The Directors present their report and the audited financial statements for the Group for the year ended 31 December 2006. A report from the Directors on corporate governance is set out in Corporate governance statement
and the Remuneration Committee report is Remuneration report
Section 234ZZB of the Companies Act 1985 requires British American Tobacco p.l.c. (the Company) to produce a business review. The information that has been prepared to a standard which fulfils the requirements of that business review can be found in the Operating and Financial Review (OFR)
of the Annual Review, those pages being incorporated by reference into this Directors’ Report. The preparation of the OFR also took into account, where considered appropriate, the best practice set out in the UK Accounting Standards Board’s ‘Reporting Statement: Operating and Financial Review’. The OFR reports on the Group’s development and performance during the past year together with its strategy and prospects, with particular reference to stated Key Performance Indicators (KPIs) and Business Measures (see Our strategy
). The OFR also includes information in respect of financial and other risks under the heading of ‘Key Group Risk Factors
’, research and development
and employee involvement and employee practices
The Annual Review is issued to all shareholders. The Directors’ Report and Accounts is issued to shareholders who have elected to receive it together with an Annual Review.
British American Tobacco p.l.c. is a holding company which owns, directly or indirectly, investments in the numerous companies constituting the British American Tobacco Group of companies. The principal subsidiaries and associates are listed in Principal subsidiary undertakings
and Principal associate undertakings
. All subsidiary undertakings are involved in activities related to the manufacture, distribution or sale of tobacco products.
Group results and dividends
The Group results are dealt with fully in the Financial Statements and in the OFR. The Board has recommended to shareholders a final dividend of 40.2p per ordinary share for the year ended 31 December 2006. If approved, this dividend will be paid on 3 May 2007 to shareholders on the register at the close of business on 9 March 2007. Full details of dividends in respect of 2006 are given in note 8
Annual General Meeting
The Annual General Meeting will be held at The Mermaid Conference & Events Centre, Puddle Dock, Blackfriars, London EC4V 3DB at 11.30am on 26 April 2007. Details of the business to be proposed at the meeting are contained in the Notice of Annual General Meeting which is sent to all shareholders and is also published on our bat.com
The following persons are the current Directors of the Company:
Jan du Plessis
Deputy Chairman and Senior Independent Non-Executive Director
Paul Adams (Chief Executive)
Paul Rayner (Finance Director)
Antonio Monteiro de Castro (Chief Operating Officer)
Dr Ana Maria Llopis
Sir Nicholas Scheele
Anthony Ruys was appointed to the Board as a Non-Executive Director on 1 March 2006 and he was reappointed by shareholders at the 2006 Annual General Meeting. In accordance with the Articles of Association, the Directors named below retire from the Board at the forthcoming Annual General Meeting and, being eligible, offer themselves for reappointment:
Sir Nicholas Scheele
Biographical and related information about the Directors is given in the Annual Review and will also be given in the Secretary’s letter in the Notice of Annual General Meeting for those Directors who are offering themselves for reappointment.
Directors’ interests and indemnities
The interests of the Directors of the Company in the issued share capital of the Company (including interests in share options and deferred shares) are shown in the Remuneration Report
No Director had any material interest in a contract of significance (other than a service contract) with the Company or any subsidiary company during the year. Details of the Executive Directors’ service contracts and the letters of appointment for the Non-Executive Directors, their emoluments and share interests (including interests in share-based payments) are given in the Remuneration Report.
The Company’s practice has always been to indemnify its Directors in accordance with the Company’s Articles of Association and to the maximum extent permitted by law. As at the date of this report, indemnities are in force under which the Company has agreed to indemnify the Directors, in accordance with the Company’s Articles of Association and to the maximum extent permitted by law, in respect of all costs, charges, expenses or liabilities, which they may incur in or about the execution of their duties to the Company, or any entity which is an associated company (as defined in Section 309A of the Companies Act 1985) or as a result of duties performed by the Directors on behalf of the Company or any such associated company.
