes
Description
The Group currently maintains and contributes to defined benefit pension plans and other post-retirement benefit plans that cover
various categories of employees and retirees worldwide. The Group’s obligations to make contributions under these arrangements may
increase in the case of increases in pension liabilities, decreases in asset returns, salary increases, inflation, decreases in long-term
interest rates, increases in life expectancies, changes in population trends and other actuarial assumptions.
Please refer to the information under the caption ‘Retirement benefit schemes’ on page 273 and to note 15 on page 302 in the Notes on
the Accounts for details of the Group’s retirement benefit schemes.
Impact
Higher contributions to the Group’s retirement benefit schemes could have an adverse impact on the Group’s results of operations,
financial condition and ability to raise funds and cause the Group to fail to deliver on its strategic growth plans.
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Product pipeline, commercialisation and Intellectual Property risks
Risk: Inability to predict consumers’ changing behaviours and launch innovative products that offer adult tobacco and
nicotine consumers meaningful value-added differentiation
Description
The Group focuses its research and development activities on both creating new products, including New Categories and Beyond
Nicotine products, whilst maintaining and improving the quality of its existing products. In a competitive market, the Group believes that
innovation is key to growth. The Group considers that one of its key challenges in the medium and long term is to provide adult tobacco
and nicotine consumers with high-quality products that take into account their changing preferences and expectations, including those
in relation to sustainability, while complying with evolving regulation.
Predicting consumers’ changing needs and behaviours across categories is a critical requirement for the Group's development. The
Group is exposed to the risk it may fail to predict consumers' changing needs and behaviours across categories and fail to deliver its
strategy effectively.
The Group continues to develop and roll-out its New Categories portfolio which requires significant investment. The Group is exposed to
the risk that it may be unsuccessful in developing and launching innovative products or maintaining and improving the quality of existing
products across combustibles, New Categories and Beyond Nicotine that offer consumers meaningful value-added differentiation. The
Group must keep pace with innovation in its sector and changes in consumer expectations. The Group is also exposed to the risk of an
inability to build sufficiently strong brand equity through social media and other digital tools to successfully compete. There are potential
bans and restrictions in key markets on using social media to advertise and communicate. Competitors may be more successful in
predicting changing consumer behaviour or better able to develop and roll-out consumer-relevant products and may be able to do so
more quickly and at a lower cost.
In addition, the Group devotes considerable resources to the research and development of innovative products that may have the
potential to reduce the risks of smoking-related diseases. The complex nature of research and development programmes necessary to
satisfy emerging regulatory and scientific requirements creates a substantial risk that these programmes will fail to demonstrate health-
related claims regarding New Categories and Beyond Nicotine or to achieve adult tobacco consumer, regulatory and scientific acceptance.
Furthermore, the regulatory environment impacting non-combustible tobacco products, Vapour products and other non-tobacco
nicotine products and Beyond Nicotine, including classification of products for regulatory and excise purposes, is still developing and it
cannot be predicted whether regulations will permit the marketing of such products in any given market in the future. Categorisation as
medicines, for example, and restrictions on advertising could stifle innovation, increase complexity and costs and significantly undermine
the commercial viability of these products. Alternatively, categorisation of any New Categories, as tobacco products for instance, could
result in the application of onerous regulation, which could further stifle uptake.
Impact
The inability to timely develop and roll-out innovations or products in line with consumer demand, including any failure to predict
changes in adult tobacco consumer and societal behaviour and expectations and to fill gaps in the product portfolio, as well as the risk
of poor product quality, could lead to missed opportunities, under- or over-supply, loss of competitive advantage, unrecoverable costs
and/or the erosion of the Group’s consumer base or brand equity.
Restrictions on packaging and labelling or on promotion and advertising could impact the Group’s ability to communicate its
innovations and product differences to adult tobacco consumers, leading to unsuccessful product launches. An inability to provide
robust scientific results sufficient to substantiate health-related product claims poses a significant threat to the ability to launch
innovative products and comply with emerging regulatory and legal regimes.
The occurrence of any of the above effects could in turn have an adverse effect on the Group’s results of operations and financial
condition and cause the Group to fail to deliver on its strategic growth plans.
In addition, there may be loss of investors’ confidence in sustainability performance, including failure to deliver our corporate purpose of
harm reduction.
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Other Information
Additional Disclosures
Group Risk Factors
Continued
434
Risk: Exposure to risks associated with intellectual property rights, including the failure to identify, protect and prevent
infringement of the Group’s intellectual property rights and potential infringement of, or the failure to retain licences to use,
third-party intellectual property rights
Description
The Group relies on trademarks, patents, registered designs, copyrights, domain names and trade secrets. The brand names under
which the Group’s products are sold are key assets of its business. The protection and maintenance of these brand names and of the
reputation of these brands is important to the Group’s success. Protection of intellectual property rights is also important in connection
with the Group’s innovative products, including New Categories.
The Group is exposed to the risk of infringements of its intellectual property rights by third parties due to limitations in judicial
protection, failure to identify, protect and register its innovations and/or inadequate enforceability of these rights in some markets
in which the Group operates.
The Group currently is involved in various patent infringement litigation proceedings in the US related to the Group’s Vapour products.
In February 2024, a Group subsidiary entered into a settlement agreement with an indirect wholly-owned subsidiary of Philip Morris
International Inc. (PMI). Pursuant to this agreement (the Settlement Agreement), among other things, both parties agreed to dismiss
certain pending legal proceedings between the parties and certain of their affiliates concerning certain Vapour and Heated Products
(HP) with prejudice and without admission of liability, to fully and finally discharge without admission of liability any injunctions granted
to the parties and their respective affiliates in such proceedings, and mutually release each other from presently known and past,
present and future claims arising out of or relating to, among other things, such proceedings, the infringement of the patents at issue in
the proceedings and certain intellectual property rights relating to certain products existing on or before a specified date. The parties
also agreed to covenants not to sue, on a perpetual, royalty-bearing or royalty-free basis, as the case may be, in respect of patents
associated with certain existing or changed Vapour or HP products. The parties also agreed to covenants not to sue on a perpetual,
royalty free basis and in respect of, among other things, the manufacture of products, accessories, replacement parts and upgrade
parts, or their respective components, and research and development of such products, accessories and parts, or their respective
components. Please refer to note 31 on page 343 in the Notes on the Accounts for details of contingent liabilities relating to patent
litigation and related settlements applicable to the Group.
Some brands and trademarks under which the Group’s products are sold are licensed for a fixed period of time in certain markets.
If any of these licences are terminated or not renewed after the end of the applicable term, the Group would no longer have the right
to use, and to sell products under, those brand(s) and trademark(s).
In addition, as third party rights are not always identifiable, the Group may be subject to claims for infringement of third party
intellectual property rights.
Impact
Any erosion in the value of the Group’s brands or innovations, or failure to obtain or maintain adequate protection of intellectual
property rights for any reason, or the loss of brands, trademarks or other intellectual property rights under licence to Group companies,
may have a material adverse effect on the Group‘s market share, results of operations and financial condition. Any inability to
appropriately protect the Group’s products and key innovations will also limit its growth and affect competitiveness and return
on innovation investment.
Any infringement of third-party intellectual property rights could result in interim or final injunctions, product recalls, legal liability
and the payment of damages, any of which may disrupt operations, negatively impact the Group’s reputation and have an adverse
effect on its results of operations and financial condition and cause the Group to fail to deliver on its strategic growth plan. Litigation
(even where successful) results in an intensive use of resources and management time leading to potential disruption. In addition,
although intellectual property-related settlements, such as the Settlement Agreement, allow the Group to focus on developing
innovative product solutions, they could also have an adverse effect on the Group’s results of operations and financial condition. For
example, the payment of royalties would create higher costs for the Group, whereas the grant of licenses and/or covenants not to sue
could result in a competitive advantage of the Group’s competitors which, in turn, could result in lower demand for the Group’s own
products and cause the Group to fail to deliver on its strategic growth plans.
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Overview
The tobacco and nicotine industry is among the most regulated
in the world, with manufacturers having to navigate highly diverse
regulatory frameworks. Nearly all countries impose restrictions
on the manufacture, sale, marketing, and packaging of tobacco
products. In addition, regulation of non-tobacco nicotine-
containing products is receiving increasing attention from
regulators. In some cases, countries are creating new regulatory
regimes for these new categories. In others, new products may be
included within existing frameworks that were not designed for
and may not necessarily be suitable for that category – for
example, Modern Oral products being regulated under pharmaceutical
regimes. The Group continues to engage with governments and
other bodies to find reasonable solutions to these issues.
Broadly, regulation of tobacco and new categories falls into the
following categories:
Category bans: Prohibitions on the sale, import, possession,
or use of specific products, including new categories.
Product: Regulations on use of ingredients, product design and
attributes (e.g. nicotine strength or flavours), as well as product
safety standards and product disclosure requirements.
Packaging and labelling: Requirements for health warnings and
other government-mandated messages to be printed on
packaging, as well as requirements around pack shape, size,
weight and colour, plain packaging requirements or markings
required for single-use plastics.
Advertising and sponsorship: Partial or total bans on advertising,
promotions and sponsorships for products, as well as brand
stretching (the association between a tobacco and a non-tobacco
product by using tobacco branding on the non-tobacco product),
and restrictions on the use of certain descriptors and brand names.
Retail: Restrictions on where tobacco and non-tobacco nicotine
products can be sold, such as the types of outlets (e.g.
supermarkets and vending machines), restrictions on how they
can be sold (e.g. above-the-counter versus beneath, or online),
and restrictions on adult purchase.
Place: Bans on smoking or vaping in certain places.
Price: Regulations which affect prices of tobacco and non-tobacco
nicotine products, such as excise taxes and minimum pricing.
Responsibility: Obligations under Extended Producer
Responsibility schemes (e.g. cigarette waste clean-up) and
measures to combat illicit trade.
The Group also operates a number of global policies which may
impose additional obligations or standards beyond those required
by local regulatory regimes.
The Group recognises and supports the objectives of governments
and policymakers in reducing smoking rates and the associated
health impacts, as well as the role of regulation in achieving these
goals. Accordingly, the Group endorses tobacco and nicotine
regulations that are grounded in robust evidence, tailored to
local circumstances, effectively achieve intended policy objectives,
and avoid unintended consequences, such as the expansion of
illegal markets.
Progressive regulations, including forward-thinking policies for
Smokeless products, are essential to Build a Smokeless World
and deliver governments’ smoke-free ambitions.
The Group believes that the development of regulations for
Smokeless products, should follow the below principles:
– be based on science and evidence, and proportionate to the
products’ risks compared with those of combustible tobacco
– facilitate adult awareness of smokeless alternatives and
allowing adult-only access
– ensure product quality, environmental sustainability, and
consumer relevance; and
– enable effective enforcement.
World Health Organization’s Framework Convention on
Tobacco Control
Perhaps uniquely for a consumer product, a large proportion
of the regulation of tobacco products has been driven at global
level by the World Health Organization’s international treaty:
the Framework Convention on Tobacco Control (FCTC). The
FCTC came into force in 2005 and contains provisions which
seek to reduce tobacco consumption and exposure to smoke.
The original treaty is supplemented by one protocol on illicit
trade and guidelines on the implementation of several of the
treaty obligations.
While the guidelines are not legally binding, they provide a
framework for Parties to the treaty on implementing specific
policies that target tobacco consumption. To date, the FCTC
has been ratified by 183 countries - not including the U.S.
One of the effects of the FCTC has been to increase efforts by
tobacco control advocates and public health organisations to
encourage governments to regulate the tobacco and nicotine
industry beyond the measures agreed to in the FCTC. The
consequence of this is that the scope of areas regulated is likely
to further expand, potentially including areas and products not
originally envisaged as being covered by the treaty.
For instance, the World Health Organization and other public
health organisations have focused efforts on widening the scope
of the FCTC beyond the text to encompass Reduced-Risk
Products
*† (RRPs). This includes decisions such as subjecting
tobacco heated products (THPs) to the FCTC, recommending
stricter regulations for RRPs, and advocating for the application of
existing cigarette regulations to RRPs.
All engagement efforts of the tobacco industry are closely
monitored by these organisations and are often (erroneously)
characterised as unlawful industry interference. In turn, this has an
impact on the willingness of Parties to engage with the industry,
which limits the opportunity for the industry to provide its
experience and expertise in the development of regulation.
The last session of the Conference of the Parties to the FCTC
(COP10) took place in February 2024 where two Expert Groups
were established. The first focused on new tobacco-control
measures under Article 2.1 of the WHO FCTC – which encourages
Parties to implement measures beyond those included in the
FCTC. The other focused on liability under Article 19 – which calls
for Parties to consider legislative action to deal with criminal and
civil liability related to tobacco control).
New guidelines were also adopted during COP10, aimed at curbing
online marketing of tobacco and nicotine products aimed at youth.
Additionally, a decision was made to address the environmental
impacts of tobacco under Article 18 of the FCTC, which pertains to
environmental protection. Other decisions included promoting
human rights and strengthening the WHO FCTC Investment Fund.
The session concluded with the Panama Declaration, which
stressed the need for more effective implementation of the FCTC.
The next meeting will take place in Geneva in November 2025.
EU Tobacco and Related Products Directive (2014/40/EU)
The most recent version of the EU Tobacco and Related Products
Directive (2014/40/EU – colloquially called TPD2), which is the
current main framework for tobacco and nicotine product regulation
for EU Member States, was adopted in April 2014 for transposition
by May 2016. TPD2 seeks to ensure that the same rules apply across
all Member States, though they are also able to go beyond its
requirements provided such measures are compatible with EU law.
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For tobacco products, the main provisions of TPD2 include: a ban
on the sale of cigarettes and roll-your-own tobacco with a
characterising flavour, including menthol flavours; requirements
for combined pictorial and textual health warnings covering 65%
of the two main pack surfaces (front and back) for cigarettes;
restrictions on pack shape and size, as well as ingredients
reporting and ‘tracking and tracing’ requirements. The Directive
also regulates vapour products by introducing a nicotine limit of
20 mg/ml, a premarket notification requirement and ingredient
reporting requirements and advertising restrictions.
In May 2021, the European Commission published a report
reviewing the implementation of the Directive which concluded it
had been successful in reducing tobacco use but that more action
was required, particularly on new categories such as vapour and
tobacco heating products (THPs).
A revised legal instrument (TPD3), which may come in the form
of a directly applicable EU Regulation that does not require
transposition into national law, is currently being drafted. The
European Commission is expected to come forward with a
proposed revised text in early 2025.
Specific measures in TPD3 are yet to be confirmed, but recent
Commission publications such as Europe’s Beating Cancer Plan
have suggested that for tobacco, they may include plain packaging
requirements, stricter ingredient rules and a ban on menthol in all
tobacco products. For vapour products, changes may include
flavour and stronger advertising restrictions and the extension of
regulation to nicotine-free products.
Stricter rules are also expected for THPs, which have already
recently been subjected to the ban on characterising flavours under
the TPD2 using a Delegated Act (see the Regulation of Ingredients,
including Flavoured Tobacco Products section for details). There
are also indications that a revised Directive could seek to regulate
nicotine pouches, either by creating a new framework or potentially
seeking to ban the category. It is currently unclear if other types of
nicotine products such as Herbal Products for Heating might also
be addressed by TPD3.
EU and Single-Use Plastics
The Single Use Plastics Directive (EU) 2019/904 (the SUP Directive)
entered into force in July 2019. It mandates Member States to establish
Extended Producer Responsibility (EPR) schemes to cover the costs of
litter clean-up and to implement on-pack marking requirements for
tobacco product filters. Member States were required to transpose the
SUP Directive into national law by 3 July 2021, with an implementation
deadline of 3 July 2021 for pack marking requirements and of 5 January
2023 for EPR schemes.
However, several Member States experienced delays in transposition
and implementation, which have resulted in EPR schemes becoming
operational months, and in some cases years, behind schedule. Spain,
for example, published its implementing regulations in late 2024. The
European Commission has also delayed issuing guidelines on the cost
criteria for litter clean-up, which were expected before the EPR
schemes’ implementation deadline.
France was the only EU Member State to implement EPR schemes
ahead of the 5 January 2023 deadline, having introduced schemes for
cigarette manufacturers, among others, in December 2020 and
February 2021. An evaluation of the SUP Directive is planned for 2027 to
assess its impact and guide potential revisions. A call for evidence is
expected soon, with a public consultation scheduled for Q4 2025.
Similar legislation has been enacted or is under consideration in other
countries, including Canada, Russia, South Korea, and at various sub-
federal levels in the United States. Internationally,
the United Nations Environment Programme’s Intergovernmental
Negotiating Committee is working on a legally binding global
agreement on plastic pollution.
Notes:
*
Based on the weight of evidence and assuming a complete switch from cigarette
smoking. These products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus,
are subject to FDA regulation and no reduced-risk claims will be made as to these
products without agency clearance
Restrictions on the Use of Tobacco and Vapour Products
in Public and Private Places
The Group operates across various markets where restrictions
are in place on smoking and vaping in certain private, public,
and workplace settings, such as restaurants, bars, beaches,
and nightclubs. While the specifics of these restrictions vary,
comprehensive bans on smoking, vaping and the use of THPs in public
and workplace environments have been established in markets such
as the U.S., Canada, the UK, France, Spain, New Zealand, and
Australia. More recently, new restrictions have included restrictions
on the use of such products within a specified distance from
designated public areas, such as primary schools, and/or in private
places such as vehicles when children are present.
Regulation of Ingredients, Including Flavoured Products
Some countries have restricted or banned the use of certain
flavours or ingredients in cigarettes and other tobacco products,
and vapour products. These actions are based on claims that
flavoured products disproportionately appeal to minors, encourage
youth smoking initiation or can increase the addictiveness or toxicity
of products. In these cases, permitted flavours are often limited to
tobacco and/or menthol variants only - varying by country/state as
some have also prohibited the use of menthol flavours.
Such restrictions have been enacted in markets including the U.S.,
Canada, Australia and Türkiye. The EU’s TPD2 similarly banned the
sale of cigarettes and roll-your-own tobacco with characterising
flavours other than tobacco. However, some regulations relating
to flavours currently face legal challenges. In Brazil, for example,
a proposed ban on ingredients with flavouring or aromatic properties,
including menthol, remains unenforced due to ongoing litigation.
Additionally, regulators in Europe are increasingly examining
restrictions on flavours and other ingredients for RRPs. For
example, Hungary, Finland, the Netherlands, Denmark and Norway
have adopted, or are considering adopting, restrictions on flavours
for vapour products. In 2023, an instrument (called a Delegated
Directive), issued by the European Commission, extended the ban
in the TPD2 on characterising flavours for tobacco products to also
apply to THPs. While this remains subject to legal challenges, the
majority of EU Member States have now transposed and
implemented this ban.
Further legislation on ingredients for both cigarettes and RRPs
is expected. The Conference of Parties to the FCTC has tasked a
working group to expand the partial guidelines on the regulation
of the contents of tobacco products and tobacco product
disclosures (see Articles 9 and 10 of the FCTC). The work of this
group was suspended in 2018 and an expert group was created to
examine the reasons for low implementation of Articles 9 and 10,
and related partial guidelines. This Expert Group presented its
report in 2021. There was no agreement at COP10 regarding
whether to continue work on these Articles via a Working Group
or an Expert Group, and the topic has stalled – pending further
discussion at COP11 in 2025.
