Annual report 2010 - Imperial Tobacco Group

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Directors’ Report: Other Information continuedStrategy Performance Governance Financialscontain certain forward-looking statements with respect tothe operations, performance and financial condition of theCompany and the Group as a whole. By their nature, thesestatements involve uncertainties since future events andcircumstances can cause actual results to differ materiallyfrom those anticipated and no reliance should be placed onthem. The forward-looking statements reflect knowledge andinformation available at the date of preparation of this AnnualReport and Accounts and the Company undertakes noobligation to update these forward-looking statements.Nothing in this Annual Report and Accounts should beconstrued as a profit forecast.The principal operating subsidiaries within the Group areshown on pages 157 and 158.InsuranceWe have purchased and, throughout the year, maintainedappropriate insurance cover in respect of Directors’ andOfficers’ liabilities. The Company has also entered intoqualifying third party indemnity arrangements for the benefitof all its Directors, in a form and scope which comply withthe requirements of the Act. These indemnities were in forcethroughout the year and up to the date of this Report.Update on Ongoing EnquiriesGerman InvestigationsCertain investigations were initiated by German authoritiesin January 2003 into alleged foreign trading and relatedviolations by a number of people, including Reemtsmaemployees, during a period prior to its acquisition byImperial Tobacco Group in May 2002. A Board Committeeestablished in 2003 remains in place to monitor the progressof the investigations and the Group’s responses on behalfof the Board.Between 2005 and 2007, the investigations against all butfive of the individuals were terminated, either for lack ofevidence or on terms agreed by the individuals with theauthorities. Settlement was made at no cost to the ImperialTobacco Group of any duty payable as a result of certain ofthe activities being investigated.In September 2006, charges relating to smuggling werebrought in connection with one of the investigations against18 individuals, one of whom is a former Reemtsmaemployee. In October 2008, the German court agreed toopen trial in relation to these charges, but no hearing hasyet been held.In November 2006, in connection with a separateinvestigation, charges relating to violations of the Germanforeign trade act were brought against four other formerReemtsma employees. In March 2010, in accordance withan agreement with the authorities, the individuals pleadedguilty and financial penalties were ordered against themand Reemtsma. These were paid at no cost to the ImperialTobacco Group.Office of Fair TradingAs previously reported, in October 2003 the UK Office ofFair Trading (OFT) commenced an investigation under theCompetition Act 1998 into the operation of the UK tobaccosupply chain.On 24 April 2008, the OFT issued a Statement of Objections(SO) which set out the OFT’s allegations against ImperialTobacco Group, Gallaher, and a number of retailers. Thesealleged infringements relate to the period prior to 2004.On 15 April 2010, the OFT reached a Decision. Althoughthe OFT dropped a number of the allegations made in theSO, it found that Imperial Tobacco Group and Gallaher hadseparately engaged in unlawful practices with ten tobaccoretailers in breach of Chapter I of the Competition Act 1998.The OFT imposed total fines of £225m on the parties involved,including a fine of £112.3m on Imperial Tobacco Group.Under the Competition Act 1998, parties have the right toappeal OFT decisions to the Competition Appeal Tribunal(CAT), and ultimately, on a point of law to the Court ofAppeal. The CAT has jurisdiction to conduct a full rehearingof the facts and has the power to uphold, vary or quash theDecision and the fine imposed.Imperial Tobacco Group does not accept the findings in theOFT’s Decision. Accordingly, Imperial Tobacco Groupsubmitted an appeal to the CAT on 15 June 2010 againstthe OFT’s findings of infringement and the level of the fine.Five retailers (Asda, the Co-operative Group, Morrisons(together with Safeway) and Shell) have also appealedagainst the Decision and the fines imposed on them bythe OFT.The CAT is in the process of establishing the timetable forthese appeals, although it is unlikely that the CAT will deliverjudgment on liability before the fourth quarter of 2011, whileany subsequent appeal to the Court of Appeal that may benecessary is unlikely to be determined before the thirdquarter of 2012.Update on Tobacco-Related LitigationWe are not facing any tobacco-related litigation in the UK.In the Republic of Ireland, the number of tobacco-relatedclaims has fallen from 307 in 1997, to 11. Ten of theseclaims are subject to dismissal motions. The other claim isinactive. The dismissal motion in respect of one claimantwas heard by the Dublin High Court in 2006. In April 2007,the court ruled that this claim should be dismissed. Thisdecision has been appealed and the dismissal motionsin respect of the nine other active claims have beenstayed pending the appeal. No date has been set forthe appeal hearing.Following our acquisition of Altadis in January 2008, we arecurrently facing a claim in Spain brought in the AdministrativeCourt on behalf of the Regional Government of Andalucia forreimbursement of hospitalisation expenses allegedly incurredin treating smokers. The claim was served on Altadis in July2009 and preliminary objections were filed by Altadis and theother tobacco company defendants in September 2009. Theproceedings are stayed until the Administrative Court ruleson these objections.We are not facing any claims in France. Following ouracquisition of Logista in May 2008, we are currently facingtwo claims in Italy. One is at an initial stage and the other hasbeen dismissed but appealed.76
