British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Investor Presentation (March 2011)
41 slides from British American Tobacco P.l.c's investor presentation, Mar 24, 2011
Slide 1: Presentation to the Investment Analyst Society of South Africa
Presentation to the Investment Analyst Society of South Africa 24th March 2011 Johannesburg
Slide 2: Ralph Edmondson, Head of Investor Relations
Ralph Edmondson Head of Investor Relations
Slide 3: Agenda
Agenda Overview of the Group Group strategy Trading environment and outlook Summary Questions & answers South Africa, March 2011
Slide 4: Back in October 2008…
Back in October 2008… In previous economic downturns… Tobacco is not recession proof… … but recession resistant Our geographic diversity mitigates risk Consumers are loyal to their brands Switching where they buy not what they buy High unemployment may lead to changing behaviour Balanc
Slide 5: Group overview
Group overview Focus on Global Drive Brands + Vogue & Viceroy 180 markets Leadership in over 50 markets Over 60,000 employees $65.5 bn gross turnover $22.8 bn net turnover $7.2 bn adjusted profit from operations Market capitalisation – top 10 in the UK South Africa, March 2011
Slide 6: Consistent market out-performance
Consistent market out-performance Daily Relative performance to FTSE100 02/01/2006 - 09/03/2011 (GMT) Price Value GBp GBp 2,400 2 2,300 1.9 2,200 1.8 2,100 1.7 2,000 1.6 1,900 1.5 1,800 1.4 1,700 1.3 1,600 1.2 1,500 1.1 1,400 1,300 1 .12 .123 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 7: A strategy for delivering shareholder value
A strategy for delivering shareholder value South Africa, March 2011
Slide 8: Group strategy: Growth
Group strategy: Growth Organic growth - Key segments and brands - Innovation Priority markets Mergers and acquisitions South Africa, March 2011
Slide 9: Group strategy: Productivity
Group strategy: Productivity Smart cost management - Supply chain - Overheads and indirects Marketing efficiency Capital effectiveness South Africa, March 2011
Slide 10: Group strategy: Responsibility
Group strategy: Responsibility Sustainability agenda Business Principles Standards of Business Conduct Effective regulation Harm reduction South Africa, March 2011
Slide 11: Group strategy: Winning organisation
Group strategy: Winning organisation Great place to work - Leadership - Culture Outstanding people - Diverse - Opportunities South Africa, March 2011
Slide 12: The business model
The business model Volumes 1 - 1½% Revenue 3 - 4% Profit 6 – 7% HSF Adj EPS South Africa, March 2011
Slide 13: The business model
The business model Organic volume growth Volumes 1 - 1½% 2008 +0.4% 2009 - 3.3% 2010 - 3.0% Revenue 3 - 4% Profit 6 – 7% HSF Adj EPS South Africa, March 2011
Slide 14: The business model
The business model Volumes 1 - 1½% Organic revenue growth Revenue 3 - 4% 2008 +7% 2009 +5% 2010 +3% Profit 6 – 7% HSF Adj EPS South Africa, March 2011
Slide 15: The business model
The business model Volumes 1 - 1½% Revenue 3 - 4% Organic profit growth 2008 +10% Profit 6 – 7% 2009 +7% 2010 +6% HSF Adj EPS South Africa, March 2011
Slide 16: The business model
The business model Volumes 1 - 1½% Revenue 3 - 4% Profit 6 – 7% Adjusted EPS growth 2008 +19% 2009 +19% HSF Adj EPS 2010 +15% South Africa, March 2011
Slide 17: Competitive edge through: Geographic diversity
Competitive edge through: Geographic diversity - Strong emerging markets exposure - Top 5 markets - Canada - Brazil Commodity-based - South Africa economies with stable - Russia currencies - Australia South Africa, March 2011
Slide 18: Competitive edge through: Diversified brand portfolio
Competitive edge through: Diversified and balanced brand portfolio - Balance between premium, mid and low priced segments - Global drive brands have maintained growth despite recession - Strong regional and local brands South Africa, March 2011
Slide 19: Competitive edge through: Marketing expertise
Competitive edge through: Marketing expertise - Trade marketing and distribution - Successful trade partnerships - Mutually beneficial relationships - Rated best overall supplier in the FMCG industry in 13 out of 22 markets surveyed - Extending direct distribution – over 50% of volume South Africa,
Slide 20: Competitive edge through: Marketing expertise
Competitive edge through: Marketing expertise - Trade marketing and distribution - Consumer insights - World class understanding of consumer trends and tastes - Responding to the needs of consumers South Africa, March 2011
Slide 21: Competitive edge through: Marketing expertise
Competitive edge through: Marketing expertise - Trade marketing and distribution - Consumer insights - Leader in innovation - Nanotek – first successful king-size super-slim - Accounts for 16% of Kent global volume - Kent Nanotek 1.2% share in Russia South Africa, March 2011
Slide 22: Competitive edge through: Marketing expertise
Competitive edge through: Marketing expertise - Trade marketing and distribution - Consumer insights - Leader in innovation - Dunhill “Reloc” packaging - Almost 11% share in GCC - Dunhill share growth in Malaysia South Africa, March 2011
Slide 23: Competitive edge through: Marketing expertise
