2014 ANNUAL REPORT AND FINANCIAL STATEMENTS
Delivering Today. Repositioning for Tomorrow Contents WHO WE ARE 4
NOTICE OF AGM 6
2014 HIGHLIGHTS 8 OUR YEAR IN PICTURES 10 CHAIRMAN’S REVIEW 16 BOARD OF DIRECTORS 18 MANAGING DIRECTOR’S REVIEW 20 LEADERSHIP TEAM 24 VISION AND STRATEGY 25
STATEMENT OF CORPORATE GOVERNANCE 26 SHAREHOLDING STRUCTURE 32 CORPORATE INFORMATION 33 FINANCIAL STATEMENTS 34 PROXY FORM 70
UGANDA British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
WHO WE ARE British American Tobacco Uganda Limited (BAT Uganda)
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BAT Uganda is a market leader in the cigarette industry in Uganda, with over 70% share of the cigarette market. We have sustained a OUR GUIDING PRINCIPLES significant presence and partnership with Uganda for over 86 years. Our Guiding Principles provide certainty about what we stand for and act as a compass to guide our behavior.
member of the British American Tobacco Group, be one of the country’s top tax payers, among other Enterprising Spirit Open Minded the world’s second largest quoted tobacco contributions to Uganda’s economy. In this regard, We have the confidence to passionately pursue growth We are forward looking and anticipate consumer needs, group by global market share, BAT Uganda has BAT Uganda , has been recognised variously over the and new opportunities whilst accepting the consid- winning with innovative, high quality products. continued to generate incomes and employ- years for its contributions and consistent compliance, ered entrepreneurial risk that comes with it. We are We listen to and genuinely consider other perspectives mentA through our cigarette business, and continues to including a current accreditation as one of only 22 bold and strive to overcome challenges. This is the and changing social expectations. We are open to new be the leading contributor of taxes from cigarettes sold Ugandan companies with the highest levels of customs cornerstone of our success. ways of doing things. in the Uganda market. compliance with the Authorized Economic Operator (AEO) status. Freedom Through Responsibility Strength From Diversity BAT Uganda boasts of four iconic cigarette brands in We always strive to do the right thing, exercising our We respect and celebrate each other’s differences and the market, namely Sportsman, Safari, Rex and Dunhill, We believe that because our products pose risks to responsibility to society and other stakeholders. We enjoy working together. We harness diversity – of our supplied through a network of independent distribution health, it is all the more important that our business is use our freedom to take decisions and act in the best people, cultures, viewpoints, brands, markets and ideas channels. In our cigarettes supply chain, we deal with managed responsibly. Responsibility is integral to our interest of consumers. – to strengthen our business. We value what makes each 7 regional distributors, over 2000 wholesalers and over strategy and through dialogue with our stakeholders, of us unique. 30,000 retailers countrywide. we work to pursue our commercial objectives in ways consistent with changing expectations of a modern The company was one of the first to be listed on the tobacco business. Uganda securities Exchange in 2000, and continues to British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notice of Annual General Meeting Notes: In addition:
NOTICE IS HEREBY GIVEN that the 15th Annual General Meeting (AGM) of British American 1. A member entitled to attend and vote at 6. All shareholders are advised to provide their email Tobacco Uganda Limited (the Company) after the Initial Public Offer will be held at the Sheraton the AGM is entitled to appoint a Proxy to addresses and mobile phone numbers to the 6 Kampala Hotel, Rwenzori Ballroom on the 7th day of May 2015 starting at 9.00am to conduct the attend and vote instead of himself/herself. Company’s Share Registrars for ease of communica- 7 following ordinary and special business of the Company: Such Proxy need not be a member of the tion at the shared email address below. Company. a) Shareholders who still hold shares in certificate form 2. A proxy form can be obtained from the are advised to refer any queries that they may have ORDINARY RESOLUTIONS: (e) Mr. Dadson Mwaura having been appointed by Company’s Head Office which is now located and update their records relating to their physical 1. To receive the Company’s audited accounts the Board of Directors after the last Annual General on the 7th Floor, TWED Towers Building, Plot and email addresses, bank account details or other for the year ended 31st December 2014, Meeting of the company, to fill up a casual vacancy 10 Kafu Road, Nakasero, Kampala; and is particulars to the Company’s Share Registrars. together with the reports of the Directors and on the Board in accordance with article 94 of the also included in the Annual Report (Page70) the external auditors. Articles of Association, is required to retire at the which is available to every shareholder of the b) Shareholders whose shares were immobilized and Annual General Meeting following his appoint- Company. are held through the Securities Central Depository 2. To declare a final dividend for the year ended ment, and the said director being eligible, offers (SCD) are advised to obtain and complete SCD 31st December 2014. himself for re-election. 3. Shareholders are requested to carry some Form 1 from their brokers in case of changes in personal identification and proof of their their postal addresses and bank account details. 3. To appoint external auditors of the Company SPECIAL RESOLUTIONS: shareholding to the meeting. and to authorise the Directors to fix their c) Shareholders who do not hold accounts with the remuneration for the year ending 31st 5. To consider and if accepted, to pass a special 4. E-copies of the Annual Report will be sent Securities Central Depository (SCD) are encouraged December 2015. resolution to amend the Articles of Association of by email to all the shareholders whose to open the same with the help of any of the the Company in the following manner: email addresses the Company currently has. Securities Central Depository Agents listed on the 4. To elect directors in place of those retiring Any shareholder who wishes to receive an Uganda Securities Exchange (USE) website www. in accordance with the provisions of the (a) To amend Article 79 of the Articles of Association e-copy of the Annual Report should contact use.or.ug and to further immobilize any shares that Company’s Articles of Association. on the Company’s borrowing powers. the Company’s Share Registrars Deloitte they still hold in paper/certificate form. (Uganda) Limited on email shareholders@ (a) Mr. Philip Lopokoiyit (48) who was appointed (b) To exempt executive directors from the rotation deloitte.co.ug. 7. The dividend, if approved, will be paid on or before to the Board on the 17th August 2012, retires requirements of articles 88 and 90(d) of the Articles the 15th of June 2015, to shareholders whose names by rotation in accordance with article 89 of of Association. 5. The Annual Report and the proxy form will appear on the Company’s share register at the close th the Articles of Association of the Company, also be available on the Uganda Securities of business on 28 May 2015. and is eligible for re-election; (c) To amend Article 122 of the Articles of Association Exchange (USE) website www.use.or.ug to prescribe how unclaimed dividends from the starting from Tuesday 21st April 2015. 8. Shareholders who have not received their dividends (b) Mr. Paul Sine (51) who was appointed to the Company should be treated. for the past years should contact the Company’s Share Board in May 2011, retires by rotation in Registrars in writing and provide valid identification accordance with article 89 of the Articles of 6. To conduct any other business that may be such as copy of passport, driver’s license, voter’s card Association of the Company, and is eligible conducted at the AGM. or national identification card. for re-election;
(c) Hon. Elly Karuhanga (68) who was appointed By order of the Board to the Board in July 2013, retires by reason BRITISH AMERICAN TOBACCO UGANDA LIMITED The Company’s Registered Address and Contacts is: of age, in accordance with article 90 of the The Company’s Registered Address and Contacts is: Articles of Association of the Company, and is British American Tobacco Uganda Limited Deloitte Uganda Limited eligible for re-election; 7th Floor TWED Towers Building, 3rd Floor, Rwenzori House (d) Mr. Fred Tumwesigye (68) who was appoint- Plot 10 Kafu Road, Nakasero 1 Lumumba Avenue P. O. Box 10314 Kampala, Uganda ed to the Board in April 2001 retires by P. O. Box 7100 Kampala, Uganda rotation and by reason of age, in accordance Tel: +256 (312) 200100 / +256 (200) 500100 Tel: +256 (414) 343850 with articles 89 and 90 of the Articles of Email: [email protected] Nicholas Ecimu Association of the Company, and is eligible Sebalu & Lule Advocates for re-election; COMPANY SECRETARY 10th April, 2015 British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
2014 Highlights
Earning and dividend per share
8 2010 2011 2012 2013 2014 9
Net Turnover (billions) 163 165 180 213 270
Profit Before Tax (billions) 16 32 17 16 48
Gov’t Revenue - Excise & VAT (billions) 49 58 62 57 69
Earning/Share (shillings) 228 450 248 220 749
Dividend/Share (shillings) 228 450 141 141 748
Contribution to Government Revenue ( VAT and Excise Duty)
70 69 62 58 60 57 49 50
40
30
20
10
0 2010 2011 2012 2013 2014 British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Our year in pictures
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The State Minister for Trade and Industry Hon. James Mutende (2nd Right) under whose Ministry the Tobacco Sector falls, is joined by the A representative from Otada Holdings Ltd, one of BAT Uganda’s distributors, is BAT Uganda Board Chairman Hon. Elly Karuhanga (R) and incoming Managing Director Dadson Mwaura (2nd left) as he hands over an congratulated by the BAT East and Central Africa Area Director, Chris Burrell after art piece from BAT Uganda, to outgoing Managing Director Jonathan D’Souza (L) at his farewell. emerging best distributor in the Sportsman Fusion Contest 2014.
Members of Parliament from tobacco growing areas consult each other during an engagement session in April 2014 with the industry and farmers on the implications of the proposed Tobacco Control Bill 2014.
Outgoing Head of Leaf, Ben Guest (R), and Head of Growing, Shareholders vote at last year’s AGM, held at the Sheraton Kampala Sam Mugenyi (C) share a light moment with one of the farmer Hotel . leaders at the Leaf farewell party in Hoima. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Our year in pictures
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BAT Uganda staff receive yet another award at the 2014 Annual Financial Reporting Awards which Tobbacco Regulation: recognises effective communication, transparency, integrity, and accountability in the corporate reporting We support the view that regulation of the sector is necessary. process. However, regulation should be reasonable, balanced, evidence-based and enforceable. We together with the rest of the tobacco industry stakeholders would like to see effective regulation that meets public health objectives, respects our legal rights, does not impede our ability to compete and does not damage livelihoods, such as those of farmers, traders and those employed in the sector.
We are transparent about what we think and will continue to engage for fair and balanced regulation.
Mr Dadson Mwaura, Managing Director BAT Uganda
Farmer leaders representing the respective tobacco growing Members of the Board of BAT Uganda at last Year’s 14th Annual regions attend a stakeholder meeting following the tabling General Meeting held on 7th May, 2014 at the Sheraton of the proposed Tobacco Control Bill in April 2014. Kampala Hotel.
The marketing team head out on a market visit to support our drive for effect distribution and product availability in the right outlets British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
A new home for BAT Uganda
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We will now focus on the more profitable cigarette business through improving our distribution capabilities, building brand equity growing value and market share. This approach will deliver a more sustainable return to our shareholders.