We understand that a purported collective claim was filedagainst us (and other tobacco companies) by an individualin Bulgaria in March 2008 but we have not yet been formallyserved with any court documents. After various rulings andappeals, which had the effect of restricting the scope ofthe claim, the claimant filed an amended statement of casewith the Sofia City Court and a hearing is scheduled for18 November 2010 to assess whether the claimant hasfulfilled the statutory conditions for bringing a collective action.In September 2009 an individual claim was brought againstus (and others) in Turkey. We filed a statement of defence ata preliminary hearing on 3 November 2009.Following our acquisition of Commonwealth Brands inApril 2007, we are currently facing one claim brought byan individual in the United States. A motion for summaryjudgment was filed by Commonwealth Brands inOctober 2005 and remains pending.In Australia, a claim was filed in January 2009 againstImperial Tobacco Australia Limited and other tobaccocompanies. The claim was discontinued in October 2009.We understand that the Saudi Ministry of Health has issuedlegal proceedings against distributors for internationaltobacco companies to recover the alleged costs of providingmedical care to individuals. No Imperial Tobacco Groupcompany has been served with any court documents inrelation to this claim.To date, no action has been successful or settled in favourof any claimant in any tobacco-related litigation againstImperial Tobacco or any of its subsidiaries. Imperial Tobaccohas been advised by its lawyers that it has meritoriousdefences to the legal proceedings in which damages aresought for alleged tobacco-related health effects. We willcontinue to vigorously contest all such litigation against us.By order of the BoardMatthew Phillips2 November 2010Imperial Tobacco Group PLCRegistered in England and Wales No: 323648377
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Imperial Tobacco Group PLCAnnual Re
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…to deliver sustainableshareholde
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Operational HighlightsDelivering Su
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and product portfolio to evolving c
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In this section9 Strategic Review10
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Our StrategyWe are focused on deliv
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Total Tobacco5 % Our Powerful Brand
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Our global strategic cigarette bran
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Our global team is fully aligned be
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Satisfying consumers and aligning o
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We are a responsive business with s
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Operating responsibly, combined wit
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Our growth drivers of sales growth,
Page 27 and 28: Principal Risks and UncertaintiesA
Page 29 and 30: Competition LawOverviewWe take comp
Page 31 and 32: Reconciliation of Adjusted Performa
Page 33 and 34: Key Performance Indicators (KPIs) 1
Page 35 and 36: Lambert & Butler and Richmond remai
Page 37 and 38: Within this the travel retail marke
Page 39 and 40: OutlookThe strength of our portfoli
Page 41 and 42: Blondes. In the Middle East, we aga
Page 43 and 44: Corporate ResponsibilityOur Corpora
Page 45 and 46: Corporate Responsibility and our St
Page 47 and 48: We have revised our IMS and employe
Page 49 and 50: Environmental Performance 1Absolute
Page 51 and 52: across the business. More informati
Page 53 and 54: Supplier RelationshipsOur main supp
Page 55 and 56: Non-financial performance indicator
Page 57 and 58: “High standards of corporategover
Page 59 and 60: 5. Pierre Jungels, CBE (HON), PHD,
Page 61 and 62: Management and Corporate StructureB
Page 63 and 64: Meetings of the Board, Board Commit
Page 65 and 66: and supplemented by our Non-Executi
Page 67 and 68: 6 Performance evaluation: How do we
Page 69 and 70: The Board recognises that we operat
Page 71 and 72: Assurance process for financial rep
Page 73 and 74: - receiving reports from, and quest
Page 75 and 76: Directors’ Report: Other Informat
Page 77: - state whether IFRSs as adopted by
Page 81 and 82: This Report covers the following:1
Page 83 and 84: 2 Directors’ Emoluments for the Y
Page 85 and 86: Directors’ Interests in Ordinary
Page 87 and 88: Executive Directors’ Service Agre
Page 89 and 90: When setting base salary the Remune
Page 91 and 92: First ElementFifty per cent of the
Page 93 and 94: In respect of the October 2007 - Oc
Page 95 and 96: Any annual bonus earned up to 100 p
Page 97 and 98: Benefit Trusts have also been provi
Page 99 and 100: Independent Auditors’ Reportto th
Page 101 and 102: Consolidated Statement ofComprehens
Page 103 and 104: Consolidated Statement of Changes i
Page 105 and 106: Accounting PoliciesBasis of Prepara
Page 107 and 108: Duty and Similar ItemsDuty and simi
Page 109 and 110: InventoriesInventories are stated a
Page 111 and 112: Restructuring CostsSignificant one-
Page 113 and 114: Property, Plant and Equipment and I
Page 115 and 116: Tobacco net revenue£ million 2010
Page 117 and 118: 3 Restructuring Costs£ million 201
Page 119 and 120: Factors affecting the tax charge fo
Page 121 and 122: 9 Intangible Assets2010£ million G
Page 123 and 124: 10 Property, Plant and Equipment201
Page 125 and 126: 13 Trade and Other Receivables2010
Page 127 and 128: Sensitivity analysisIFRS 7 requires
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At 30 September 2009Balance sheetam
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(iii) Currency analysis and effecti
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(iv) Derivative financial instrumen
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Matures in financial year ending in
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The following tables are provided i
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Matures in financial year ending in
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(vi) Hedge of net investments in fo
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18 Retirement Benefit SchemesThe Gr
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Assumptions regarding future mortal
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21 Share SchemesThe Group recognise
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Year from 1 October 2008 to 30 Sept
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23 CommitmentsCapital commitments£
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27 Reconciliation of Cash Flow to M
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Imperial Tobacco Group PLC Balance
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(iii) Debtors: Amounts Falling Due
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Principal SubsidiariesThe principal
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Shareholder InformationRegistered O
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IndexAAccounting Policies 103Acquis
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Annual report 2010 - Imperial Tobacco Group

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