Plain and Standardised Packaging and Design
Plain (or ‘standardised’) packaging typically involves restrictions on
using trademarks, logos, and colours on product packaging,
allowing only a single approved colour and specifying the font, size,
and placement of the brand name and variant. Tobacco control
advocates have tended to prioritise these measures, with non-
binding FCTC guidelines suggesting that Parties "should" consider
adopting plain packaging.
As of November 2024, 28 countries have either implemented
or passed legislation for plain packaging requirements impacting
cigarettes, including Australia, Belgium, Canada, Denmark, France,
Ireland, New Zealand, the Netherlands, Saudi Arabia, Singapore,
Türkiye and the UK. A number of other countries, including but not
limited to Spain, South Africa and Indonesia, are currently actively
considering introducing similar legislation.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
437
Moreover, in several cases, particularly in Europe, RRPs have been
subject to plain packaging requirements. Denmark introduced
plain packaging for both vapour products and THPs in 2022,
followed by Finland in 2023, and Australia and Norway in 2024.
Canada and Israel have plain packaging requirements for THPs,
while Belgium and the Netherlands are considering similar
measures for certain RRPs.
More recently, some regulators and tobacco control advocates
have examined measures which could apply to individual
cigarettes, such as mandatory on-product health messages.
A series of such messages was approved in Canada and Australia,
and regular cigarettes will be required to carry the messages as of
April 2025 in both jurisdictions. Additionally, some countries have
taken an interest in regulating the design of vapour product
devices and refill containers to standardise their colour, for
example. This is currently being considered in Norway.
Product Display Bans at Point of Sale and Licensing
Regimes
Product display bans at the point of sale and licensing regimes
have become relatively commonplace for combustible tobacco
products and have been implemented for several years in a
number of countries, including in Norway, Iceland, Finland, New
Zealand, Thailand, Canada, Australia, and the UK. A small number
of countries have also sought to extend these provisions to apply
to RRPs.
Some countries, such as Hungary, Finland and Spain, have also
sought to restrict the supply of tobacco products, including
through the adoption of licensing regimes limiting the number
of retail outlets from which it is possible to purchase tobacco
products or by prohibiting the sale of tobacco products
within a certain distance of specified public places.
Illicit Trade
The illegal market for tobacco products is an increasingly
important issue for governments and the industry across the
world with an increasing number considering or adopting
regulation to support anti-illicit trade activities.
These regulations may include mandatory "tracking and tracing"
systems to help regulators identify where seized products entered
the supply chain, security features to prevent counterfeiting, and
inspection and authentication requirements for seized products.
For instance, the TPD2 mandates that all unit packets of tobacco
be marked with a unique, indelible identifier that provides various
details about the product’s route-to-market when scanned.
In November 2012, FCTC Parties adopted the Protocol to Eliminate
Illicit Trade in Tobacco Products, which includes a range of supply
chain control measures, such as the implementation of "tracking
and tracing" technologies. As of 8 January 2024, 68 parties,
including the EU, have ratified the Protocol.
Regulation of Reduced-Risk Products
*† (RRPs)
The vapour products category has grown rapidly in both size and
complexity in the past decade. However, there is still no consensus
on how RRPs should be regulated. The TPD2, for example,
establishes frameworks for the regulation of novel tobacco
products and vapour products by introducing nicotine limits,
health warning requirements, advertising restrictions and pre-
market notification and post-market disclosure obligations. As
noted above, the World Health Organization and other public
health organisations have also sought to widen the scope of the
FCTC to include RRPs.
In countries where sales of vapour products are permitted,
governments are seeking to regulate them more strictly, including
by adopting bans on vaping in public places, restrictions on flavour,
plain packaging and retail display bans. An increasing number of
governments have moved to ban the sale of single-use vapour
products, with Belgium implementing a ban in January 2025, and
the U.K. and New Zealand to follow suit later this year.
Other RRPs such as nicotine pouches and THPs are also facing
increasing scrutiny. In many jurisdictions, existing legislative
definitions of ‘tobacco products’ are interpreted to apply to THPs,
thereby subjecting them to the same restrictions as those
designed for traditional combustible tobacco products, often
without any need to change existing laws.
Countries including Brazil, India and Mexico, have expressly banned
or are seeking to ban all RRPs while others, such as Australia,
regulate vapour products as medicinal products, thereby heavily
restricting their sale. A number of countries, including Netherlands,
Belgium and Germany have implemented a ban on Modern Oral
products, either through provisions banning their sale outright, or
via classification as foodstuffs, meaning their sale is de facto
prohibited. Other jurisdictions have sought to implement bans via
their classification as tobacco substitutes or medicinal products.
It is considered likely that tobacco-free nicotine pouches will be
regulated at a European level as part of the next revision of the
Tobacco Products Directive.
Additional measures
Generational Sales Bans (GSB) are among the latest significant
developments to be discussed in tobacco control policy. These
seek to ban the sale of tobacco products (and, sometimes,
nicotine) to anyone born after a certain date, meaning they
would never legally be allowed to purchase tobacco products
in their lifetime.
New Zealand became the first country to legislate for such a ban
in 2022 by passing an Act to ban sales to anyone born on or after
1 January 2009. However, the measures were later repealed by a
successor Government, due to concerns over enforcement and
the potential for the creation of a significant black market.
Similarly, the Malaysian Government sought to introduce GSB
provisions in a bill in 2023. These were also removed due to
concerns that the measures would be unconstitutional.
The UK Government is the latest to consider legislation to
implement a generational sales ban for tobacco products,
including THPs. The Turkish Government is also reported to be
drafting a bill with similar provisions, while both the Australian
and Norwegian Governments have indicated they are evaluating
comparable policies. Some individual lawmakers in various
countries have attempted to introduce bills aiming to ban sales
of tobacco to future generations. However, as no country has
implemented such measures yet, the real-world impacts are yet
to be tested.
Another key measure that has garnered attention from regulators
in recent years is the proposal to gradually reduce the nicotine
content in combustible tobacco products to levels that are
‘minimal’ or ‘non-addictive’. Notable countries that have initiated
significant discussions on these proposals include New Zealand,
where the measure was approved in Parliament but subsequently
repealed by the successor government, with concerns expressed
as to the efficacy of such a method for cessation and its potential
to contribute significantly to illicit trade. In the U.S., plans to
introduce a similar policy have been removed from the
Government’s list of immediate priorities.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Regulation of the Group’s Business
Continued
438
The U.S.
Through the Reynolds American Inc. (RAI) subsidiaries, the Group
is subject to U.S. federal, state, and local laws and regulations. The
Family Smoking Prevention and Tobacco Control Act (FSPTCA),
which was enacted in 2009, grants the U.S. Food & Drug
Administration (FDA) broad authority over the manufacture, sale,
marketing, and packaging of tobacco products but initially limited
the FDA’s authority to cigarettes, smokeless tobacco products,
cigarette tobacco and roll-your-own tobacco products. Elements
of the FSPTCA include: filing of facility registrations, product
listing, constituent testing and ingredient information; obtaining
the FDA's clearance for new products and product modifications;
banning all characterising flavours other than tobacco or menthol
in cigarettes; establishing ‘user fees’ to fund the FDA’s regulation
of tobacco products; requiring large pictorial warnings to be
included on cigarette packaging and advertising; directing FDA to
establish good manufacturing practices; revising the labelling and
advertising requirements for smokeless tobacco products; and
requiring the study of menthol. The U.S. Congress did limit the
FDA’s authority in various ways, including prohibiting it from:
– Banning categories of tobacco products; and
– Requiring the reduction of nicotine yields of a tobacco product
to zero.
On 10 May 2016, the FDA issued a final regulation, referred to as
the Deeming Rule, deeming all remaining products that are “made
or derived from tobacco” to be subject to the FDA’s regulatory
authority under the FSPTCA. The Deeming Rule became effective
as of 8 August 2016, though some requirements of the Deeming
Rule had their own compliance dates. Such ‘deemed’ tobacco
products subject to the FSPTCA include, among others, electronic
nicotine delivery systems (including e-cigarettes, e-hookah, e-cigars,
vape pens, advanced refillable personal vapourisers, electronic pipes
and e-liquids mixed in vape shops), certain dissolvable tobacco
products, cigars, pipe tobacco, and nicotine pouches.
The ‘pre-existing products’ date under the Final Rule for newly
deemed products remained the same as the ‘pre-existing
products’ date for those tobacco products already subject to the
FSPTCA – 15 February 2007 (known as ‘Pre-Existing Tobacco
Products’). Any tobacco product that was not legally marketed as
of 15 February 2007 is considered a new tobacco product subject
to premarket review by the FDA. The FDA established a
compliance policy allowing all newly deemed new tobacco
products that were on the market as of 8 August 2016 to remain
on the market so long as the manufacturer filed a Premarket
Tobacco Product Application (PMTA) by a specific deadline
(9 September 2020).
In October 2019, R. J. Reynolds Vapor Company filed PMTAs for
Vuse Solo. Based upon requirements of the FSPTCA that must be
addressed in PMTAs, and the FDA’s Guidance regarding the type
of evidence required for such applications, the costs of preparing
a PMTA are significant. R. J. Reynolds Vapor Company thereafter
filed PMTAs for the remaining Vuse products (Vibe, Ciro, and Alto)
and the Velo products (pouch and lozenge) by the September
2020 deadline. Certain additional data from ongoing research
relevant to the Alto and Velo applications were submitted as
amendments to the PMTAs during the FDA review process.
The FDA issued marketing granted orders for the Vuse Solo device
and its tobacco (‘original’) flavour in October 2021, but issued a
marketing denial order for Vuse Solo flavours other than menthol
(which were not on the market). That denial is being appealed with
the FDA. In May 2022, the FDA issued marketing granted orders
for the Vuse Vibe device and its tobacco flavour and the Ciro
device and its tobacco flavour but issued a marketing denial order
for flavours other than menthol (which were not on the market).
R. J. Reynolds Vapor Company has appealed the denials issued for
the relevant Vuse Vibe and Ciro products by requesting further
Agency review. We have received and are challenging the FDA's
marketing denial orders dated January 2023 related to Vibe and
Ciro (menthol variants).
In October 2023, the FDA issued a marketing denial order for Vuse Alto
menthol and mixed-berry (the latter of which was not on the market).
We have received court-ordered stays of enforcement of the FDA’s
denial orders for currently marketed menthol Vuse Alto, Solo, and Vibe
products, which means these Vuse menthol products can continue to
be marketed and sold while the judicial review process continues. In a
case FDA v. Wages & White Lion Investments, L.L.C, the U.S. Supreme
Court will likely decide whether FDA’s marketing denial orders of that
company’s flavoured products were legal. The impact of the Wages &
White Lion decision on our claims will depend on the specifics of the
Court’s opinion, but we have distinguishable arguments even in the
event of an adverse decision against that company. There can be no
assurance, however, that the Vuse menthol or other flavours-related
appeals will succeed. The U.S. Supreme Court also will rule in 2025 on
one aspect of R.J. Reynolds Vapor Company’s challenge to FDA’s denial
of menthol and mixed-berry Alto. Specifically, the FDA argues that the
case should not have been filed in the Fifth Circuit Court of Appeals.
Even if the FDA prevails at the U.S. Supreme Court, however, the
decision will be limited to the question of whether the case was filed in
the correct court.
In July 2024, the FDA issued marketing granted orders for the Vuse Alto
device as well as Vuse Alto Rich Tobacco and Golden Tobacco. The
Group’s Velo products remain on the market in the U.S., pending the
FDA's decisions on their premarket tobacco product applications and
there can be no assurance these applications will be granted. If the FDA
denies a marketing authorisation, then the relevant product(s) would
need to be withdrawn from the market (unless a court, or the agency
via supervisory review, intervenes).
Legislation granting the FDA authority over synthetic nicotine products
(products containing nicotine not ‘made or derived from tobacco’) went
into effect in April 2022, which required manufacturers of such
products to file PMTAs by a May 2022 deadline to continue marketing
those products.
In July 2024, the Group acquired the marketing rights to synthetic
nicotine pouch products that had submitted PMTAs by the May 2022
deadline. Those products are marketed as Velo Plus Pouches and
Grizzly Pouches. The application for those products remain under the
FDA’s review and, consistent with FDA enforcement priorities, may
continue to be marketed pending further FDA action. There can be no
assurance that the application will be granted.
Comprehensive Plan for Tobacco and Nicotine Regulation
On 28 July 2017, the FDA announced its intent to develop a
comprehensive plan for tobacco and nicotine regulation that
recognises the continuum of risk for nicotine delivery. As part
of that plan, the FDA planned to publish an Advance Notice of
Proposed Rulemaking (ANPRM) to seek public input regarding the
potential health benefits and possible adverse effects of lowering
the level of nicotine in combustible cigarettes. The FDA also
announced its intent to issue ANPRMs requesting public
stakeholder input on the impact of flavours (including menthol)
in increased initiation among youth and young adults as well as
assisting adult smokers to switch to potentially less harmful
forms of nicotine delivery, and the patterns of use and public
health impact of premium cigars.
This follows on from the FDA’s decision to issue its own
preliminary scientific evaluation regarding menthol cigarettes
in 2013, which concluded that menthol cigarettes adversely
affect initiation, addiction and cessation compared to
non-menthol cigarettes.
Notes:
*
Based on the weight of evidence and assuming a complete switch from cigarette
smoking. These products are not risk free and are addictive.
†
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus,
are subject to FDA regulation and no reduced-risk claims will be made as to these
products without agency clearance.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
439
In March 2018, the Agency issued three ANPRMs, seeking
information on (1) the lowering of nicotine levels to non-addictive
or minimally addictive levels, (2) the impact of flavours (including
menthol) in increased initiation among youth and young adults
as well as assisting adult smokers to switch to potentially less
harmful forms of nicotine delivery, and (3) the patterns of use and
public health impact of premium cigars. In April 2022, the FDA
published a proposed product standard that would ban menthol
as a characterising flavour in cigarettes. The FDA accepted public
comment on this proposed rule through August 2022. RAI Services
Company submitted a detailed comment
to the FDA (available on the U.S. Government's Regulations.gov
website) opposing the proposed rule as unsupported by existing
scientific evidence and with the potential for negative unintended
consequences. The Biden administration initially announced a non-
binding target date of August 2023 for issuing the final rule. The
administration then pushed the target date back to March 2024.
Then, in April 2024, the Administration announced that the
final rule would be further delayed, and the final rule has yet
to be issued.
In December 2022, the sale of all tobacco products with
characterising flavours other than tobacco (including menthol)
were banned in the state of California.
Additional regulation
In April 2019, the FDA issued a proposed rule on the format and
content of reports to demonstrate substantial equivalence. This
follows on from the FDA’s previous statements regarding the
development of foundational rules so as to provide clarity and
predictability to the tobacco product submission process,
including not only substantial equivalence applications but new
product applications as well as MRTP applications. In September
2019, the FDA published a proposed rule on the format and
content of PMTAs.
The final foundational rules for substantial equivalence and PMTAs
were published on 5 October 2021 and became effective on 4
November 2021. The FDA has not yet promulgated its proposed
rule for MRTP applications.
Under the FSPTCA, for a manufacturer to launch a new tobacco
product or modify an existing tobacco product after 15 February
2007, the manufacturer must obtain an order from the FDA
authorising the new or modified product to be marketed. One
exception is that a manufacturer that introduced a cigarette or
smokeless tobacco product between 15 February 2007 and 22
March 2011 could file a substantial equivalence report with the FDA
demonstrating either (1) that the new or modified product had the
same characteristics as a product commercially available as at
15 February 2007, referred to as a predicate product, or (2) if the
new or modified product had different characteristics than the
predicate product, that it did not raise different questions of public
health. A product subject to such report is referred to as a
provisional product. A manufacturer may continue to market a
provisional product unless and until the FDA issues an order that
the provisional product is not substantially equivalent, in which
case the FDA could then require the manufacturer to remove the
provisional product from the market. Many of the RAI subsidiaries’
cigarette and smokeless tobacco products currently on the market
are provisional products.
In January 2017, the FDA issued its first proposed product standard
whereby the Agency would require the reduction, over a three-year
period, of the levels of N-nitrosonornicotine (NNN) contained in
smokeless tobacco products. Since issuing this proposal, the
Agency has simply stated that it is evaluating submitted comments.
The FDA’s semi-annual regulatory agenda has not listed the NNN
proposal since its publication. Thus, it is not known whether or
when this proposed rule will be finalised, and, if adopted, whether
the final rule will be the same as or similar to the proposed rule.
On 18 March 2020, the FDA issued a rule mandating the
incorporation on cigarettes packages and advertising of graphic
health warnings. The rule required eleven new textual warnings, each
accompanied by a specific graphic image, on the top 50% of the
front and back of all cigarette packages, on the left 50% of the front
and back of cigarette cartons, and 20% of all cigarette advertising in
a location at the top of each advertisement, beginning 18 June 2021.
On 3 April 2020, RAI subsidiaries R. J. Reynolds Tobacco Company
and Santa Fe Natural Tobacco Company, in conjunction with several
cigarette manufacturers and retailers, filed a lawsuit seeking an order
and judgment holding unlawful, enjoining, and setting aside the rule
in its entirety. The court, following multiple orders to delay the
implementation of the rule, invalidated it as unconstitutional in
December 2022. In February 2023, the FDA appealed this decision to
the U.S. Court of Appeals for the Fifth Circuit. On 21 March 2024, the
U.S. Court of Appeals for the Fifth Circuit issued its opinion reversing
the court’s decision, and concluding that the warnings are constitutional.
On 25 November 2024, the U.S. Supreme Court declined to review
the Fifth Circuit’s decision. Plaintiffs continue to pursue their
remaining statutory claims against the rule in district court.
On 13 January 2025, the District Court entered an order postponing
the effective date of the rule pending final disposition of the
remaining statutory claims. That order may be appealed.
Under the prior Biden administration, the FDA announced its
intention to issue a final rule to ban menthol as a characterising
flavour in cigarettes. In January 2025, the Trump administration
withdrew the rule from the Office of Management and Budget and it
is currently held pending the new Trump administration’s
reconsideration of regulations advanced by Biden.
On 15 January 2025, in the final days of the outgoing Biden
administration, the FDA issued a proposed product standard
whereby the agency would limit nicotine level in cigarettes following
a two-year effective date from publication of any final rule. The
proposed rule is currently subject to public comment, but may be de-
prioritised by the Trump administration as it considers all proposed
regulations advanced by the Biden administration. Thus, it is not
known whether or when this proposed rule will be finalised, and, if
adopted, whether the final rule will be the same as or similar to the
proposed rule.
Cigarettes and other tobacco products are subject to substantial
taxes in the U.S. All states and the District of Columbia currently
impose cigarette excise taxes. Certain city and county governments,
such as those of New York City, Philadelphia, and Chicago, also
impose substantial excise taxes on cigarettes sold
in those jurisdictions. Also, all states and the District of Columbia
currently subject smokeless tobacco products to excise taxes.