Competitive edge through: Marketing expertise - Trade marketing and distribution - Consumer insights - Leader in innovation - Success with capsule technology - Kent, Kool and Lucky Strike - Broad geographic roll out South Africa, March 2011
Slide 24: Competitive edge through: Productivity
Competitive edge through: Productivity - 5 year programme 2003-07 - Annualised cost savings of £1 billion by 2007 - Focus on overheads and indirects and the supply chain - 5 year programme 2008-12 - Targeting 35% operating margin by 2012 - Shared services and smarter operating platforms Target 35.0%
Slide 25: Delivering growth in challenging times
Delivering growth in challenging times CAGR 2000 to 2010: Adjusted EPS 11.9% Dividends per share 14.7% 175.7 153.0 128.8 114.2 108.5 98.1 99.5 89.3 83.7 76.6 66.5 69.2 66.2 56.9 61.8 55.9 47.0 38.8 41.9 32.0 35.2 29.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Adj EPS (pence) Div per
Slide 26: Delivering growth in challenging times
Delivering growth in challenging times Strong cash generation Balance sheet in excellent shape Share buy-back programme to be recommenced £750 million South Africa, March 2011
Slide 27: Global drive brands
Global drive brands GDB volumes 2000-2010 250 200 Volume: 48 billion +18% 150 Share up 0.4ppt in T40 100 Successful Brazil migration 50 Strong performance in GCC 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 GDB volume: 208 billion +7% International brands 358 billion +5% Volume:
Slide 28: Global drive brands
Global drive brands GDB volumes 2000-2010 250 200 Volume: 26 billion +2% 150 Share stable in T40 100 Growth across Americas 50 Initial success of Click & Roll 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 GDB volume: 208 billion +7% International brands 358 billion +5% Volume: 73
Slide 29: Asia Pacific
Asia Pacific Strong organic profit growth Volume 2% Strong profit growth in GDBs 1% Australia and Japan Revenue 15% Share growth in Malaysia Profit 16% Record share in South Korea Op. Margin ppts +0.3 -10% 0% 10% 20% South Africa, March 2011
Slide 30: Americas
Americas Volume Revenue and profit driven by -1% strong pricing, improved mix and FX GDBs 54% Strong volume growth in Revenue 11% Canada Profit 17% Stable volume in Mexico Op. Margin ppts -20% 0% 20% +1.9 South Africa, March 2011
Slide 31: Western Europe
Western Europe Volume -8% Strong underlying profit growth GDBs 4% Excellent margin improvement Revenue -12% Improving share Profit 6% performance in second half of the year Op. Margin +5.2 ppts -15% 5% South Africa, March 2011
Slide 32: Eastern Europe
Eastern Europe Volume -3% Profit affected by adverse exchange GDBs 0% Share and profit growth in Russia and Ukraine Revenue 4% Illicit trade impacted Profit -12% Romania Op. Margin -3.9 ppts -15% 5% South Africa, March 2011
Slide 33: Africa & Middle East
Africa & Middle East Volume -2% Strong revenue and profit growth GDBs 11% Good performances in Nigeria and the GCC Revenue 11% Turkey impacted by excise Profit 19% and competitor pricing Op. Margin +2.1 ppts -10% 10% South Africa, March 2011
Slide 34: Productivity programme
Productivity programme £1 billion of annualised cost savings 2003 – 07 £800 million target for 2008 – 12 £245 million in 2008 £239 million in 2009 £327 million in 2010 Targeting 35% operating margin by 2012 30.0% in 2007 30.7% in 2008 31.4% in 2009 33.5% in 2010 South Africa, Mar
Slide 35: Operating margin
Operating margin* 39.5% 37.6% 35.1% 35.4% 34.0% 33.5% 31.9% 31.4% 30.8% 25.6% 25.1% 21.2% 2009 2010 Asia Pacific Americas W. Europe E. Europe AME Group * Based on adjusted profit South Africa, March 2011
Slide 36: Drivers of adjusted EPS growth
Drivers of adjusted EPS growth Pence % EPS 2009 153.0 Profit performance 9.6 +6 Acquisitions 0.3 - Net finance costs 2.1 +1 Associates 3.1 +2 Taxation 0.1 - Minority interests 0.7 +1 Exchange 7.1 +5 Share issues (0.3) - EPS 2010 175.7 +15 South Africa, March 2011
Slide 37: Cash Flow
Cash Flow 2010 2009 £m £m Adjusted profit from operations 4,984. 4,461. Non cash items 501. 471. Increase in working capital (61) (100) Net capital expenditure (523) (515) Operating cash flow 4,901. 4,317. Net interest paid (491) (499) Tax paid (1,178) (1,095) Dividends paid to non-controlling inter
Slide 38: Cash Flow
Cash Flow 2010 2009 £m £m Free cash flow 3,240. 2,630. Dividends paid to shareholders (2,093) (1,798) Net investment activities -. (196) Other net flows (77) (203) Net cash flow 1,070. 433. South Africa, March 2011
Slide 39: Net debt
Net debt 2010 2009 £m £m Opening net debt at 1 January (8,842) (9,891) Net cash flow for the period 1,070. 433. Exchange rate effects (63) 672. Other (including acquired net debt) (6) (56) Closing net debt at 31 December (7,841) (8,842) South Africa, March 2011
Slide 40: Summary
Summary Good share trends in H2 2010 Recovery signs in key markets Many successful innovations launches in 2010 Continued pricing momentum Excellent progress on cost savings In good shape as recession recedes South Africa, March 2011
Slide 41: Presentation to the Investment Analyst Society of South Africa
Presentation to the Investment Analyst Society of South Africa 24th March 2011 Johannesburg
British American Tobacco — Investor Presentation (March 2011) on 6ix