bat plc annual report 2007 - Notes on the accounts: Notes 5-8
5 Associates and joint ventures
| 2007 | 2006 | |||
|---|---|---|---|---|
| Total £m | Group’s share £m | Total £m | Group’s share £m | |
| Gross turnover (including duty, excise and other taxes) | 12,089 | 4,436 | 11,831 | 4,384 |
| Duty, excise and other taxes | (3,503) | (1,228) | (3,349) | (1,194) |
| Revenue | 8,586 | 3,208 | 8,482 | 3,190 |
| Profit from operations | 1,926 | 735 | 1,765 | 677 |
| Net finance costs | (99) | (42) | (61) | (26) |
| Profit on ordinary activities before taxation | 1,827 | 693 | 1,704 | 651 |
| Taxation on ordinary activities | (646) | (246) | (564) | (216) |
| Profit on ordinary activities after taxation | 1,181 | 447 | 1,140 | 435 |
| after (charging)/crediting | ||||
| – brand impairments | (16) | (7) | (30) | (13) |
| – exceptional tax credits | 40 | 17 | ||
| Attributable to | ||||
| British American Tobacco’s shareholders (Group income statement) | 442 | 431 | ||
| Minority interests | 5 | 4 | ||
| Dividends | ||||
| – listed investments | (245) | (222) | ||
| – unlisted investments | (45) | (45) | ||
| (290) | (267) | |||
The share of post-tax results of associates and joint ventures is after brand impairments and exceptional tax credits.
In the year ended 31 December 2007, Reynolds American modified the previously anticipated level of support between certain brands and the projected net sales of certain brands, resulting in a brand impairment charge of which the Group’s share amounted to £7 million (net of tax) (2006: £13 million).
In the year ended 31 December 2006, Reynolds American also benefited from the favourable resolution of tax matters of which the Group’s share was £17 million.
6 Taxation on ordinary activities
a) Summary of tax on ordinary activities
| 2007 £m | 2006 £m | |
|---|---|---|
| UK corporation tax | 14 | |
| comprising | ||
| – current year tax expense | 977 | 768 |
| – double taxation relief | (977) | (754) |
| Overseas tax | 765 | 681 |
| comprising | ||
| – current year tax expense | 816 | 743 |
| – adjustments in respect of prior periods | (51) | (62) |
| Total current tax | 765 | 695 |
| Deferred tax | 26 | 21 |
| comprising | ||
| – deferred tax relating to origination and reversal of temporary differences | 38 | 16 |
| – deferred tax relating to a previously unrecognised tax loss | (14) | |
| – deferred tax relating to changes in tax rates | (12) | 19 |
| 791 | 716 |
b) Factors affecting the tax charge
The taxation charge differs from the standard 30 per cent rate of corporation tax in the UK. The major causes of this difference are listed below:
| 2007 | 2006 | |||
|---|---|---|---|---|
| £m | % | £m | % | |
| Profit before tax | 3,078 | 2,764 | ||
| Less: share of associates post-tax profit | (442) | (431) | ||
| 2,636 | 2,333 | |||
| Tax at 30% (2006: 30%) on the above | 791 | 30.0 | 700 | 30.0 |
| Factors affecting the tax rate: | ||||
| Tax at standard rates other than UK corporation tax rate | (72) | (2.7) | (56) | (2.4) |
| National tax rate relief | 18 | 0.7 | (15) | (0.6) |
| State and local taxes | 52 | 2.0 | 50 | 2.1 |
| Permanent differences | (51) | (1.9) | 9 | 0.5 |
| Overseas withholding taxes | 63 | 2.4 | 50 | 2.1 |
| Double taxation relief on UK profits | (8) | (0.3) | (13) | (0.6) |
| Unutilised tax losses | 28 | 1.0 | 13 | 0.6 |
| Adjustments in respect of previous periods | (51) | (1.9) | (62) | (2.7) |
| Deferred tax charges at other tax rates | 33 | 1.2 | 21 | 0.9 |
| Deferred tax attributable to a (decrease)/increase in the rate of domestic income tax | (12) | (0.5) | 19 | 0.8 |
| 791 | 30.0 | 716 | 30.7 | |
c) Tax on items recognised directly in equity
| 2007 £m | 2006 £m | |
|---|---|---|
| Current tax | 25 | 14 |
| Deferred tax | (6) | (2) |
| Charged to equity | 19 | 12 |
7 Earnings per share
Basic earnings per share are based on equity earnings of £2,130 million (2006: £1,896 million) and 2,025 million (2006: 2,059 million) ordinary shares of 25p each, being the weighted average number of shares in issue during the year (excluding shares held as treasury shares).