Directors’ responsibilities in relation to the financial statements
The following statement sets out the responsibilities of the Directors in relation to the financial statements of both the Group and the Company. The report of the independent auditors
set out their responsibilities in relation to those financial statements.
Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss of the Group for the financial year. In preparing those financial statements, the Directors are required to: (1) select appropriate accounting policies and apply them consistently; (2) make judgements and estimates that are reasonable and prudent; (3) state whether applicable accounting standards have been followed, subject to any material departures being disclosed and explained; and (4) prepare the financial statements on the going concern basis, unless they consider that to be inappropriate.
The applicable accounting standards referred to in (3) above are: (a) United Kingdom Generally Accepted Accounting Principles (UK GAAP) for the Company; and (b) International Financial Reporting Standards (IFRS) as adopted by the European Union and implemented in the UK for the Group.
The Directors are responsible for ensuring that the Company keeps sufficient accounting records to disclose with reasonable accuracy the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for taking reasonable steps to safeguard the assets of the Company and the Group and, in that context, to have proper regard to the establishment of appropriate systems of internal control with a view to the prevention and detection of fraud and other irregularities.
The Directors are required to prepare financial statements and to provide the auditors with every opportunity to take whatever steps and undertake whatever inspections the auditors consider to be appropriate for the purpose of enabling them to give their audit report.
The Directors are responsible for the maintenance and integrity of the Annual Report and Accounts on the Company’s bat.com website in accordance with the UK legislation governing the preparation and dissemination of financial statements. Access to the website is available from outside the UK, where comparable legislation may be different.
The Directors consider that they have pursued the actions necessary to meet their responsibilities as set out in this Statement.
Directors’ declaration in relation to relevant audit information
Having made enquiries of fellow Directors and of the Company’s auditors, each of the Directors confirms that:
(1) to the best of his or her knowledge and belief, there is no relevant audit information of which the Company’s auditors are unaware; and (2) he or she has taken all steps that a Director might reasonably be expected to have taken in order to make himself or herself aware of relevant audit information and to establish that the Company’s auditors are aware of that information.
After reviewing the Group’s annual budget and plans, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis in preparing the accounts.
Resolutions will be proposed at the Annual General Meeting to reappoint PricewaterhouseCoopers LLP as the Company’s auditors and to authorise the Directors to agree their remuneration. The Audit Committee will recommend the appropriate level of fees to the Board.
At 1 March 2007, the following person had notified an interest in the ordinary shares of the Company.
| ||Number of ordinary shares||Percentage of issue2 |
|R&R Holdings S.A.1 ||604,336,627 ||29.20 |
1 Pursuant to the Standstill Agreement dated 11 January 1999 entered into between the Company and R&R Holdings S.A. (then named Rothmans International Holdings S.A.), Compagnie Financière Richemont SA (then called Compagnie Financière Richemont AG) and Rembrandt Group Limited (together ‘the R and R Parties’), the R and R Parties gave certain undertakings to the Company including the following: (a) that the R and R Parties and persons acting in concert with any of them will not exercise at any general meeting of the Company more than 25 per cent of the voting rights attached to shares of a class carrying rights to vote in all circumstances at general meetings of the Company; and (b) the interests of the R and R Parties and persons acting in concert with any of them in the issued ordinary share capital of the Company will not exceed 27.8 per cent except in certain specified circumstances e.g. the Company making a purchase of its own shares or otherwise having reduced its issued share capital. During the year ended 31 December 2006, the interests of the R and R Parties changed as a result of the Company continuing its share buy-back programme (see below). Further to a reorganisation of the Rembrandt Group in August 2000, the interest of Rembrandt Group Limited in R&R Holdings S.A. is now held by Remgro Limited, which company has become a party to the Standstill Agreement.
2 The interest of R&R Holdings S.A. is expressed as a percentage of the Company’s issued ordinary share capital before the proposed repurchase and cancellation of shares described under ‘Purchase of own shares’ below (the ‘Repurchases and Cancellations’). The interest of R&R Holdings S.A. immediately after the Repurchases and Cancellations will be 29.30 per cent.