In September 2014, BAT Uganda moved offices from its historical home on Jinja Road to a new location, effectively changing Hon. Dr Elly Karuhanga, Chairman BAT Uganda Board address to 7th Floor, TWED Towers on Plot 10 Kafu Road, Nakasero Kampala. The staff believe the new office is more modern, effective and aligned to changing times and our new business model and strategy to deliver shareholder value. Celebrating a great legacy
Very few companies can boast of a legacy that spans over 86 years and yet still going strong. In December 2014, BAT Uganda staff decided to celebrate this great legacy, recounting the operations of the company through the different eras – from the 1920s-1950s, 1960s & 70s, 1980s to 1990s and the 2000s into a bolder and brighter future as the business repositions for an even better future. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
In 2014 the business registered a profit after tax Dividend that is 240% higher than that of 2013. In view of the above results, the directors recommend a final dividend of Shs 748 per share. The dividend Chairman’s Review Economic Landscape payment which is subject to withholding tax will be paid During 2014 the country experienced favorable on or before the 15th June 2015 to shareholders on the climate conditions that led to good crop harvests; register at the close of business on 28th May 2015. this factor amongst others contributed to low inflation rates which were 2.1% at year end. These Future Outlook: It is my pleasure to present the 2014 Annual Report economic benefits were partially offset by the In August 2014, we closed our leaf operations in Uganda. 16 for British American Tobacco Uganda Limited. weakening of the shilling. The shilling depreciated This decision did not affect the crop we contracted to 17 10% during the year. purchase for the 2014 season. We have fulfilled our Despite difficult economic factors, the business has sponsorship commitments to our farmers and purchased These factors presented a favorable environment for the crop we had contracted to be grown per the terms of registered a strong performance and continues to doing business through the improved disposable our sponsorship agreements with the farmers. This crop incomes of our consumers, better productivity of has been processed and will be sold in 2015. deliver sustainable business growth. our farmers & improved quality of the tobacco Exiting staff were treated fairly, with dignity and respect, grown which in part impacted on our performance in line with existing company policy on employee ter- during the year under review. mination. We are happy to state that a significant number While revenue increased by 27% in comparison to 2013, this was greatly offset by the full year impact of of these staff have subsequently found employment. the 2013 excise increase of 40% on cigarettes as well as import duty costs. The underlying profit for the Business Review business was 10% lower than in 2013. However this decline was offset by the combined effort of reduc- Our leaf exports volumes were higher by 43% With the closure of our leaf operations, a source of tion in costs as well as the proceeds from sale of the Kampala Green Leaf Threshing plant. compared to 2013. This volume growth comprises considerable volatility, risk and overhead cost has been both the packed leaf exports, which grew by removed. We will now focus on the more profitable 27% as well as green leaf export volumes which cigarette business through improving our distribution increased by 110%. capabilities, building brand equity and growing value and market share. This approach will deliver a more sustainable Operating profit increased by In 2014 our Cigarette volumes were 3% higher return to our shareholders. than in 2013. This growth was also attributable to improved distribution following the imple- The threat of increasingly stringent regulatory regimes; 37 mentation of route to market review initiatives at increased taxation coupled with a growing incidence of 8% the end of 2013. illicit trade and further depreciation of the Uganda shilling make 2015 a very challenging year. We will continue to Overall revenue growth Overall, our revenue grew by 27% reflecting the collaborate with a broad range of stakeholders to ensure impact of an increase in both leaf and cigarette that any legislation enacted is reasonable, balanced and sales volumes and related pricing and mix impacts. evidence based.
27% We cannot mention illicit trade, without thanking the en- The directors recommend a final forcement agencies for their continued efforts in curbing dividend of Shs 748 per share. this threat to our business and collection of government revenue.
Financial Performance On a special note, I would like to thank our outgoing The business realized a gross profit of Shs 72.4 Directors who were with us for 2014 – Mr. Jonathan billion for the year under review, compared to Shs D’Souza (Former Managing Director) and Mr. Ben Guest 70.1 Billion in 2013. Operating profit increased (Leaf Director) for their tireless work in delivering a by 378%, mainly due to the sale of the Kampala profitable 2014 as well as guiding the company through Green leaf threshing plant site. the restructuring process. We wish them all the best in their future endeavours. Hon. Elly Karuhanga The increase in operating profit was to some extent Chairman, BAT Uganda offset by finance costs which were Shs 11.5 billion I also take this opportunity to welcome our new Managing higher than in 2013, principally due to realized Director – Mr. Dadson Mwaura to the Board. We are foreign exchange losses arising out of repayments confident that he will take this business to greater heights. of the pre finance for our leaf operations amidst a depreciating Uganda shilling. Nonetheless profit Overall, on behalf of the Board, I thank all our shareholders, before tax increased by 204% compared to 2013 staff, Government, consumers and the entire private sector attributable to the sale of the Kampala Green Leaf and other stakeholers for the support and commitment threshing plant site. Cash generated from op- you have shown to our business. We look forward to this erations decreased by 218% due to the receivable continued collaboration as we seek to further strengthen from the sale of the Kampala Green leaf threshing our business. plant and from leaf sales to British American Tobacco Kenya. Thank you Elly Karuhanga, Chairman Board of Directors. BoardBritish of American Directors Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
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Hon. Dr. Elly Karuhanga (68) Dadson Mwaura (42) Mr. Paul Claude Sine (51) Mr. Fred Tumwesigye (68) Mr. Fabian Kasi (48) Mr. Philip Lopokoiyit (48) Chairman Managing Director Finance Director Non-Executive Director Non-Executive Director Non-Executive Director
Hon. Elly Karuhanga was formerly a Mem- Appointed to the Board as an Executive Direc- Appointed to the Board as an Executive Director Appointed to the Board as a Non-Executive Mr. Fabian Kasi is the Managing Director of Appointed to the Board as a Non-Executive Di- ber of Parliament for Nyabushozi County tor and Managing Director of the Company and Finance Director of the Company in May Director of the Company in April 2001. Be- Centenary Rural Development Bank. He was rector of the Company in August 2012, Philip and Chairman of the Presidential & Foreign on 1st January 2015. Dadson joined the 2011. Paul joined the BAT group in 1993 as fore this appointment, he had a long and a Board Chairman of the Association of Mi- is currently the Area Head of Finance for East Affairs Committee of the Parliament of the Group in 1997 with BAT Kenya, and has held an Assistant Internal Audit Manager with BAT distinguished career in operations with the crofinance Institutions of Uganda and served & Central Africa and Finance Director for BAT Republic of Uganda and Chairman National several roles in Marketing, Strategic Planning Uganda and later held the portfolios of Senior Company retiring as Head of Processing in on the Board of FINCA Uganda and Kampala Kenya. He was previously the BAT West Africa 2000. He previously worked for the then East Social Security Fund. He is a founding partner and Consumer Insights in Kenya, UK, Hungary Leaf Accountant, Company Secretary and Fi- Club. He is the Chairman of the Advisory Area Head of Finance, based in Lagos. He has African Railways Corporation and also as a of Kampala Associated Advocates, Founder and Turkey. Prior to joining the Board, he was nance Project Manager prior to becoming the Board of Microfinance Department of Nkozi extensive experience in financial management Board Member of the Civil Aviation Authority President and Chairman of the Governing Head of Trade Marketing and Distribution in East African Area Auditor. He was the Area Leaf University, a Board member of the Uganda and has served in senior management roles over of Uganda. Upon retiring from the Company, Council of the Centre for Arbitration and BAT Kenya. Dadson brings along extensive Finance Manager, Marketing Finance Manager Institute of Bankers and a Board member the last 10 years as Head of Finance in several he joined Babcon Uganda Limited, a privately experience in different areas of Marketing and and Finance Manager of British American To- of Cheshire Homes Katalemwa. He holds a BAT business units. Philip is also a member of Alternative Dispute Resolution. He retired as owned local construction company. He is a people leadership. He holds an MBA degree bacco Kenya up till 2005 when he moved to Bachelor’s Degree in Commerce and is a Fel- the BAT Uganda Audit Committee, a member Tullow Oil Uganda President last year. He is member of the Uganda Institute of Professional in Marketing and International Business from Nigeria as Area Audit Manager, West Africa. low of the Association of Chartered Certified of ICPAK, a fellow of the Institute of Chartered the Chairman of Uganda Chamber of Mines Engineers and the Institute of Corporate Gov- University of Nairobi He became the West Africa Area Operations Accountants (FCCA), United Kingdom Accountants of England and Wales and holds and Petroleum and Honorary Consul of the ■ ernance of Uganda ■ Republic of Seychelles to Uganda. He serves Finance Manager and later the Operations ■ an MBA from Warwick Business School■ on the Boards of DFCU Bank, Nile Breweries Finance Manager for Turkey, Middle East and (SABMiller) and Marasa Holdings. He holds North Africa Area, a role that he held at the time a Bachelor’s Degree in Law (LLB) and a Post he was seconded to BAT Uganda as Finance Graduate Diploma in Legal Practice Director. He is a lawyer, an Associate of the ■ Institute of Chartered Secretaries & Administra- tors (UK) with various certifications in Finance, Marketing and Leadership■
Prof. Dr. Maggie Kigozi (64) Mr. Jonathan D’Souza (47) Nicholas Ecimu (39) Ben Guest (42) Non-Executive Director Managing Director (outgoing) Company Secretary Head of Leaf (outgoing)
Prof. Dr. Maggie Kigozi was formerly the Appointed to the Board as an Executive Direc- Mr. Nicholas Ecimu is a Partner at Sebalu and Appointed to the Board as an Executive Executive Director of the Uganda Investment tor and Managing Director of the Company in Lule Advocates and heads the firm’s Energy, Director in November 2013. Ben, who also Authority (UIA). A holder of a Bachelor’s June 2012. Jonathan joined the BAT Group in Oil & Gas, Mining and Projects Practice. He sits on the top management team, as the Degree in Medicine and Master of Surgery, 1993 with BAT Uganda, and has held several also provides company secretarial services to Head of Leaf for BAT Uganda, joined the BAT she worked as a medical doctor in Uganda, roles in IT, Marketing, Human Resource & Gen- companies including BAT Uganda and Orient Group in 1996 and has since held several Zambia and Kenya. She was an Investment eral Management in Kenya, the UK, Nigeria, Bank Limited. Nicholas is a graduate member roles as Regional Leaf Manager, Leaf Buyer, Promotion Expert for UNIDO and served on Benin, Ghana and Senegal. Prior to joining the of the Institute Of Chartered Secretaries And Leaf Business Manager, Digital Tax Stamps the Boards of Uganda Manufacturers Associ- Board he was the Head of Human Resource for Administrators – London, holds a Post Gradu- Project Manager, Primary Leaf Supply Chain ation (UMA) and Uganda Women Entrepre- East & Central Africa (ECA) and was a member ate Diploma in Legal Practice and a Bachelor of Project Manager before being posted as Head neurs Association. She is the Chief Scout of of the ECA Area Leadership Team. Jonathan Laws Degree from Makerere University. He has of Leaf Uganda. He has taken up postings in trained with renowned institutions around the Uganda, a Fellow of the African Leadership is a graduate of the Institute of Statistics and Zimbabwe, Western China, Germany, Vietnam world like Euro Money Training Solutions PLC – Initiative of the Aspen Institute and a member Applied Economics of Makerere University, and the UK, prior to returning to Uganda in London, Institute of Public Private Partnerships of Makerere University Business School Eco- Kampala 2012 ■ – Washington DC, International Development nomic Forum. She serves on the Boards of ■ Law Organization – Rome and the Royal In- SON Limited and Akina Mama wa Africa. She stitute of Public Administration – London. Mr. is a Director of Crown Beverages Limited and Ecimu is internationally recognized as a leading an Advisor to UMA and UIA■ projects lawyer by both Chambers Global – the world’s leading lawyers and the International Financial Law Review (IFLR 1000)■ British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Additionally, we exported 5.5million kgs of green leaf to Kenya which was 110% higher Managing Director’s Review than 2013. The combined leaf exports generated Ushs 206 billion in revenue, an increase of 48% compared to 2013. This marked the end to I take this opportunity to our involvement in the tobacco leaf growing Our business registered a