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Glossary of terms D-F

Helpful financial definitions

 

D

Depreciation: The systematic allocation of an asset’s depreciable amount (acquisition cost less residual value) over its useful economic life. In the case of intangible assets the term “amortisation” is generally used rather than “depreciation”.

Diluted earnings per share: Profit for the period attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period adjusted for the potential dilutive effect of employee share schemes.

Dividend: The amount paid to shareholders in cash or shares from the Company's profits after tax, commonly expressed in pence per share. UK listed companies usually announce a final and an interim dividend during the financial year.

Dividend cover (adjusted): Adjusted diluted earnings per share divided by the declared dividend per Ordinary Share.

DSS: Direct store sales.

E

Earnings: Profit for the period attributable to ordinary shareholders of the parent entity.

Earnings per share:

  1. Basic: Profit for the period attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period (excluding treasury shares).
  2. Diluted: Profit for the period attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period adjusted for the potential dilutive effect of employee share schemes.
  3. Adjusted diluted: As for ‘Earnings per share – diluted’, but amended to exclude the effect of adjusting items, allowing EPS to be measured on a comparable basis with previous periods. Adjusted diluted earnings per share is shown at both current and constant rates of exchange to indicate the impact of the exchange rate movement on the Group’s results.
  4. Headline: 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 2/2013 ‘Headline Earnings’, as issued by the South African Institute of Chartered Accountants.

EBITDA: Profit on ordinary activities before interest and tax, adjusted for goodwill impairment, depreciation and amortisation.

Effective tax rate: The tax charge expressed as a percentage of profit before tax.

Employee Share Ownership Trust (ESOT): Holds British American Tobacco p.l.c. shares purchased in the market, to provide for share options granted to British American Tobacco employees.

Enterprise value (EV): Market capitalisation, plus net debt and the market value of the non-controlling interests.

EV / EBITDA: This ratio compares companies using all the capital employed, including debt. It is a useful means of comparing companies that are domiciled in different countries with different tax and accounting conventions.

Ex-dividend date: The date from which shares are traded without the right to the next dividend payment.

F

FCTC: The Framework Convention on Tobacco Control, issued by the World Health Organization (WHO).

Final dividend: The dividend a company pays after the end of its financial year.

FMCG: Fast moving consumer goods.

Free cash flow: An additional non-GAAP measure used by companies and investors as a performance target, generally taken to mean the amount of cash a business generates after accounting for capital expenditure / reinvestment in the business, and provides a measure of how much cash is available for additional reinvestment in the business and for acquisitions, or available for return to shareholders. The Group prepares an alternative cash flow, which includes a measure of ‘free cash flow’, to illustrate the cash flows before dividends, share buy-backs and investing activities and highlight the effect of restructuring costs, tax, and dividends to non-controlling interests, while excluding the distorting effects of borrowings-related cash flows.

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