Speech by Richard Burrows, Chairman, at the British American Tobacco p.l.c. 2016 Annual General Meeting

Good morning ladies and gentlemen.

It is my pleasure to welcome you to British American Tobacco’s 2016 Annual General Meeting, held here at Milton Court for the second time. Thank you for your attendance.

All of your directors are here today apart from Dimitri Panayotopoulos who is sadly injured and is unable to travel and Dick Tubb who is unable to attend due to a family illness.

The headline of our Annual Report summarises your Company’s performance in 2015 as ‘delivering today, investing in tomorrow’.

Strong adverse currency movements significantly impacted our reported results. However, at constant rates of exchange, revenue grew 5.4 per cent; earnings per share grew 10.1 per cent; and profits from operations grew 4 per cent.

Cigarette volumes were down 0.5 per cent, against an estimated industry decline of 2.3 per cent, with the Group share of Key Markets increasing by over 40 basis points.

This growth in market share was achieved through the outstanding performance of our Global Drive Brands, which grew volume by 8.5 per cent and increased their market share by 120 basis points.

Our Global Drive Brands now account for some 45% of all Group cigarettes sold and continue to be a crucial part of our growth strategy.

Given our confidence in our future we propose an increased dividend which you will be voting on today of 104.6p per share, taking the total dividend for 2015 to 154.0p – an increase of four per cent.

Your Company’s strong underlying results in 2015 are reflective of its continuing ability to generate returns for shareholders while investing in opportunities for future growth.

In that context, in 2015 we completed a number of investments and strategic partnerships that have both contributed to our 2015 results and further enhanced our prospects for the future.

You will recall that last year I said that we had agreed to invest US$4.7 billion as part of Reynolds American’s proposed acquisition of Lorillard, enabling your Company to maintain its equity position in the enlarged business.

That investment has now been made and your Company now owns 42 per cent of a substantially stronger Reynolds American.

We also strengthened our business in the Americas by acquiring the rest of the shares we did not already own in our Brazilian subsidiary, Souza Cruz, and de-listed the company.

Additionally, we completed the acquisition of the leading independent cigarette manufacturer in Central Europe, TDR, which has provided your Company with immediate scale in the core markets of Croatia, Bosnia and Serbia, enhancing our market share in those countries.

In relation to Next Generation Products, our ambition is to lead the category worldwide as we are convinced that such products can deliver substantial and sustainable returns to shareholders over the long term.

That is why, in 2015, we not only expanded our range of products and e-liquid flavours, but also the geographical footprint of our Next Generation Product business beyond the UK, with launches of our e-cigarette brand, Vype, in France, Germany, Italy, Poland and Colombia, as well as acquiring CHIC  the market-leading e-cigarette business in Poland .

We also launched our first Tobacco Heating Product, the ‘glo iFuse’ in Romania where initial consumer feedback has been very encouraging.

Additionally, in 2015 we strengthened our R&D capabilities by signing a vapour products technology-sharing agreement with R.J. Reynolds Tobacco Company and yesterday we announced that we have strengthened our NGP business in the UK with the recently completed acquisition of Ten Motives.

Your Company’s R&D focus on building a high quality pipeline of Next Generation Products continues in tandem with investments and strategic partnerships that will position us for future growth in this exciting category.

Turning to current trading in 2016, in our first quarter Interim Management Statement posted yesterday, our Chief Executive, Nicandro Durante, made the following comments:

“Our momentum has continued with market share in our Key Markets increasing by a further 20 bps. Cigarette volume was up 3.6%, with our GDBs growing by 10.5%. This excellent volume performance reflects the strength of the business combined with the uplift from recent acquisitions and some benefit from inventory movements in the comparator period. Revenue increased by 7.5% at constant rates of exchange, or 6.1% on an organic basis. Our UK NGP business continued to grow, we made good progress with the expansion of Vype to other markets and launched glo iFUSE, our first tobacco heating device, in Romania. While profit growth will be weighted to the second half of the year, partly due to the impact of foreign exchange on our cost base, I remain confident that we will deliver another year of good earnings growth at constant rates of exchange.”

There are two changes to the Board which will take effect from the conclusion of today’s Annual General Meeting.

Karen de Segundo will be retiring from the Board having served for eight years on the Board, nearly seven of which as Chairman of the Corporate and Social Responsibility Committee.

Dr Richard Tubb will also retire from the Board having served as a Non-Executive Director since January 2013.

During that time, Richard has been a member of the Corporate Social Responsibility Committee and the Nominations Committee.

Let me take this opportunity to thank them for their extremely valuable service over the years.

Reflecting on the success of 2015, let me express my thanks and appreciation to my fellow Directors on the Board, to our Chief Executive, Nicandro Durante,  and his management team, and all of our employees across the world for their continuing commitment, leadership and resilience over the last year.

Finally, and on behalf of the board, I would to extend my thanks to you for your continued support.