commendable profit performance in 2014; this was thank our directors, man- business in Uganda. mainly driven by profits from the sale of the Kampala Green Leaf Threshing Plant 20 agement team and staff Financial Performance 21 site. The underlying performance, excluding the sale of this site, has dropped by for the warm welcome and The amalgamated gross revenue for the 10% in comparison to 2013. The main cause of this drop in performance is the entire business grew by 25% reflecting the support extended to me as impact of increased leaf shipment volumes. full year impact of the 2013 excise increase of 40% on cigarettes as well as the I took on the stewardship Underlying operating profit dropped by 10% imposition of import duty on cigarettes during the first half of 2014. as a consequence of the full year impact of the of this great company. excise increase in 2013 and the import duty I also extend my gratitude additional cost. to our shareholders, Profit before tax was higher by 204% mainly business partners and as an outcome of the proceeds from the sale of the Kampala Green Leaf Threshing Plant site. consumers. I look forward to pulling all efforts While our cash generated from operations was down by 152% compared to 2013, this was together for sustainable mainly driven by the receivables related to the sale of property. By the end of 2013 we had BAT Uganda returns to shareholders. received pre-payment for the bulk of the leaf export crop. remained a significant Therefore with these results and in line with contributor to Cigarette Sales our dividend policy, the Board is glad to Cigarette volumes increased by 3% recommend issuance of a dividend of Shs 748 government attributable to higher sales of Safari as well which represents 100% of our profit after tax. revenue by as Dunhill our Global Drive Brand. Sales of registering an our flagship brand - Sportsman were lower BAT Uganda remained a significant contributor than 2013 mainly due to higher consumer to government revenue by registering an increase of 21% pricing from the 2013 Excise increase. increase of 21% in excise and VAT remittances in excise and VAT Though Cigarette revenues registered a 1% totalling UGX 69 billion. remittances. increase this was overshadowed by the full year impact of the 2013 excise increase as Regulation well as the cost of import duty. The resultant In 2014, a key focus of our engagement was the effect was a 38% decline of the operating Tobacco Control Bill 2014, which was tabled in performance of the cigarette business. Parliament on March 6th, 2014, for 1st Reading. The Speaker of Parliament assigned the Bill Illicit trade continues to impact the legal to the Parliamentary Committee of Health, cigarette sales volume as well as government to review the proposals therein, and report revenues. This problem will only be alleviated back to Parliament with its recommendations. Dadson Mwaura by the continued and consistent action by The Committee conducted stakeholder Managing Director all concerned stakeholders. consultations, in which we had an opportunity to participate, alongside other key stakeholders Leaf Exports & Revenues including government agencies, Civil Society, In 2014, we contracted 14,000 farmers Private Sector, anti-tobacco lobby groups and to grow 16 million Kgs of tobacco. We key players in the industry and tobacco value registered a good quality crop as well as an chain. The bill will then go through a Second outstanding loan recovery of 98%. During and Third Reading, followed by presidential the year, 14.1 million Kgs of packed leaf assent before it’s enacted into law. were exported, which was 27% higher than 2013 as a consequence of shipment of the Acknowledging that along with the pleasures of leaf of earlier years (2010,2011 and 2012). smoking come serious health risks, we support British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Focus on the Cigarettes Business
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the view that regulation of the sector With our new business model structured In our quest to introduction of a new brand - Safari had 5 others getting recognized, with is necessary. However, regulation around the cigarette sales business, Extra- to support our brand portfolio one employee being awarded as the should be reasonable, balanced, we have a young dynamic team that is remain competitive in strategy. This was aimed at meeting employee of the year by BAT East and evidence-based and enforceable. We comprised of several multi-talented and our consumer needs in the lower Central Africa. would like to see effective regulation diverse individuals. 2014 and beyond, our priced segment. that meets public health objectives, focus was on improving An efficient and optimal cigarette respects our legal rights, does not Conclusion distribution network is central to our impede our ability to compete and does In 2015, we expect the macro economic brand portfolio, ■ On distribution efficiency, we ability to grow our business in the not damage livelihoods, such as those and competitive environment to get distribution efficiency rolled out a new Route to Market future. It is important that we also of farmers, traders and those employed tougher, being a prelude to an election model restructuring our third party take our Trade partners (Distributors, distributor partners to 7 committed 1 in the sector. year. However we are confident that with and developing our Wholesalers and Retailers) along with the closure of the volatile and high risk Trade Marketing and distributors from the previous 13. us on our quest to retain our number We are transparent about what we think leaf operation, we will focus our efforts The tangible benefits of this include one position in the market. We have and will continue to engage for fair and on increasing our cigarette market share Distribution staff optimized distribution and operating very energized and focused Trade balanced regulation in line with our generating long term and sustainable costs making the distributorships more Marketing team with a clear vision principles of transparency and integrity returns for our business. capability. In 2014, we viable in the long term. The distributors for the business. They will continue in lobbying and external engagements implemented are now more focused on the core to focus our efforts to ensure that with regulators, government and other We will continue to monitor the evolving business, enjoy improved economies our products are available to all our third parties. regulatory environment and will maintain several initiatives. of scale and drive for performance. consumers in the right outlets, in the our engagements with all relevant right moments and at the right price. Our People stakeholders, in order to support a ■ In line with the company’s We are proud to note that with the reasonable, balanced, evidence-based and We upgraded the pack of our desire and recognition that our people closure of the leaf operations in enforceable regulation. ■ iconic local brand “Sportsman” to give are not only the greatest assets, but Uganda, majority of the impacted it a new modern look and feel, ensuring also the major repository of our 2 staff are already employed elsewhere I also extend my gratitude to our the brand continues to stay competitive competitive edge, we continued to while others have been transferred shareholders, business partners and in a changing environment. In the last invest behind the Trade Marketing and to the cigarette part of the business consumers. I look forward to pulling all quarter of 2014, the company made Distribution staff. In 2014, we had 6 of both in and outside Uganda. This efforts together for sustainable returns to major investments in expanding our staff getting international Training gives credence to the higher calibre of shareholders. our Safari family brand through the and exposure out of Uganda. We also training and development that we, as a company, provide to our staff. Thank you.
Dadson Mwaura, Managing Director
The distributors are now more focused on the core business, enjoy improved economies of 3 scale and drive for performance.
1. BAT Uganda board Chairman Elly Karuhanga welcomes Mr Mwaura as new Managing Director as outgoing Managing Director Jonathan D’Souza (c) looks on. 2. Mr Mwaura is introduced to the State Minister for Trade & Industry, under whose Ministry the tobacco sector falls 3. Mr Mwaura makes his maiden speech as Managing Director, to stakeholders British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Leadership Team Vision and Strategy
24 25 Our strategy to deliver greater shareholder value:
The BAT Way We have a clear Vision and Mission statement that describes how we will deliver the future and what we believe in, as well as our four Strategy Pillars and our Guiding Principles, that summarise our values.
Mission To champion informed consumer choice and shape a new deal with society by advocating and defending the rights of our consumers to Dadson Mwaura Jonathan D’Souza Paul Sine Stephen Katumba Managing Director Managing Director Finance Director Business Resilience & choose & giving them (Incoming 1st Jan 2015) (Outgoing 31st Dec 2014) Continuity Manager real choice to meet their needs and ensure that they are informed about the potential implications of their choices.
Vision World’s best at satisfying consumer moments in tobacco and beyond.
Our Strategy pillars Growth Developing brands, innovations and new products to meet consumers’ evolving needs Productivity Effectively deploying resources to increase profits and generate funds Winning organisation Great people, great teams, great place to work Ben Guest Diana Apio-Kasyate Ali Balunywa Marie Pinycwa Agnes Nantongo Leaf Director Corporate & Regulatory Head of Trade Human Resource Legal Counsel (Outgoing) Affairs Manager Business Partner Sustainability Ensuring a sustainable business that meets stakeholders expectations British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Statement of Corporate Governance
Corporate Governance Approach of the Company. All the directors are highly regarded, Board Committees: Remuneration Committee: British American Tobacco Uganda (the Company) qualified and experienced individuals with proven The Board has established three This Committee was established by 26 is committed to implementing initiatives that foster business acumen and hold positions of responsibility (3) committees, namely, the Audit the Board in 2013 and its mandate 27 good corporate governance. The Company prides and other directorships in credible entities. The and Corporate Social Responsibility is to assist the Board in setting and itself in the establishment of an appropriate legal, diversity of skills and experience on the Board ensures Committee, the Nominations overseeing the implementation of the institutional and policy driven environment that that the Board functions effectively. Committee and the Remuneration Company’s remuneration philosophy allows it to thrive and remain a going concern Committee, to assist it in the and strategy. The Remuneration and which advances long-term shareholder value The Board provides leadership based on integrity, performance of its duties. The Committee determines the remu- and people development while in keeping with transparency, accountability and responsibility. The committees meet regularly and, in neration policy for employees and Non- responsibilities to the society that we operate in. The Directors have a duty to govern, direct, control, their meetings, interact with members Executive Directors and ensures that Board of Directors (the Board) endeavours to create lead, guide and monitor the performance of the of management on the operations of compensation is performance-driven a system of governance that ensures conformance Company. Importantly the Board regularly reviews the Company. The committees are and appropriately benchmarked and performance. the Company’s internal controls and governance established on the basis of specific against other companies in Uganda. system to ensure that the control environment is terms of reference. The Statement takes cognizance of, and elucidates robust for business growth and sustainability. The Remuneration Committee on, how the Company complies with the Capital Audit and Corporate Social is further responsible for setting Markets (Corporate Governance) Guidelines, 2003 It is the Board’s duty to prepare and present a balanced Responsibility Committee: executive remuneration covering and its continuing listing obligations under the and understandable assessment of the Company’s The Company maintains a sound salary and benefits, performance Listing Rules of the Uganda Securities Exchange. position while reporting to the shareholders and system of internal control to based, variable rewards, pensions other stakeholders. safeguard shareholders’ investment and terms of service, setting of The Company maintains a The Board and the Company assets. The Audit targets applicable for the Company’s sound system of internal The Board is accountable and responsible for the Meetings of the Board and Corporate Social Responsibility performance based reward schemes, control to safeguard efficient and effective governance of the Company. The Board holds at least three pre-scheduled Committee (ACC) regularly reviews monitoring and advising the Board The Board is currently constituted of eight directors, meetings annually, with a mandate to formulate, the Company’s processes and on major changes to the policy on shareholders’ investment five of whom are non-executive members and four review, evaluate and make decisions on key strategic procedures to ensure the effectiveness employee benefit structures for the and the Company assets are independent directors. Directors are elected by and operational activities of the business. Other of these controls and oversees the Company. the shareholders in accordance with the Company’s meetings are conducted as the need arises. The embedment of the principles of Articles of