Various states and the District of Columbia impose a tax on Vapour
products, such as e-cigarettes, and many other states have
proposed taxes on Vapour products. Currently, there is no federal tax
on Vapour products.
State and local governments also consider and implement other
legislation and regulation regarding the sale of tobacco products.
Measures include, among others, limiting or prohibiting the sale
of flavours in tobacco products, restricting where tobacco
products may be sold and increasing the minimum age to
purchase tobacco products.
The Group believes that, as a responsible business, it can contribute
through information, ideas and practical steps, to help regulators
address the key issues regarding its products, including underage
access, illicit trade, product information, product design, involuntary
exposure to smoke and the development of potentially less harmful
products, while maintaining a competitive market that
accommodates the significant percentage of adults who choose to
be tobacco consumers. The Group is committed to working with
national governments and multilateral organisations and welcomes
opportunities to participate in good faith to achieve sensible and
balanced regulation of traditional tobacco and potentially RRPs.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Regulation of the Group’s Business
Continued
440
The Master Settlement Agreement
& State Settlement Agreements
In 1998, the major U.S. cigarette manufacturers (including
R.J. Reynolds Tobacco Company, Lorillard and Brown & Williamson,
businesses which are now part of Reynolds American) 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, among other things, the volume of cigarettes sold and
market share (based on cigarette shipments in that year).
During 2012, R.J. Reynolds Tobacco Company, various other
tobacco manufacturers, 17 states, the District of Columbia and
Puerto Rico reached a final agreement related to Reynolds
American’s 2003 MSA activities, 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 billion 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 company’s 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
received US$170 million in credits, which have 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.
R.J. Reynolds Tobacco Company received US$285 million in credits,
which have been 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
received US$61 million in credits, which have been applied over a
five-year period from 2017. 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 received US$182 million in credits for
settled periods through 2017, which have been applied over a five-
year period from 2018. Also in 2018, a 10th 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 received US$205 million in credits for settled periods
through 2017, which have been applied over a five-year period from
2019. In the first quarter of 2020, certain conditions set forth in the
2018 agreements were met for those 10 states. In addition, in
August 2020, 24 states, the District of Columbia and Puerto Rico
agreed to settle NPM disputes related to claims for the period 2018
to 2022. 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 US$130 million in credits
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 million for settled periods through 2018, which will be
applied over a five-year period from 2024. In the first quarter of
2024, an additional state settled NPM disputes related to claims for
the period 2005 to 2031. It is estimated that R.J. Reynolds Tobacco
Company will receive a credit of US$11 million for settled periods
through 2018, which will be applied over a five-year period from
2024. In the third quarter of 2024, an additional state settled NPM
disputes related to claims for the period 2005 to 2011. It is
estimated that R.J. Reynolds Tobacco Company will receive a credit
of US$69 million for settled periods through 2011, which will be
applied over a five-year period from 2026. Credits in respect of
future years’ 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 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
American Inc.'s operating subsidiaries' expenses and payments
under the MSA and the State Settlement Agreements for 2024
amounted to US$2,160 million in respect of settlement expenses
and US$2,535 million in respect of settlement cash payments; for
2023 amounted to US$2,516 million in respect of settlement
expenses and US$2,874 million in respect of settlement cash
payments; for 2022 amounted to US$2,951 million in respect of
settlement expenses and US$3,129 million in respect of settlement
cash payments; for 2021 amounted to US$3,420 million in respect
of settlement expenses and US$3,744 million in respect of
settlement cash payments; for 2020 amounted to US$3,572 million
in respect of settlement expenses and US$2,848 million in respect
of settlement cash payments; and for 2019 amounted to
US$2,762 million in respect of settlement expenses and
US$2,918 million in respect of settlement cash payments.
R.J. Reynolds Tobacco Company divested certain brands to Imperial
Tobacco Group (ITG) in 2015. In 2020, R.J. Reynolds Tobacco
Company recognised additional expenses, included above, under the
State Settlement Agreements in the states of Mississippi, Florida,
Texas and Minnesota related to these divested brands. R.J. Reynolds
Tobacco Company recognised US$241 million of expense for
payment obligations to the state of Florida for the ITG acquired
brands from the date of divestiture, 12 June 2015, as a result of an
unfavourable judgment. In addition, R.J. Reynolds Tobacco Company
recognised US$264 million 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 acquired brands from the date
of divestiture. R.J. Reynolds Tobacco Company settled certain related
claims with Phillip Morris USA under the State Settlement
Agreements in the states of Mississippi, Texas and Minnesota for
US$8 million. Finally, in June 2022, R.J. Reynolds Tobacco Company
settled PM USA's claims relating to the calculation of the base-year
net operating profits for the ITG acquired brands for US$37 million.
Other Agreements
Settlement Agreement between Nicoventures
Trading Limited and Philip Morris Products S.A.
On 1 February 2024, Nicoventures Trading Limited, an indirect,
wholly-owned subsidiary of British American Tobacco p.l.c., entered
into a settlement agreement with Philip Morris Products S.A., an
indirect, wholly-owned subsidiary of Philip Morris International Inc.
(the Settlement Agreement).
Pursuant to this Settlement Agreement, among other things, both
parties have agreed to take all actions, as necessary, to dismiss with
prejudice, subject to certain limited exceptions, certain pending legal
proceedings between the parties and their respective affiliates
concerning certain Vapour products and Heated Products (HP)
(including devices and consumables) without admission of liability, and
to fully and finally discharge without admission of liability any
injunctions granted to the parties and their respective affiliates in such
proceedings. The parties have also agreed to a mutual release of
presently known and past, present and future claims arising out of or
relating to, among other things, such proceedings, the infringement of
the patents at issue in the proceedings and certain intellectual property
rights relating to certain products existing on or before a specified date.
Additionally, the parties have agreed to covenants not to sue, on a
perpetual, royalty-bearing or royalty-free basis, as the case may be,
in respect of patents associated with certain existing or changed
Vapour or HP products. The parties have also agreed to covenants
not to sue on a perpetual, royalty-free basis in respect of, among
other things, the manufacture of products, accessories,
replacement parts and upgrade parts, or their respective
components, and research and development of such products,
accessories, replacement parts, upgrade parts and components.
The Settlement Agreement is for a term of eight years from
1 February 2024 and is substantially worldwide in scope.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Material Contracts
441
Significant agreements
Change of Control Provisions as at 31 December 2024
Nature of agreement
Key provisions
The revolving credit facilities agreement, effective 12 March 2020
and 6 March 2023, entered into between the Company, B.A.T.
International Finance p.l.c., B.A.T. Netherlands Finance B.V. and
B.A.T Capital Corporation (as borrowers and, in the case of the
Company, as a guarantor) and HSBC Bank plc (as agent) and
certain financial institutions (as lenders), pursuant to which the
lenders have agreed to make available to the borrowers
£5.4 billion for general corporate purposes (the Facility).
– should a borrower (other than the Company) cease to be a direct
or indirect subsidiary of the Company, such borrower shall
immediately repay any outstanding advances made to it and shall
cease to be a borrower under the Facility; and
– where there is a change of control in respect of the Company,
the lenders can require all amounts outstanding under the Facility
to be repaid.
During 2024, the Group arranged, extended and/or renewed
short-term bilateral facilities with core relationship banks for
a total amount of £2.4 billion. B.A.T. International Finance p.l.c.
is the borrower under these facilities and the Company is the
guarantor. As at 31 December 2024, nil was drawn on a short-
term basis.
– should the borrower cease to be a direct or indirect subsidiary
of the Company, the borrower shall immediately repay any
outstanding advances made to it under these facilities; and
– where there is a change of control in respect of the Company,
the lenders can require all amounts outstanding under these
facilities to be repaid.
On 25 July 2017, the Company acceded as a guarantor under
the indenture of its indirect, wholly-owned subsidiary Reynolds
American Inc.. The securities issued under the indenture include
approximately US$6.7 billion aggregate principal amount of
unsecured Reynolds American Inc. debt securities.
– with respect to each series of debt securities issued under the
indenture, upon a change of control event, combined with a credit
ratings downgrade of the series to below investment-grade level
(such downgrade occurring on any date from the date of the
public notice of an arrangement that could result in a change of
control event until the end of the 60-day period following public
notice of the occurrence of a change of control event), Reynolds
American Inc. is obligated to make an offer to repurchase all debt
securities from each holder of debt securities. As a guarantor
under the indenture, the Company guarantees such payments.
Rules for the awards under the long-term incentive plans 2007
and 2016 (“LTIPs”), Restricted Share Plan (“RSP"), 2019 Deferred
Annual Share Bonus Scheme ("DSBS") and 2016 Sharesave
Scheme ("Sharesave").
– in the event of a change of control of the Company as a result
of a takeover, reconstruction or winding-up of the Company (not
being an internal reorganisation), LTIP, RSP, DSBS and Sharesave
awards will vest (and in the case of an option, become exercisable
for a limited period) based on the period of time that has elapsed
since the date of the award and the achievement of the
performance conditions (if applicable) at that date (performance
conditions are applicable to the LTIP only), unless the
Remuneration Committee determines this not to be appropriate
in the circumstances; and
– the rules of the LTIPs, RSP, DSBS and Sharesave allow (as an
alternative to early release) that participants may, if permitted,
exchange their existing awards for new awards of shares
in the acquiring company on a comparable basis.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Material Contracts
Continued
442
The Group uses a combination of in-house and contract manufacturers to manufacture its products.
BAT-owned manufacturing facilities
1
United States
AME
APMEA
Total
Fully integrated manufacturing
1
13
23
37
Other processing sites (including leaf threshing and OTP)
—
8
9
17
Sites manufacturing other products (including Snus, Modern Oral and Liquids)
2
4
—
6
Research and development facilities
2
2
3
7
Total
5
27
35
67
Note:
1.
As of 31 December 2024.
The plants and properties owned or leased and operated by the Group’s subsidiaries are maintained in good condition and are believed
to be suitable and adequate for the Group’s present needs.
The technology employed in the Group’s factories is sophisticated, especially in the area of cigarette-making and packing where
throughputs can reach between 500 and 1,000 packs per minute. The Group can produce many different pack formats (e.g., the number
of cigarettes per packet) and configurations (e.g., bevel edge, round corner, international) to suit marketing and consumer requirements.
New technology machines are sourced from the leading machinery suppliers to the industry. Close cooperation with these organisations
helps the Group support its marketing strategy by driving its product innovations, which are brought to the market on a regular basis.
The Group utilises quality standards, processes and procedures covering the entire end-to-end value chain to help to ensure quality
products are provided to its customers and adult tobacco consumers according to the Group’s requirements and End Market
regulatory requirements.
In 2024, the Group manufactured cigarettes in 37 cigarette factories in 35 countries. These plants and properties are owned or leased
and operated by the Group’s subsidiaries. The Group’s factory outputs and establishments vary significantly in size and production
capacity. In line with our corporate commitment to fight climate change, our factories have decarbonisation, water usage and waste
optimisation programmes.
Also in 2024, the Group used third-party manufacturers to manufacture the components required, including the devices, related
to New Categories. The Group also used third-party manufacturers to supplement the Group’s own production facilities in the U.S.
and Poland to bottle the liquids used in Vapour products. Further, in 2024, the Group’s manufacturing facilities in Poland and Sweden
(included in the above analysis) also undertook research and development activities, but were not distinct sites from the manufacturing
activities. As such, they were not recorded in the research and development facilities to avoid the risk of double counting.
For more information on property, plant and equipment, see note 13 in the Notes on the Accounts.
Raw Materials
While the Group does not own tobacco farms or directly employ farmers, it sources tobacco leaf directly from circa 91,000 contracted
farmers and third-party suppliers, primarily in emerging markets. We are committed to enhancing the sustainability and viability of our
contracted farmers by focusing on improving quality, distributing more resistant hybrid seeds and implementing tailored mechanisation
to reduce costs of production and increased yield. We hold our third-party suppliers to similar expectations regarding their farmer
contracts. We review our contracts on an annual basis, taking into account Group requirements over the medium term (2-3 years)
to ensure stability of demand and supply on production volumes. Our third-party suppliers also conduct annual reviews. The Group also
purchases a small amount of tobacco leaf from India via our associate ITC Ltd, where the tobacco is bought over an auction floor.
ITC maintains full traceability and monitors farmers to ensure the sustainable provenance of the tobacco procured via the auction floor.
Like any global agricultural commodity, the international price of tobacco fluctuates yearly. This is influenced by various factors including
changes in production costs such as labour and agricultural inputs, local inflationary pressures, economic and political conditions,
as well as climatic conditions that affect the supply, demand and quality of grown tobacco.
The Group believes there is an adequate supply of tobacco leaf in the world markets to satisfy its current and anticipated production
requirements.
We also source a number of other materials required as part of our production requirements, covering areas that include wrapping
materials and filters for our combustibles business and liquids and batteries for our New Categories products. We work closely with
our suppliers to ensure a robust supply chain, with contingency sourcing in place. Contracts and sourcing agreements are reviewed
regularly, to ensure competitive trading terms while recognising that prices may be impacted by external factors that affect our
third-party supply partners.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Property, Plant and Equipment
443
Principles
In the U.S., ADSs of the Company are listed on the New York Stock
Exchange (NYSE). The significant differences between the
Company’s corporate governance practices as a UK company
and those required by NYSE listing standards for U.S. companies
are discussed below.
The Company has applied a set of board governance principles,
which reflect the UK Corporate Governance Code 2018 (the 2018
Code) and its principles-based approach to corporate governance.
NYSE rules require U.S. companies to adopt and disclose on
their websites corporate governance guidelines. The Company
complies with UK requirements, including a statement in this
report of how the Company has applied the principles of the
Code and that the Company has complied with the provisions
of the Code.
Independence
The Company’s Board governance principles require that all
Non-Executive Directors be determined by the Board to be
independent in character and judgement and free from any
business or other relationships that could interfere materially with,
or appear to affect, their judgement. The Board also has formal
procedures for managing conflicts of interest. The Board has
determined that, in its judgement, the Chair of the Board and all
of the Non-Executive Directors are independent. In doing so, the
Board has taken into consideration the independence requirements
outlined in the NYSE’s listing standards and considers these to
be met by the Chair and all of its Non-Executive Directors.
Committees
The Company has a number of Board Committees that are broadly
comparable in purpose and composition to those required by
NYSE rules for domestic U.S. companies. For instance, the
Company has a Nominations (rather than nominating/corporate
governance) Committee and a Remuneration (rather than
compensation) Committee. The Company also has an Audit
Committee, which NYSE rules require for both U.S. companies
and foreign private issuers.
These Committees are composed solely of Non-Executive
Directors and, in the case of the Nominations Committee,
the Chair of the Board whom the Board has determined
to be independent in the manner described above.
Each Board Committee has its own terms of reference, which
prescribe the composition, main tasks and requirements of each
of the Committees (see the Board Committee reports on
pages 189, 194 and 205).
Under U.S. securities laws and the listing standards of the NYSE,
the Company is required to have an audit committee that satisfies
the requirements of Rule 10A-3 under the Exchange Act and
Section 303A.06 of the NYSE Listed Company Manual. The
Company’s Audit Committee complies with these requirements.
The Company’s Audit Committee does not have direct
responsibility for the appointment, reappointment or removal of
the independent auditors. Instead, it follows the UK Companies
Act 2006 by making recommendations to the Board on these
matters for it to put forward for shareholder approval at the AGM.
One of the NYSE’s additional requirements for the audit
committee states that at least one member of the audit
committee is to have ‘accounting or related financial management
expertise’. The Board has determined that Darrell Thomas and
Holly Keller Koeppel possess such expertise and also possess the
financial and audit committee experience set forth in both the UK
Code and SEC rules (see the Audit Committee report on page 194).
Darrell Thomas and Holly Keller Koeppel have also each been
designated as an Audit Committee financial expert as defined in
Item 16.A. of Form 20-F. The Board has also determined that each
Audit Committee member meets the financial literacy
requirements applicable under NYSE listing standards.
Shareholder Approval of Equity Compensation Plans
The NYSE rules for U.S. companies require that shareholders must
be given the opportunity to vote on all equity-compensation plans
and material revisions to those plans. The Company complies with
UK requirements that are similar to the NYSE rules. The Board,
however, does not explicitly take into consideration the NYSE’s
detailed definition of what are considered ‘material revisions’.
Codes of Business Conduct and Ethics
The NYSE rules require U.S. companies to adopt and disclose
a code of business conduct and ethics for all directors, officers
and employees and promptly disclose any waivers of the code for
directors or executive officers. The Group Standards of Business
Conduct (the SoBC) described on pages 118 and 119 apply to all
employees in the Group, including senior Management and the
Board, and satisfy the NYSE requirements. All Group companies
have adopted the SoBC (or localised versions). The SoBC also set
out the Group’s whistleblowing policy, enabling employees, in
confidence and anonymously, to raise concerns without fear of
reprisal, including concerns regarding questionable accounting or
auditing matters. The SoBC is available at bat.com/sobc.
The Company has also adopted a code of ethics for its Chief
Executive, Chief Financial Officer, Group Financial Controller and
Group Chief Accountant as required by the provisions of Section
406 of the Sarbanes-Oxley Act of 2002 and the rules issued by the
SEC. No waivers or exceptions to the Code of Ethics were granted
in 2024. The Code of Ethics includes requirements in relation to
confidentiality, conflicts of interest and corporate opportunities,
and obligations for those senior financial officers to act with
honesty and integrity in the performance of their duties and to
promote full, fair, accurate, timely and understandable disclosures
in all reports and other documents submitted to the SEC, the UK
Financial Conduct Authority, and any other regulatory agency.
The Company considers that these codes and policies address
the matters specified in the NYSE rules for U.S. companies.
Code for Share Dealing
The British American Tobacco Code for Share Dealing (the BAT
Code) governs the purchase, sale, and other dispositions of BAT's
securities by Directors, employees (including senior management),
contractors, and consultants of the Group.
The BAT Code is reasonably designed to promote compliance with
the UK's Market Abuse Regulation and other applicable insider
trading laws, rules and regulations, and any listing standards
applicable to the Group. The BAT Code is filed as Exhibit 11.2 to this
Annual Report and Form 20-F.
Independent Director Contact
Interested parties may communicate directly with the independent
Directors, individually or as a group, by sending written
correspondence addressed to the independent Director(s) to the
attention of the Company Secretary at the following address: c/o
Caroline Ferland, Company Secretary, British American Tobacco
p.l.c., Globe House, 4 Temple Place, London WC2R 2PG.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
U.S. Corporate Governance Practices
444
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures
The Group maintains ‘disclosure controls and procedures’ (as such
term is defined in Exchange Act Rule 13a-15(e)), that are designed
to ensure that information required to be disclosed in reports
the Group files or submits under the Exchange Act is recorded,
processed, summarised and reported within the time periods
specified in the SEC rules and forms, and that such information
is accumulated and communicated to Management, including
the Chief Executive and Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and
procedures, our Management, including the Chief Executive and
Chief Financial Officer, recognise that any controls and
procedures, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met. Due
to the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Group have been detected.
