Helpful financial definitions
Operating margin: Group adjusted profit from operations (operating profit excluding adjusting items), divided by revenue, multiplied by 100 per cent.
Organic growth: Organic growth is the growth after adjusting for mergers and acquisitions and discontinued activities. Adjustments are made to current and prior period numbers based on the current Group position.
Profit from operations: Profit earned from operating activities i.e. before net finance costs, the share of post-tax results of associates and joint ventures, and tax. Adjusted profit from operations excludes the adjusting items.
Proposed dividend: Dividend proposed by the Board of Directors but not yet approved by the shareholders at the Annual General Meeting.
Related parties: 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, typically with associates.
Reloc: Resealable cigarette pack exclusive to Dunhill.
Restructuring costs: Costs incurred as a result of initiatives to improve the effectiveness and the efficiency of the Group as a globally integrated enterprise. These initiatives include a review of the Group’s manufacturing operations, supply chain, overheads and indirect costs, organisational structure and systems and software used.
Revenue: Revenue principally comprises sales of cigarettes and other tobacco products to external customers. Revenue excludes duty, excise and other taxes and is after deducting rebates, returns and other similar discounts. Revenue is recognised when the significant risks and rewards of ownership are transferred to a third party.
Segments: The four 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 chief operating decision maker, identified as the Management Board, for assessing performance and allocating resources. The Management Board reviews current and prior period segmental revenue, adjusted profit from operations of subsidiaries and adjusted post-tax results of associates and joint ventures at constant rates of exchange.
Share option scheme: A right granted to employees to purchase shares in a company at a fixed price for a set period of time.
Subsidiary undertaking: A subsidiary is an entity controlled by the Group. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. This is often evidenced by directly or indirectly holding more than 50 per cent of the voting capital.
Taxation: Taxation is income tax chargeable on the profits for the period, together with deferred taxation. The current income tax charge is calculated on the basis of tax laws enacted or substantially enacted at the balance sheet date in the countries where the Group’s subsidiaries, associates and joint ventures operate and generate taxable income. Deferred taxation is provided in full using the liability method for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for taxation purposes.
Total shareholder return: Dividends combined with share price appreciation relative to the FTSE 100 Index and also to the Fast Moving Consumer Goods (FMCG) peer group. The FMCG comparator group is reviewed annually to ensure that it remains both relevant and representative. TSR is measured according to the return index calculated by Datastream, on the basis of all companies’ dividends being reinvested in their shares. The return is the percentage increase in each company’s index over a three year period.
Total tobacco volume: Total tobacco volume is measured with cigarette sticks as the basis, with usage levels applied to other tobacco products to calculate the equivalent number of cigarette units.
Trade loading: Where retailers and wholesalers order additional products in advance, usually ahead of an anticipated price increase.
Treasury shares: Previously issued shares of the Company, reacquired by buying them on the market through the share buyback programme or through employee share option schemes.
Underlying tax rate: The adjusted tax charge expressed as a percentage of adjusted profit before tax excluding the results of associates.
Volumes: Quantities of cigarettes sold during the reporting period by BAT Group companies, including the volumes of joint operations not already recognised by Group subsidiaries, but excluding the volumes of associates and joint ventures. Total tobacco volume is measured with cigarette sticks as the basis, with usage levels applied to other tobacco products to calculate the equivalent number of cigarette units.
Weighted average cost of capital: The cost of capital for the Group, i.e. the return that the providers of the Group’s capital (both borrowings and equity) require, weighted by the proportions of borrowings and equity and the different rates of return for each.
Weighted average number of shares in issue: The average number of shares in issue during the period, weighted for the period of time they were in issue.