Association. Casual vacancies are filled attendance of Board meetings in 2014 is as below: Corporate Social Responsibility in the The Committee is chaired by a by the Board in accordance with the Company’s Company’s business. Non-Executive Director and has a Articles of Association and such appointments are Delegation of Authority: membership of two Non-Executive ratified by the shareholders in the Annual General Although day to day managerial authority is delegated The ACC also helps to identify and Directors. Members from the Meetings that follow, in accordance with the Articles to the management team led by the Managing assess, together with management, management team of the Company of Association of the Company. Director, the Board monitors and evaluates the any social and reputation risks that may however be invited to implementation of strategies, policies, management might prevent the Company’s ob- Committee meetings. The Company has a unitary board structure and performance and business plans at its meeting and jectives from being achieved. The the roles of Chairman and Managing Director are through committees it has established to assist it in Committee also reviews, and makes The Committee meets at least once separate. The Chairman is an independent non- discharging its responsibilities. The Board regularly recommendations to the Board on, a year to discharge its duties and executive director. reviews the delegation of authority framework to the Company’s conduct of its business responsibilities. ensure that it is appropriate and consistent with in conformity with the Company’s The composition of the Board takes cognizance of the best practice and meets the requirements of the Core Values. Nomination Committee: knowledge, skills and experience of the director for Company. This Committee was established by effective contribution to the Board and the business The ACC is chaired by a Non-Executive the Board in 2013 and its mandate is Director and has a membership of to review and consider the structure Attendance of Board meetings in 2014 two Non-Executive Directors. Internal and balance of the Board and make and external auditors and members recommendations regarding ap- Director 26th Feb 6th May 28th August 26th Nov 2014 2014 2014 2014 from the management team of the pointments, retirements and terms Hon. Dr. Elly Karuhanga Company are permanent invitees on of office of directors. Prof. Dr. Maggie Kigozi the ACC. Mr. Fabian Kasi The Committee’s responsibilities Mr. Fred Tumwesigye The ACC meets at least three times include, among others, identifying Mr. Philip Lopokoiyit a year and uses internal and external and recommending to the Board, Mr. Jonathan D’Souza audit results to support the monitoring candidates for the Board and com- Mr. Paul Sine of risks and controls throughout the petencies of new directors, reviewing Mr. Ben Guest year. induction procedures, reviewing British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
succession plans for the Board and reviewing In accordance with the Standards of Business measures for keeping directors up to date with the Conduct, directors and employees must im- 28 Company’s activities and external developments. mediately disclose any actual or potential conflicts 29 of interest which are duly recorded and appropriate The Committee is chaired by a Non-Executive action taken. Actual and potential conflicts of Director and has a membership of two Non-Executive interest must also be disclosed each year during Directors. Members from the management team the year end formal confirmation of compliance of the Company may however be invited to with the Standards. Committee meetings. Employees: The Company Secretary: Our employment principles provide a framework for The Company Secretary facilitates the Board process best work place practices and employee relations. and guides the Board on the proper discharge of Recruitment of employees is done meritoriously their duties and responsibilities. The Directors have on the basis of equality and equal opportunities. unrestricted access to the Company Secretary. Employees have various forums, like team briefs, Access to information and resources: breakfast with the Managing Director, “Your Voice Directors have unrestricted access to management Survey” and discussion forums, at which they and Company information, and the resources express their views and make direct contribution necessary to carry out their role. Directors are to the management of the business. provided with comprehensive information to facilitate their decision making at Board meetings Engagement with Shareholders: and outside Board meetings. The Company ensures that its shareholders and The Board regularly the investing public are availed with full and timely reviews the delegation Standards of Business Conduct: information about its business and performance. The Company strives to uphold the highest level This is achieved through publication of half-year of authority framework of integrity and to ensure that its business and and full-year financial statements, annual reports, to ensure that it is dealings are conducted ethically. In that regard, the attending to information requests at all times and appropriate and consistent Company has adopted the BAT Group Standards of holding shareholder meetings. Business Conduct which ensure the achievement of with best practice and the Company’s business objectives in a responsible The Company engages closely with the holding meets the requirements manner in tandem with high standards of honesty, company which provides technical support to the Stakeholder Engagement: of the Company. transparency and integrity. All the Company’s management on an ongoing basis. The Board is focused on ensuring that the Company maintains employees and directors sign the Standards of regular and appropriate engagement with its key stakeholders who Business Conduct adherence on an annual basis. Every shareholder has a right to participate and vote include the Government of Uganda, regulatory agencies such as Enforcement and observance of the Standards at the general shareholders meeting including the the Capital Markets Authority, the Uganda Securities Exchange, of Business Conduct is continually monitored. election of Directors. Shareholders are encouraged to the Uganda Revenue Authority and the general public. The Board Compliance ensures that the actions of employees ask questions or seek clarification on the Company’s recognises that the goodwill of stakeholders is critically important and directors are in line with the expected ethical performance as reflected in the annual reports and to the Company’s sustainability and long-term future. standards and the laws of Uganda. The Standards accounts or in any matter that may be relevant enhance employees’ and directors’ ability to make to the company’s performance or promotion of Compliance: appropriate judgment and decisions in the course shareholders’ interests and receive explanations The Company complies with applicable legislation, regulations, of their work. from the directors and /or management. standards and policies and continues to monitor such compliance. Management of Conflict of Interest: Going Concern: The directors have sufficient reason to believe that the Company has adequate resources to continue operating as a going concern. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
2013 AGM held on May 7th 2014
30 31
BAT Uganda, has been recognised variously over the years for its contributions to the economy, financial reporting standards and consistent compliance. We are currently accredited by the Uganda Revenue Authority as one of only 22 Ugandan companies with the highest levels of customs compliance with the Authorized Economic Operator (AEO) status.
Responsibility is integral to our strategy and through dialogue with our stakeholders, we work to pursue our commercial objectives in ways consistent with changing expectations of a modern tobacco business.
Proceedings from the 2013 Annual General Meeting held on May 7th 2014 at the Sheraton Kampala Hotel. The theme was Delivering Greater Value. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Shareholding Structure Corporate Information As at 31st December 2014:
List of Top 10 Shareholders as At: 31st December 2014 32 33
SCD NO SHAREHOLDER NAME ADDRESS SHARES HELD PERCENTAGE Directors: Lawyers: - British American Tobacco (Investments) Ltd Globe House, 1 Water Street, 34,356,000 70.00002282 Hon. Dr. Elly Karuhanga • Chairman Lumonya Bushara & Co. Advocates London WC2R 3LA Mr. Fred Tumwesigye • Non-Executive Director Jumbo Plaza, Plot 2 Parliament Avenue - Precis Handelsweg 53 A,1181ZA Amostelveen Mr. Philip Lopokoiyit • Non-Executive Director P. O. Box 3242 The Netherlands 9,816,000 20.00000652 Kampala, Uganda 187011 SCBM-RE Pictet and CIE A/C THS Kingaway Fund C/O Standard Chartered Bank 3,929,963 8.007262187 Mr. Fabian Kasi • Non-Executive Director P. O. Box 7111 Prof. Dr. Maggie Kigozi • Non-Executive Director Kiwanuka & Karugire Advocates UAP Provincial Insurance Company Limited P. O. Box 43013 Nairobi Kenya 50,000 0.101874524 Mr. Jonathan D’Souza • Managing Director Plot 5A2, Acacia Avenue 194794 Millville Opportunites Master Fund LP Kampala 7131 Kampala 48,840 0.099511035 Mr. Paul Sine • Finance Director P. O. Box 6061 45802 Vikesh Dawda 1726 Kampala 1726 Kampala 34,429 0.07014876 Kampala, Uganda 47554 Wilson Mulindwa P.O. Box 23995 Kampala Najjanankumbi 30,000 0.061124714 Mr. Ben Guest • Leaf Director Kampala 23995 Kampala Sebalu & Lule Advocates 80675 The Registered Trustees of Chandaria P. O. Box 3554 Kampala 27,000 0.055012243 Audit and Corporate Social Responsibility Committee: S&L Chambers, Plot 14 Mackinnon Road, Foundation Mr. Fred Tumwesigye • Chairman Nakasero 60429 Simon Gachira Gichuki P. O. Box 8506 - 00200 Nairobi 25,041 0.051020799 25453 Goldstar Insurance Company Limited P. O. Box 7781 Kampala 22,655 0.046159347 Mr. Philip Lopokoiyit • Member P. O. Box 2255 Mr. Fabian Kasi • Member Kampala, Uganda Total Number of Shares 48,339,928 98.49214295 Mr. Jonathan D’Souza • Permanent Invitee Bankers: and:- 1294 other Shareholders 740,056 1.507857052 Ms. Diana Apio Kasyate • Permanent Invitee Mr. Paul Sine • Permanent Invitee Barclays Bank Uganda Limited TOTAL 49,079,984 100% Plot 2/4 Hannington Road Mr. Ben Guest • Permanent Invitee P. O. Box 7101 Mr. Rowlands Nadida • Permanent Invitee Kampala, Uganda PricewaterhouseCoopers • Permanent Invitee BAT Summary of Shareholders as at 31st December 2014 Ms. Rose Ruhiu • Secretary Citibank Uganda Limited Centre Court, 4 Ternan Avenue DESCRIPTION NO. OF SHARES PERCENTAGE P. O. Box 7505 SHAREHOLDERS HELD HOLDING Remuneration Committee: Kampala, Uganda Mr. Fabian Kasi • Chairman Between 1 and 100 Shares 693 48,454 0.10% Prof. Dr. Maggie Kigozi • Member Stanbic Bank Uganda Limited Between 101 and 500 Shares 365 113,870 0.23% Mr. Philip Lopokoiyit • Member Crested Towers, Short Tower Between 501 and 1,000 Shares 130 120,587 0.25% Ms. Beatrice Imathiu • Secretary 17 Hannington Road Between 1,001 and 5,000 Shares 82 229,094 0.47% P. O. Box 7131 Kampala, Uganda Between 5,001 and 10,000 Shares 16 128,051 0.26% Nominations Committee: Between 10,001 and 50,000 Shares 15 337,965 0.69% Hon. Dr. Elly Karuhanga • Chairman Standard Chartered Bank Uganda Limited Above 1,000,001 Shares 3 48,101,963 98.01% Prof. Dr. Maggie Kigozi • Member Plot 5 Speke Road TOTAL 1,304 49,079,984 100.00% Mr. Philip Lopokoiyit • Member P. O. Box 7111 Kampala, Uganda
Auditors: Company Secretary PricewaterhouseCoopers BAT Summary of Shareholders as at 31st December 2014 Mr. Nicholas Ecimu Communications House Sebalu & Lule Advocates NATIONALITY CATEGORY NO. OF SHARES PERCENTAGE Plot 1, Colville Street S&L Chambers, SHAREHOLDERS HELD HOLDING P.O. Box 882 Plot 14 Mackinnon Road, Nakasero P.O. Box 2255 Kampala, Uganda East African Corporate 36 182,512 0.37% Kampala, Uganda Individual 1,238 713,404 1.45% Registered Office 1,274 895,916 1.83% Registrars: 7th Floor, TWED Towers Foreign Corporate 5 48,158,170 98.12% Deloitte (Uganda) Limited Plot 10, Kafu Road, Nakasero Individual 25 25,898 0.05% Rwenzori House, Lumumba Avenue P. O. Box 7100 30 48,184,068 98.17% P. O. Box 10314 Kampala, Uganda Grand Totals: 1,304 49,079,984 100.00% Kampala, Uganda Tel: +256 312 200 100 / +256 200 500 100 British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST DECEMBER 2014
The directors submit their report together with the audited financial statements for the year ended 31 December 2014, which disclose the state of affairs of the Company. 34 35 PRINCIPAL ACTIVITIES The principal activities of the Company are purchase, processing and sale of tobacco products. British American Tobacco Uganda Limited RESULTS AND DIVIDEND The net profit for the year of Shs 36,752 million (2013: Shs 10,809 million) has been added to retained Annual report and financial statements earnings. The directors recommend the payment of a dividend of Shs 748 per share, amounting to Shs For the year ended 31 December 2014 36,712 million (2013: Shs 141 per share, amounting to Shs 6,920 million). DIRECTORS Table of contents Page The directors who held office during the year and to the date of this report were:
Elly Karuhanga Chairman Directors’ report 35 Jonathan D’Souza Managing Director – Resigned 31 December 2014 Statement of directors’ responsibilities 36 Dadson Mwaura Managing Director – Appointed 1 January 2015 Report of the independent auditor 37 – 38 Paul Sine Finance Director Ben Guest Leaf Director Fred Tumwesigye Non Executive Director Financial statements: Philip Lopokoiyit Non-Executive Director Statement of comprehensive income 39 Maggie Kigozi Non-Executive Director Fabian Kasi Non-Executive Director Statement of financial position 40 Statement of changes in equity 41 AUDITOR Statement of cash flows 42 In accordance with section 167 (2) of the Uganda Companies Act, the Company’s auditor, Notes 43 - 69 PricewaterhouseCoopers, will not seek reappointment at the next Annual General Meeting, scheduled for 7th May 2015.