The Group’s disclosure controls and procedures have been
designed to meet, and Management believes that they meet,
reasonable assurance standards.
Management, with the participation of the Chief Executive and
Chief Financial Officer, has evaluated the effectiveness of the
Group disclosure controls and procedures pursuant to Exchange
Act Rule 13a-15(b) as of the end of the period covered by this
annual report. Based on that evaluation, the Chief Executive and
Chief Financial Officer have concluded that the Group disclosure
controls and procedures were effective at a reasonable
assurance level.
Management’s report on internal
control over financial reporting
Management, under the oversight of the Chief Executive and
the Chief Financial Officer, is responsible for establishing and
maintaining adequate internal control over financial reporting for
the Group. The Group’s internal control over financial reporting
consists of processes which are designed to: provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of the Group’s financial statements for external
reporting purposes in accordance with IFRS as issued by the IASB
and UK-adopted international accounting standards; provide
reasonable assurance that receipts and expenditure are made only
in accordance with the authorisation of Management; and provide
reasonable assurance regarding the prevention or timely detection
of any unauthorised acquisition, use or disposal of assets that
could have a material effect on the consolidated
financial statements.
As required by Section 404 of the Sarbanes-Oxley Act of 2002,
Management has assessed the effectiveness of the internal
control over financial reporting (as defined in Rules 13(a)-13(f) and
15(d)-15(f) under the U.S. Securities Exchange Act of 1934) based
on the updated Internal Control‑Integrated Framework issued
by the Committee of Sponsoring Organisations of the Treadway
Commission (COSO) (2013). Based on that assessment,
Management has determined that the Group’s internal control
over financial reporting was effective as at 31 December 2024.
Any internal control framework, no matter how well designed,
has inherent limitations, including the possibility of human error
and the circumvention or overriding of controls and procedures
and may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of
changes in conditions or because the degree of compliance
with the policies or procedures may deteriorate.
»KPMG LLP, an independent registered public accounting firm,
who also audit the Group’s consolidated financial statements,
has audited the effectiveness of the Group’s internal control over
financial reporting as at 31 December 2024, which is included
in this document.»
Changes in internal control over financial reporting
During the period covered by this report, there were no changes
in the Group’s internal control over financial reporting that have
materially affected or are reasonably likely to materially affect
the effectiveness of internal control over financial reporting.
Statements Regarding Competitive Position
Statements referring to the competitive position of BAT and its subsidiaries are based on the Group’s belief and best estimates.
In certain cases, such statements and figures rely on a range of sources, including investment analyst reports, independent market
surveys, and the Group’s own internal assessments of market share.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Controls and Procedures
445
This Other Information section of the Company's Annual Report and Form 20-F, which includes Additional Disclosures and Shareholder
Information, forms part of, and includes certain disclosures which are required by law to be included in, the Directors’ Report.
Strategic Report Disclosures
Section 414C(11) of the Companies Act 2006 allows the Board to include in the Strategic Report information that it considers to be of
strategic importance that would otherwise need to be disclosed in the Directors’ Report. The Board has chosen to take advantage of
this provision and accordingly, the information set out below, which would otherwise be required to be contained in the Directors’
Report, has been included in the Strategic Report.
Information required in the Directors’ Report
Section in the Strategic Report
Information on dividends
Financial Performance Summary
Certain risk information about the use of financial instruments
Treasury and Cash Flow
An indication of likely future developments in the business of the Group
Strategic Pillar Overview
Our Markets and Megatrends
An indication of the activities of the Group in the field of research and development
Tobacco Harm Reduction
Beyond Nicotine
Omni™
A statement describing the Group’s policy regarding the hiring, continuing employment
and training, career development and promotion of disabled persons
Employee Communities
Details of employee engagement: information, consultation, regard to employee interests,
share scheme participation and the achievement of a common awareness of the financial
and economic factors affecting the performance of the Group
Engaging with our Stakeholders
Employee Communities
Details of business relationships: Directors’ regard to business relationships with
customers, suppliers and other external stakeholders
Engaging with Our Stakeholders
Board Engagement with Stakeholders
Disclosures concerning greenhouse gas emissions and energy consumption
TCFD Reporting
Shareholder Information Disclosures
Information required in the Directors’ Report
Section in Other Information
Change of control provisions
Material contracts
Information on dividends
Dividends
Share capital – structure and voting rights; restrictions on transfers of shares
Articles of Association
Directors – appointment and retirement
Articles of Association
Amendment of Articles of Association
Articles of Association
Branch outside of the UK - Representative Office in South Africa
Inside page of the back cover
Major shareholders
Share Capital and Security Ownership
Directors – share issuance and buy-back powers
Share Capital and Security Ownership
Purchases of Shares
UK Listing Rules (UKLRs) Disclosures
For the purpose of UKLR 6.6.4R the applicable information required to be disclosed by UKLR 6.6.1R
Section in Other Information
Section (11) – shareholder waivers of dividends
Group Employee Trust
Section (12) – shareholder waivers of future dividends
Group Employee Trust
Directors: Interests and Indemnities
Interests
– details of Directors’ remuneration and emoluments, and their interests in the Company’s shares (including share
options and deferred shares) as at 31 December 2024 are given in the Remuneration Report; and
– no Director had any material interest in a contract of significance (other than a service contract) with the Company
or any subsidiary company during the year.
Insurance
– appropriate cover provided in the event of legal action against the Company’s Directors.
Indemnities
– provision of indemnities to Directors in accordance with the Company’s Articles of Association and to the maximum
extent permitted by law; and
– as at the date of this report, such indemnities are in force covering any costs, charges, expenses or liabilities that they
may incur in or about the execution of their duties to the Company or to any entity which is an associated company
(as defined in Section 256 of the Companies Act 2006), or as a result of duties performed by them on behalf of the
Company or any such associated company.
Directors’ Report Approval and Signature
The Directors’ Report comprises the information on pages 164 to 204
@ and page 247
@ and pages 389 to 463. The Directors’ Report
was approved by the Board of Directors on 12 February 2025 and signed on its behalf by Caroline Ferland, Company Secretary.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Directors’ Report Information
446
This document contains certain forward-looking statements,
including “forward-looking” statements made within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995. These
statements are often, but not always, made through the use of
words or phrases such as “believe,” “anticipate,” “could,” “may,”
“would,” “should,” “intend,” “plan,” “potential,” “predict,” “will,”
“expect,” “estimate,” “project,” “positioned,” “strategy,” “outlook”,
“target” and similar expressions. These include statements
regarding our intentions, beliefs or current expectations
concerning, amongst other things, our results of operations,
financial condition, liquidity, prospects, growth, strategies and
the economic and business circumstances occurring from time
to time in the countries and markets in which the Group operates.
In particular, these forward-looking statements include, among
other statements, statements regarding the Group’s future
financial performance, planned product launches and future
regulatory developments, as well as: (i) certain statements in the
Overview section (pages 2 to 23), including the Chair’s Introduction
and Chief Executive’s Review; (ii) certain statements in the Strategy
section (pages 11-25), including the Our Strategic Navigator section,
Our Business Model section, Engaging with Our Stakeholders
section, Chief Financial Officer's Overview and Our Markets and
Megatrends section; (iii) certain statements in the Quality Growth
section (pages 26 to 37), including the Strategic Pillar overview; (iv)
certain statements in the Dynamic Business section (pages 38 to
59), including certain statements in the Strategic Pillar Overview
section, the Financial Performance Summary, the Treasury and
Cash Flow section and the going concern discussions in the Other
Financial Information section; (v) certain statements in the
Sustainable Future section (pages 60 to 163), including the Our
Sustainability Strategy section, Double Materiality Assessment
section, Tobacco Harm Reduction section, Climate section, Nature
section, Circularity section, Communities section, TCFD reporting
and TNFD reporting section; (vi) certain statements in the Notes on
Accounts (pages 269 to 370), including the Group's ability to
navigate regulatory change on page 297 and estimates and
assumptions in connection with the Proposed Plans under the
CCAA on page 328; and (vii) certain statements in the Other
Information section (pages 389 to 467), including the Additional
Disclosures and Shareholder Information sections.
All such forward-looking statements involve estimates and
assumptions that are subject to risks, uncertainties and other
factors. It is believed that the expectations reflected in this
document are reasonable but they may be affected by a wide
range of variables that could cause actual results to differ
materially from those currently anticipated.
Among the key factors that could cause actual results to differ
materially from those projected in the forward-looking statements
are uncertainties related to the following: the impact of
competition from illicit trade; the impact of adverse domestic
or international legislation and regulation; the inability to develop,
commercialise and deliver the Group’s New Categories strategy;
the impact of Supply chain disruptions; adverse litigation and
dispute outcomes and the effect of such outcomes on the Group’s
financial condition; the impact of significant increases or structural
changes in tobacco, nicotine and New Categories related taxes;
translational and transactional foreign exchange rate exposure;
changes or differences in domestic or international economic
or political conditions; the ability to maintain credit ratings and to
fund the business under the current capital structure; the impact
of serious injury, illness or death in the workplace; adverse
decisions by domestic or international regulatory bodies; direct
and indirect adverse impacts associated with Climate Change;
direct and indirect adverse impacts associated with the move
towards a Circular Economy; and Cyber Security risks caused by
the heightened cyber-threat landscape and increased digital
interactions with consumers, and changes to regulation. Further
details on the principal risks that may affect the Group can be
found in the Group Principal Risks section of the Strategic Report
on pages 155 to 162 of this document. A summary of all the risk
factors (including the principal risks) which are monitored by the
Board through the Group’s risk register is set out in the Additional
Disclosures section under the Group Risk Factors heading on
pages 414 to 435.
Past performance is no guide to future performance and persons
needing advice should consult an independent financial adviser.
The forward-looking statements reflect knowledge and
information available at the date of preparation of this document
and the Group undertakes no obligation to update or revise these
forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned
not to place undue reliance on such forward-looking statements.
No statement in this document is intended to be a profit forecast
and no statement in this document should be interpreted to mean
that earnings per share of BAT for the current or future financial
years would necessarily match or exceed the historical published
earnings per share of BAT.
Although financial materiality has been considered in the
development of our Double Materiality Assessment (DMA), our
DMA and any conclusions in this document as to the materiality or
significance of sustainability matters do not imply that all topics
discussed therein are financially material to our business taken as
a whole, and such topics may not significantly alter the total mix of
information available about our securities.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Cautionary Statement
447
Main Market – London Stock Exchange (LSE)
The primary market for BAT’s ordinary shares is the LSE (Share Code: BATS; ISIN: GB0002875804). BAT’s ordinary shares have been
listed on the LSE main market since 8 September 1998 and are a constituent element of the FTSE 100 Index.
Secondary Listing – Johannesburg Stock Exchange (JSE Limited), South Africa
BAT’s ordinary shares have a secondary listing and are traded in South African rand on the Main Board of the JSE in South Africa
(Abbreviated name: BATS; Trading code: BTI). BAT’s ordinary shares have been listed on the JSE since 28 October 2008 and are
a constituent element of the JSE Top 40 Index.
American Depositary Shares (ADSs) – New York Stock Exchange (NYSE)
BAT ordinary shares trade in the form of BAT ADSs in the U.S. under the symbol BTI (CUSIP Number: 110448107). The BAT ADSs have
been listed on the NYSE since 25 July 2017 as a Sponsored Level III ADS programme for which Citibank, N.A. is the depositary (the
‘Depositary’) and transfer agent. Each ADS represents one ordinary share. ADSs are evidenced by American Depositary Receipts (ADRs).
Share Prices
The high and low prices at which the Company’s ordinary shares and ADSs are recorded as having traded during the year on each
of the LSE, JSE and NYSE are as follows:
High
Low
LSE
£30.10
£22.67
JSE
R695.60
R536.25
NYSE
US$39.36
US$28.38
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Shareholder Information
448
Policy
The Group’s policy is to pay dividends of 65% of long-term sustainable earnings, calculated with reference to adjusted diluted earnings
per share, as defined on page 405, and reconciled from earnings per share in note 11 in the Notes on the Accounts. Please see page 54
of this Annual Report and Form 20-F 2024 for further discussion on the Group’s dividend.
Currencies and Exchange Rates
Details of foreign exchange rates are set out in the Financial Review section of the Strategic Report on page 58 of this Annual Report
and Form 20-F 2024. There are currently no UK foreign exchange controls or restrictions on remittance of dividends on the ordinary
shares other than restrictions applicable to certain countries and persons subject to UK economic sanctions.
American Depositary Shares – Dividends
The following table shows the dividends paid by British American Tobacco p.l.c. in the years ended 31 December 2024 to
31 December 2022 inclusive.
Announcement
Year
Payment
Dividend Period
Dividend Per BAT
Ordinary Share
GBP
Dividend Per BAT ADS
ADS ratio 1:1
US$
1
2024
May
Quarterly Interim 2024
0.5888
0.734851
August
Quarterly Interim 2024
0.5888
0.753752
November
Quarterly Interim 2024
0.5888
0.762702
February 2025
Quarterly Interim 2024
0.5888
0.730435
Total
2.3552
2.981740
2023
May
Quarterly Interim 2023
0.5772
0.723866
August
Quarterly Interim 2023
0.5772
0.734400
November
Quarterly Interim 2023
0.5772
0.713880
February 2024
Quarterly Interim 2023
0.5772
0.7318030
Total
2.3088
2.903949
2022
May
Quarterly Interim 2022
0.5445
0.680434
August
Quarterly Interim 2022
0.5445
0.655523
November
Quarterly Interim 2022
0.5445
0.635540
February 2023
Quarterly Interim 2022
0.5445
0.669190
Total
2.1780
2.640687
Note:
1.
Holders of BAT ADSs: dividends are receivable in US$ based on the £/US$ exchange rate on the applicable ADS payment date, being three business days after the payment date for the
BAT ordinary shares.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Dividends
449
Quarterly Dividends for the Year Ended 31 December 2024
The Group pays quarterly dividends. The Board has declared an interim dividend of 240.24p per ordinary share of 25p which is payable
in four equal quarterly instalments of 60.06p per ordinary share in May 2025, August 2025, November 2025 and February 2026. This
represents an increase of 2.0% on 2023 (2023: 235.52p per share), and a payout ratio, on 2024 adjusted diluted earnings per share,
of 66.3%.
The quarterly dividends will be paid to shareholders registered on either the UK main register or the South Africa branch register
and to ADS holders, each on the applicable record dates set out under the heading ‘Key dates’ below.
Holders of American Depositary Shares (ADSs)
For holders of ADSs listed on the NYSE, the record dates and payment dates are set out below. The equivalent quarterly dividends
receivable by holders of ADSs in US$ will be calculated based on the exchange rate on the applicable payment date.
South Africa branch register
In accordance with the JSE Listing Requirements, the finalisation information relating to shareholders registered on the South Africa
branch register (comprising the amount of the dividend in South African rand, the exchange rate and the associated conversion date)
will be published on the dates stated below, together with South Africa dividends tax information.
The quarterly dividends are regarded as ‘foreign dividends’ for the purposes of the South Africa Dividends Tax. For the purposes
of South Africa Dividends Tax reporting, the source of income for the payment of the quarterly dividends is the United Kingdom.
Key dates
In compliance with the requirements of the LSE, the NYSE and Strate, the electronic settlement and custody system used by the JSE, the following are the
salient dates for the quarterly dividend payments. All dates are 2025 unless otherwise stated.
Event
Payment No. 1
Payment No. 2
Payment No. 3
Payment No. 4
Preliminary announcement (includes declaration
data required for LSE and JSE purposes)
13 February
Publication of finalisation information (JSE)
17 March
17 June
22 September
15 December
No removal requests permitted (in either
direction) between the UK main register and the
South Africa branch register
17 March–
28 March
17 June–
27 June
22 September–
3 October
15 December– 30
December
Last Day to Trade (LDT) cum-dividend (JSE)
25 March
24 June
30 September
23 December
Shares commence trading ex-dividend (JSE)
26 March
25 June
1 October
24 December
No transfers permitted between the UK main
register and the South Africa branch register
26 March–
28 March
25 June–
27 June
1 October–
3 October
24 December– 30
December
No shares may be dematerialised or
rematerialised on the South Africa branch register
26 March–
28 March
25 June–
27 June
1 October–
3 October
24 December– 30
December
Shares commence trading ex-dividend (LSE)
27 March
26 June
2 October
29 December
Shares commence trading ex-dividend (NYSE)
28 March
27 June
3 October
30 December
Record date (JSE, LSE and NYSE)
28 March
27 June
3 October
30 December
Last date for receipt of Dividend Reinvestment
Plan (DRIP) elections (LSE)
11 April
11 July
17 October
14 January 2026
Payment date (LSE and JSE)
7 May
1 August
7 November
4 February 2026
ADS payment date (NYSE)
12 May
6 August
13 November
9 February 2026
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Additional Disclosures
Dividends
Continued
450
The following discussion summarises material U.S. federal income
tax consequences and UK taxation consequences to U.S. holders
of owning and disposing of ordinary shares or ADSs, this
information is accurate as at 4 February 2025. This discussion
does not address any tax consequences arising under the laws of
any state, local or foreign jurisdiction or under any U.S. federal laws
other than those pertaining to income tax. This discussion is based
upon the U.S. Internal Revenue Code of 1986 (the ‘U.S. Tax Code’),
the Treasury regulations promulgated under the U.S. Tax Code and
court and administrative rulings and decisions, all as in effect on
the date hereof. These laws may change, possibly retroactively,
and any change could affect the accuracy of the statements
and conclusions set forth in this discussion.
This discussion addresses only those U.S. holders of ordinary
shares or ADSs who hold such equity interests as capital assets
within the meaning of Section 1221 of the U.S. Tax Code. Further,
this discussion does not address all aspects of U.S. federal income
taxation that may be relevant to U.S. holders in light of their
particular circumstances or that may be applicable to them if they
are subject to special treatment under the U.S. federal income tax
laws, including, without limitation:
– a bank or other financial institution;
– a tax-exempt organisation;
– an S corporation or other pass-through entity and an
investor therein;
– an insurance company;
– a mutual fund;
– a regulated investment company or real estate investment trust;
– a dealer or broker in stocks and securities, or currencies;
– a trader in securities that elects mark-to-market treatment;
– a U.S. holder subject to the alternative minimum tax provisions
of the U.S. Tax Code;
– a U.S. holder that received ordinary shares or ADSs through the
exercise of an employee stock option, pursuant to a tax qualified
retirement plan or otherwise as compensation;
– a U.S. holder that is a tax-qualified retirement plan
or a participant or a beneficiary under such a plan;
– a person that is not a U.S. holder (as defined below);
– a person that has a functional currency other than the US dollar;
– a person required to recognise any item of gross income
as a result of such income being recognised on an applicable
financial statement;
– a U.S. holder of ordinary shares or ADSs that holds such equity
interest as part of a hedge, straddle, constructive sale,
conversion or other integrated transaction;
– a U.S. holder that owns (directly, indirectly or constructively) 10%
or more of ordinary shares or ADSs by vote or by value; or
– a U.S. expatriate.
