From the Chairman GROUP FINANCIAL STATEMENTS Performance and strategy PAGE Report of the independent auditors Independent auditors’ report on the Group financial statements. 108 Group income statement Regional review Summary of the Group’s turnover, revenue and profits. 109 Group statement of comprehensive income Summary of the Group’s comprehensive income. 110 Financial review Group statement of changes in equity Summary of the Group’s changes in equity. 111 Group balance sheet Summary of the Group’s assets, equity and liabilities. 112 Governance Group cash flow statement Summary of the Group’s cash flows. 114 Notes on the accounts Detailed notes on the Group accounts. 115 Group financial statements Five year summary Summary of financial data from 2004-2009. 191 Half-yearly analyses of profit 2009 profit figures broken down by half year. 192 financial statements Parent Company Principal subsidiary undertakings List of the Principal subsidiary undertakings of the Group. 193 Principal associate undertakings List of the Principal associate undertakings of the Group. 194 Shareholder information Financial statements and other information British American Tobacco Annual Report 2009 107 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BRITISH AMERICAN TOBACCO p.l.c. We have audited the Group financial statements of British American Opinion on other matter prescribed by the Companies Act 2006 Tobacco p.l.c. for the year ended 31 December 2009 which comprise In our opinion the information given in the Directors’ report for the the Group income statement, the Group statement of comprehensive financial year for which the Group financial statements are prepared income, the Group statement of changes in equity, the Group balance is consistent with the Group financial statements. sheet, the Group cash flow statement, the notes on the accounts Matters on which we are required to report by exception and the Principal subsidiary undertakings and the Principal associate We have nothing to report in respect of the following: undertakings. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Under the Companies Act 2006 we are required to report to you Reporting Standards (IFRSs) as adopted by the European Union. if, in our opinion: Respective responsibilities of Directors and auditors ■ certain disclosures of Directors’ remuneration specified by law As explained more fully in the Responsibility of Directors statement are not made; or set out on page 105, the Directors are responsible for the preparation ■ we have not received all the information and explanations we of the Group financial statements and for being satisfied that they give require for our audit. a true and fair view. Our responsibility is to audit the Group financial statements in accordance with applicable law and International Standards Under the Listing Rules we are required to review: on Auditing (UK and Ireland). Those standards require us to comply ■ the Directors’ statement, set out on page 71, in relation to going with the Auditing Practices Board’s Ethical Standards for Auditors. concern; and This report, including the opinions, has been prepared for and only ■ the part of the Corporate governance statement relating to the for the Company’s members as a body in accordance with Chapter 3 Company’s compliance with the nine provisions of the June 2008 of Part 16 of the Companies Act 2006 and for no other purpose. We Combined Code specified for our review. do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown Other matter or into whose hands it may come save where expressly agreed by our We have reported separately on the Parent Company financial prior consent in writing. statements of British American Tobacco p.l.c. for the year ended 31 December 2009 and on the information in the Remuneration Scope of the audit of the financial statements report that is described as having been audited. An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an Richard Hughes (Senior Statutory Auditor) assessment of: whether the accounting policies are appropriate to for and on behalf of PricewaterhouseCoopers LLP the Group’s circumstances and have been consistently applied and Chartered Accountants and Statutory Auditors adequately disclosed; the reasonableness of significant accounting London, United Kingdom estimates made by the Directors; and the overall presentation of the 24 February 2010 financial statements. Opinion on financial statements In our opinion the Group financial statements: ■ give a true and fair view of the state of the Group’s affairs as at 31 December 2009 and of its profit and cash flows for the year then ended; ■ have been properly prepared in accordance with IFRSs as adopted by the European Union; and ■ have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the lAS Regulation. 