By order of the Board
Nicholas Ecimu Sebalu & Lule Advocates SECRETARY 10th Aril 2015 British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014
Statement of Directors’ responsibilities Report of the independent auditor to the for the year ended 31 December 2014 Members of British American Tobacco Uganda Limited
36 Report on the financial statements 37 he Uganda Companies Act requires the directors to prepare financial statements for each We have audited the accompanying financial statements of British American Tobacco Uganda Limited financial year that give a true and fair view of the state of affairs of the Company as at the (“the Company”) as set out on pages 39 to 69. These financial statements comprise the statement Tend of the financial year and of its profit or loss. It also requires the directors to ensure that of financial position as at 31 December 2014 and the statements of comprehensive income, changes the Company keeps proper accounting records that disclose, with reasonable accuracy, the financial in equity and cash flows for the year then ended, and notes, comprising a summary of significant position of the Company. They are also responsible for safeguarding the assets of the Company. accounting policies and other explanatory information.
The directors accept responsibility for the annual financial statements, which have been prepared using Directors’ responsibility for the financial statements appropriate accounting policies supported by reasonable estimates, in conformity with International The directors are responsible for the preparation and fair presentation of these financial statements in Financial Reporting Standards and the requirements of the Uganda Companies Act. The directors are of accordance with International Financial Reporting Standards and with the requirements of the Uganda the opinion that the financial statements give a true and fair view of the state of the financial affairs of Companies Act, and for such internal control as the directors determine is necessary to enable the the Company and of its profit in accordance with International Financial Reporting Standards and the preparation of financial statements that are free from material misstatement, whether due to fraud Uganda Companies Act. The directors further accept responsibility for the maintenance of accounting or error. records that may be relied upon in the preparation of financial statements and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free Auditor’s responsibility from material misstatement, whether due to fraud or error. Our responsibility is to express an independent opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards Nothing has come to the attention of the directors to indicate that the Company will not remain a require that we comply with ethical requirements and plan and perform our audit to obtain reasonable going concern for at least twelve months from the date of this statement. assurance that the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an ______opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the Director Director appropriateness of accounting policies used and the reasonableness of accounting estimates made by 26 February 2015 26 February 2015 the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company at 31 December 2014 and of its profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Uganda Companies Act. British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014
Report of the independent auditor to the members of Statement of Comprehensive Income British American Tobacco Uganda limited (continued)
38 39 Notes Year ended 31 December
Report on other legal requirements 2014 2013 Shs’000 Shs’000 The Uganda Companies Act requires that in carrying out our audit we consider and report to you on the following matters. We confirm that: Net revenue 5 269,534,025 213,011,176
• we have obtained all the information and explanations which to the best of our knowledge and Cost of sales (197,176,235) (142,930,505)
belief were necessary for the purposes of our audit; Gross profit 72,357,790 70,080,671
• in our opinion proper books of account have been kept by the company, so far as appears from Other income 6 24,768,395 1,409,998 our examination of those books; and Distribution costs (7,161,295) (9,129,224) Administrative expenses (28,410,044) (33,066,374) Other expenses (17,829,312) • the Company’s statement of financial position and statement of comprehensive income are in (6,717,777)
agreement with the books of account. Operating profit 54,837,069 11,465,759
Finance costs 7 (7,316,988) (3,024,168) Finance income 7 - 7,211,119
Profit before income tax 47,520,081 15,652,710
Income tax expense 10 (10,768,126) (4,844,116) Certified Public Accountants Kampala Profit for the year 36,751,955 10,808,594
27 February 2015 Other comprehensive income net of tax: Items that will not be reclassified to profit or loss: Gains on revaluation of buildings 13 9,964,935 -
Total comprehensive income for the year 46,716,890 10,808,594
Basic and diluted earnings per share (Shs) 11 749 220
British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Statement of Financial Position Statement of Changes in Equity
As at 31 December Share Revaluation Retained Proposed Total capital reserve earnings dividends equity 40 Notes 2014 2013 Notes Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 41 Shs’000 Shs’000 Equity Year ended 31 December 2013 Share capital 12 61,350 61,350 Revaluation reserve 13 13,644,094 5,425,990 At start of year 61,350 5,703,305 7,159,496 - 12,924,151 Retained earnings 13,112,073 11,325,127 Proposed dividends 11 36,711,840 6,920,278 Profit for the year - - 10,808,594 - 10,808,594 Total equity 63,529,357 23,732,745 Other comprehensive income: Non-current liabilities Transfer of excess depreciation 13 - (277,315) 277,315 - - Deferred income tax liability 14 1,246,473 - in respect of revaluation surplus, net of tax Total equity and non-current liabilities 64,775,830 23,732,745 Total comprehensive income - (277,315) 11,085,909 - 10,808,594 Non-current assets Deferred income tax asset 14 - 1,240,401 Transactions with owners: Property, plant and equipment 15 34,947,845 32,527,565 Proposed dividend for 2013 11 (6,920,278) 6,920,278 - Prepaid operating lease rentals 16 43,687 68,651 Total non-current assets 34,991,532 33,836,617 At end of year 61,350 5,425,990 11,325,127 6,920,278 23,732,745
Current assets Year ended 31 December 2014 Current income tax recoverable 10 3,518,608 - At start of year 61,350 5,425,990 11,325,127 6,920,278 23,732,745 Inventories 18 82,229,881 136,202,570 Profit for the year - - 36,751,955 - 36,751,955 Trade and other receivables 19 74,598,162 16,492,217 Cash at bank 20 21,730,430 11,095,062 Other comprehensive income: 182,077,081 163,789,849 Gains on revaluation of 13 - 9,964,935 - - 9,964,935 buildings, net of tax Non-current assets held for sale 17 967,161 1,001,751 Transfer of revaluation surplus 13 - (1,651,066) 1,651,066 - - on sale of buildings, net of tax Total current assets 183,044,242 164,791,600 Transfer of excess depreciation in 13 - (95,765) 95,765 - - respect of revaluation surplus, Current liabilities net of tax Current income tax payable 10 - 6,279,273 Trade and other payables 21 78,213,518 121,818,802 Total comprehensive income - 8,218,104 38,498,786 - 46,716,890 Provisions for other liabilities 22 14,007,650 12,736,897 Borrowings 23 61,038,776 34,060,500 Transactions with owners: Final dividend for 2013 - - - (6,920,278) (6,920,278) Total current liabilities 153,259,944 174,895,472 Proposed dividend for 2014 11 - - (36,711,840) 36,711,840 - Net current assets/ (liabilities) 29,784,298 (10,103,872) Net assets 64,775,830 23,732,745 At end of year 61,350 13,644,094 13,112,073 36,711,840 63,529,357
The financial statements on pages 39 to 69 were approved for issue by the board of directors on 26 February 2015 and signed on its behalf by:
______Director Director British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Statement of Cash Flows Notes
42 Notes Year ended 31 December 1. General information 43
2014 2013 British American Tobacco Uganda Limited (“the Company”) is incorporated in Uganda under the Uganda Companies Act as a limited liability company, and is domiciled in Uganda. The address of its Shs’000 Shs’000 registered office is:
Cash flows from operating activities 7th Floor, Twed Towers Cash generated from operations 26 4,642,866 48,634,023 Plot 10 Kafu Road, Nakasero Interest paid (1,217,706) (3,024,168) P. O. Box 7100 Income tax paid (22,349,819) (9,009,143) Kampala
Net cash (used in)/ generated from operating activities (18,924,659) 36,600,712 For Uganda Companies Act reporting purposes, the balance sheet is represented by the statement of financial position and the profit and loss account by the statement of comprehensive income in these
financial statements. Cash flows from investing activities Purchase of property, plant and equipment 15 (1,354,060) (625,588) 2. Summary of significant accounting policies Proceeds from disposal of property 10,500,096 - plant and equipment The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. Net cash generated from/ (used in) investing activities 9,146,036 (625,588) (a) Basis of preparation Cash flows from financing activities The financial statements have been prepared in accordance with International Financial Reporting Proceeds from borrowings 124,704,000 624,856,925 Standards (“IFRS”) and the Uganda Companies Act. The measurement basis applied is the historical Repayment of borrowings (649,188,845) (97,725,724) cost basis, except for land and buildings, which have been measured at fair value. Dividends paid to the Company’s shareholders (6,920,278) - The preparation of financial statements in conformity with IFRS requires the use of certain critical Net cash generated from/(used in) 20,057,998 (24,331,920) accounting estimates. It also requires management to exercise its judgement in the process of applying financing activities the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 3 Net increase in cash at bank 10,279,375 11,643,204 Changes in accounting policy and disclosures
Cash at bank at start of year 1,095,062 296,661 (i) New and amended standards adopted by the Company Exchange gains/ (losses) on cash 355,993 (844,803) The following standards have been adopted by the Company for the first time for the financial year Cash at bank at end of year 20 21,730,430 11,095,062 beginning on or after 1 January 2014. These standards have not had a material impact on the Company’s financial statements:
Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms.
Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
2 . Summary of significant accounting policies (continued) 2. Summary of significant accounting policies (continued)
44 Changes in accounting policy and disclosures (continued) annual periods beginning on or after 1 January 2017 and earlier application is permitted. . The Company 45 is yet to assess the impact of IFRS 15. Amendment to IAS 39, ‘Financial instruments: Recognition and measurement’ on the novation of derivatives and the continuation of hedge accounting. This amendment considers legislative changes There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to to ‘over-the-counter’ derivatives and the establishment of central counterparties. Under IAS 39 have a material impact on the Company. novation of derivatives to central counterparties would result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation of a hedging (b) Revenue recognition instrument meets specified criteria. Revenue comprises the fair value of the consideration received or receivable for the sale of goods (i) New and amended standards adopted by the Company (continued) and services in the ordinary course of the Company’s activities. Net revenue is shown after excluding value-added tax (VAT), rebates and discounts. IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37 ‘Provisions’. The interpretation addresses what the obligating event is that gives rise The Company recognises revenue when the amount of revenue can be reliably measured, it is probable to pay a levy and when a liability should be recognised. that future economic benefits will flow to the Company and when specific criteria have been met for each of the Company’s activities as described below. The Company bases its estimates on historical Other standards, amendments and interpretations which are effective for the financial year beginning results, taking into consideration the type of customer, the type of transaction and the specifics of on 1 January 2014 are not material to the Company. each arrangement.