The determination of the actual tax consequences to a U.S. holder
will depend on the U.S. holder’s specific situation. U.S. holders of
ordinary shares or ADSs should consult their own tax advisers as
to the tax consequences of owning and disposing of ordinary
shares or ADSs, in each case, including the applicability and effect
of the alternative minimum tax and any state, local, foreign or
other tax laws and of changes in those laws.
For purposes of this discussion, the term U.S. holder means a
beneficial owner of ordinary shares or ADSs (as the case may be)
that:
– is for U.S. federal income tax purposes: (i) an individual citizen or
resident of the United States; (ii) a corporation, including any
entity treated as a corporation for U.S. federal income tax
purposes, created or organised in or under the laws of the United
States, any state thereof or the District of Columbia; (iii) a trust if
a U.S. court is able to exercise primary supervision over the
trust’s administration and one or more U.S. persons are
authorised to control all substantial decisions of the trust or it
has a valid election in effect under applicable Treasury
regulations to be treated as a U.S. person; or (iv) an estate that is
subject to U.S. federal income tax on its income regardless of its
source; and
– is not resident in the UK for UK tax purposes.
The U.S. federal income tax consequences to a partner in an entity
or arrangement treated as a partnership for U.S. federal income
tax purposes that holds ordinary shares or ADSs generally will
depend on the status of the partner and the activities of the
partnership. Partners in a partnership holding any such equity
interest should consult their own tax advisers.
Material U.S. Federal Income Tax Consequences
Relating to the Ownership and Disposition of Ordinary
Shares or ADSs
The following is a discussion of the material U.S. federal income tax
consequences of the ownership and disposition by U.S. holders of
ordinary shares or ADSs. This discussion assumes that BAT is not,
and will not become, a passive foreign investment company for
U.S. federal income tax purposes, as described below.
ADSs
A U.S. holder of ADSs, for U.S. federal income tax purposes,
generally will be treated as the owner of the underlying ordinary
shares that are represented by such ADSs. Accordingly, deposits
or withdrawals of ordinary shares for or from ADSs will not be
subject to U.S. federal income tax.
Taxation of Dividends
The gross amount of distributions on the ordinary shares or ADSs
will be taxable as dividends to the extent paid out of BAT’s current
or accumulated earnings and profits, as determined under U.S.
federal income tax principles. Such income will be includable in a
U.S. holder’s gross income as ordinary income on the day actually
or constructively received by the U.S. holder. Such dividends will be
treated as foreign source income and will not be eligible for the
dividends received deduction allowed to corporations under the
U.S. Tax Code.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
Shareholder Taxation Information
451
With respect to non-corporate U.S. investors, certain dividends
received from a qualified foreign corporation may be subject to
reduced rates of taxation. A qualified foreign corporation includes
a foreign corporation that is eligible for the benefits of a
comprehensive income tax treaty with the United States that the
Treasury determines to be satisfactory for these purposes and
that includes an exchange of information provision. The Treasury
has determined that the treaty between the United States and the
United Kingdom meets these requirements, and BAT believes that
it is eligible for the benefits of the treaty. However, non-corporate
holders that do not meet a minimum holding period requirement
during which they are not protected from the risk of loss or that
elect to treat the dividend income as ‘investment income’ pursuant
to Section 163(d)(4) of the U.S. Tax Code will not be eligible for the
reduced rates of taxation. In addition, the rate reduction will not
apply to dividends if the recipient of a dividend is obligated to make
related payments with respect to positions in substantially similar
or related property. This disallowance applies even if the minimum
holding period has been met. U.S. holders should consult their own
tax advisers regarding the application of these rules to their
particular circumstances.
The amount of any dividend paid by BAT in sterling (including any
such amount in respect of ADSs that is converted into US dollars
by the depositary bank) will equal the US dollar value of the sterling
actually or constructively received, calculated by reference to the
exchange rate in effect on the date the dividend is so received by
the U.S. holder, regardless of whether the sterling are converted
into US dollars. If the sterling received as a dividend are converted
into US dollars on the date received, the U.S. holder generally will
not be required to recognise foreign currency exchange gain or
loss in respect of the dividend income. If the sterling received as a
dividend are not converted into US dollars on the date of receipt,
the U.S. holder will have a basis in sterling equal to their US dollar
value on the date of receipt. Any gain or loss realised on a subsequent
conversion or other disposition of sterling will be treated as U.S.
source ordinary income or loss. U.S. holders of ADSs should
consult their own tax advisers regarding the application of these
rules to the amount of any dividend paid by BAT in sterling that is
converted into US dollars by the depositary bank.
To the extent that the amount of any distribution exceeds BAT’s
current and accumulated earnings and profits for a taxable year,
as determined under U.S. federal income tax principles, the
distribution will first be treated as a tax-free return of capital,
causing a reduction in the U.S. holder’s adjusted basis of the
ordinary shares or ADSs, and to the extent the amount of the
distribution exceeds the U.S. holder’s tax basis, the excess will
be taxed as capital gain recognised on a sale or exchange, as
described below. BAT does not expect to determine earnings
and profits in accordance with U.S. federal income tax principles.
Therefore, notwithstanding the foregoing, U.S. holders should
expect that distributions generally will be reported as dividend
income for U.S. information reporting purposes.
Distributions by BAT of additional ordinary shares (which may be
distributed by the depositary bank to a holder of ADSs in the form
of ADSs) to a U.S. holder that is made as part of a pro rata
distribution to all holders of ordinary shares and ADSs in respect
of their ordinary shares or ADSs, and for which there is no option
to receive other property (not including ADSs), generally will not be
subject to U.S. federal income tax. The basis of any new ordinary
shares (or ADSs representing new ordinary shares) so received will
be determined by allocating the U.S. holder’s basis in the previously
held ordinary shares or ADSs between the previously held ordinary
shares or ADSs and the new ordinary shares or ADSs, based on
their relative fair market values on the date of distribution.
Passive foreign investment company
A passive foreign investment company (“PFIC”) is any foreign
corporation if, after the application of certain ‘look-through’ rules:
(1) at least 75% of its gross income is ‘passive income’ as that term
is defined in the relevant provisions of the U.S. Tax Code;
or (2) at least 50% of the average value of its assets produce
‘passive income’ or are held for the production of ‘passive income.’
The determination as to PFIC status is made annually.
BAT does not believe that it is, for U.S. federal income tax
purposes, a PFIC, and BAT expects to operate in such a manner
so as not to become a PFIC. If, however, BAT is or becomes a PFIC,
U.S. holders could be subject to additional U.S. federal income
taxes on gain recognised with respect to the ordinary shares or
ADSs and on certain distributions, plus an interest charge on
certain taxes treated as having been deferred under the PFIC rules.
Non-corporate U.S. holders will not be eligible for reduced rates of
taxation on any dividends received from BAT if it is a PFIC in the
taxable year in which such dividends are paid or in the preceding
taxable year. BAT’s U.S. counsel expresses no opinion with respect
to BAT’s PFIC status.
Taxation of capital gains
Upon a sale, exchange or other taxable disposition of ordinary
shares or ADSs, a U.S. holder will generally recognise capital gain
or loss for U.S. federal income tax purposes in an amount equal to
the difference between the US dollar value of the amount realised
on the disposition and the U.S. holder’s adjusted tax basis in the
ordinary shares or ADSs as determined in US dollars. Such gain or
loss generally will be U.S. source gain or loss, and will be long-term
capital gain or loss if the U.S. holder has held the ordinary shares or
ADSs for more than one year. Certain non-corporate U.S. holders
may be eligible for preferential rates of U.S. federal income tax in
respect of net long-term capital gains. The deductibility of capital
losses is subject to limitations.
The amount realised on a sale, exchange or other taxable
disposition of ordinary shares for an amount in foreign currency
will be the US dollar value of that amount on the date of sale or
disposition. On the settlement date, the U.S. holder will recognise
U.S. source foreign currency exchange gain or loss (taxable as
ordinary income or loss) equal to the difference (if any) between
the US dollar value of the amount received based on the exchange
rates in effect on the date of sale, exchange or other disposition
and the settlement date. However, in the case of ordinary shares
traded on an established securities market that are sold by a cash-
basis U.S. holder (or an accrual-basis U.S. holder that so elects),
the amount realised will be based on the exchange rate in effect
on the settlement date for the sale, and no foreign currency
exchange gain or loss will be recognised at that time.
A U.S. holder’s tax basis in ordinary shares or ADSs will generally
equal the US dollar cost of the ordinary shares or ADSs. The
US dollar cost of ordinary shares purchased with foreign currency
will generally be the US dollar value of the purchase price on the
date of purchase, or the settlement date for the purchase in the
case of ordinary shares traded on an established securities market
that are purchased by a cash-basis U.S. holder (or an accrual-basis
U.S. holder that so elects).
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
Shareholder Taxation Information
Continued
452
Information with respect to foreign financial assets
Individuals and certain entities that own ‘specified foreign financial
assets’ with an aggregate value in excess of US$50,000 are
generally required to file information reports with respect to such
assets with their U.S. federal income tax returns. Depending on the
individual’s circumstances, higher threshold amounts may apply.
Specified foreign financial assets include any financial accounts
maintained by foreign financial institutions, as well as any of the
following, but only if they are not held in accounts maintained by
financial institutions: (1) stocks and securities issued by non-U.S.
persons; (2) financial instruments and contracts held for
investment that have non-U.S. issuers or counterparties; and
(3) interests in non‑U.S. entities. If a U.S. holder is subject to this
information reporting regime, the failure to file information reports
may subject the U.S. holder to penalties. U.S. holders are urged to
consult their own tax advisers regarding their obligations to file
information reports with respect to ordinary shares or ADSs.
Medicare net investment tax
Certain persons who are individuals (other than non-resident
aliens), estates or trusts are required to pay an additional 3.8% tax
on the lesser of (1) their ‘net investment income’ (in the case of
individuals) or ‘undistributed net investment income’ (in the case of
estates and trusts) (which includes dividend income in respect of,
and gain recognised on the disposition of, ordinary shares or ADSs)
for the relevant taxable year; and (2) the excess of their modified
adjusted gross income (in the case of individuals) or adjusted
gross income (in the case of estates and trusts) for the taxable
year over specified dollar amounts. U.S. holders are urged to
consult their tax advisers regarding the applicability of this
provision to their ownership of ordinary shares or ADSs.
Credits or deductions for UK taxes
As indicated under ‘Material UK tax consequences’ below,
dividends in respect of, and gains on the disposition of, ordinary
shares or ADSs may be subject to UK taxation in certain
circumstances. A U.S. holder may be eligible to claim a credit
or deduction in respect of UK taxes attributable to such income
or gain for purposes of computing the U.S. holder’s U.S. federal
income tax liability, subject to certain limitations. The U.S. foreign
tax credit rules are complex, and U.S. holders should consult their
own tax advisers regarding the availability of U.S. foreign tax
credits and the application of the U.S. foreign tax credit rules
to their particular situation.
Information reporting and backup withholding
Information reporting and backup withholding may apply to
dividend payments and proceeds from the sale, exchange or other
taxable disposition of ordinary shares or ADSs. Backup withholding
will not apply, however, to a U.S. holder that: (1) furnishes a correct
taxpayer identification number (TIN), certifies that such holder is
not subject to backup withholding on Internal Revenue Service
Form W-9 (or appropriate successor form) and otherwise
complies with all applicable requirements of the backup
withholding rules; or (2) provides proof that such holder is
otherwise exempt from backup withholding. Backup withholding is
not an additional tax, and any amounts withheld under the backup
withholding rules may be refunded or credited against a holder’s
U.S. federal income tax liability, if any, provided that such holder
furnishes the required information to the Internal Revenue Service
in a timely manner. The Internal Revenue Service may impose a
penalty upon any taxpayer that fails to provide the correct TIN.
This summary of material U.S. federal income tax
consequences is not tax advice. The determination of the
actual tax consequences for a U.S. holder will depend on the
U.S. holder’s specific situation. U.S. holders of ordinary shares
or ADSs, in each case, should consult their own tax advisers as
to the tax consequences of owning and disposing of ordinary
shares or ADSs, including the applicability and effect of the
alternative minimum tax and any state, local, foreign or other
tax laws and of changes in those laws.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
453
Material UK Tax Consequences
The following paragraphs summarise material aspects of the UK
tax treatment of U.S. holders of ordinary shares or ADSs and do
not purport to be either a complete analysis of all tax
considerations relating to holding ordinary shares or ADSs or an
analysis of the tax position of BAT. They are based on current UK
legislation and what is understood to be current HMRC practice,
both of which are subject to change, possibly with
retrospective effect.
The comments are intended as a general guide and (otherwise
than where expressly stated to the contrary) apply only to U.S.
holders of ordinary shares or ADSs (other than under a personal
equity plan or individual savings account) and who are the absolute
beneficial owners of such shares. These comments do not deal
with certain types of shareholders such as charities, dealers in
securities, persons holding or acquiring shares in the course of a
trade, persons who have or could be treated for tax purposes as
having acquired their ordinary shares or ADSs by reason of their
employment, collective investment schemes, persons subject to
UK tax on the remittance basis and insurance companies. You are
encouraged to consult an appropriate independent professional
tax adviser with respect to your tax position.
Tax on chargeable gains as a result of
disposals of ordinary shares or ADSs
Subject to the below, U.S. holders will not generally be subject
to UK tax on chargeable gains on a disposal of ordinary shares
or ADSs provided that they do not carry on a trade, profession
or vocation in the United Kingdom through a branch, agency or
permanent establishment in connection with which the ordinary
shares or ADSs are held.
A U.S. holder who is an individual, who has ceased to be resident
for tax purposes in the United Kingdom for a period of less than
five years and who disposes of ordinary shares or ADSs during that
period may be liable for UK tax on capital gains (in the absence of
any available exemptions or reliefs). If applicable, the tax charge will
arise in the tax year that the individual returns to the
United Kingdom.
Tax on dividends
BAT is not required to withhold UK tax at source from dividends
paid on ordinary shares or ADSs.
U.S. holders will not generally be subject to UK tax on dividends
received from BAT provided that they do not carry on a trade,
profession or vocation in the United Kingdom through a branch,
agency or permanent establishment in connection with which
the ordinary shares or ADSs are held.
Stamp duty and stamp duty reserve tax (SDRT)
Based on current published HMRC practice and recent case law,
transfers of ADSs should not be subject to SDRT or stamp duty.
The transfer of an underlying ordinary share to the ADS holder
in exchange for the cancellation of an ADS should also not give
rise to a stamp duty or SDRT charge.
Transfers of ordinary shares outside of the depositary bank,
including the repurchase of ordinary shares by BAT, will generally
be subject to stamp duty or SDRT at the rate of 0.5% of the
amount or value of the consideration given, except as described
above in connection with the cancellation of an ADS. If ordinary
shares are redeposited into a clearance service or depositary
system, the redeposit will attract stamp duty or SDRT at the
higher rate of 1.5%.
The purchaser or the transferee of the ordinary shares or ADSs
will generally be responsible for paying any stamp duty or SDRT
payable. Where stamp duty or SDRT is payable, it is payable
regardless of the residence position of the purchaser.
Inheritance tax
A gift or settlement of ordinary shares or ADSs by, or on the
death of, an individual shareholder may give rise to a liability to
UK inheritance tax even if the shareholder is not a resident of,
or domiciled in, the United Kingdom.
A charge to inheritance tax may arise in certain circumstances
where ordinary shares or ADSs are held by close companies
and trustees of settlements.
However, pursuant to the Estate and Gift Tax Treaty 1980
(the “Treaty”) entered into between the United Kingdom and the
United States, a gift or settlement of ordinary shares or ADSs
by shareholders who are domiciled in the United States for the
purposes of the Treaty may be exempt from any liability to UK
inheritance tax.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
Shareholder Taxation Information
Continued
454
Share Capital
Ordinary shares of 25p each
31 December 2024
Issued ordinary shares (excluding treasury shares)
2,209,559,098
Treasury shares
133,266,206
Total allotted and fully paid ordinary shares
2,342,825,304
Aggregated nominal value £m
585.71
Note:
1. Includes treasury shares and shares owned by employee share trusts.
Authority to allot shares
At the 2024 AGM, authority was given to the Directors to allot
relevant securities up to an amount representing one-third of the
Company’s issued ordinary share capital (excluding treasury shares)
as at 5 March 2024, for the period until the next AGM in 2025. The
renewal of this authority is put forward to shareholders annually at
the AGM. There are no present plans to allot new shares, other in
relation to employee share plans. However, the Directors consider
it appropriate to maintain the flexibility that this authority provides.
Analyses of Shareholders
Ordinary Shares
At 31 December 2024, there was a total of 2,342,825,304 ordinary
shares in issue held by 90,635 shareholders. The breakdown of
these shareholdings is as follows:
(a) by listing as at 31 December 2024:
Register
Total number
of shares
Number of
holders
% of issued
share capital
UK
2,119,448,657
30,139
90.47
South Africa
223,376,647
60,496
9.53
Total
2,342,825,304
90,635
100.00
(b) by size of shareholding as at 31 December 2024:
UK Register
Number of
holders
% of UK
ordinary
share capital
1-1,999
26,024
0.50
2,000-9,999
2,948
0.53
10,000-199,999
823
1.94
200,000-499,999
121
1.89
500,000 and over
222
88.85
Treasury shares (UK)
1
6.29
Total
30,139
100
South Africa Register
Number of
holders
% of SA
ordinary
share capital
1-1,999
55,842
6.25
2,000-9,999
3,196
5.86
10,000-199,999
1,337
22.54
200,000-499,999
75
10.78
500,000 and over
46
54.56
Total
60,496
100
Combined registers
Number of
holders
% of issued ordinary
share capital
1-1,999
81,866
1.05
2,000-9,999
6,144
1.04
10,000-199,999
2,160
3.90
200,000-499,999
196
2.74
500,000 and over
268
85.59
Treasury shares (UK)
1
5.69
Total
90,635
100
American Depositary Shares (ADSs)
At 31 December 2024, there was a total of 354,965,781 ADSs
outstanding held by 7,798 registered holders. The ADS register is set out
according to the size of shareholding as at 31 December 2024 as follows:
Number of holders
% of total ADSs
1-1,999
7,644
0.39
2,000-9,999
137
0.13
10,000-199,999
15
0.08
200,000-499,999
1
0.06
500,000 and over1
1
99.34
Total
7,798
100.00
Note:
1. One registered holder of ADSs represents 653,335 underlying shareholders.
Security Ownership of Ordinary Shares
As at 5 February 2025 there were 30,060 record holders of ordinary
shares listed on the LSE (including Citibank as the depositary bank for
the ADSs) and 2,124,271,857 of such ordinary shares outstanding. As at
that date, to BAT’s knowledge, 299 record holders, representing 0% of
the ordinary shares listed on the LSE, had a registered address in the
U.S.. As at 5 February 2025, there were 1,133 record holders of ordinary
shares listed on the JSE (including PLC Nominees (Proprietary) Limited
as the nominee for the dematerialised ordinary shares listed on the
JSE) and 215,634,586 of such ordinary shares outstanding. As at
such date, to BAT’s knowledge, 61 record holders, representing 0%
of the ordinary shares listed on the JSE had a registered address in
the U.S.. As at 5 February 2025, based on information received from
Citibank, there were 7,764 record holders of ADSs and 354,963,076
ADSs outstanding. As at that date, based on information received
from Citibank, 7,704 record holders, representing 99.99% of ADSs
representing ordinary shares, had a registered address in the U.S..
