Speech by Richard Burrows, Chairman at the British American Tobacco p.l.c. 2015 Annual General Meeting

Good morning ladies and gentlemen - welcome to your AGM.

All of your directors are here today including our new board members.  Let me introduce Sue Farr, Pedro Malan and Dimitri Panayotopoulos, who all joined the board in February.

In 2014 your company performed strongly in a tough economic environment, once more confirming that our strategy continues to deliver.

Although currency movements significantly impacted our reported results in 2014, at constant rates of exchange, revenue grew 2.8 per cent; adjusted profits from operations grew 4.4 per cent and adjusted diluted earnings per share grew 7.9 per cent.

Whilst group cigarette volume was down by 1.4 per cent - against a backdrop of an estimated industry decline of 2.5per cent – we continued to grow overall market share.  This is a mark of good management of the business. 

Given our confidence in our strategy and future financial performance, we propose to increase the dividend and you will be voting today on a final dividend of 100.6p per share making the total dividend for the year 148.1p, an increase of 4 per cent compared with 2013.

These strong underlying results reinforce the excellent progress we have made in recent years since enhancing our strategy with a sharper focus on the consumer.

During the last four years we have increased our share of the global cigarette market by 70 basis points.  The Global Drive Brand portfolio has grown at an even faster rate, stimulated by product innovations which now make up almost 50 per cent of our GDB volume.

In addition, we are investing heavily in markets which represent the greatest opportunity for future growth - in Eastern Europe, Middle East, Africa and in Asia Pacific.

We are also making excellent progress towards our goal of leading the various next generation product categories. Since the launch of the Vype e-pen in October 2014, Vype has been the fastest growing e-cigarette brand in the UK; we have made significant progress towards launching our medicinal nicotine product, Voke, which was granted a UK medicines license last year; and we also plan to begin consumer trials of a tobacco heating product by the end of 2015, with the first product in a test market in 2016.

This is the strategy that is enabling us to continue to deliver for shareholders today at the same time as investing for a sustainable future tomorrow.

As you will be aware from our announcement last July, we have agreed to invest $4.7 billion as part of Reynolds American Inc.’s proposed acquisition of Lorillard, enabling the Group to maintain its 42 per cent equity position in the enlarged business.

With the transaction approved by both Reynolds and Lorillard shareholders we are awaiting approval of the acquisition from the US anti-trust authority, the Federal Trade Commission, with a decision expected shortly.

Additionally, your company has filed a request with the Brazilian securities regulator to register a public tender offer to acquire the remaining 24.7 per cent of Souza Cruz shares which are not currently owned by the Group and to delist the company.

However protecting our future also means protecting our assets.

Our brands represent a significant investment – of time, money and creativity – and are key to our ability to compete. Consequently as we believe that the recent decisions by the UK and Irish governments to proceed with Plain Packaging are serious errors of judgement, as we have already made clear, we are prepared to take whatever action we deem appropriate to protect our valuable intellectual property.

Now, turning to current trading in 2015, in our first quarter Interim Management Statement posted this morning, our Chief Executive, Nicandro Durante made the following comments:

“The Group continued to perform well in the first three months of the year despite the challenging trading environment. Our market share increased by 40 basis points driven by our Global Drive Brands which continue to deliver strong share and volume growth.

Revenue increased at constant rates of exchange, driven by pricing more than offsetting lower volume, while adverse exchange rate movements led to a reduction in reported revenue.

I remain confident that we will deliver another year of good earnings growth at constant rates of exchange, with performance significantly skewed to the second half of the year principally due to a strong first-half volume comparator and the timing of price increases.”

In conclusion let me extend my sincere thanks to all our employees worldwide who have worked hard to achieve the business outcome which we place before you today.

And let me single one employee out in particular.

As this is his last AGM before retirement let me extend my thanks, on behalf of the board and shareholders, to our Legal Director and General Counsel, Neil Withington.

Neil joined the Group in 1993 and he will retire on the 30th of April.

Having been your company’s Legal Director and General Counsel since 2000, Neil has been a constant source of insight, professionalism and good humour throughout his career here.

Finally, let me thank Nicandro and his management team for their continued commitment during this past challenging year.