bat plc annual report 2007 - Measuring our performance (1 of 2)

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Annual Report and Accounts 2007

We have a wide range of measures and indicators by which the Board assesses performance compared to the Group’s strategy.

To ensure management’s focus is aligned with the interests of our shareholders, the Key Performance Indicators form the basis upon which the levels of incentives for the global organisation are decided.

1. Revenue growth

Revenue for 2007 grew by 3 per cent, compared to the long term target of growing revenue, on average over the medium to long term, by 3 to 3.5 per cent per annum.

This figure is calculated as the revenue of the Group after the deduction of any duties, excise and other taxes, as published in the Group Income Statement.


2. Global Drive Brand volume

A key strength of the Group is its diversified Global Drive Brands (GDBs) portfolio. The growth of the four GDBs – Dunhill, Kent, Lucky Strike and Pall Mall – is therefore a key driver of the Group strategy. In 2007, GDB overall volumes grew by 10 per cent to 161 billion, compared to 17 per cent growth in 2006. Our target is to achieve high single-figure growth.

GDB volumes are calculated as the total volumes of the four brands sold by our subsidiaries. More information about the GDBs and their individual performances, is provided under Growth.

Global Drive Brand volume

3. Share of global volume amongst key players

The share of the Group subsidiaries amongst key players of global volumes, excluding China, grew by 0.2 per cent to 20.5 per cent. When the volumes of associate companies are included, the share grew by 0.1 per cent to 27.4 per cent. The target is to continue our growth of the share of global volume as compared to other global players.

Share of global volume is calculated as the volumes sold by all international players, namely Altria, Japan Tobacco, Imperial Group, Gallaher and Altadis. The information used in this calculation is based on publicly available information and internal company analysis.

Share of global volume, excluding China

4. Profit from operations excluding exceptional items

The Group’s long term target is to grow, on average, operating profit by 6 per cent per annum. For 2007, it was 7 per cent, the same as the growth for 2006.

Profit used in this assessment is the profit from operations of the Group’s subsidiaries, excluding any exceptional items – the items shown as memorandum information on the Group Income Statement.

Profit from operations, excluding exceptional items

*This percentage has been calculated after adjusting for the distortions caused by the inclusion in 2004 of seven months’ results of Brown & Williamson, prior to the company’s merger with R.J. Reynolds to form Reynolds American, since then an associate of the Group. It is also adjusted to remove the distortion caused by the disposal of Etinera in December 2004.

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