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BRITISH AMERICAN TOBACCO PLC - Annual Report for the Year Ended 31 December 2023

2024/02/12 07:05:00

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                    Annual Report for the Year Ended 31 December 2023

British American Tobacco p.l.c.
Incorporated in England and Wales
(Registration number: 03407696)
Short name: BATS
Share code: BTI
ISIN number: GB0002875804

BRITISH AMERICAN TOBACCO p.l.c. (the 'Company')

Annual Report for the Year Ended 31 December 2023

In compliance with Listing Rule 9.6.1 and Disclosure Guidance and Transparency Rule ('DTR') 4.1, the
Company announces that the following documents have been published on its website:

   •   Annual Report and Form 20-F 2023 (the 'Annual Report 2023'); and
   •   Combined Performance and ESG Summary 2023.

These documents have been submitted to the National Storage Mechanism and will shortly be
available for inspection via the following link:

In addition, in accordance with Section 203.01 of the New York Stock Exchange Listed Company
Manual, the Company announces that it filed its Annual Report on Form 20-F 2023 (the 'Form 20-F
2023') with the Securities and Exchange Commission on 9 February 2024. The Form 20-F 2023
included audited financial statements for the year ended 31 December 2023. The Form 20-F 2023 will
shortly be available on the Company's website at www.bat.com/annualreport and also online at

The Annual Report 2023 and other ancillary shareholder documents will be mailed and made available
to shareholders on 14 March 2024. Investors have the option to receive a hard copy of the Company's
complete audited financial statements, free of charge, upon request, by contacting the below:

  United Kingdom
  British American Tobacco Publications     Telephone: +44 20 7511 7797
                                            Email: bat@team365.co.uk
  South Africa
  The Company's Representative Office       Telephone: +27 21 003 6712
  United States
  Citibank Shareholder Services             Telephone: +1 888 985 2055 (toll-free)
                                            Email: citibank@shareholders-online.com

This announcement should be read in conjunction with the Company's Final Results announcement
which was released to the market on 8 February 2024. Together these constitute the material required
by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information
Service. This material is not a substitute for reading the full Annual Report 2023. Page numbers and
cross-references in the extracted information below refer to page numbers in the Annual Report 2023.
The following disclosures are set out in the appendices to this announcement:

   •   Appendix A: Group Principal Risks (pages 121 to 128 of the Annual Report 2023);
   •   Appendix B: Related Party Disclosures (pages 284 and 285 of the Annual Report 2023); and
   •   Appendix C: Directors' Responsibility Statement (page 193 of the Annual Report 2023).

C Dhokia
Deputy Secretary

9 February 2024


British American Tobacco Media Centre
+44 (0)20 7845 2888 (24 hours) @BATPlc

Investor Relations
Victoria Buxton: +44 (0)20 7845 2012
Amy Chamberlain +44 (0)20 7845 1124
John Harney: +44 (0)20 7845 1263
Jane Henderson +44 (0)207845 1117


The Principal Risks that may affect the Group are set out on the following pages.

Each risk is considered in the context of the Group's strategy and business model, as set out in this
Strategic Report beginning on page 2 and page 18. On the following pages is a summary of each
Principal Risk, its potential impact and management by the Group. The Group defines the Principal
Risks as those assessed with a high impact and probable likelihood. Additionally, 'Supply Chain
Disruption', 'Cyber Security', 'Litigation' and 'Solvency and liquidity' risks are also recognised as
Principal Risks; they are not assessed as having high impact and probable likelihood but are material
to the delivery of the Group's strategic objectives.

The Group has identified risks and is actively monitoring and mitigating these risks, including those
related to climate change and other sustainability matters. This section focuses on those risks that the
Directors believe to be the Principal Risks to the Group. Not all of these risks are within the control of
the Group and other risks besides those listed may affect the Group's performance. Some risks may
be unknown at present. Other risks, currently regarded as less material, could become material in the
future. Clear accountability is attached to each risk through the risk owner.

The risks listed in this section and the activities being undertaken to manage them should be
considered in the context of the Group's internal control framework. This process is described in the
section on risk management and internal control in the corporate governance statement from page #.
This section should also be read in the context of the cautionary statement on page 386. A summary
of all the risk factors (including the Principal Risks) which are monitored by the Board through the
Group's risk register is set out in the Additional Disclosures section from page 353.

Assessment of Group Principal Risks
During the year, the Directors carried out a robust assessment of the Principal Risks, uncertainties and
emerging risks facing the Group, including those that could impact delivery of its strategic objectives,
business model, future performance, solvency or liquidity.

Leading in Sustainability is a core component/key building block of our corporate strategy and
sustainability risk factors are embedded across the Group's risks in accordance with how risks are
managed within the Group.