Security Ownership – Major Shareholders
All shares held by the significant shareholders represent the Company's
ordinary shares. These significant shareholders have no special voting
rights compared with other holders of the Company's ordinary shares.
At 31 December 2024, the following substantial interests (3% or more) in the
Company’s ordinary share capital (voting securities) had been notified to the
Company in accordance with Section 5.1.2 of the Disclosure Guidance and
Transparency Rules (DTRs). Additional changes to substantial interests
notified to the Company post-31 December 2024 are set out in Notes 3 and 5
below.
Name
Number of
ordinary
shares
% of issued
share
capital
1
The Capital Group Companies, Inc.
2, 3
310,426,805
14.05
Spring Mountain Investments Ltd.
4
231,975,495
10.50
BlackRock, Inc
132,891,526
6.01
Notes:
1.
The percentage of issued share capital as at 31 December 2024, excluding treasury shares.
2. Includes 48,571,281 ordinary shares represented by ADRs.
3. On 15 January 2025, the Capital Group Companies, Inc. notified the Company that,
on 14 January 2025, its interest in the Company’s ordinary share capital had increased to
a total of 332,948,937 voting rights, representing 15.08% of the Company’s issued share
capital (excluding treasury shares) as at that date; and on 7 February 2025 that, on 6
February 2025, its interest in the Company’s share capital had increased to a total of
355,299,930 voting rights, representing 16.10% of the Company’s issued share capital
(excluding treasury shares) at that date.
4. Includes 5,902,088 ordinary shares represented by ADRs.
5. On 31 January 2025, Standard Bank Group Limited notified the Company that,
on 29 January 2025, its interest in the Company’s ordinary share capital had increased to
a total of 74,103,515 voting rights, representing 3.35% of the Company’s issued share
capital (excluding treasury shares) as at that date.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Share Capital and Security Ownership
455
Additional Significant Shareholding Disclosure
The Company is aware of the following interests from filings by shareholders made under the U.S. Securities Exchange Act of 1934 as at
the date of this report:
Holder
Schedule 13G Filing Date
1
Date of holding
Ordinary shares held
Percentage of ordinary
share capital held
2
Portfolio Services Ltd
3
26 January 2024
31 December 2023
234,328,476
10.5 %
8 December 2023
7 December 2023
225,064,318
10.1 %
10 February 2023
31 December 2022
198,285,158
8.9 %
10 February 2022
31 December 2021
187,023,731
8.2 %
BlackRock, Inc.
22 October 2024
30 September 2024
147,648,482
6.7 %
6 February 2024
31 December 2023
173,760,660
7.8 %
31 January 2023
31 December 2022
172,502,866
7.7 %
3 February 2022
31 December 2021
184,921,039
8.1 %
Capital International Investors, a
division of Capital Research and
Management Company
4
7 February 2024
29 December 2023
120,859,227
5.4 %
13 February 2023
30 December 2022
115,107,720
5.1 %
11 February 2022
31 December 2021
110,680,543
4.8 %
Capital Research Global Investors, a
division of Capital Research and
Management Company
4
7 February 2024
29 December 2023
134,227,673
6.0 %
13 February 2023
30 December 2022
126,794,516
5.7 %
Notes:
1.
In addition to the Schedule 13G filings made with the SEC, in accordance with the DTRs, shareholders must notify the Company if their shareholding reaches, exceeds or falls below 3%
of total voting rights and each 1% threshold thereafter. The notifications received by the Company during the past three years to the best of the Company’s knowledge are set out in the
notes below.
Standard Bank Group Limited notified the Company on 31 January 2025 that on 29 January 2025 it had a direct interest in 74,103,515 ordinary shares, representing 3.35% of the total
voting rights at that date.
2. The percentage of issued share capital held is with reference to the number of ordinary shares held by the holder as at the date of the event triggering the relevant Schedule 13G filing.
The percentage of the Company's issue share capital shown excludes treasury shares.
3. Kenneth B. Dart is beneficial owner of all outstanding shares of Portfolio Services Ltd and Spring Mountain Investments Ltd. Spring Mountain Investments Ltd notified the Company on:
– 18 May 2023 that on 16 May 2023 it had a direct interest in 201,404,985 ordinary shares, representing 9.00% of the total voting rights at that date;
– 8 December 2023 that on 7 December 2023 it had a direct interest in 224,329,318 ordinary shares representing 10.03% of the total voting rights at that date; and
– 18 December 2023 that on 15 December 2023 it had a direct interest in 231,975,495 ordinary shares representing 10.37% of the total voting rights at that date.
4. The notifications regarding the holdings by The Capital Group Companies, Inc., listed below, indicate that Capital Research and Management Company is part of a chain of controlled
undertakings with The Capital Group Companies, Inc.. The Capital Group Companies, Inc. notified the Company on:
– 25 January 2022 that on 24 January 2022 it had: an indirect interest in ordinary shares of 249,908,259; and financial instruments pursuant to DTR 5.3.1 R (1)(b) which refer to 3,972,871
voting rights, representing 10.89% and 0.17%, respectively, of the total voting rights at that date;
– 26 January 2022 that on 25 January 2022 it had: an indirect interest in ordinary shares of 253,762,060; and financial instruments pursuant to DTR 5.3.1 R (1)(b) which refer to 4,365,071
voting rights, representing 11.06% and 0.19%, respectively, of the total voting rights at that date;
– 24 February 2022 that on 23 February 2022 it had an indirect interest in 275,311,725 ordinary shares, representing 12.01% of the total voting rights at that date;
– 9 June 2022 that on 8 June 2022 it had an indirect interest in 295,342,819 ordinary shares, representing 13.04% of the total voting rights at that date;
– 17 June 2022 that on 16 June 2022 it had an indirect interest in 293,149,711 ordinary shares, representing 12.96% of the total voting rights at that date;
– 14 July 2022 that on 13 July 2022 it had an indirect interest in 293,899,574 ordinary shares, representing 13.03% of the total voting rights at that date;
– 28 July 2022 that on 27 July 2022 it had an indirect interest in 292,880,152 ordinary shares, representing 12.99% of the total voting rights at that date;
– 11 August 2022 that on 9 August 2022 it had an indirect interest in 292,841,616 ordinary shares, representing 13.00% of the total voting rights at that date;
– 11 May 2023 that on 10 May 2023 it had an indirect interest in 290,195,446 ordinary shares, representing 12.98% of the total voting rights at that date;
– 21 June 2024 that on 20 June 2024 it had an indirect interest in 289,142,364 ordinary shares, representing 13.01% of the total voting rights at that date;
– 10 July 2024 that on 8 July 2024 it had an indirect interest in ordinary shares of 287,970,670 ordinary; and financial instruments pursuant to DTR 5.3.1 R (1)(b) which refer to 246,755
voting rights, representing 12.96% and 0.01%, respectively, of the total voting rights at that date;
– 31 July 2024 that on 30 July 2024 it had an indirect interest in 289,303,974 ordinary shares, representing 13.04% of the total voting rights at that date;
– 2 December 2024 that on 29 November 2024 it had an indirect interest in 310,426,805 ordinary shares, representing 14.04% of the total voting rights at that date;
– 15 January 2025 that on 14 January 2025 it had an indirect interest in 332,948,937 ordinary shares, representing 15.08% of the total voting rights at that date; and
– 7 February 2025 that, on 6 February 2025, it had an indirect interest in 355,299,930 ordinary shares, representing 16.10% of the total voting rights at that date.
To the extent known by BAT, BAT is not directly or indirectly owned or controlled by another corporation, any foreign government or by
any other natural or legal person, severally or jointly. BAT is not aware of any arrangements, the operation of which may at a subsequent
date result in a change of control of the Group.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
Share Capital and Security Ownership
Continued
456
The Company is a public limited company incorporated under the name of British American Tobacco p.l.c. and is registered in England
and Wales under registered number 3407696. Under the Companies Act 2006 (the “Companies Act”), the Company’s objects are
unrestricted. The following descriptions summarise certain provisions of the Company’s current Articles of Association (the “Articles”)
(as adopted by special resolution at the AGM on 19 April 2023), applicable English and Welsh law and the Companies Act. This
summary is qualified in its entirety by reference to the Companies Act and the Articles. Copies of the Articles are available on bat.com.
The Articles may be altered or added to, or completely new articles may be adopted, by a special resolution of the shareholders of the
Company, subject to the provisions of the Companies Act.
Share capital – structure
Ordinary shares
– all of the Company’s ordinary shares are fully paid
– no further contribution of capital may be required by the Company from the holders of such shares
Alteration of share capital – the Company by ordinary resolution may:
– consolidate and divide all or any of its shares into shares of a larger nominal amount than its existing shares
– divide or sub-divide any of its shares into shares of a smaller nominal amount than its existing shares
– determine that, as between the shares resulting from such a sub-division, any of them may have any preference or advantage
as compared with the others
Alteration of share capital – the Company, subject to the provisions of the Companies Act, may:
– reduce its share capital, its capital redemption reserve and any share premium account in any way
– purchase its own shares, including redeemable shares, and may hold such shares as treasury shares or cancel them
Dividend rights
– shareholders may, by ordinary resolution, declare dividends but not in excess of the amount recommended by the Directors
– the Directors may pay interim dividends out of distributable profits
– no dividend shall be paid otherwise than out of the profits available for distribution as specified under the provisions of the
Companies Act
– the Directors may, with the authority of an ordinary resolution of the shareholders, pay scrip dividends or satisfy the payment
of a dividend by the distribution of specific assets
– unclaimed dividends for a period of 12 years shall be forfeited and cease to be owed by the Company
– specific provisions enable the Directors to elect to pay dividends by bank or electronic transfer only
Share capital – voting rights
Voting at general meetings
– at a general meeting which has been convened as a hybrid meeting, on a poll, or otherwise by a show of hands, 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
– on a show of hands, every shareholder who is present in person has one vote regardless of the number of shares held
by that shareholder
– every proxy appointed by a shareholder and present at a general meeting has one vote except that if the proxy has been duly
appointed by more than one shareholder entitled to vote on the resolution and is instructed by one or more of those shareholders to
vote for the resolution and by one or more others to vote against it, or is instructed by one or more of those shareholders to vote in
one way and is given discretion as to how to vote by one or more others (and wishes to use that discretion to vote in the other way),
they have one vote for and one vote against the resolution
– a shareholder (or their duly appointed proxy) entitled to more than one vote need not use all their votes or cast all the votes they use
in the same way
– a poll may be demanded by any of the following:
– the Chair of the meeting;
– the majority of the Directors present at the meeting;
– not less than five shareholders having the right to vote at the meeting;
– a shareholder or shareholders representing not less than one-tenth of the total voting rights of all shareholders having the right
to vote at the meeting (excluding any voting rights attached to treasury shares); or
– a shareholder or shareholders holding shares which confer a right to vote on the resolution at the meeting being shares on which
an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right
(excluding any voting rights attached to treasury shares)
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Articles of Association
457
Share capital – voting rights continued
Matters transacted at general meetings
– ordinary resolutions can include resolutions for the appointment, reappointment and removal of Directors, the receiving of the Annual
Report, the declaration of final dividends, the appointment and reappointment of the external auditor, the authority for the Company
to purchase its own shares and the grant of authority to allot shares
– an ordinary resolution is passed when a simple majority of the votes cast at a meeting at which there is a quorum vote in favour
of the resolution
– special resolutions can include resolutions amending the Company’s Articles and resolutions relating to certain matters concerning
a winding‑up of the Company
– a special resolution is passed when not less than three-quarters of the votes cast at a meeting at which there is a quorum vote
in favour of the resolution
– quorum for a meeting of the Company is a minimum of two shareholders present in person or by proxy or by a duly authorised
representative(s) of a corporation which is a shareholder and entitled to vote
– voting record date: the Company may specify a time not more than 48 hours before the time of the meeting (excluding any part of a
day that is not a working day) by which a person must be entered on the register of members in order to have the right to attend or
vote at the meeting
– postponement of a meeting: the Directors may postpone the time at which the meeting is held and/or change the place(s)
of a meeting any number of times before the meeting is held
– form of general meetings: the Directors may decide in relation to any general meeting (including a postponed or adjourned meeting)
whether it is to be held as a physical meeting or a hybrid meeting, and may make such arrangements as they may decide
in connection with the facilities for participation by electronic means (but may not convene a purely electronic meeting)
Share capital – pre-emptive rights and new issues of shares
– holders of ordinary shares have no pre-emptive rights under the Articles – the ability of the Directors to cause the Company to issue
shares, securities convertible into shares or rights to shares, otherwise than pursuant to an employee share scheme, is restricted
– under the Companies Act, the directors of a company are, with certain exceptions, unable to allot any equity securities without
express authorisation, which may be contained in a company’s articles of association or given by its shareholders in a general
meeting, but which in either event cannot last for more than five years
– under the Companies Act, a company may also not allot shares for cash (otherwise than pursuant to an employee share scheme)
without first making an offer to existing shareholders to allot such shares to them on the same or more favourable terms in
proportion to their respective shareholdings, unless this requirement is waived by a special resolution of the shareholders
Restrictions on transfers of shares
– Directors may, in their absolute discretion, refuse to register the transfer of a share in certificated form which is not fully paid,
provided that such a refusal would not prevent dealings in shares in certificated form which are not fully paid from taking place
on an open and proper basis
– the Directors may also refuse to register a transfer of a share in certificated form (whether fully paid or not) unless the instrument
of transfer:(a) is lodged, duly stamped, and is deposited at the registered office of the Company or such other place as the Directors
may appoint and is accompanied by a certificate for the shares to which it relates and such other evidence as the Directors may
reasonably require to show the right of the transferor to make the transfer; (b) is in respect of only one class of share; and (c) is in
favour of not more than four transferees
– for uncertificated shares, transfers shall be registered only in accordance with the terms of the Uncertificated Securities Regulations
2001 so that Directors may refuse to register a transfer which would require shares to be held jointly by more than four persons
– if the Directors refuse to register a share transfer, they must give the transferee notice of this refusal as soon as practicable and
in any event within two months of the instrument of transfer being lodged with the Company
Repurchase of shares
– subject to authorisation by shareholder resolution, the Company may purchase its own shares in accordance with the Companies Act
– any shares which have been bought back may be held as treasury shares or, if not so held, must be cancelled immediately upon
completion of the purchase, thereby reducing the amount of the Company’s issued share capital
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
Articles of Association
Continued
458
Directors
Appointment and retirement
– a Board of Directors of not fewer than five Directors and not subject to any maximum (unless otherwise determined by ordinary
resolution of shareholders)
– Directors and the Company (by ordinary resolution) may appoint a person who is willing to act as a Director
– all Directors must retire from office at each annual general meeting (AGM) and seek re-election, except any Director appointed by the
Board after notice of that AGM has been given and before the AGM has been held. All of the Directors of the Company will be subject
to re-election at the forthcoming AGM to be held on 16 April 2025 in accordance with the Articles
– fees for Non-Executive Directors and the Chair are determined by the Directors but cannot currently exceed in aggregate an annual
sum of £2,500,000, unless determined otherwise by ordinary resolution of the shareholders. This is subject to the provision that any
Director who holds any other office in the Company (including for this purpose, the office of Chair of the Board), serves on any
Committee of the Board, or performs services that the Directors consider go beyond the ordinary duties of a Director may be paid
such additional remuneration as the Directors may determine
– the remuneration of the Executive Directors is determined by the Remuneration Committee, which comprises independent
Non‑Executive Directors
Disclosure of interests
– the Articles require disclosure, subject to certain limited exceptions, of Directors’ interests in transactions that may result in a conflict
of interest, including those which may arise as a result of the Director’s office or employment or persons connected with such
Director, and identify procedures to resolve such conflicts of interest
Meetings and voting
– the quorum for a meeting of Directors is two Directors
– the Directors may delegate any of their powers to a person or a committee
– the Articles place a general prohibition on a Director voting at a Board meeting on any matter in which they have an interest other
than by virtue of their interest in shares in the Company
– the Articles restrict a Director’s ability to vote on any resolution concerning a matter in which such Director has a material interest,
unless such Director’s interest arises only because the resolution relates to the giving of guarantees; the provision of indemnities;
insurance proposals; retirement benefits; and other specified transactions or arrangements with a company in which the Director
may have an indirect interest
Borrowing powers
– the Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property,
assets (present and future) and uncalled capital
– the Directors may also issue debentures, debenture stock and other securities
Additional disclosures
Disclosure of ownership of shares
– there are no provisions in the Articles whereby persons acquiring, holding or disposing of a certain percentage of the Company’s
ordinary shares are required to make disclosure of their ownership percentage, although there are such requirements under statute
and regulation
Director retirement
– there is no requirement for a Director to retire on reaching any age
Sinking funds
– there is no sinking fund provision in the Articles applicable to the Company’s ordinary shares
Limitations on voting and shareholding
– there are no limitations under the Articles restricting the right of non-resident or foreign owners to hold or vote in relation to ordinary
shares in the Company
Distribution of assets on a winding up
– if the Company is wound up, the liquidator may, with the sanction of a special resolution and any other sanction required by law,
divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets
and determine how the division shall be carried out as between the members or different classes of members
– the liquidator may, with the like sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members
as he may with the like sanction determine, but no member shall be compelled to accept any assets upon which there is a liability
Anti-takeover devices and change of control
– there are no provisions in the Articles that would have the effect of delaying, deferring or preventing a takeover, or change of control,
of the Company
– under English law, the Company’s Directors have a fiduciary duty to take only those actions that are in the interests of the Company
and any anti-takeover devices employed by the Directors in the future, if any, must accordingly be in the interests of the Company
– the Company is also subject to the City Code on Takeovers and Mergers (the “City Code”), which governs the conduct of mergers
and takeovers in the UK. Any takeover of the Company would have to be in accordance with the City Code
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
459
Renewal of Authority for Company to Purchase Own Shares
Current authority
to purchase shares
– At the AGM on 24 April 2024, authorisation was given to the Company to purchase up to 223,642,156
ordinary shares. This authority will expire at the 2025 AGM.
– The current authorisation is expected to be renewed at the 2025 AGM to ensure that the appropriate
mechanisms are in place to continue repurchasing shares under the current share buy-back programme.
The Directors would exercise this authority where the repurchase of shares would be expected to result in
an increase in the Company’s earnings per share and would be in the interest of its shareholders generally.
Proposed authority
to purchase shares
– The minimum price that may be paid for such shares is 25p, and the maximum price is the higher of:
– an amount equal to 105% of the average of the middle-market price for an ordinary share as derived from
the LSE Daily Official List for the five business days immediately preceding the day on which the ordinary
share is contracted to be purchased; and
– the higher of the price of the last independent trade and the highest current independent bid for an
ordinary share on the trading venues where the market purchases by the Company will be carried out;
– in the absence of the necessary practical arrangements, the proposed authority has not been extended to
enable BAT to purchase its own ordinary shares on the JSE in South Africa or the NYSE in the form of ADSs; and
– further details will be set out in the Notice of Annual General Meeting 2025 which will be made available
to all shareholders and will be published on bat.com.