(ii) New standards and interpretations not yet adopted Revenue is recognised as follows:
A number of new standards and amendments to standards and interpretations are effective for i. Sales of goods are recognised in the period in which the Company has delivered products to the annual periods beginning after 1 January 2014, and have not been applied in preparing these financial customer, the customer has full discretion over the channel and price to sell the products, and there statements. None of these is expected to have a significant effect on the financial statements of the is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery Company, except the following set out below: does not occur until the products have been accepted by the customer.
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial No element of financing is deemed present as the sales are made with a credit term of 30 days, which assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the is consistent with the market practice. The Company does not operate any loyalty programmes. guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement ii. Interest income is recognised on a time proportion basis using the effective interest method. categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow (c) Foreign currency translation characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair (a) Functional and presentation currency value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification Items included in the financial are measured using the currency of the primary economic environment and measurement except for the recognition of changes in own credit risk in other comprehensive in which the Company operates (‘the functional currency’). The financial statements are presented in income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements Uganda Shillings (Shs) rounded to the nearest thousands. Uganda Shillings is the Company’s functional for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic currency. relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous (b) Transactions and balances documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. Foreign currency transactions are translated into the functional currency of the Company using the The Company is yet to assess IFRS 9’s full impact. exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are Revenue is recognised when a customer obtains control of a good or service and thus has the ability presented in profit or loss within ‘finance income or cost’. All other foreign exchange gains and losses to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 are presented in profit or loss within ‘other income’ or ‘other expenses’. ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
2 . Summary of significant accounting policies (continued) 2 . Summary of significant accounting policies (continued)
46 (d) Property, plant and equipment (e) Leases 47
Land and buildings are shown at fair value, based on periodic, but at least triennial, valuations by Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are external independent valuers, less subsequent depreciation for buildings. All other property, plant and classified as operating leases. Payments made under operating leases (net of any incentives received equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. directly attributable to the acquisition of the items. (f) Inventories Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will Inventories are stated at the lower of cost and net realisable value. Cost is determined by the weighted flow to the Company and the cost of the item can be measured reliably. The carrying amount of the average cost method less provision for impairment. The cost of finished goods and work in progress replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during comprises raw materials, direct labour, other direct costs and related production overheads (based on the financial period in which they are incurred. normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Increases in the carrying amount arising on revaluation of land and buildings are credited to other comprehensive income and show as a revaluation reserve in equity. Decreases that offset previous (g) Financial assets increases of the same asset are charged in other comprehensive income and debited against the revaluation reserve, all other decreases are charged to profit or loss. Each year the difference between (i) Classification depreciation based on the revalued carrying amount of the asset (the depreciation charged to profit or loss) and depreciation based on the asset’s original cost is transferred from the revaluation reserve All financial assets of the Company are classified as loans and receivables, based on the purpose for to retained earnings. which the financial assets were acquired.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to Loans and receivables are non-derivative financial assets with fixed or determinable payments that allocate their cost or revalued amounts to their residual values over their estimated useful lives, as are not quoted in an active market. They are included in current assets, except for maturities greater follows: than 12 months after the end of the reporting period. These are classified as non-current assets. The Company’s loans and receivables comprise ‘non current receivables and prepayments’, ‘trade and Buildings 2%-5% other receivables’ and ‘cash and cash equivalents’ in the statement of financial position. Lease hold properties over the period of lease Plant and machinery 12.5% (ii) Recognition and measurement Fixtures and fittings 12.5% Equipment and motor vehicles 33.3% Regular purchases and sales of financial assets are recognised at fair value on the trade-date – the date on which the Company commits to purchase or sell the asset. Loans and receivables are subsequently The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of carried at amortised cost using the effective interest method. each reporting period. (iii) Offsetting financial instruments Property, plant and equipment are reviewed for impairment whenever events or changes in circum- stances indicate that the carrying amount may not be recoverable. An impairment loss is recognised Financial assets and liabilities are offset and the net amount reported in the statement of financial for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable position when there is a legally enforceable right to offset the recognised amounts and there is an amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of intention to settle on a net basis or realise the asset and settle the liability simultaneously. assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are (iv) Impairment reviewed for possible reversal of the impairment at each reporting date. The Company assesses at the end of each reporting period whether there is objective evidence that Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets are included in profit or loss. When revalued assets are sold, the amounts included in the revaluation is impaired and impairment losses are incurred only if there is objective evidence of impairment as a reserve relating to that asset are transferred to retained earnings. result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
2. Summary of significant accounting policies (continued) 2. Summary of significant accounting policies (continued)
48 (g) Financial assets (continued) Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the 49 extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is (iv) Impairment (continued) deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services Evidence of impairment may include indications that the debtors or a group of debtors is experiencing and amortised over the period of the facility to which it relates. significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate Borrowings are classified as current liabilities unless the Company has an unconditional right to defer that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or settlement of the liability for at least 12 months after the end of the reporting period. economic conditions that correlate with defaults. (k) Provisions For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit Provisions are recognised when: the Company has a present legal or constructive obligation as a result losses that have not been incurred) discounted at the financial asset’s original effective interest rate. of past events; it is probable that an outflow of resources will be required to settle the obligation; and The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current and employee termination payments. Provisions are not recognised for future operating losses. effective interest rate determined under the contract. Provisions are measured at the present value of the expenditures expected to be required to settle If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be re- the obligation using a pre-tax rate that reflects current market assessments of the time value of lated objectively to an event occurring after the impairment was recognised (such as an improvement money and the risks specific to the obligation. The increase in the provision due to passage of time is in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised recognised as interest expense. in profit or loss. (l) Share capital (h) Trade receivables Ordinary shares are classified as ‘share capital’ in equity. Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating Incremental costs directly attributable to the issue of new ordinary shares (net of tax) are shown in cycle of the business if longer), they are a classified as current assets. If not, they are presented as equity as deduction from the proceeds. non-current assets. (m) Cash and cash equivalents Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment (note g). Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank (i) Trade payables overdrafts are shown within borrowings in current liabilities on the statement of financial position.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary (n) Employee benefits course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are (i) Retirement benefit obligations presented as non-current liabilities. The Company operates defined contribution retirement benefit schemes for its employees.The Trade payables are recognised initially at fair value and subsequently measured at amortised cost Company and all its employees also contribute to the appropriate National Social Security Fund, which using the effective interest method. are defined contribution schemes.
(j) Borrowings A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are the fund does not hold sufficient assets to pay all employees the benefits relating to employee service subsequently stated at amortised cost; any differences between proceeds (net of transaction costs) in the current and prior periods. and the redemption value is recognised in profit or loss over the period of the borrowings, using the effective interest method. The Company’s contributions to the defined contribution schemes are recognised as an employee benefit expense when they fall due. The Company has no further payment obligations once the contributions have been paid.
British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
2 . Summary of significant accounting policies (continued) 2 . Summary of significant accounting policies (continued)
50 (n) Employee benefits (continued) neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and 51 laws) that have been enacted or substantively enacted at the statement of financial position date and (ii) Other entitlements are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. The estimated monetary liability for employees’ accrued annual leave entitlement at the statement of financial position date is recognised as an expense accrual. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The Company recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset adjustments. The Company recognises a provision where contractually obliged or where there is past current tax assets against current tax liabilities and when the deferred income taxes assets and liabil- practice that has created a constructive obligation. ities relate to income taxes levied by the same taxation authority where there is an intention to settle the balances on a net basis. (iii) Termination benefits (p) Dividends Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for Dividends on ordinary shares are charged to equity in the period in which they are declared. Proposed these benefits. The Company recognises termination benefits when it is demonstrably committed dividends are shown as a separate component of equity until declared. to a termination when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. (q) Borrowing costs
In the case of an offer made to encourage voluntary redundancy, the termination benefits are General and specific borrowing costs directly attributable to the acquisition, construction or pro- measured based on the number of employees expected to accept the offer. duction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets Benefits falling due more than 12 months after the end of the reporting period are discounted to their are substantially ready for their intended use or sale. present value. Investment income earned on the temporary investment of specific borrowings pending their expen- (o) Income tax diture on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
(a) Current income tax All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
The tax expense for the period comprises current and deferred income tax. Tax is recognised in profit (r) Non - current assets held for sale or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in The Company classifies assets (or disposal groups) as non current assets held for sale if the assets are equity respectively. not current assets (and deferred tax assets, assets arising from employee benefits, financial assets within the scope of IFRS 9, non-current assets that are accounted for in accordance with the fair value Current income tax is the amount of income tax payable on the taxable profit for the year determined model in IAS 40 – Investment Property, non-current assets that are measured at fair value less costs in accordance with the relevant tax legislation. The current income tax charge is calculated on the basis to sell in accordance with IAS 41 – Agriculture, contractual rights under insurance contracts as defined of the tax enacted or substantively enacted at the statement of financial position date. Management in IFRS 4 – Insurance Contracts) and the carrying amount of these assets will be recovered principally periodically evaluates positions taken in tax returns with respect to situations in which applicable through a sale transaction rather than continuing use. tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The Company considers this condition for classification of an asset (or disposal group) as a non-current asset held for sale to be met only when the sale of the non-current asset held for sale is highly probable (b) Deferred income tax and the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Before classification of assets as a non-current held for sale, the asset is measured in accordance However, deferred income tax is not accounted for if it arises from initial recognition of an asset or with applicable IFRS. Then, on initial classification as held for sale, noncurrent assets are measured in liability in a transaction other than a business combination that at the time of the transaction affects accordance with IFRS 5 that is at the lower of their carrying amount and fair value less costs to sell. Any differences are included in profit or loss. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
3. Critical accounting estimates and judgements (ii) Cash flow and fair value interest rate risk 52 Estimates and judgements are continually evaluated and are based on historical experience and other 53 factors, including experience of future events that are believed to be reasonable under the circum- The Company’s interest rate risk arises from short-term borrowings. The Company’s short term stances. borrowings are maintained at fixed interest rates and measured at amortised cost for the duration of the borrowing. As a result of these fixed rate borrowings, the Company is not exposed to cash flow (i) Critical accounting estimates and assumptions interest rate risk. The Company regularly monitors financing options available to ensure optimum interest rates are obtained. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions Credit risk that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions as well as credit exposures to customers, including outstanding receivables and committed transactions. Income taxes Credit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Significant judgment is required in determining the Company’s provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the Credit risk is managed by the finance director with support from the finance manager who is respon- ordinary course of business. The Company recognises liabilities for anticipated tax audit issues based sible for managing and analysing credit risk for each new client before standard payment and delivery on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is terms are offered. Credit risk in respect of cash at bank is managed by monitoring the Company’s net different from the amounts that were initially recorded, such differences will impact the income tax exposure with each financial institution where the Company maintains bank balances. and deferred tax provisions in the period in which such determination is made. For trade receivables, the finance manager assesses the credit quality of the customer, taking into In the process of applying the company’s accounting policies, the directors have made judgements in account its financial position, past experience and other factors. The Company does not grade the determining whether assets are impaired. credit quality of receivables.
