“Revenue growth of 5 per cent, and organic revenue at constant rates up by 3 per cent, with Global Drive Brand volume up 7 per cent, is a very good performance.”
John Daly
Chief Operating Officer
Chief Operating Officer's introduction
Group revenue grew by 5 per cent in 2010. This was the result of favourable exchange rate movements, continued good pricing momentum and the acquisition of PT Bentoel Internasional Investama Tbk (Bentoel) in the middle of 2009. Organic Group revenue was up 3 per cent at constant rates of exchange.
The reported profit from operations was 5 per cent higher at £4,318 million, with a 12 per cent increase if adjusting items (as explained in Adjusting items in the Financial review) are excluded. The major difference between the growth rates of adjusted profit from operations compared to the reported profit, is the goodwill and trademark impairment write-downs in respect of Turkey, as further described in Adjusting items in the Financial review. All of the regions contributed to this good profit result, except for Eastern Europe where there were significantly lower industry volumes in Romania, driven by illicit trade, and an adverse exchange rate in Uzbekistan. Adjusted profit from operations was 6 per cent higher at constant rates of exchange, with all regions growing.
Group volumes from subsidiaries were 708 billion in 2010, down 2 per cent on last year despite the acquisition of Bentoel. This was a result of lower industry volumes in some markets – mainly Turkey, Pakistan, Romania and South Africa – and an increase in illicit trade.
Group market share in the Top 40 markets increased with a particularly strong performance in the second half of 2010.
The Global Drive Brands (GDBs) achieved good overall volume growth of 7 per cent following the launch of successful innovations, and this resulted in a continued improvement in market share. Excluding brand migrations, growth was 3 per cent.
Dunhill increased volumes by 18 per cent in 2010, mainly as a result of brand migrations in Brazil and South Africa and strong growth in the Gulf Cooperation Council (GCC), Russia, France, Nigeria and Indonesia. Kent was 1 per cent lower after industry volume declines in two of its main markets, Japan and Romania, despite growing market share in both. Volumes were up in Russia, Ukraine and Uzbekistan.
Lucky Strike volumes were 2 per cent higher with growth in many markets, including France, Chile and Argentina. However, this was partially offset by declines in its main markets of Germany, Spain and Japan. Pall Mall volumes increased by 8 per cent, with growth in Germany, Uzbekistan, Italy, Spain, Pakistan, Nigeria and Chile, partially offset by lower volumes in Russia, Romania, Hungary and Turkey.
Other international brands excluding GDBs grew by 2 per cent, with good performances by Vogue, Benson & Hedges, Craven 'A', John Player Gold Leaf and Rothmans.