For the calculation of diluted earnings per share, the weighted average number of shares in issue is increased to 2,039 million (2006: 2,076 million) to reflect the potential dilutive effect of employee share schemes.
| 2007 | 2006 | |||||
|---|---|---|---|---|---|---|
| Earnings £m | Weighted average number of shares m | Earnings per share pence | Earnings £m | Weighted average number of shares m | Earnings per share pence | |
| Basic earnings per share | 2,130 | 2,025 | 105.19 | 1,896 | 2,059 | 92.08 |
| Share options | 14 | (0.73) | 17 | (0.75) | ||
| Diluted earnings per share | 2,130 | 2,039 | 104.46 | 1,896 | 2,076 | 91.33 |
Earnings have been affected by a number of exceptional items. To illustrate the impact of these, an alternative earnings per share is shown below:
Alternative earnings per share calculation
| Diluted | Basic | |||||||
|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |||||
| Earnings £m | Earnings per share pence | Earnings £m | Earnings per share pence | Earnings £m | Earnings per share pence | Earnings £m | Earnings per share pence | |
| Unadjusted earnings per share | 2,130 | 104.46 | 1,896 | 91.33 | 2,130 | 105.19 | 1,896 | 92.08 |
| Restructuring costs per income statement | 173 | 8.49 | 216 | 10.40 | 173 | 8.54 | 216 | 10.49 |
| Tax and minority interests on restructuring costs | (41) | (2.01) | (48) | (2.31) | (41) | (2.02) | (48) | (2.33) |
| Net (gains)/losses on disposal of businesses and brands per income statement | (75) | (3.68) | (41) | (1.98) | (75) | (3.70) | (41) | (1.99) |
| Tax on net (gains)/losses on disposal of businesses and brands | 19 | 0.93 | 18 | 0.87 | 19 | 0.94 | 18 | 0.87 |
| Associates: brand impairments and exceptional tax credits per income statement | 7 | 0.34 | (4) | (0.19) | 7 | 0.34 | (4) | (0.19) |
| Adjusted earnings per share | 2,213 | 108.53 | 2,037 | 98.12 | 2,213 | 109.29 | 2,037 | 98.93 |
8 Dividends and other appropriations
| 2007 | 2006 | |||
|---|---|---|---|---|
| Pence per share | £m | Pence per share | £m | |
| Ordinary shares | ||||
| Interim | ||||
| 2007 paid 12 September 2007 | 18.60 | 377 | ||
| 2006 paid 13 September 2006 | 15.70 | 323 | ||
| Final | ||||
| 2006 paid 3 May 2007 | 40.20 | 821 | ||
| 2005 paid 4 May 2006 | 33.00 | 685 | ||
| 58.80 | 1,198 | 48.70 | 1,008 | |
The Directors have recommended to shareholders a final dividend of 47.60 pence per share for the year ended 31 December 2007. If approved, this dividend will be paid to shareholders on 7 May 2008. This dividend is subject to approval by shareholders at the Annual General Meeting and therefore, in accordance with IAS10, it has not been included as a liability in these Financial Statements. The total estimated dividend to be paid is £954 million which takes the total dividends declared in respect of 2007 to £1,331 million (2006: £1,144 million) representing 66.20 pence per share (2006: 55.90 pence per share).
As described in note 4, while the 2006 interim dividend did not comply with the technical requirements of the Companies Act 1985, the payment has been presented as a dividend payment above.