4. Financial risk management objectives and policies
The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance. The Company does not hedge any of its risk exposures.
Financial risk management is carried out by the finance department under policies approved by the Board of Directors.
Market risk
(i) Foreign exchange risk
The Company makes export sales, imports finished goods and raw materials and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions, and recognised assets and liabilities.
Management’s policy to manage foreign exchange risk is to hold foreign currency bank accounts which act as a natural hedge for purchases of imported raw materials.
At 31 December 2014, if the Uganda Shilling had strengthened/weakened by 10% (2013: 10%) against the US dollar with all other variables held constant, post-tax profit for the year and equity would have been Shs 4,560 million (2013: Shs 7,973 million) higher/lower, mainly as a result of US dollar denominated trade payables, bank loans, intercompany payables and bank balances. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
4. Financial risk management objectives and policies (continued) 4. Financial risk management objectives and policies (continued)
54 Set out below is a summary of amounts that represent the Company’s exposure to credit risk: The Company’s bank loans are repayable within 2 months from year-end; attract interest at rates of 55 between 3.4 % and 4%. 2014 2013 Shs’000 Shs’000 Financial instruments by category 2014 2013 Shs’000 Shs’000 Cash at bank 21,730,430 11,095,062 Financial assets - loans and receivables Trade and other receivables 74,006,570 17,830,508 Cash at bank 21,730,430 11,095,062 95,737,000 28,925,570 Trade receivables and other receivables 74,006,570 17,830,508 95,737,000 28,925,570 No collateral is held for any of the above assets. The Company does not grade the credit quality of receivables. Financial liabilities - liabilities at amortised cost Bank loans and overdrafts 61,038,776 34,060,500 The above assets are neither past due nor impaired except, for the following amounts in trade and Trade and other payables 78,213,518 121,818,802 other receivables related to farmer advances, which are considered to be impaired as of 31 December 139,252,294 155,879,302 2013. Capital management 2014 2013 Shs’000 Shs’000 The Company’s objectives when managing capital are to safeguard the Company’s ability to continue Receivables individually determined to be impaired: as a going concern in order to provide returns for shareholders and to maintain an optimal capital Carrying amount before provision for impairment loss - 2,803,877 structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Provision for impairment loss - (2,803,877) Company may limit the amount of dividends paid to shareholders, issue new shares, or sell assets to Net carrying amount - - reduce debt.
Liquidity risk The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall capital is calculated as equity, as shown in the statement of financial position, plus net debt. due. Prudent liquidity risk management includes maintaining sufficient cash balances, and the avail- The gearing ratios at 31 December 2014 and 2013 were as follows: ability of funding from an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, the finance department maintains flexibility in funding by maintaining 2014 2013 availability under committed credit lines. Shs’000 Shs’000
Management perform cash flow forecasting and monitor rolling forecasts of the Company’s liquidity Total borrowings (note 23) 61,038,776 34,060,500 requirements to ensure it has sufficient cash to meet its operational needs while maintaining suffi- Less: cash at bank (note 20) (21,730,430) (11,095,062 ) cient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. The Net debt 39,308,346 22,965,438 Company’s approach when managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking Total equity 63,529,357 23,732,745 damage to the Company’s reputation. Total capital 102,837,703 46,698,183 Gearing ratio 38% 49% The table below analyses the Company’s financial liabilities. These financial liabilities will be settled within a period of one year from 31 December 2014. The amounts disclosed in the table below are the contractual undiscounted cash flows. 5. Net revenue and operating profit
2014 2013 For purposes of IFRS 8 – Operating Segments, the Company’s Managing Director is considered to be Shs’000 Shs’000 the Chief Operating Decision Maker. The Company is a single product business providing cigarettes and other tobacco products. While the Company has clearly differentiated brands, detailed bank loans 61,307,884 34,328,722 segmentation within a wide portfolio of brands may not be presented without a high degree of trade and other payables 78,213,518 121,818,802 estimation. The information provided below on revenue and operating profit provides an additional 139,521,402 156,147,524 analysis of the business although the Company is managed as one entity. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
5.Net revenue and operating profit (continued) 7. Finance (costs)/ income 2014 2013 Shs’000 Shs’000 56 The Company’s assets are managed as part of one business unit. All the Company’s non-current assets 57 are located in Uganda. Finance costs: Interest expense - bank loans and overdraft (1,217,706) (3,024,168 ) With the exception of BAT GLP and BAT Kenya, the Company does not sell more than 10% of its Net foreign exchange losses (6,099,282) - products to a single customer. Sales to BAT GLP and BAT Kenya, which relate to the leaf revenue stream, are disclosed in note 27 to these financial statements. Cigarette sales are made to the (7,316,988) (3,024,168 ) Company’s customers in Uganda. Finance income: The revenue and operating profit by category are as follows: Net foreign exchange gains - 7,211,119
2014 2013 8. Expenses by nature Shs’000 Shs’000 Employee benefits expense (note 9) 18,996,964 26,602,621 Total sales 338,245,870 270,050,985 Depreciation on property, plant and equipment (note15) 2,746,303 4,275,289 Value added tax and excise duty (68,711,845) (57,039,809) Impairment of plant and machinery (note 15) - 9,360,177 Operating lease payments expensed 1,098 2,056 Net revenue 269,534,025 213,011,176 Receivables – provision for impairment losses - 264,025 Inventories expensed 196,841,353 142,618,047 Local sales - cigarettes: Reversals of impairments in inventories (4,612,782) (7,559,181) Revenue 63,933,340 74,092,862 Auditor’s remuneration 225,715 199,989 Operating profit 17,807,491 28,680,093 Repairs and maintenance expenses 1,312,567 828,705 Transportation costs 4,967,081 5,005,715 Export sales - leaf: 9. Employee benefits expense 2014 2013 Revenue 205,600,685 138,918,314 Shs’000 Shs’000 Operating profit/ (loss) 37,029,578 (17,214,334) The following items are included within employee benefits expense: During the year ended 31 December 2014, the Company made a decision to discontinue its leaf growing and export business. The Company will sell the leaf that was held in stock as of year-end Salaries and wages 11,300,722 22,099,991 to its customers during the period ending 31 December 2015. Redundancy costs 5,207,565 1,588,934
6. Other income 2014 2013 Retirement benefits costs: Shs’000 Shs’000 - Defined contribution scheme 1,116,981 1,759,596 - National Social Security Fund 1,371,696 1,154,100 Gain on disposal of property 23,256,641 - Miscellaneous income 1,511,754 1,409,998 18,996,964 26,602,621
24,768,395 1,409,998 Redundancy costs relate to termination benefits incurred in respect of employees who were attached to the leaf business. The Company decided to discontinue leaf growing in 2014. The gain on disposal mainly relates to the sale of the Company’s property on Plot 2B, Old Port Bell Road and Plot 69-71, Jinja Road. 10. Income tax expense 2014 2013 Shs’000 Shs’000 Miscellaneous income mostly comprises fees earned for the provision of management services to a related entity. Current income tax charge 12,665,417 6,279,273 Deferred income tax credit (1,479,995) (1,556,360 ) Prior year over provision for current income tax (113,479) - Prior year (over)/under provision for deferred income tax (303,817) 121,203
Income tax expense 10,768,126 4,844,116 British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
The tax on the Company’s profit before income tax differs from the theoretical amount that would 12. Share capital arise using the statutory income tax rate as follows: 58 Number of shares Ordinary shares 59 2014 2013 (Thousands) Shs’000 Shs’000 Shs’000 At 1 January 2013, 31 December 2013 and 2014 49,080 61,350 Profit before income tax 47,520,081 15,652,710 Tax calculated at the statutory income tax 14,256,024 4,695,813 The total authorised number of ordinary shares is 64,000,000 with a par value of Shs 1.25 per share. rate of 30% (2013: 30%) Issued share capital consists of 49,080,000 ordinary shares fully paid for at a par value of Shs 1.25.