Treasury shares
– At 31 December 2024, the number of treasury shares was 133,266,206 (2023: 220,533,855); no dividends
are paid on treasury shares; treasury shares have no voting rights; and treasury shares may be resold at
a later date.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On 18 March 2024, the Company announced the launch of a share buy-back programme to purchase £1.60 billion of its own ordinary
shares of 25 pence each (the "Programme") by 31 December 2025, with £700 million to be purchased in 2024, and the remaining £900
million to be purchased in 2025. The Programme commenced on the same date and all shares purchased pursuant to the Programme
will be cancelled to reduce the issued share capital of the Company.
Under the Programme, the Company purchased 27,571,116 shares for a total consideration of £699,999,231.65 in 2024 (average price of
£25.3889 per share), representing 1.25% of the Company's issued share capital (excluding treasury shares) as at 31 December 2024. All
shares purchased under the programme in 2024 were cancelled.
The following table provides details of ordinary share purchases made under the Programme, or made by the trustees of employee share
ownership plans (“ESOPs”) and other purchases of ordinary shares made to satisfy the commitments to deliver shares under certain
employee share-based payment plans.
Total number of shares
purchased
1
Average price
paid per
share £
2
Total number of shares
purchased under
the Programme
3
The maximum £ of
shares that may yet be
purchased under the
Programme
3
2024
January
4,287
23.382097
—
—
February
148,252
23.405684
—
—
March
2,624,344
23.807607
2,620,000
1,537,620,279
April
7,789,873
23.204490
4,815,278
1,425,000,008
May
6,784,229
24.201104
6,646,202
1,263,967,882
June
1,492,723
24.615902
1,488,282
1,227,331,387
July
3,520,828
25.222080
3,516,585
1,138,632,782
August
1,902,000
27.829736
1,776,539
1,089,215,538
September
1,484,721
28.791255
1,481,192
1,046,570,068
October
2,004,191
26.831905
2,000,302
992,899,871
November
1,864,010
28.226535
1,738,094
943,709,761
December
1,492,307
29.361760
1,488,642
900,000,768
TOTAL
31,111,765
27,571,116
Notes:
1.
Total number of shares purchased under the Programme, by trustees of ESOPs and under certain employee share-based plans. During the year ended 31 December 2024, a total of
3,540,649 shares were purchased in addition to shares purchased under the Programme. All share purchases were of ordinary shares of 25p each and were open market transactions.
No purchase of ADSs took place during the year ended 31 December 2024.
2. Average price paid across purchases made under the Programme, by the trustees of ESOPs and under certain employee share-based plans.
3. On 18 March 2024, the Company announced a Programme to purchase £1.60bn (US$2.04bn) of its own shares. The Programme will end no later than 31 December 2025. Authorisation
was given at the 2024 AGM to buy-back up to 223.64 million ordinary shares.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
Purchase of Shares
460
The British American Tobacco Group Employee Trust (BATGET)
Function
– used to satisfy the vesting and exercise of awards of ordinary shares under the BAT Deferred Share Bonus
Scheme and Long-Term Incentive Plans; and
– a committee of senior management reporting to the Board’s Share Schemes Committee monitors the
number of ordinary shares held in BATGET to satisfy outstanding awards.
Funding
– funded by interest-free loan facilities from the Company totalling £1 billion;
– this enables BATGET to facilitate the purchase of ordinary shares to satisfy the future vesting or exercise
of options and awards;
– loan to BATGET: £557.81 million at 31 December 2024 (2023: £470.65 million);
– the loan is either repaid from the proceeds of the exercise of options or, in the case where ordinary shares
acquired by BATGET are used to satisfy the vesting and exercise of awards, the Company will subsequently
waive the loan provided over the life of the awards; and
– if any options or awards lapse, ordinary shares may be sold by BATGET to cover the loan repayment.
1 Jan 2024
31 Dec 2024
Ordinary shares
held in BATGET
Number of ordinary shares
5,613,369
6,763,796
Market value of ordinary shares
£128.85m
£194.80m
% of issued share capital of Company
0.23
0.29
Dividends paid
in 2024
– BATGET currently waives dividends on the ordinary shares held by it; and
– quarterly interim dividends waived: £14.61 million across 2024.
Voting rights
– the trustee does not exercise any voting rights while ordinary shares are held in BATGET; and
– share scheme participants may exercise the voting rights attaching to those ordinary shares once the ordinary
shares have been transferred out of BATGET.
Notes:
1.
Company share-based payment arrangements: details of the material equity share-based and cash-settled share-based arrangements are set out in note 28 in the Notes on the Accounts.
2. The values of ordinary shares shown are based on the closing mid-market share price on 31 December 2024: 2,880p (29 December 2023: 2,296p).
3. No ADSs are held by BATGET.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Group Employee Trust
461
Fees and Charges Payable by ADS Holders
Citibank, N.A. (Citibank) was appointed as the depositary bank (the “Depositary”) for BAT’s ADS programme pursuant to the Amended
and Restated Deposit Agreement dated 1 December 2008 and amended as of 14 February 2017 and 14 June 2017 between BAT,
the Depositary and the owners and holders of ADSs (the “Deposit Agreement”). Citibank was reappointed as the Depositary pursuant
to the Second Amended and Restated Deposit Agreement dated 26 November 2018 (the “Restated Deposit Agreement”) and pursuant
to a Letter Agreement effective from 1 December 2023 (the "Letter Agreement").
The Restated Deposit Agreement provides that ADS holders may be required to pay various fees to the Depositary, and the Depositary
may refuse to provide any service for which a fee is payable, until the applicable fee has been paid.
Service
Fees
Issuance of ADSs upon deposit of ordinary shares (excluding issuances as a result
of distributions of shares described below)
Up to US$0.05 per ADS issued
1
Cancellation of ADSs
Up to US$0.05 per ADS surrendered
1
Distribution of cash dividends or other cash distributions (i.e., sale of rights and
other entitlements)
Up to US$0.05 per ADS held
2
Distribution of ADSs pursuant to: (1) stock dividends or other free stock
distributions; or (2) exercise of rights to purchase additional BAT ADSs
Up to US$0.05 per ADS held
Distribution of securities other than ADSs or rights to purchase additional ADSs
(i.e., spinoff shares)
Up to US$0.05 per ADS held
Depositary bank services
Up to US$0.05 per ADS held
Notes:
1.
Under the terms of a separate agreement between BAT and the Depositary, the Depositary has agreed to waive the fees that would otherwise be payable in connection with the
issuance of ADSs upon deposit of ordinary shares and the cancellation of ADSs and corresponding withdrawal of ordinary shares, in each case by BAT or any of its affiliates, officers,
directors or employees. The terms of this separate agreement may be amended at any time by BAT and the Depositary.
2. Under the Restated Deposit Agreement, cash dividends paid in respect of ADSs are subject to a fee of up to US$0.05 per ADS payable to the Depositary. Currently, under the terms of
the Letter Agreement, such dividends are subject to a fee of up to US$0.04 per ADR per year (a fee of US$0.01 per dividend based on the distribution of four quarterly cash dividends per
year). Under the Letter Agreement, the dividend fee may not be varied by the Depositary without the consent of BAT.
In addition, ADS holders may be required under the Restated Deposit Agreement to pay the Depositary: (a) taxes (including applicable
interest and penalties) and other governmental charges; (b) registration fees; (c) certain cable, telex and facsimile transmission and
delivery expenses; (d) the expenses and charges incurred by the Depositary in the conversion of foreign currency; (e) such fees and
expenses as are incurred by the Depositary in connection with compliance with applicable exchange control regulations and other
regulatory requirements; and (f) the fees and expenses incurred by the Depositary, the custodian or any nominee in connection with the
servicing or delivery of deposited securities. The Depositary may: (a) withhold dividends or other distributions or sell for the account of any
ADS holder any or all of the shares underlying the ADSs in order to satisfy any tax or governmental charge; and (b) deduct from any cash
distribution the applicable fees and charges of, and expenses incurred by, the Depositary and any taxes, duties or other governmental
charges on account.
Fees and Payments Made by the Depositary to BAT
Under the terms of the contractual arrangements set out in the separate agreement between BAT and the Depositary referred to above,
BAT received a total of approximately US$13.4 million from the Depositary, comprising fees charged in respect of dividends and a
contribution to BAT’s ADS programme administration costs for the year ended 31 December 2024.
In 2024, these programme administration costs principally included those associated with AGM proxy mailings, exchange listing and
regulatory fees, foreign private issuer analysis, legal fees, share registration fees and other expenses incurred by BAT in relation to the
ADS programme. Under these contractual arrangements, the Depositary has also agreed to waive certain standard fees associated with
the administration of the ADS programme.
Contact details for Citibank Shareholder Services are set out on page 463.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
American Depositary Shares
462
Ordinary Shareholder Enquiries
United Kingdom Registrar
Computershare Investor Services PLC (Computershare)
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ
tel: 0800 408 0094 (UK only) or +44 370 889 3159 (Overseas)
online: www.investorcentre.co.uk/contactus
South African Registrar
Computershare Investor Services Proprietary Limited
Private Bag X9000, Saxonwold, 2132, South Africa
tel: 0861 100 634; +27 11 870 8216
email: web.queries@computershare.co.za
American Depositary Shares Enquiries
All enquiries regarding ADS holder accounts and payment
of dividends should be addressed to:
Citibank Shareholder Services
PO Box 43077, Providence, Rhode Island 02940-3077, USA
tel: +1 888 985 2055 (toll-free) or +1 781 575 4555
email: citibank@shareholders-online.com
website: www.citi.com/dr
Manage Your Shareholding Online
Computershare operates an online service, Investor Centre, for
holders of shares on the Company’s UK share register. Investor
Centre allows shareholders to manage their shareholding online,
enabling shareholders to:
– update personal details and provide address changes;
– update dividend bank mandate instructions and review dividend
payment history;
– register for the Dividend Reinvestment Plan (“DRIP”); and
– register to receive Company communications electronically.
To register for Investor Centre, go to
www.computershare.com/uk/investor/bri.
Shareholders with any queries regarding their holding should
contact Computershare using the above contact details or at
www.investorcentre.co.uk/contactus.
Share dealing
Computershare also offers a share dealing service to existing
shareholders. For full details on how to trade British American
Tobacco shares traded on the London Stock Exchange, go to
www.computershare.com/dealing/uk. Please note that this
service is only available in certain countries.
Dividends
Comprehensive information on dividend payments is available
on pages 449 and 450.
DRIP
We offer a DRIP to our UK shareholders. The DRIP allows eligible
shareholders to use their cash dividends to acquire additional
shares in the Company. The DRIP shares are purchased by
Computershare through a low-cost dealing arrangement. Contact
Computershare in the UK for details and exclusions of this service.
Taxation of dividends
See pages 451 and 454 for details on dividend taxation.
Historical UK capital gains tax information
is available at bat.com/cgt. Alternatively, contact the British
American Tobacco Company Secretarial Department on
+44 20 7845 1000.
Share Fraud
The practice of share fraud (also known as ‘boiler room’ scams)
unfortunately continues with many companies’ shareholders
receiving unsolicited phone calls or mail from people offering to
sell them what often turn out to be worthless or high-risk shares
in U.S. or UK investments, or to buy shares at an inflated price in
return for an upfront payment.
If you suspect that you have been approached by fraudsters,
please tell the FCA using the share fraud reporting form at
www.fca.org.uk/scamsmart, where you can find out more about
investment scams. You can also call the FCA Consumer Helpline
on 0800 111 6768. If you have lost money to investment fraud,
you should report it to Action Fraud on 0300 123 2040 or online
at www.actionfraud.police.uk.
Documents on Display and Publications
This Annual Report and Form 20-F 2024 is available online at
bat.com/annualreport. Copies of current and past Annual Reports
are available on request from:
British American Tobacco Publications
Unit 80, London Industrial Park, Roding Road, London E6 6LS
tel: +44 20 7511 7797 email: bat@team365.co.uk
Holders of shares held on the South Africa register can contact the
Company’s Representative office in South Africa using the contact
details shown at the end of this Annual Report and Form 20-F 2024.
ADS holders can contact Citibank Shareholder Services in the U.S.
using the contact details shown opposite.
Highlights from the current and past Annual Reports can
be produced in alternative formats such as Braille, audio tape
and large print.
Documents referred to in this Annual Report and Form 20-F 2024
do not form part of this Annual Report unless specifically
incorporated by reference.
The Company is subject to the information requirements of the
U.S. Securities Exchange Act of 1934 applicable to foreign private
issuers. In accordance with these requirements, the Company files
its Annual Report on Form 20-F and other documents with the
SEC. BAT’s SEC filings are available to the public at the SEC’s
website, www.sec.gov.
The Company’s agent for service in the U.S. for the purposes of the
registration statement on Form F-3 (333-265958) is Puglisi &
Associates, 850 Library Avenue, Suite 204, Newark, DE 19711 U.S.A.
Our Website
Comprehensive information about British American Tobacco is
available from our website: bat.com. Within the Investors section
you will find valuation and charting tools, dividend and share price
data and you can download shareholder publications and
subscribe for email alert services. You can also download our
Investor Relations app to access all the latest financial information
on your iPad, iPhone or Android device.
Calendar 2025
Wed 16 April
at 11:30am
Annual General Meeting
Details of the venue and business to be
proposed at the meeting are set out in the
Notice of Annual General Meeting, which is
made available to all shareholders and is
published on bat.com.
BAT provides for the vote on each resolution to
be by poll rather than by a show of hands. This
provides for greater transparency and allows
the votes of all shareholders to be counted,
including those cast by proxy. The voting results
will be released on the same day in accordance
with regulatory requirements and made
available on bat.com.
Thurs 31 July
Half-Year Report
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholding Administration and Services
463
The following documents are filed in the SEC EDGAR system, as part of this Annual Report on Form 20-F, and can be viewed on the
SEC’s website, www.sec.gov:
1
Articles of Association of British American Tobacco p.l.c.
1
2.1
Second Amended and Restated Deposit Agreement, dated as of 26 November 2018, by and among British American Tobacco
p.l.c., Citibank, N.A., as depositary bank, and all holders and beneficial owners of American Depositary Shares issued
thereunder.
2
2.2
Indenture, dated as of 15 August 2017, among British American Tobacco p.l.c. and certain of its subsidiaries as guarantors,
and Wilmington Trust, National Association, as Trustee.
3
2.3
Supplemental Indenture No. 1, dated as of 28 September 2018, among British American Tobacco p.l.c. and certain of its
subsidiaries as guarantors, and Wilmington Trust, National Association, as Trustee.
4
2.4
Indenture, dated as of 6 September 2019, by and among B.A.T Capital Corporation, the Guarantors party thereto and Citibank,
N.A., as trustee, authentication agent, transfer agent, registrar, calculation agent and initial paying agent.
5
2.5
Supplemental Indenture No. 2, dated as of 6 September 2019, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
6
2.6
Supplemental Indenture No. 3, dated as of 6 September 2019, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
7
2.7
Supplemental Indenture No. 4, dated as of 6 September 2019, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
8
2.8
Supplemental Indenture No. 5, dated as of 2 April 2020, by and among B.A.T Capital Corporation, the Guarantors party thereto
and Citibank, N.A., as Trustee.
9
2.9
Supplemental Indenture No. 6, dated as of 2 April 2020, by and among B.A.T Capital Corporation, the Guarantors party thereto
and Citibank, N.A., as Trustee.
10
2.10
Supplemental Indenture No. 7, dated as of 2 April 2020, by and among B.A.T Capital Corporation, the Guarantors party thereto
and Citibank, N.A., as Trustee.
11
2.11
Supplemental Indenture No. 8, dated as of 25 September 2020, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
12
2.12
Supplemental Indenture No. 9, dated as of 25 September 2020, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
13
2.13
Supplemental Indenture No. 10, dated as of 25 September 2020, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
14
2.14
Supplemental Indenture No. 11, dated as of 25 September 2020, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
15
2.15
Supplemental Indenture No. 12, dated as of 16 March 2022, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
16
2.16
Supplemental Indenture No. 13, dated as of 16 March 2022, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
17
2.17
Supplemental Indenture No. 14, dated as of 24 March 2022, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
18
2.18
Supplemental Indenture No. 15, dated as of 19 October 2022, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
19
2.19
Supplemental Indenture No. 16, dated as of 2 August 2023, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
20
2.20
Supplemental Indenture No. 17, dated as of 2 August 2023, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
21
2.21
Supplemental Indenture No. 18, dated as of 2 August 2023, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
22
2.22
Supplemental Indenture No. 19, dated as of 2 August 2023, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
23
2.23
Supplemental Indenture No. 20, dated as of 20 February, 2024, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
24
2.24
Supplemental Indenture No. 21, dated as of 20 February, 2024, by and among B.A.T Capital Corporation, the Guarantors party
thereto and Citibank, N.A., as Trustee.
25
2.25
Indenture, dated as of 25 September 2020, by and among B.A.T. International Finance p.l.c., the Guarantors party thereto
and Citibank, N.A., as trustee, authentication agent, transfer agent, registrar, calculation agent and initial paying agent.
26
2.26
Supplemental Indenture No. 1, dated as of 25 September 2020, by and among B.A.T. International Finance p.l.c., the Guarantors
party thereto and Citibank, N.A., as Trustee.
27
Exhibit
Number
Description
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
Exhibits
464
2.27
Supplemental Indenture No. 2, dated as of 16 March 2022, by and among B.A.T. International Finance p.l.c., the Guarantors
party thereto and Citibank, N.A., as Trustee.
28
2.28
Supplemental Indenture No. 3, dated as of 2 August 2023, by and among B.A.T. International Finance p.l.c., the Guarantors
party thereto and Citibank, N.A., as Trustee.
29
2.29
Thirty-fourth Supplemental Trust Deed, dated 17 March 2022, by and among B.A.T. International Finance p.l.c., B.A.T Capital
Corporation, B.A.T. Netherlands Finance B.V., British American Tobacco p.l.c. and the Law Debenture Trust Corporation p.l.c.,
further modifying the Trust Deed, dated as of 6 July 1998 (as previously modified and restated) relating to the
US$3,000,000,000 (now £25,000,000,000) Euro Medium Term Note Programme.
30
2.30
Description of Securities registered under Section 12 of the Exchange Act.
4.1
Rules of the British American Tobacco 2007 Long-Term Incentive Plan.
31
4.2
Rules of the British American Tobacco 2016 Long-Term Incentive Plan (Amended and Restated as of 20 March 2023).
32
4.3
British American Tobacco p.l.c. Deferred Annual Share Bonus Scheme.
33
4.4
Annex to British American Tobacco p.l.c. Deferred Annual Share Bonus Scheme.
34
4.5
British American Tobacco p.l.c. 2019 Deferred Annual Share Bonus Scheme (Amended and Restated as of 20 March 2023).
