The Group’s businesses operate under increasingly stringent regulatory regimes around the world. Further regulation is expected, particularly as a result of the World Health Organisation’s Framework Convention on Tobacco Control (FCTC) and increasingly active tobacco control activities outside the FCTC. It is not possible to predict where, when and in what form regulations will be enacted, but regulation of the tobacco industry generally covers:

• Product: product design and attributes (e.g. ‘low ignition propensity paper’) as well as product disclosures (e.g. ingredients, additives, emissions);
• Packaging: pictorial warnings, rotating warnings, use of colours and size;
• Promotion: communications regarding the Group’s products at both retail and trade levels;
• Purchase: the manner in which cigarettes are sold, such as type of outlet (e.g. supermarkets, vending machines) and how they are sold (e.g. above the counter versus beneath the counter);
• Place: regulations as to the places where adults can and cannot smoke tobacco products;
• Price: regulations as to the price the Group can charge for its products (e.g. by excise or minimum prices).

These regulations may have an impact on volumes (e.g. as a result of restrictions on where cigarettes may be smoked) and profits (e.g. as a result of diminution of brand equity leading consumers away from premium brands, through excise increases and/or through increased cost of complying with product design, disclosure or packaging requirements). Further, taking into account the significant number of regulations applying to the Group’s businesses across the world, it is possible that there may be allegations of breaches of regulations. Even when such allegations are proven untrue, there is often a reputational impact and a financial cost in defending such allegations.