108 British American Tobacco Annual Report 2009 Financial statements and other information From the Chairman www.bat.com/annualreport2009 GROUP INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER Performance and strategy 2009 2008 Notes £m £m Gross turnover (including duty, excise and other taxes of £26,505 million (2008: £21,799 million)) 40,713 33,921 Revenue 2 14,208 12,122 Raw materials and consumables used (3,983) (3,335) Changes in inventories of finished goods and work in progress 35 19 Employee benefit costs 3a (2,317) (1,907) Regional review Depreciation and amortisation costs 3b (611) (430) Other operating income 3c 196 281 Other operating expenses 3d (3,427) (3,178) Profit from operations 2 4,101 3,572 Analysed as: – adjusted profit from operations 2 4,461 3,717 – restructuring and integration costs 3e (304) (160) – Canadian settlement 3f (102) – amortisation of trademarks 3g (58) (24) Financial review – gains on disposal of businesses and trademarks 3h 2 141 4,101 3,572 Finance income 77 267 Finance costs (581) (658) Net finance costs 4 (504) (391) Share of post-tax results of associates and joint ventures 5 483 503 Analysed as: – adjusted share of post-tax results of associates and joint ventures 2 541 477 Governance – trademark impairments 5 (65) (20) – additional ST income 5 13 – termination of joint venture 5 45 – health plan credit 5 16 – restructuring costs 5 (9) (12) 483 503 Group financial Profit before taxation 4,080 3,684 statements Taxation on ordinary activities 6 (1,124) (1,025) Profit for the year 2,956 2,659 Attributable to: Shareholders’ equity 2,713 2,457 Minority interests 243 202 2,956 2,659 financial statements Parent Company Earnings per share Basic 7 137.0p 123.3p Diluted 7 136.3p 122.5p All of the activities during both years are in respect of continuing operations. The accompanying notes are an integral part of the Group financial statements. Shareholder information Financial statements and other information British American Tobacco Annual Report 2009 109 GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2009 2008 Notes £m £m Profit for the year (page 109) 2,956 2,659 Other comprehensive income Differences on exchange – subsidiaries 166 213 – associates (258) 724 Differences on exchange reclassified and reported in profit for the year (22) Cash flow hedges – net fair value (losses)/gains (72) 180 – reclassified and reported in profit for the year 67 (173) – reclassified and reported in net assets (1) 1 Available-for-sale investments – net fair value gains 3 1 – reclassified and reported in profit for the year (3) (6) Net investment hedges – net fair value gains/(losses) 238 (672) – differences on exchange on borrowings 12 (178) Revaluation of existing business 26c 179 Retirement benefit schemes – actuarial losses in respect of subsidiaries 12 (295) (547) – surplus recognition and minimum funding obligations in respect of subsidiaries 12 (76) – actuarial gains/(losses) in respect of associates net of tax 11 61 (396) Tax on items recognised directly in other comprehensive income 6d (71) 184 Total other comprehensive income for the year (229) (512) Total comprehensive income for the year 2,727 2,147 Attributable to: – shareholders’ equity 2,476 1,913 – minority interests 251 234 2,727 2,147 The accompanying notes are an integral part of the Group financial statements. 110 British American Tobacco Annual Report 2009 Financial statements and other information From the Chairman www.bat.com/annualreport2009 GROUP STATEMENT OF CHANGES IN EQUITY AT 31 DECEMBER Performance and strategy 2009 Share premium, capital redemption and merger Other Retained Shareholders’ Minority Share capital reserves reserves earnings funds interests Total equity Notes £m £m £m £m £m £m £m Total comprehensive income for the year (page 110) 77 2,399 2,476 251 2,727 Regional review Employee share options – value of employee services 61 61 61 – proceeds from shares issued 2577 Dividends and other appropriations – ordinary shares (1,798) (1,798) (1,798) – to minority interests (240) (240) Purchase of own shares – held in employee share ownership trusts (94) (94) (94) Financial review Minority interests in Bentoel 26 11 Minority interests – capital injection 29 16 16 Other movements 17 17 17 Total changes in equity for the year 2 77 590 669 28 697 Balance at 1 January 506 3,905 955