Tax effect of: 13. Revaluation reserve - (income)/ expenses not deductible for tax purposes (3,070,602) 27,100 - prior year (over)/ under provision for deferred (303,817) 121,203 The revaluation reserve represents the surplus on the revaluation of buildings and freehold land net of income tax deferred income tax. This reserve is not available for distribution to the Company’s shareholders. - prior year over provision for current income tax (113,479) - 2014 2013 Income tax expense 10,768,126 4,844,116 Shs’000 Shs’000
The movement in the current tax amount is as set out below: At start of year 5,425,990 5,703,305 Tax payable at start of year 6,279,273 9,009,143 Current income tax charge 12,551,938 6,279,273 Revaluation gains on buildings 14,235,621 - Tax paid (22,349,819) (9,009,143) Deferred income tax in respect of revaluation gains (4,270,686) -
Tax (recoverable)/ payable at end of year (3,518,608) 6,279,273 9,964,935 -
11. Dividends and earnings per share Revaluation surplus on sale of land and buildings (2,358,666) - Deferred income tax in respect of revaluation surplus 707,600 - (a) Dividends per share (1,651,066) - At the annual general meeting to be held in May 2015, a final dividend in respect of the year ended 31 December 2014 of Shs 748 per share, amounting to Shs 36,712 million (2013: Shs 141 per share, Transfer of excess depreciation in respect of (136,807) (396,164) amounting to Shs 6,920 million) will be offered to the Company’s shareholders. These financial revaluation surplus statements do not reflect this dividend as a payable. However, the proposed dividend has been Deferred income tax in respect of excess depreciation 41,042 118,849 transferred to a separate category of equity. Payment of dividends is subject to withholding tax at rates depending on the residence of the respective shareholders. (95,765) (277,315 )
(b) Earnings per share At end of year 13,644,094 5,425,990
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
2014 2013 Profit attributable to equity holders (Shs’000) 36,751,955 10,808,594 of the Company
Weighted average number of ordinary 49,080 49,080 shares in issue (thousands) Basic and diluted earnings per share (Shs) 749 220
There were no potentially dilutive shares outstanding at 31 December 2014 or 2013. Diluted earnings per share are therefore the same as basic earnings per share. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
14. Deferred income tax 14. Deferred income tax (continued)
60 Deferred income tax is calculated using the enacted income tax rate of 30% (2013: 30%). 61
The movement on the deferred income tax account is as follows: Charged/ 1 January (credited) Charged 31 December 2013 to P/L to SCI 2013 2014 2013 Year ended 31 December 2013 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
Deferred income tax liabilities At start of year (1,240,401) 194,756 Property, plant and equipment: Credit to profit or loss (note 10) (1,783,812) (1,435,157 ) - on historical cost basis 1,666,220 (482,481) - 1,183,739 Tax effect of revaluation (note 13) 4,270,686 - - on revaluation surpluses 2,936,465 (611,041) - 2,325,424
At end of year 1,246,473 (1,240,401) 4,602,685 (1,093,522) - 3,509,163
Because of the uncertainty in estimating the extent to which the Company’s deferred income tax Deferred income tax assets assets and liabilities will crystallise within 12 months from the year end, the Company’s entire net Unrealised foreign exchange (3,046,434) 3,494,127 - 447,693 deferred income tax liability has been classified as a non-current liability. (losses)/gains Provisions (1,361,495) (3,835,762) - (5,197,257) Deferred income tax assets and liabilities and the deferred income tax credit/charge in the profit or
loss (P/L) and statement of comprehensive income (SCI) are attributable to the following items: (4,407,929) (341,635) - (4,749,564)
Net deferred income tax 194,756 (1,435,157) - (1,240,401) Charged/ liability/(asset) 1 January (credited) Charged 3 1 December 2014 to P/L to SCI 2014 Year ended 31 December 2014 Shs’000 Shs’000 Shs’000 Shs’000
Deferred income tax liabilities Property, plant and equipment: - on historical cost basis 1,183,739 (749,699) - 434,040 - on revaluation surpluses 2,325,424 (748,641) 4,270,686 5,847,469
3,509,163 (1,498,340) 4,270,686 6,281,509 Deferred income tax assets Unrealised foreign exchange 447,693 (940,825) - (493,132) gains/ (losses) Provisions (5,197,257) 655,353 - (4,541,904)
(4,749,564) (285,472) - (5,035,036)
Net deferred income tax (1,240,401) (1,783,812) 4,270,686 1,246,473 (asset)/ liability British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
62 63 British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
15. Property, plant and equipment (continued) 17. Non-current assets held for sale (continued)
64 Land and buildings were revalued on 30 March 2014 by Knight Frank Uganda Limited, external inde- 65 pendent valuers. Valuations (i.e. level 2) were made on the basis of the open market value. Level 2 fair 2014 2013 values of land and buildings were determined directly by reference to observable prices in the open Shs’000 Shs’000 market and recent similar market transactions at arm’s length terms. At start of year 1,001,751 - The book values of the properties were adjusted to the revaluations and the resultant surplus net of Reclassifications from property, - 1,001,751 deferred income tax was credited to the revaluation reserve in shareholders’ equity. If the buildings plant and equipment and freehold land were stated on the historical cost basis, the amounts would be as follows: Disposals (34,590) - At end of year 967,161 1,001,751 2014 2013 Shs’000 Shs’000 The net gain of Shs 115 million arising from the disposal of the property in Rwabudongo has
been recorded under other income in profit or loss. Cost 17,051,976 22,008,739 Accumulated depreciation (5,687,874) (6,055,999) 18. Inventories Net book amount 11,364,102 15,952,740 2014 2013 Work in progress as at 31 December 2014 mainly comprises new furniture and equipment that had not been capitalised by year-end. Shs’000 Shs’000
Leaf stocks 71,497,856 119,583,104 16. Prepaid operating lease rentals Finished goods 10,732,025 8,007,914 Consumables - 8,611,552 2014 2013 82,229,881 136,202,570 Shs’000 Shs’000 Cost of inventories recognised as an expense 192,228,571 135,058,866 Cost: At start of year 88,684 88,684 Including: Disposals (38,211) - – write-down of inventories to net realisable value - 1,194,758 At end of year 50,473 88,684 – reversals of impairments in inventories (4,612,782) (8,753,939)
Amortisation: 19. Trade and other receivables At start of year (20,033) (17,978) Charge for the year (1,098) (2,055) Trade receivables 2,000,924 3,597,608 Amortisation on disposals 14,345 - Less: Provision for impairment losses - (2,803,877)
At end of year (6,786) (20,033) Trade receivables – net 2,000,924 793,731 Net book value 43,687 68,651 Receivables from related companies (note 27) 48,767,548 14,232,900 Prepayments and other receivables 591,592 1,465,586 17. Non-current assets held for sale Receivables in respect of disposal of property 23,238,098 - and equipment During the year ended 31 December 2013, management decided to dispose of the land and buildings 74,598,162 16,492,217 in Rwabudongo and Rwekonda, because they were deemed surplus to Company’s requirements. This property met the criteria for classification as held for sale under IFRS 5, Non-current assets held for sale and discontinued operations. It was therefore classified as held for sale and recorded at the lower of its net book value and fair value.
During the year ended 31 December 2014, the Company disposed of the property in Rwabudongo. British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
19. Trade and other receivables (continued) 23. Borrowings (continued)
66 The weighted average interest rate for bank loans was 3.6% (2013: 4.5%). The carrying amount of the 67 Movements in the provision for impairment of trade receivables are as follows: bank loans is approximately equal to the fair value.
2014 2013 The Company’s bank loans are repayable within 2 months from year-end, attract interest at rates of Shs’000 Shs’000 between 3.4% and 4% and are denominated in United States Dollars. The security for these borrowing is in the form of promissory notes issued by the Company. At start of year 2,803,871 2,539,846 - 264,025 Provision in the year The facilities are annual facilities subject to review on various dates of the year. The overdraft limit (2,803,871) - Receivables written off during the year was not exceeded at any time during the year. as uncollectible
At end of year - 2,803,871 24. Contingent liabilities
20. Cash at bank The Company is a defendant in various legal actions. In the opinion of the directors, after taking appropriate legal advice, the outcome of such actions will not give rise to a significant loss. Bank balances 21,730,430 11,095,062 25. Capital commitments 21. Trade and other payables There were no capital commitments at year end (2013: nil). Trade payables 3,879,778 6,291,778 Amounts due to related companies (note 27) 55,257,899 96,955,274 26. Cash generated from operations Other payables and accrued expenses 19,075,841 18,571,750 Reconciliation of profit before income tax to cash generated from operations: 78,213,518 121,818,802 2014 2013 22. Provisions for other liabilities Shs’000 Shs’000
2014 2013 Profit before income tax 47,520,081 15,652,710 Shs’000 Shs’000 Adjustments for: Interest expense (note 7) 1,217,706 3,024,168 12,736,897 6,959,383 At start of year Depreciation (note 15) 2,746,303 4,275,289 4,610,401 17,015,205 Additional provisions Amortisation of prepaid operating lease rentals 1,098 2,055 (3,339,648) (11,237,691) Used during year Impairment loss (note 15) - 9,360,177 14,007,650 12,736,897 At end of year Gain on disposal of property, plant and (23,256,640) - equipment (note 6) Provisions, which represent liabilities that could be settled with the next twelve months, relate to the Unrealised exchange differences (355,993) 844,803 Company’s obligations in respect of the restructuring of the Company, following the closure of the leaf business and other liabilities arising in the ordinary course of business. Changes in working capital - trade and other receivables (34,867,847) 5,276,463 In the directors’ opinion, the actual liabilities that will be incurred by the Company in settling the - inventories 53,972,689 (6,074,963) above obligations will not differ materially for the amounts provided for at year-end. - trade and other payables and provisions (42,334,531) 16,273,321 Cash generated from operations 4,642,866 48,634,023 23. Borrowings 27. Related party transactions 2014 2013
Shs’000 Shs’000 The Company is controlled by British American Tobacco Limited, which is incorporated in the United Kingdom. Bank loans 61,038,776 34,060,500 The following transactions were carried out with related parties with which the Company shares common ownership: British American Tobacco Uganda Limited British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014 Annual Report and Financial Statements for the Year ended 31st December 2014
Notes (continued) Notes (continued)
27. Related party transactions (continued) 27. Related party transactions (continued)
68 69 i) Sale of goods and services v) Outstanding balances arising from sale and purchase of goods/services 2014 2013 Shs’000 Shs’000 2014 2013 Shs’000 shs’000 BAT Holdings Limited 1,346,034 - Due from related parties BAT GLP 152,965,843 115,648,198 BAT GLP 2,536,179 547,732 BAT Kenya 52,634,842 23,270,116 BAT Kenya Limited 45,955,632 13,583,952 206,946,719 138,918,314 BAT Area Limited 275,737 101,216 48,767,548 14,232,900 ii) Purchase of goods and services Due to related parties BAT GLP 37,471,904 85,630,645 BAT Kenya Limited 39,187,854 32,141,683 BAT Kenya Limited 11,533,427 9,693,309 BAT Area Limited 2,623,134 3,296,064 BAT Congo - 38,935 BASS (AME) - South Africa 647,474 739,292 BAT Nigeria and (GSD) Limited 52,278 110,231 BAT Investments - UK 5,927,745 6,114,567 BAT Holdings 62,096 448,330 48,386,207 42,291,606 BAT Area Limited 151,505 871,909 BAT Investments 148,259 - iii) Key management compensation BAT International Finance plc 5,838,430 - BASS AME - 161,915 Key management includes directors (executive and non-executive) and members of senior 55,257,899 96,955,274 management. The compensation paid or payable to key management for employee services is shown below: The amounts due from related parties are neither secured nor impaired and are due for settlement within 12 months from the year end. 2014 2013 Shs’000 shs’000 The amounts due to related parties are not secured against any of the Company’s assets, are interest free and are repayable within 12 months from the year end. Salaries and other short-term employment benefits 4,092,727 3,645,642 Termination benefits 1,860,902 - 5,953,629 3,645,642
iv) Directors’ remuneration
Fees for services as a director 155,649 51,578
Other emoluments (included in key management 5,072,348 2,486,256 compensation above) 5,227,997 2,537,834 British American Tobacco Uganda Limited Annual Report and Financial Statements for the Year ended 31st December 2014
PROXY FORM
To:
The Company Secretary 70 British American Tobacco Uganda Limited 7th Floor, TWED Towers Plot 10, Kafu Road, Nakasero P.O. Box 7100 Kampala, Uganda
I ______of address______being a member of British American Tobacco Uganda Limited, hereby appoint,______of address ______; as my proxy to vote for me and on my behalf at the Annual General Meeting of the Company to be held on the 7th day of May 2015 and at any adjournment thereof. Dated this ______day of______, 2015.
______Shareholder’s Signature Name of shareholder/Authorized official signing Share Certificate/SCD Account No: ______
Notes: 1. If a member is not able to attend this meeting personally, this proxy form should be completed and returned to the Company Secretary, British American Tobacco Uganda and the filled in form should reach the Registered Office of the Company on 7th Floor Twed Towers, Plot 10, Kafu Road, P. O. Box 7100, Kampala, not later than 48 hours before the 7th of May 2015 and in default the instrument of proxy shall be invalid. 2. In case of a corporation, the proxy must be under its common seal or under the hand of the officer or attorney duly authorized in that behalf. 3. In case of joint shareholders, each joint shareholder must sign. 4. A person appointed to act as a Proxy need not be a member of the Company.
TEAR OFF THE ADMISSION FORM BELOW AND RETAIN FOR PRESENTATION AT THE MEETING
BRITISH AMERICAN TOBACCO UGANDA LIMITED Annual General Meeting 7th May 2015, Sheraton Kampala Hotel, Rwenzori Ballroom
ADMISSION FORM The shareholder or his proxy must produce this admission form in order to obtain admission to the Annual General Meeting. Shareholders or their proxies are requested to sign the admission form before attending the meeting.
Name of person attending ______Signature of person attending ______Name of Shareholder ______Share Certificate/SCD No.______No. of Shares
BRITISH AMERICAN TOBACCO UGANDA 2015 HEAD OFFICE British American Tobacco Uganda Limited 7th Floor, TWED Towers Plot 10, Kafu Road, Nakasero P.O. Box 7100 Kampala, Uganda Email: [email protected] www.bat.com