Annual Report 2009 - British American Tobacco

GROWTH
MEASURING OUR PERFORMANCE
2. BUSINESS MEASURES
A number of other business measures, financial and non-financial, are monitored and
assessed frequently to ensure that the Group’s strategy is delivered. Although these
are not included in management’s incentives, we believe that these business measures
contribute to the success of the Group, particularly over the long term. Further details of
our performance against these measures, in relation to the four elements of our strategy,
are shown on pages 12 to 31.
Business measure Description Target and status
Adult smokers under 30
(see page 14)
Lights
(see page 14)
Premium
(see page 14)
Menthol
(see page 14)
PRODUCTIVITY
Operating margin
(see page 52)
Productivity savings
(see page 19)
Free cash flow as a percentage
of adjusted earnings
(see page 57)
Our share of volume in the Adult smokers under 30
(ASU30) segment in the Group’s top 40 markets
(excluding volume from acquisitions made in 2008
and 2009).
Our share of volume in the Lights segment in the
Group’s top 40 markets (excluding volume from
acquisitions made in 2008 and 2009).
Our share of volume in the Premium segment in
the Group’s top 40 markets (excluding volume
from acquisitions made in 2008 and 2009).
Our share of volume in the Menthol segment in
the Group’s top 40 markets (excluding volume
from acquisitions made in 2008 and 2009).
Business measure Description Target and status
Percentage of adjusted profit from operations
divided by revenue.
The savings in supply chain, overheads and indirect
costs (anything other than leaf, wrapping
materials, cigarette making machinery and labour).
Free cash flow as a ratio of the adjusted diluted
earnings per share.
To maintain or grow our share of volume each year
on an organic basis. In 2009, our share of volume
in the ASU30 segment was 24.0 per cent, up from
23.7 per cent in 2008.
To maintain or grow our share of volume each year
on an organic basis. In 2009, our share of volume
in the Lights segment was 25.4 per cent, down
from 25.7 per cent in 2008.
To maintain or grow our share of volume each year
on an organic basis. In 2009, our share of volume
in the Premium segment was 26.8 per cent, up
from 26.7 per cent in 2008.
To maintain or grow our share of volume each year
on an organic basis. In 2009, our share of volume
in the Menthol segment was 23.8 per cent, up from
23.4 per cent in 2008.
To increase operating margin to 34.0 per cent
by 2012. Operating margin was 31.4 per cent
in 2009, up from 30.7 per cent in 2008 and
30.0 per cent in 2007.
To achieve £800 million in cost savings between
2008 and 2012. In 2009, we made cost savings
of £239 million, bringing the total figure
achieved since 2008 to £484 million.
To maintain the percentage figure in the mid 80s.
In 2009, the figure was 86 per cent.
10 British American Tobacco Annual Report 2009 Directors’ report: Business review