Continued progress was made to further embed both climate-related and other sustainability risks
into the Group Risk Management Framework.

Key risk initiatives include the introduction of the Group's inaugural Sustainability risk register and
the development of a Climate Diagnostic Tool. Sustainability risks are assessed on a residual risk
basis and are reviewed biannually and evaluated in terms of their relevance and materiality to the
business, in accordance with the Group's risk management methodology. The Climate Diagnostic
Tool will enable better understanding of the climate change impact to the Group's physical property
locations and subsequent business interruption. These emphasise the Group's commitment to
understand, mitigate, and manage risks that could impact the organisation as a whole, BAT's
stakeholders and the wider environment.

The viability statement on 129 provides a broader assessment of long-term solvency and liquidity. The
Directors considered a number of factors that may affect the resilience of the Group. Except for the
risk 'Injury, illness or death in the workplace' which is not considered to be sufficiently material to
impact the Group's overall viability assessment, the Directors also assessed the potential impact of
the Principal Risks that may impact the Group's viability.


Competition from illicit trade
Increased competition from illicit trade and illegal products – either local duty evaded, smuggled,
counterfeits, or non-regulatory compliant, including products diverted from one country to another.

Time frame

Strategic impact
Quality Growth/Sustainable Future

Key Stakeholders
Consumers, Society, Shareholders & Investors

Considered in viability statement

Erosion of goodwill, with lower volumes and/or increased operational costs (e.g. track and trace costs)
and reduced profits.
Reduced ability to take price increases.
Investment in trade marketing and distribution is undermined and the product is commoditised.
Counterfeit products (especially in New Categories) and other illicit products could harm consumers,
damaging goodwill, and/or the category (with lower volumes and reduced profits), potentially leading
to misplaced claims against BAT, further regulation and a failure to deliver the corporate harm
reduction objective.
Breach of legislation, criminal offences, contract breaches under the EU Cooperation Agreement,
allegations of facilitating smuggling and reputational damage, including negative perceptions of our
Existence of illicit trade reduces our ability to reduce the health impact of our business, it undermines
policies of state governments with respect to underage tobacco users and creates basis for
inappropriate regulation.

Mitigation activities across all categories
Dedicated Anti-Illicit Trade (AIT) teams operating at regional and country levels; internal cross-
functional levels; compliance procedures, toolkit and best practice shared.
Active engagement with key external stakeholders.
Cross-industry and multi-sector cooperation on a range of AIT issues.
Regional AIT strategy supported by a research programme to further the understanding of the size
and scope of the problem.
AIT Engagement Teams (including a dedicated analytical laboratory and a forensic and compliance
team) work with enforcement agencies as appropriate.

Geopolitical tensions
Geopolitical tensions, civil unrest, economic policy changes, global health crises, terrorism and
organised crime have the potential to disrupt the Group's business in multiple markets.
Time frame

Strategic impact
Quality Growth/Sustainable Future

Key Stakeholders
Society, Our people, Shareholders & Investors

Considered in viability statement

Potential injury or loss of life, loss of assets and disruption to supply chains and normal business
Increased costs due to more complex supply chain and security arrangements and/or the cost of
building new facilities or maintaining inefficient facilities.
Lower volumes as a result of not being able to trade in a country.
Higher taxes or other costs of doing business as a foreign company or the loss of assets as a result of
Reputational damage, including negative perceptions of our governance and protection of our people
and our ESG credentials. Disruption to the supply chain impacts our ability to reduce the health impact
of our business.

Mitigation activities across all categories
Physical and procedural security controls are in place, and regularly reviewed in accordance with our
Security Risk Management process, for all field force and supply chain operations, with an emphasis
on the protection of Group employees.
Globally integrated sourcing strategy and contingency sourcing arrangements are in place.
Security risk modelling, including external risk assessments and the monitoring of geopolitical and
economic policy developments worldwide.
Insurance coverage and business continuity planning, including scenario planning and testing, and
risk awareness training.
Geopolitical assessment and monitoring by the Group Security Centre of Excellence and regions
inform the Business Continuity Management organisation plans and responses to geopolitical
risks, including readiness of Crisis Management Teams at all levels.

Tobacco, New Categories and other regulation interrupts growth strategy
The enactment of, proposals for, or rumours of, regulation that significantly impairs the Group's ability
to communicate, differentiate, market or launch its products, and/or the lack of appropriate
regulation for New Categories.

