directors report and accounts 2006 - Notes on the accounts

 
 

 Notes on the accounts

 1 Investments in Group companies

The Company's directly owned subsidiaries are British American Tobacco (1998) Limited, B.A.T. International Finance p.l.c., B.A.T Capital Corporation, BATMark Limited, British American Ventures Limited and British American Tobacco QUEST Limited.

The Directors are of the opinion that the individual investments in the subsidiary undertakings have a value not less than the amount at which they are shown in the Balance Sheet.

 2006
£m
2005
Restated
£m
 4,0474,047

As described in Accounting policies, the investments in 2005 have been increased by £25 million as a result of the amendment to FRS26.

 2 Debtors

 2006
£m
2005
Restated
£m
Amounts due from Group undertakings2,2462,002

Included in debtors are amounts of £99 million (2005: £60 million) falling due after one year. As described in Accounting policies, debtors in 2005 have been increased by £77 million as a result of the amendment to FRS26.

 3 Shareholders' funds

 Share
capital
£m
Share
premium
account
£m
Capital
redemption
reserves
£m
Other
reserves
£m
Profit and
loss account
£m
Total
£m
1 January 2006524 43 83 90 1,064 1,804
Change in accounting policy    5 5
 524 43 83 90 1,069 1,809
Increase in share capital - share options 5    5
Transfer from profit and loss account    1,809 1,809
Dividends and other appropriations      
ordinary shares (note 8)    (1,008)(1,008)
Purchase of own shares(7) 7  (500)(500)
Consideration paid for purchase of own shares      
held in Employee Share Ownership Trusts    (77)(77)
Consideration received on the exercise of       
options over own shares held in Employee      
Share Ownership Trusts    23 23
Other movements    40 40
31 December 2006517 48 90 90 1,356 2,101

The accounting policy change is in respect of guarantees provided to other Group companies, required to be recognised at fair value in the Balance Sheet as a result of the amendment to FRS26 Financial Instruments: Measurement. The guarantees are recognised based on the net present value of the fee income (actual or notional) charged thereon.

Dividends paid are recognised in the year in which they are declared, and dividends received are recognised in the year in which they are received. The final dividend which has been declared for the year ended 31 December 2006 is shown in note 8 and will be recognised in the financial statements for the year ended 31 December 2007.

In 2006, for the first time, the Company needed to file interim accounts which were prepared to recognise additional dividend income in 2006. As a result of the Company not doing so, the interim dividend of £323 million paid on 13 September 2006 did not comply with the technical requirements of the Companies Act 1985. It is proposed that the appropriation of distributable profits to the payment of the interim dividend will be ratified by shareholders by way of special resolution at the Annual General Meeting.

As permitted by Section 230 of the Companies Act 1985, the profit and loss of the Company has not been presented in these Financial Statements. The profit for the year ended 31 December 2006 was £1,809 million (2005 restated: £2,168 million).

Details of Directors' remuneration, share options and retirement benefits are given in the Remuneration Report.

 Ordinary
shares of 25p each
Number of shares
Convertible redeemable
preference shares of 25p each
Number of shares
£m
Share capital   
Authorised   
1 January 2006 and 31 December 20062,858,265,349 241,734,651 775.00
Allotted, called up and fully paid   
1 January 20062,096,139,187  524.03
Changes during the year   
- share option schemes994,757  0.25
- purchase of own shares(28,330,000) (7.08)
31 December 20062,068,803,944 517.20

Between 22 September 2006 and 4 December 2006, the Company sought to repurchase 6,927,790 shares for an aggregate consideration of £100 million, which are included in the purchases of own shares of £500 million above. However, as a result of the technical infringement of the Companies Act 1985, the repurchase and cancellation of these shares was invalid and, accordingly, their nominal value is included within the Company's allotted, called up and fully paid share capital as at 31 December 2006 shown above. These shares will be repurchased on 1 March 2007 from their present holders, the Company's brokers, at the same prices agreed between 22 September 2006 and 4 December 2006. The above table includes 28 million shares purchased for cancellation at a cost of £400 million.

Share capitalOrdinary
shares of 25p each
Number of shares
Convertible redeemable
preference shares of 25p each
Number of shares
£m
Authorised   
1 January 2005 and 31 December 20052,858,265,349 241,734,651 775.00
Allotted, called up and fully paid   
1 January 20052,139,807,599  534.95
Changes during the year   
- share option schemes1,571,588  0.39
- purchase of own shares(45,240,000) (11.31)
31 December 20052,096,139,187 524.03

During 2005, 45 million shares were purchased for cancellation at a cost of £501 million.

Share premium

The increase of £5 million relates solely to ordinary shares issued under the Company's share option schemes. These schemes are described in the Remuneration Report.

 4 Creditors

 2006
£m
2005
Restated
£m
Amounts due to Group undertakings2,0032,094
Loan due to Group undertakings2,0462,046
Sundry creditors143100
 4,1924,240

Included in creditors are amounts of £106 million (2005: £69 million) falling due after one year.

Loans due to Group undertakings are unsecured and bear interest at a rate of 6.21 per cent.

As described in the Accounting policies, creditors in 2005 have been increased by £97 million as a result of the amendment to FRS26.

5 Audit fees

 2006 2005
Auditors' fees£30,000£30,000
Fees paid to PricewaterhouseCoopers for advisory and accountancy services - UK£nil£nil


6 Contingent liabilities and financial commitments

British American Tobacco p.l.c. has guaranteed borrowings by subsidiary undertakings of £5,907 million (2005: £6,425 million) and total borrowing facilities of £13,009 million (2005: £15,326 million).

Performance guarantees given to third parties in respect of Group companies were £157 million (2005: £167 million).

There are contingent liabilities in respect of litigation in various countries (note 30).