british american tobacco p.l.c. annual report 2008 - From the Chairman

Dear Shareholder,

2009 was a remarkable year to join British American Tobacco. While many companies have struggled in the harsh economic climate and international markets have wavered, I find myself with the great privilege of being Chairman of a business that continues to deliver excellent results and has a well established strategy for achieving sustainable growth.

Revenue rose by 10 per cent at constant rates of exchange and by 17 per cent to £14,208 million at current rates. Adjusted profit from operations increased by 10 per cent at constant rates of exchange and by 20 per cent to £4,461 million at current rates. The benefit from the translation of our results into sterling was £355 million.

These fine figures resulted in adjusted diluted earnings per share growing by 19 per cent to 153.0p.

The Board has recommended a final dividend of 71.6p per share, an increase of 16 per cent, which will be paid on 6 May 2010 to shareholders on the register at 12 March 2010. This takes the total dividend for the year to 99.5p, an increase of 19 per cent, and maintains our target of paying out 65 per cent of sustainable earnings in dividends.

It is to the credit of all our people that British American Tobacco has had yet another successful year and I am delighted with the performance of our executive team. At the end of 2009, Jimmi Rembiszewski, our outstanding and long-serving Marketing Director, retired and was succeeded by Jean-Marc Lévy. Jean-Marc, who was previously Regional Director, Western Europe, has been succeeded by Jack Bowles.

My fellow Non-Executive Directors have played an important role in constructively challenging our strategy and ensuring that the Group is very well governed. My thanks to them for their help and support in my new role.

May I also extend my warmest thanks on behalf of all shareholders to my predecessor, Jan du Plessis, who led the Board so skilfully over the past five years. He set an exemplary standard of Chairmanship and is a tough act to follow. I know I speak for everyone at British American Tobacco in wishing him continued success.

Jan’s time here has certainly been a period of impressive value creation for shareholders. Over the past five years, British American Tobacco has achieved a compound annual growth rate of 15 per cent in earnings per share and 19 per cent in dividends per share. Over the same five year period, our total shareholder return has been 175 per cent compared to 35 per cent for the FTSE 100.

In summary, I am delighted to be here and optimistic about the future for British American Tobacco. We have a well established company in one of the more resilient industries. Indeed, as an outsider, I have been struck by both the broad stability of the tobacco sector and the opportunities for growth within it.

There are signs that the global economy is beginning to improve, although unemployment, which is an important influence on our business, may continue to rise in developed markets. We have a very clear strategy and excellent management, with a well balanced portfolio of brands. Our unrivalled geographic spread mitigates risk for shareholders and will help us maintain sustainable growth and build shareholder value.

Richard Burrows
Chairman

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