Time frame

Strategic impact
Quality Growth/Sustainable Future

Key Stakeholders
Consumers, Society, Shareholders & Investors

Considered in viability statement

A lack of acceptance or rejection of Tobacco Harm Reduction as a tobacco control policy could prevent
a balanced regulatory framework for New Categories. Restricted ability to sell and communicate New
Categories could lead to failure of the harm reduction objective and loss of confidence in the Group's
ESG performance. Lack of appropriate regulation and its enforcement may impact our opportunity for
quality growth and affect our ability to develop an outstanding pipeline of new products.
Disproportionate regulations for New Categories, such as questionable regulatory classifications or
total bans, that may not be science-based and/or risk-proportionate and that neither recognise
unintended consequences nor respect legal rights (e.g. wrong regulatory classifications or total bans).
Reduced ability to make scientific claims and compete in future product categories and make new
market entries. Erosion of brand value through commoditisation and the inability to launch
innovations may negatively affect our ability to generate value growth. Regulation with respect to
bans or severe restrictions on menthol flavours, product design & features and nicotine levels may
adversely impact individual brand portfolios. Reduced consumer acceptability of new product
specifications, leading to consumers seeking alternatives in illegal markets or irresponsible operators
exploiting regulatory loopholes. Shocks to share price on rumours of, or the announcement or
enactment of, restrictive regulation (e.g. sales ban to future generations). Failure to deliver
appropriate and proportionately costed Extended Producer Responsibility (EPR) schemes.

Mitigation activities across all categories
Establishment of Regulation and Science Committee, the objectives of which are to review the
execution of the Group's regulatory, corporate, and science strategies, monitor the regulatory and
science landscape, prioritize key regulatory and science initiatives and resource allocation.
Engagement and alignment across the Group to drive a balanced global policy framework for
combustibles and New Categories.
Stakeholder mapping and prioritisation, developing robust compelling advocacy materials (with
supporting evidence and data) and regulatory engagement programmes.
Regulatory risk assessment of marketing plans to ensure decisions are informed by an understanding
of the potential regulatory environments.
Advocating the application of integrated regulatory proposals to governments and public health
regulators and practitioners based on the harm reduction potential of New Categories.
Development of an integrated regulatory strategy that spans conventional combustibles and New
Training and capability programmes for End Markets to upskill Corporate and Regulatory Affairs
managers on combustible and New Categories regulatory engagement, including product knowledge.
Direct access to online portal providing latest position and advocacy material for End Market
engagement on combustibles and New Categories.
Working to define a sustainable EPR model and markets negotiating to implement effective EPR

Please refer to the to the description of the tobacco and nicotine regulatory regimes under which the
Group's businesses operate set out from page 375

Supply Chain disruption
Disruption to the global supply chain that may impact our ability to manufacture products or supply
our consumers.

Time frame
Strategic impact
Quality Growth/Sustainable Future/Dynamic Business

Key Stakeholders
Consumers, Our people, Shareholders & Investors

Considered in viability statement

Disruption to the global supply chain may impact all aspects of our business and impede our ability
to manufacture products and supply our consumers.
Disruption to supply chain can lead to volume shortfalls and inability to supply markets, increased
replacement or/and rebuild costs consequently leading to reduced profit and reputational damage.
This may affect our ability to reinvest into New Categories and deliver our Tobacco Harm Reduction
Loss of one or more key facilities or suppliers may cause loss of life and injuries. It may also lead to
societal dislocation resulting in population migration and loss of key skills.
Our supply chain could be negatively impacted by events arising from, but not limited to natural
disasters, man-made accidents, cyber incidents.

Mitigation activities across all categories
Group-wide business continuity plans (BCP) and contingency sourcing plans (CSP) in compliance with
the new Business Continuity Management standard, are in place.
All factory CSPs are regularly updated, reviewed and desktop simulations conducted to ensure
compliance with the Group's policy.
BCPs and disaster recovery plans for logistics providers are in place.
Unrest and Evacuation plans are in place.
Existence of insurance cover for Property Damage and Business Interruption.
Appropriate technical and organisational cyber security measures are in place.

Product liability, regulatory or other significant cases (including investigations) may be lost or settled
resulting in a material loss or other consequence.

Time frame

Strategic impact
Quality Growth/Sustainable future

Key Stakeholders
Shareholders & Investors

Considered in viability statement

Damages and fines, negative impact on reputation (including ESG credentials), disruption and loss of
focus on the business.
Consolidated results of operations, cash flows and financial position could be materially affected by
an unfavourable outcome or settlement of pending or future litigation, criminal prosecution or other
contentious action, or by the costs associated with bringing proceedings or defending claims.
Inability to sell products as a result of an injunction arising out of a patent infringement action against
the Group may restrict growth plans and competitiveness.
Potential share price impact.
Sustainability-related litigation could also result in a reduction in the investor base due to
sustainability and sustainability-related concerns.