35
4.6
Rules of the British American Tobacco Restricted Share Plan (Amended and Restated as of 20 March 2023).
36
4.7
Deferred Compensation Plan for Directors of Reynolds American Inc. (Amended and Restated Effective 30 November 2007).
37
4.8
Service Contract between British American Tobacco p.l.c. and Tadeu Marroco, dated as of 14 May 2023.
38
4.9
Service Contract between British American Tobacco p.l.c. and Soraya Benchikh, dated as of 1 November 2023.
4.10
Master Settlement Agreement, referred to as the MSA, dated 23 November 1998, between the Settling States named
in the MSA and the Participating Manufacturers also named therein.
39
4.11
Settlement Agreement dated 25 August 1997, between the State of Florida and settling defendants in The State of Florida
v. American Tobacco Co.
40
4.12
Comprehensive Settlement Agreement and Release dated 16 January 1998, between the State of Texas and settling
defendants in The State of Texas v. American Tobacco Co.
41
4.13
Settlement Agreement and Release in re: The State of Minnesota v. Philip Morris, Inc., by and among the State of Minnesota,
Blue Cross and Blue Shield of Minnesota and the various tobacco company defendants named therein, dated as of 8 May 1998.
42
4.14
Settlement Agreement and Stipulation for Entry of Consent Judgment in re: The State of Minnesota v. Philip Morris, Inc., by and
among the State of Minnesota, Blue Cross and Blue Shield of Minnesota and the various tobacco company defendants named
therein, dated as of 8 May 1998.
43
4.15
Form of Consent Judgment by Judge Kenneth J. Fitzpatrick, Judge of District Court in re: The State of Minnesota v. Philip
Morris, Inc.
44
4.16
Stipulation of Amendment to Settlement Agreement and for Entry of Agreed Order dated 2 July 1998, by and among
the Mississippi Defendants, Mississippi and the Mississippi Counsel in connection with the Mississippi Action.
45
4.17
Stipulation of Amendment to Settlement Agreement and for Entry of Consent Decree dated 24 July 1998, by and among
the Texas Defendants, Texas and the Texas Counsel in connection with the Texas Action.
46
4.18
Stipulation of Amendment to Settlement Agreement and for Entry of Consent Decree dated 11 September 1998, by and among
the State of Florida and the tobacco companies named therein.
47
4.19
Term Sheet agreed to by R. J. Reynolds Tobacco Company, an indirect subsidiary of Reynolds American Inc., certain other
Participating Manufacturers, 17 states, the District of Columbia and Puerto Rico.
48
4.20
Revolving credit facilities agreement, dated as of 6 March 2023, among British American Tobacco p.l.c., B.A.T. International
Finance p.l.c., B.A.T. Netherlands Finance B.V. and B.A.T Capital Corporation, as borrowers, British American Tobacco p.l.c., as
guarantor, HSBC Bank plc, as agent and euro swingline agent, HSBC Bank USA, National Association, as U.S. agent and US$
swingline agent, and the banks and financial institutions party thereto.
49
4.21
Settlement Agreement dated February 1, 2024 between Nicoventures Trading Limited and Philip Morris Products S.A.
50
8
List of Subsidiaries included on pages 371 to 380 in this report.
11.1
Code of Ethics.
51
11.2
British American Tobacco Code for Share Dealing.
12
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13
Certification under Section 906 of the Sarbanes-Oxley Act of 2002.
52
15
Consent of KPMG LLP, independent registered public accounting firm.
17
Guarantor Subsidiaries of the Registrant (included as part of Exhibit 2.30).
97
BAT Group Malus and Clawback Policy for Senior Executives.
53
99
Cybersecurity disclosure excerpts from Item 16K of Form 20-F (for use in tagging the Interactive Data File in XBRL (Extensible
Business Reporting Language)).
101
Interactive Data Files (formatted in XBRL and furnished electronically).
Exhibit
Number
Description
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
465
Notes:
1.
Incorporated by reference to Exhibit 99.1 to British American Tobacco p.l.c.’s Form 6-K filed on 19 April 2023.
2.
Incorporated by reference to Exhibit 4.1 to BAT’s Registration Statement on Form S-8 (Reg. No. 333-237186) filed on 16 March 2020.
3.
Incorporated by reference to Exhibit 2.4 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2017 filed on 15 March 2018.
4.
Incorporated by reference to Exhibit 4.2 to BAT’s Registration Statement on Form F-4 (Reg. No. 333-227658) filed on 2 October 2018.
5.
Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.’s Form 6-K filed on 6 September 2019.
6.
Incorporated by reference to Exhibit 4.3 to British American Tobacco p.l.c.’s Form 6-K filed on 6 September 2019.
7.
Incorporated by reference to Exhibit 4.4 to British American Tobacco p.l.c.’s Form 6-K filed on 6 September 2019.
8.
Incorporated by reference to Exhibit 4.5 to British American Tobacco p.l.c.’s Form 6-K filed on 6 September 2019.
9.
Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.’s Form 6-K filed on 2 April 2020.
10. Incorporated by reference to Exhibit 4.2 to British American Tobacco p.l.c.’s Form 6-K filed on 2 April 2020.
11.
Incorporated by reference to Exhibit 4.3 to British American Tobacco p.l.c.’s Form 6-K filed on 2 April 2020.
12. Incorporated by reference to Exhibit 4.2 to British American Tobacco p.l.c.’s Form 6-K filed on 25 September 2020.
13. Incorporated by reference to Exhibit 4.3 to British American Tobacco p.l.c.’s Form 6-K filed on 25 September 2020.
14. Incorporated by reference to Exhibit 4.4 to British American Tobacco p.l.c.’s Form 6-K filed on 25 September 2020.
15. Incorporated by reference to Exhibit 4.5 to British American Tobacco p.l.c.’s Form 6-K filed on 25 September 2020.
16. Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.’s Form 6-K filed on 16 March 2022.
17. Incorporated by reference to Exhibit 4.2 to British American Tobacco p.l.c.’s Form 6-K filed on 16 March 2022.
18. Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.’s Form 6-K filed on 24 March 2022.
19. Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.’s Form 6-K filed on 19 October 2022.
20. Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.'s Form 6-K filed on 2 August 2023.
21. Incorporated by reference to Exhibit 4.2 to British American Tobacco p.l.c.'s Form 6-K filed on 2 August 2023.
22. Incorporated by reference to Exhibit 4.3 to British American Tobacco p.l.c.'s Form 6-K filed on 2 August 2023.
23. Incorporated by reference to Exhibit 4.4 to British American Tobacco p.l.c.'s Form 6-K filed on 2 August 2023.
24. Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.'s Form 6-K filed on 20 February 2024.
25. Incorporated by reference to Exhibit 4.2 to British American Tobacco p.l.c.'s Form 6-K filed on 20 February 2024.
26. Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.’s Form 6-K filed on 25 September 2020.
27. Incorporated by reference to Exhibit 4.6 to British American Tobacco p.l.c.’s Form 6-K filed on 25 September 2020.
28. Incorporated by reference to Exhibit 4.3 to British American Tobacco p.l.c.’s Form 6-K filed on 16 March 2022.
29. Incorporated by reference to Exhibit 4.5 to British American Tobacco p.l.c.’s Form 6-K filed on 2 August 2023.
30. Incorporated by reference to Exhibit 4.1 to British American Tobacco p.l.c.’s Registration Statement on Form F-3 (Reg. No. 333-265958) filed on 1 July 2022.
31. Incorporated by reference to Exhibit 10.6 to BAT’s Registration Statement on Form F-4 (Reg. No. 333-217939) filed on 12 May 2017.
32. Incorporated by reference to Exhibit 4.2 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2023 filed on 9 February 2024.
33. Incorporated by reference to Exhibit 10.8 to BAT’s Registration Statement on Form F-4 (Reg. No. 333-217939) filed on 12 May 2017.
34. Incorporated by reference to Exhibit 4.6 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2018 filed on 15 March 2019.
35. Incorporated by reference to Exhibit 4.5 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2023 filed on 9 February 2024.
36. Incorporated by reference to Exhibit 4.6 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2023 filed on 9 February 2024.
37. Incorporated by reference to Exhibit 10.43 to Reynolds American Inc.’s Annual Report on Form 10-K for the fiscal year ended 31 December 2007 filed on 27 February 2008.
38. Incorporated by reference to Exhibit 4.8 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2023 filed on 9 February 2024.
39. Incorporated by reference to Exhibit 4 to R.J. Reynolds Tobacco Holdings, Inc.’s Form 8-K dated 24 November 1998.
40. Incorporated by reference to Exhibit 2 to R.J. Reynolds Tobacco Holdings, Inc.’s Form 8-K dated 5 September 1997.
41. Incorporated by reference to Exhibit 2 to R.J. Reynolds Tobacco Holdings, Inc.’s Form 8-K dated 27 January 1998.
42. Incorporated by reference to Exhibit 99.1 to R.J. Reynolds Tobacco Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended 30 March 1998 filed on 15 May 1998.
43. Incorporated by reference to Exhibit 99.2 to R.J. Reynolds Tobacco Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended 30 March 1998 filed on 15 May 1998.
44. Incorporated by reference to Exhibit 99.3 to R.J. Reynolds Tobacco Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended 30 March 1998 filed on 15 May 1998.
45. Incorporated by reference to Exhibit 99.2 to R.J. Reynolds Tobacco Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended 30 June 1998 filed on 14 August 1998.
46. Incorporated by reference to Exhibit 99.4 to R.J. Reynolds Tobacco Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended 30 June 1998 filed on 14 August 1998.
47. Incorporated by reference to Exhibit 99.1 to R.J. Reynolds Tobacco Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended 30 September 1998 filed on 12 November 1998.
48. Incorporated by reference to Exhibit 10.1 to Reynolds American Inc.’s Form 8-K dated 12 March 2013.
49. Incorporated by reference to Exhibit 4.19 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2023 filed on 9 February 2024.
50. Incorporated by reference to Exhibit 99.1 to British American Tobacco p.l.c.’s Form 6-K filed on 8 February 2024.
51. Incorporated by reference to Exhibit 11 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2021 filed on 8 March 2022.
52. These certifications are furnished only and are not filed as part of BAT’s Annual Report on Form 20-F for the year ended 31 December 2024.
53. Incorporated by reference to Exhibit 97 to BAT’s Annual Report on Form 20-F for the year ended 31 December 2023 filed on 9 February 2024.
Certain instruments which define the rights of holders of long-term debt issued by BAT and its subsidiaries are not being filed because the total amount of
securities authorised under each such instrument does not exceed 10% of the total consolidated assets of BAT and its subsidiaries. BAT agrees to furnish copies
of any or all such instruments to the SEC on request.
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder Information
Exhibits
Continued
466
Abbreviation
ADR
American Depositary Receipt
ADS
American Depositary Share – 1 ADS is
equivalent to 1 BAT ordinary share
AGM
Annual General Meeting
AME
Americas (excluding U.S.) and Europe
AmSSA
Americas (excluding U.S.) and Sub-Saharan
Africa
APFO
Adjusted profit from operations
APME
Asia-Pacific and Middle East
APMEA
Asia-Pacific, Middle East and Africa
bps
Basis points
cc
Constant currency
CDP
Formerly the Carbon Disclosure Project
CGFO
Cash generated from operations
CO
2e
Carbon dioxide equivalent
Code
UK Corporate Governance Code, July 2018
version
CSR
Corporate Social Responsibility
CSRD
EU Corporate Sustainability Reporting
Directive
DOJ
The United States Department of Justice
DSBS
Deferred share bonus scheme
EMTN
European Medium Term Notes
ENA
Europe and North Africa
EPS
Earnings per share
ESG
Environmental, Social and Governance
ERP
Enterprise Resource Planning
ESRS
European Sustainability Reporting Standards
EU
European Union
EURIBOR
Euro Interbank Offered Rate
FII GLO
Franked Investment Income Group
Litigation Order
FCTC
Framework Convention on Tobacco Control
FMCG
Fast Moving Consumer Goods
FRC
UK Financial Reporting Council
GAAP
Generally Accepted Accounting Practice
GDB
Global Drive Brands, being Kent, Dunhill, Pall
Mall, Lucky Strike and Rothmans
GDPR
EU General Data Protection Regulation
GDSB
Global Drive and Key Strategic Brands, being
the GDBs, plus Shuang Xi and State Express
555
GJ
Gigajoules (of energy use)
HP
Heated Products (i.e., the devices, which
include glo and our hybrid products).
Heated Products are used to heat our
Tobacco Heated Products or Herbal Heated
Products
IASB
International Accounting Standards Board
IEIS
International Executive Incentive Scheme
IFRS
International Financial Reporting Standards as
issued by the IASB and as adopted by the EU
ISA
International Standards on Auditing
JSE
Johannesburg Stock Exchange
KPI
Key performance indicator
LIBOR
London Interbank Offered Rate
LSE
London Stock Exchange
LR
Listing Rules
LTIP
Long-Term Incentive Plan
MCE
Million cigarettes equivalent
MSA
Master Settlement Agreement
NTO
Net turnover or revenue
NYSE
New York Stock Exchange
OCF
Operating cash flow
OECD
Organisation for Economic Co-operation
and Development
OFAC
The United States Department of the
Treasury's Office of Foreign Assets Control
OTP
Other tobacco products, including but not
limited to roll-your-own, make-your-own
and cigars
Parker Report
The Parker Review Committee’s final report
on ethnic diversity in UK boards published
on 12 October 2017
PCAOB
Public Company Accounting Oversight Board
ppts
Percentage points
Reynolds American Reynolds American Inc.
Reynolds American
Companies
Reynolds American Inc. and its subsidiary
companies
ROCE
Return on capital employed
RRPs
Reduced-risk Products
Ryde
The Group’s functional shot brand Ryde:
TM
SAFL
Sustainable Agriculture and Farmer Livelihoods
SEC
United States Securities and Exchange
Commission
SIP
Share incentive plan
SoBC
Group Standards of Business Conduct
SOFR
Secured Overnight Financing Rate
SONIA
Sterling Overnight Index Average
SOx
United States Sarbanes-Oxley Act of 2002
SRS
Share reward scheme
TaO
Programme to implement the new
operating model, including one instance of
SAP
TCFD
Taskforce on Climate-related Financial
Disclosures
TDR
TDR d.o.o
THP
Tobacco Heated Product
THR
Tobacco Harm Reduction
TPD1
European Tobacco Products Directive
(directive 2001/37/EC)
TPD2
European Tobacco and Related Products
Directive
(directive 2014/40/EU)
TSR
Total shareholder return
U.S.
United States of America
UURBS
Unfunded unapproved retirement benefit
scheme
WHO
World Health Organization
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Other Information
Glossary
467
1
Identity of Directors, Senior Management and Advisers
N/A
2
Offer Statistics and Expected Timetable
N/A
3
Key Information
A
Selected financial data
N/A
B
Capitalization and indebtedness
N/A
C
Reasons for the offer and use of proceeds
N/A
D
Risk factors
155–162, 415–435
4
Information on the Company
A
History and development of the Company
Inside front cover page, 26–27, 40, 56, 123, 299–302,
336–337, 390, 412, 457, 463, Inside back cover page
B
Business overview
2–5, 12–36, 39, 42–47, 50, 74-77, 106, 108-109, 127–128, 157,
161, 180–181, 274–277, 390–391, 417–419, 422–430, 436–
440, 443, 445
C
Organizational structure
371–380, 390
D
Property, plants and equipment
299–300, 443
4a
Unresolved staff comments
N/A
5
Operating and Financial Review and Prospects
A
Operating results
20–29, 31, 33–36, 42–52, 54, 57–59, 126–127, 157–158,
160, 274–277, 297-299, 314–316, 332, 410, 412, 422–430,
436–440
B
Liquidity and capital resources
55–57, 59, 268, 317, 324–326, 331–335, 366–367, 412, 432
C
Research and development, patents and licenses
15, 26–33, 37, 50, 60–61, 73–77, 83, 93, 281, 390, 434–435
D
Trend information
6–9, 10 (other than: Organic Revenue at cc (%); Organic
Revenue from New Categories at cc (%); Smokeless
revenue as % of total revenue (%); Adjusted Organic
Profit from Operations at cc (%); Adjusted Diluted
Earnings per Share (p); Adjusted Organic Diluted
Earnings per Share at cc (%) and Total Shareholder
Return (rank), and, in each case, related footnote 5), 12–
21, 23–25, 42–47, 49–59, 60–62, 120–127, 144, 155–162,
436–440
E
Critical Accounting Estimates
N/A
6
Directors, Senior Management and Employees
A
Directors and senior management
166–171, 185
B
Compensation
10, 48, 166-171, 191, 213–246, 302–309, 341–342, 395–401,
405–407, 410, 459
C
Board practices
166–171, 191, 194–227, 238–240, 244–246, 342, 446, 459
D
Employees
341, 411
E
Share ownership
230–233, 242–243, 338–340, 461
F
Disclosure of a registrant’s action to recover erroneously
awarded compensation
N/A
7
Major Shareholders and Related Party Transactions
A
Major shareholders
455–456
B
Related party transactions
341–342
C
Interests of experts and counsel
N/A
8
Financial Information
A
Consolidated statements and other financial information
54, 158, 196, 260–370, 425–429, 449–450
B
Significant changes
N/A
9
The Offer and Listing
A
Offer and listing details
448
B
Plan of distribution
N/A
C
Markets
448
D
Selling shareholders
N/A
E
Dilution
N/A
F
Expenses of the issue
N/A
Item
Form 20-F caption
Location in this document
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
Other Information
Cross-Reference to Form 20-F
468
10
Additional Information
A
Share capital
N/A
B
Memorandum and Articles of Association
231, 457–459
C
Material contracts
441–442
D
Exchange controls
449
E
Taxation
451–454
F
Dividends and paying agents
N/A
G
Statements by experts
N/A
H
Documents on display
463–466
I
Subsidiary information
N/A
J
Annual Report to Security Holders
N/A
11
Quantitative and Qualitative Disclosures about Market Risk
331–335
12
Description of Securities Other Than Equity Securities
A
Debt securities
N/A
B
Warrants and rights
N/A
C
Other securities
N/A
D
American Depositary Shares
462
13
Defaults, Dividend Arrearages and Delinquencies
N/A
14
Material Modifications to the Rights of Security Holders
and Use of Proceeds
N/A
15
Controls and Procedures
260–261, 445
16A
Audit Committee Financial Expert
195, 444
16B
Code of Ethics
204, 444, 465
16C
Principal Accountant Fees and Services
203–204, 283
16D
Exemptions from the Listing Standards for Audit
Committees
N/A
16E
Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
460
16F
Change in Registrant’s Certifying Accountant
N/A
16G
Corporate Governance
444
16H
Mine Safety Disclosure
N/A
16I
Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
N/A
16J
Insider Trading Policies
444, 465
16K
Cybersecurity
162, 199–200, 416, 428
17
Financial Statements
N/A
18
Financial Statements
262–370
19
Exhibits
464–465
Item
Form 20-F caption
Location in this document
BAT Annual Report and Form 20-F 2024
Strategic Report
Governance Report
Financial Statements
Other Information
469
Page intentionally left blank
470
471