Illicit trade in the form of counterfeit products, smuggled genuine products and locally manufactured product on which applicable taxes are evaded, represents a significant and growing threat to the legitimate tobacco industry. Increasing excise rates are encouraging more consumers to switch to illegal cheaper tobacco products and providing greater rewards for smugglers. Illicit trade can have an adverse effect on Group volumes, restrict the ability to increase selling prices and damage brand equity.

The brand names under which the Group’s products are sold are key assets. Investments over a period of time have led to many of the Group’s brands having significant brand equity and global appeal to consumers, essential for delivering sustainable profit growth into the future. The protection and maintenance of the reputation of these brands is important to the success of the Group. In a number of countries around the world, the risk of intellectual property rights’ infringement remains high as a result of limitations in judicial protection and/or inadequate enforceability. Any substantial erosion in the value of the brands could have an adverse effect on the Group.