Mitigation activities across all categories
Consistent litigation and patent management strategy across the Group.
Expertise and legal talent maintained both within the Group and external partners, including for New
Categories and sustainability-related matters.
Ongoing monitoring of key legislative and case law developments related to our business.
Delivery with Integrity compliance programme.
Driving the litigation strategy in relation to key regulatory issues.
Central management of strategic litigation impacting key regulatory processes.
Developing expert analysis on efficacy of various regulatory proposals.

Please refer to note 31 on page 286 in the Notes on the Accounts for details of contingent liabilities
applicable to the Group.

Significant increases or structural changes in tobacco, nicotine and New Categories related taxes
The Group is exposed to unexpected and/or significant increases or structural changes in tobacco,
nicotine and New Categories related taxes in key markets.

Time frame

Strategic impact
Quality Growth/Sustainable Future

Key Stakeholders
Consumers, Society, Shareholders & Investors

Considered in viability statement

Consumers reject the Group's legitimate tax-paid products for products from illicit sources or cheaper
Reduced legal industry volumes.
Reduced sales volume and/or portfolio erosion leading to inability to invest in, develop, commercialise
and deliver New Category products.
Partial absorption of excise increases leading to lower profitability.

Mitigation activities across all categories
Formal pricing and excise strategies, including Revenue Growth Management using a data science-led
approach, with annual risk assessments and contingency plans across all products.
Pricing, excise and trade margin committees in markets, with global support.
Engagement with relevant local and international authorities where appropriate, in particular in
relation to the increased risk to excise revenues from higher illicit trade.
Portfolio reviews to ensure appropriate balance and coverage across price segments.
Monitoring of economic indicators, government revenues and the political situation.

Inability to develop, commercialise and deliver the New Categories strategy
Risk of not capitalising on the opportunities in developing and commercialising successful, safe and
consumer-appealing innovations.

Time frame

Strategic impact
Quality Growth/Sustainable Future/Dynamic Business

Key Stakeholders
Consumers, Society, Shareholders & Investors

Considered in viability statement

Failure to deliver Group strategic imperative, 2025 growth ambition and 2030 consumer targets.
Potentially missed opportunities, unrecoverable costs and/or erosion of brand, with lower volumes
and reduced profits.
Reputational damage and recall costs may arise in the event of defective product design or
Loss of market share due to non-compliance of product portfolio with regulatory requirements or
inability to engage on our science, leading to a negative shift in sentiment and confidence in Group
Loss of investor confidence in ESG performance.
Failure to deliver our corporate purpose of harm reduction.

Mitigation activities across all categories
Focus on product stewardship to ensure high-quality standards across the portfolio.
Brand Expression, which sets out how our brand expresses itself (including through its logo, name,
product, packaging, etc.) deployed to lead End Markets via activation workshops and best practices
Generating sufficient IP to develop competitive and sustainable products.
Accelerating digital and consumer analytics along with data management platforms for enhanced
methodologies, insight generation and line of sight across the Group.
R&D is accredited to ISO9001 standard and laboratories are accredited to ISO17025 for key
Internal and external communications about BAT's science through publications and engagement.
Quality assurance reviews undertaken with key science suppliers to ensure appropriate standards in

Disputed taxes, interest and penalties
The Group may face significant financial penalties, including the payment of interest, in the event of
an unfavourable ruling by a tax authority in a disputed area.

Time frame
Short-/medium term
Strategic impact
Quality Growth/Sustainable Future

Key Stakeholders
Shareholders & Investors

Considered in viability statement

Significant fines and potential legal penalties.
Disruption and loss of focus on the business due to diversion of management time.
Impact on profit and dividend.

Mitigation activities across all categories
End Market tax committees.
Internal tax function provides dedicated advice and guidance, and external advice sought where
Engagement with tax authorities at Group, regional and individual market level.

Injury, illness or death in the workplace
The risk of injury, death or ill health to employees and those who work with the business is a
fundamental concern of the Group and can have a significant effect on our operations.

Time frame

Strategic impact
Quality Growth/Sustainable Future/Dynamic Business

Key Stakeholders
Our people

Considered in viability statement

Serious injuries, ill health, disability or loss of life suffered by employees and the people who work
with the Group.
Exposure to civil and criminal liability and the risk of prosecution from enforcement bodies and the
cost of associated legal costs, fines and/or penalties.
Interruption of Group operations if issues are not addressed promptly.
High staff turnover or difficulty recruiting employees if perceived to have a poor Environment,
Health and Safety (EHS) record.
Reputational damage to the Group and negative impact on our ESG credentials.

Mitigation activities across all categories
Risk control systems in place to ensure equipment and infrastructure are provided and maintained.
EHS strategy aims to ensure that employees at all levels receive appropriate EHS training and
Behavioural-based safety programme to drive operations' safety performance, culture and closer to
zero accidents.
Analysis of incidents undertaken regionally and globally by a dedicated team to identify increasing
incident trends or high potential risks that require coordinated action.
Global monthly Health & Safety (H&S) Committee established, formed by senior members from the
H&S and Operations Sustainability leadership team.

Solvency and liquidity
Liquidity (access to cash and sources of finance) is essential to maintaining the Group as a going
concern in the short-term (liquidity) and medium-term (solvency).

Time frame

Strategic impact
Quality Growth/Sustainable Future/Dynamic Business

Key Stakeholders
Shareholders & Investors

Considered in viability statement

Inability to access the Group's cash resources and to fund the business under the current capital
structure resulting in missed strategic opportunities or inability to respond to threats.
Decline in our creditworthiness and increased funding costs for the Group.
Requirement to issue equity or seek new sources of capital.
Reputational risk of failure to manage the financial risk profile of the business, resulting in an erosion
of shareholder value reflected in an underperforming share price.
Inability to mitigate accounting and economic exposures.
Economic loss as a result of devaluation/revaluation of assets (including cash) valued or held in local
currency, and additional costs as a result of paying premiums to obtain hard currency.
Failure to appropriately engage with investors' and lenders' sustainability criteria and concerns may
impact BAT's counterparty availability, credit ratings, access to funding, or may result in an increase
in the cost of funding.
Exposure to the cannabis sector may lead to regulatory and legal risk, reputation and compliance
issues restricting bank and/or investor access.

Mitigation activities across all categories
Group policies include a set of financing principles and key performance indicators, including the
monitoring of credit ratings, interest cover, solvency and liquidity with regular reporting to the
Corporate Finance Committee and the Board.
Controls in place to ensure full compliance with Sanctions regimes.
Plans implemented to manage the risk in key geographies.
The Group targets an average centrally managed debt maturity of at least five years with no more
than 20% of centrally managed debt maturing in a single rolling year.
At 31 December 2023, the Group had access to a £5.38 billion revolving credit facility. In March
2023, the Group refinanced the £2.7 billion 364-day tranche of the revolving credit facility at the
reduced amount of £2.5 billion, maturing in March 2024 with two one-year extension options, and a
one-year term out option. Additionally, £3.0 billion of the five-year tranche remains available until
March 2025, with £2.85 billion extended to March 2026 and £2.5 billion extended to March 2027.
Liquidity pooling structures are in place to ensure that there is maximum mobilisation of cash
liquidity within the Group.
Going concern and viability support papers are presented to the Board on a regular basis.
Continued review of UK money laundering legislation and cannabis policy with financial partners.

Foreign exchange rates exposures
The Group faces translational and transactional foreign exchange (FX) rate exposure for earnings/cash
flows from its global businesses.

Time frame

Strategic impact

Key Stakeholders
Shareholders & Investors

Considered in viability statement

Fluctuations in FX rates of key currencies against sterling introduce volatility in reported earnings per
share (EPS), cash flow and the balance sheet driven by translation into sterling of our financial
results and these exposures are not normally hedged.
The dividend may be impacted if the payout ratio is not adjusted.
Differences in translation between earnings and net debt may affect key ratios used by credit rating
Volatility and/or increased costs in our business, due to transactional FX, may adversely impact
financial performance.

Mitigation activities across all categories
While translational FX exposure is not hedged, its impact is identified in results presentations and
financial disclosures; earnings are restated at constant rates for comparability.
Debt and interest are matched to assets and cash flows to mitigate volatility where possible and
economic to do so.
Hedging strategy for transactional FX is defined in the treasury policy, a global policy approved by the
Illiquid currencies of many markets where hedging is either not possible or uneconomic are reviewed
on a regular basis.

Climate Change and Circular Economy

Direct and indirect adverse impacts associated with climate change and the move towards a circular

Time frame

Strategic impact
Quality Growth/Sustainable Future
Key Stakeholders
Consumers, Society, Shareholders & Investors

Considered in viability statement

Direct physical risks to BAT agricultural, manufacturing, operational and logistic processes may lead
to reduced production capability, delays, volume shortfalls, disruption of energy supply (and other
utilities) and business interruption.
Extreme temperatures and pollution could be harmful for employees, creating health and safety
Failure to adequately manage supply chain risks associated with transitional and operational impacts
(of climate change particularly) may cause increased volatility in supply volume, quality or cost of
raw materials and services necessary for the effective and efficient operation of BAT's business
across its value chain.
GHG emissions can indirectly increase costs of supply and delivery.
Punitive actions against the Group or ability to sell products in key markets, due to failure to comply
in an effective, competitive or economic manner with evolving regulations and requirements
relevant to business operations, products and supply chain, and reporting.
Technology risk increase due to write-offs and early retirement of existing assets. Additional cost
required to deploy new practices and processes.
Poor ESG ratings by investors or platforms/indices used by them may lead to reduced access to
capital, increased cost of capital or impact the share price.
Loss or damage to reputation may reduce market share and revenue, due to customers and/or
consumers having a reduced or negative perception of BAT and its products in comparison to
its competitors, or of specific products/product categories overall.
Negative impact upon the attraction, retention and motivation of skilled employees and contractors.
Inadequate waste management can increase negative public opinion on BAT and cause potential
damage to brand value from loss of consumer trust, increased costs in jurisdictions where waste
management is costly and/or insufficient.
Failure to adequately manage Group sustainability priorities like climate change, protection of natural
resources and forest, human rights in leaf supply chain may restrict suppliers willing to do business
with BAT.

Mitigation activities across all categories
The Group has a well-established Environmental Sustainability Committee and Operations
Sustainability Forum. Sustainability matters overall, and climate change and circular economy
specifically, are under the governance remit of the Audit Committee.
Life Cycle Assessment is used in the development and approval processes for new products to
understand and improve their climate change and circular economy impacts.
Monitoring of climate change- and circular economy-related governmental policy and regulations,
and taking proactive actions to meet and/or surpass it.
Working to mitigate climate change impacts and optimise circular economy alignment across the
value chain by designing for the reuse and recycling of end-of-life products and increasing the use of
recycled and environmentally preferable materials. Compliance assessment tool covering all
significant touch points related to employee health and safety and environmental impact.
Circular economy strategy, Business Continuity and Contingency Sourcing plans.
Supplier Code of Conduct which defines the minimum standards expected for suppliers, including
the requirement of adoption of BAT environmental procedures.
2023 review of future ESG reporting requirements and frameworks, globally, and increasing
alignment with them, ahead of required timescales.
Ongoing increase in the reporting of sustainability information in the Group's Combined Annual and
Sustainability Report and accompanying ESG Performance Data Book, including public provision to
financial actors of information required by investors for their own sustainability reporting.
Internal and external goals and targets related to the risks and opportunities posed by climate
change and circular economy to the Group's business and wider society, along with comprehensive
programmes for review of progress against these goals.
Climate change- and circular economy-related objectives, targets and metrics publicly reported and
externally assured and integrated into personal performance objectives of those functionally
responsible for their delivery.
Driving innovation and collaboration through Btomorrow Ventures.
Cross-functional and cross-industry engagement on sustainability topics.

Cyber Security
Inability of the organisation to defend against an intentional or unintentional action that results in loss
of confidentiality, availability or integrity of systems and data.

Time frame

Strategic impact
Quality Growth/Sustainable Future/Dynamic Business

Key Stakeholders
Consumers, Society, Our People, Shareholders & Investors

Considered in viability statement

Loss or theft of confidential business information, when used alone or in conjunction with any other
available information reduces the impact of BAT business strategy, investments and commercial
Personal data breach incidents that result in the disclosure of personally identifiable data resulting in
legal, reputational, and regulatory compliance impacts.
Disruption to BAT's business operations that impacts R&D facilities, manufacturing, distribution or
technology services resulting in business interruption and/or impacts to health & safety.
Inappropriate use of technology systems to enable fraud, or theft of product, technology, or
monetary resources.
Loss of digital trust resulting in brand damage and a loss of consumer trust.
A cyber incident experienced by a third party partner or supplier resulting in business interruption,
supply chain disruption, loss of company data or provides access or transmission of malicious activity
from the supplier to BAT.

Mitigation activities across all categories
The group implements physical, technical and administrative safeguards to mitigate risks of a cyber
security incident, including security measures, such as defensive technologies, encryption,
authentication, backup and recovery systems, to protect the confidentiality, integrity and availability
of IDT systems and networks.
The Group's cyber security processes are regularly reviewed and updated to ensure these remain
effective and aligned with our business objectives, regulatory obligations and industry standards.
Regular training and awareness programmes provided to Group employees and contractors on cyber
security best practices and procedures and adherence to our SoBC.
Vendor management processes in place, including due diligence and contractual obligations, to
ensure that third-party service providers adhere to BAT's cyber security requirements and standards.
Development of business continuity plans to ensure that the Group can promptly respond to any
potential or actual cyber security incident and minimise their impact on the business.
Engagement with external assessors, consultants, auditors and other third parties to provide
independent assurance and recommendations on cyber security matters.
Engagement with relevant stakeholders on cyber security matters and being prepared to disclose any
material cyber security risks or incidents in a timely and transparent manner.

Viability Statement

The Board has assessed the viability of the Group taking into account the current position and principal
risks, in accordance with provision 31 of the UK Corporate Governance Code 2018. Whilst the Board
believes the Group will be viable over a longer period, owing to the inherent uncertainty arising due
to ongoing litigation and regulation, the period over which the Board considers it possible to form a
reasonable expectation as to the Group's longer-term viability (that it will continue in operation and
meet its liabilities as they fall due) is three years.

In making this assessment, the Board considered the Group's:
- strong cash generation from operating activities;
- access to, and ability to raise, external sources of financing, including the removal, in prior years,
    of any financial covenants in such credit facilities; and
- the current macro-economic environment, including the impact of inflation and higher interest

This assessment included a robust review of the Group's operational and financial processes, (which
cover both short-term financial forecasts and capacity plans) and the Principal Risks (as indicated on
pages 117 to 121) that may impact the Group's viability. These are considered, with the mitigating
actions, at least once a year. The assessment included a reverse stress test of the principal risks and
did not identify any individual risk, based upon a prudent annual forecast, that would, if arising in
isolation and without mitigation, impact the Group's viability within the three-year confirmation
period. Furthermore, the Board recognised that even if all the principal risks arose simultaneously,
given the underlying strong free cash flow generation before the payment of dividends (2022: £8.0
billion), the Group would be able to undertake mitigating actions to meet the liabilities as they fall
due. The assessment also reviewed the potential impact of inflation on the Group's delivery and the
impact of climate-related risks and concluded that these, including the potential cost implications and
noting the mitigating actions, would not impact the Group's viability (see discussion commencing on
page 70 with respect to TCFD).

The Board noted that the Group has access to a £5.7 billion credit facility (2022: undrawn), US (US$4
billion) and Euro (£3 billion) commercial paper programmes (2022: £27 million drawn) and £3.0 billion
of bilateral agreements which may be utilised to support the Group's ability to operate. However, the
Group is subject to inherent uncertainties with regards to regulatory change and litigation, the
outcome of which may have a bearing on the Group's viability. The Group maintains, as referred to in
note 31 in the Notes on the Accounts 'Contingent Liabilities and Financial Commitments,' that, whilst
it is impossible to be certain of the outcome of any particular case, the defences of the Group's
companies to all the various claims are meritorious on both law and the facts. If an adverse judgment
is entered against any of the Group's companies in any case, an appeal may be made, the duration of
which can be reasonably expected to last for a number of years.


The Group has a number of transactions and relationships with related parties, as defined in IAS 24
Related Party Disclosures, all of which are undertaken in the normal course of business. Transactions
with CTBAT International Limited (a joint operation) are not included in these disclosures as the results
are immaterial to the Group.
Intercompany transactions and balances are eliminated on consolidation and therefore are not
Transactions and balances with associates relate mainly to the sale and purchase of cigarettes and
tobacco leaf. The Group's share of dividends from associates, included in other income in the table
below, was £559 million (2022: £438 million; 2021: £392 million).

                                                                      2023          2022        2021
                                                                      £m             £m         £m
– revenue                                                             523          494          524
– purchases                                                           (178)        (190)        (123)
– other income                                                        560          441          393
– other expenses                                                      (6)          (1)          (6)
Amounts receivable at 31 December                                     48           51           48
Amounts payable at 31 December                                        (4)          (4)          (3)

In November 2023, the Group announced the signing of an agreement for a further investment in
Organigram. At 31 December 2023, the proposed investment of CAD$125 million (approximately
£74 million) was subject to customary conditions, including necessary approvals by the shareholders
of Organigram, which was given on 18 January 2024. On 24 January 2024, BAT made the first tranche
investment of CAD$42 million (£24 million), acquiring a further 12,893,175 common shares of
Organigram at a price of CAD$3.22 per share. Subject to certain conditions, the remaining 25,786,350
shares subscribed for shall be issued at the same price in two further equal tranches by the end of
August 2024 and February 2025 respectively. Based on Organigram's outstanding share capital at the
end of 2023, this investment will increase the Group's equity position from c.19% to c.45% (restricted
to 30% voting rights) once all three tranches have been completed.

In addition, as mentioned in note 27, in 2023, the Group also acquired 20% of DeFloria for £8 million
and increased its ownership in Steady State LLC from 5.76% to 10.8% for £4 million. In October 2023,
a further investment of £8 million was made in Steady State LLC by way of a convertible loan note.

During 2023, the Group acquired a further 1.31% in Hrvatski Duhani d.d., at a cost of less than
£1 million, following the acquisitions in 2022 (3.3% at a cost of £1 million) and 2021 (2.7% at a cost of
£1 million).

In 2022, as mentioned in note 27, the Group made a £32 million investment in exchange for 16% of
Sanity Group GmbH and made ?a non-controlling investment in Steady State LLC for £4 million.

During 2022, the Group increased its ownership of a wholesale producer and distributor operating in
the agriculture sector based in Uzbekistan, FE 'Samfruit' JSC to 45.40% for £1 million. In 2021, the
Group increased its ownership to 42.61%, for £1 million.

In November 2022, the Group invested in Charlotte's Web via a convertible debenture of £48 million
which is currently convertible into a non-controlling equity stake of approximately 19.9%.
In 2021, the Group made a capital contribution in Brascuba Cigarrillos S.A. at a cost of £6 million. There
was a capital reduction in CTBAT International Limited of approximately US$171 million with funds
remitted prorata to investors in 2021.

On 5 October 2021, PT Bentoel Internasional Investama Tbk (Bentoel) announced its intention to delist
from the Indonesia Stock Exchange and go private by conducting a Voluntary Tender Offer (VTO). As
part of this, in two phases in November and December 2021, the Group acquired an additional 0.2%
of shares in Bentoel from independent shareholders at a cost of £4 million and terminated the total
return swap (as explained in note 32).

As explained in note 15, in 2022 the Group provided a temporary liquidity facility to the main UK
pension fund. As at 31 December 2023 this facility was undrawn.

The Group and Organigram also entered into a Product Development Collaboration Agreement
following which a Centre of Excellence has been established to focus on developing the next
generation of cannabis products with an initial focus on cannabidiol (CBD).

As a result of the implementation of the EU Single-Use Plastic Directive in certain EU countries, the
Group, along with other tobacco manufacturers, established Producer Responsibility Organisations
for the management of the Extended Producer Responsibility obligations relating to tobacco product
butt filter waste collection. The costs incurred by the Group in relation to this waste disposal
is included in note 6(l).

The key management personnel of British American Tobacco consist of the members of the Board of
Directors of British American Tobacco p.l.c. and the members of the Management Board. No such
person had any material interest during the year in a contract of significance (other than a service
contract) with the Company or any subsidiary company. The term key management personnel in this
context includes their close family members.
                                                                              2023         2022         2021
                                                                              £m           £m           £m
 The total compensation for key management personnel, including
 Directors, was:
 – salaries and other short-term employee benefits                            17           19           18
 – post-employment benefits                                                   1            1            1
 – share-based payments                                                       13           17           16
                                                                              31           37           35

The following table, which is not part of IAS 24 disclosures, shows the aggregate emoluments of the
Directors of the Company.
                              Executive Directors             Chairman          Non-Executive                   Total
                          2023    2022     2021     2023 2022     2021    2023 2022 2021 2023          2022    2021
                          £'000   £'000    £'000    £'000 £'000   £'000   £'000 £'000 £'000 £'000      £'000   £'000
Salary; fees; benefits;
– salary                  1,644   2,129    2,119                                            1,644      2,129   2,119
– fees                                              688    670 727        1,059 1,027 1,045 1,747      1,697   1,772
– taxable benefits        395     449      420      17      59 55            31 78    2     443        586     477
– short-term incentives   1,650   3,761    4,128                                            1,650      3,761   4,128
– long-term incentives    1,371   7,888    3,399                                            1,371      7,888   3,399
Sub-total                 5,060   14,227   10,066   705    729    782     1,09 1,105 1,047 6,855       16,06   11,89
                                                                          0                            1       5
– pension            248     320      318                                         248     320     318
– other emoluments   2       6        6                                           2       6       6
Sub-total            250     326      324                                         250     326     324
Total emoluments     5,310   14,553   10,390   705   729   782   1,09 1,105 1,047 7,105   16,38   12,21
                                                                 0                        7       9


Statement of Directors' Responsibilities in Respect of the Annual Report and the Financial

The Directors are responsible for preparing the Annual Report and the Group and Parent Company
financial statements in accordance with applicable law and regulations. Under company law, directors
must not approve the Financial Statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Parent Company and the Group for that period.

Under applicable law, directors are required to prepare the financial statements in accordance with
UK-adopted international accounting standards and applicable law. The Directors have elected to
prepare the Parent Company financial statements in accordance with UK Accounting Standards and
applicable law, including FRS 101 'Reduced Disclosure Framework'. In preparing these Group financial
statements, the Directors have also elected to comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

In preparing each of the Group and Parent Company financial statements, the Directors are required
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable, relevant, reliable and prudent;
- state whether Group financial statements have been prepared in accordance with UK-adopted
    international accounting standards;
- state whether, for the Parent Company financial statements, applicable UK Accounting Standards
    have been followed, subject to any material departures disclosed and explained in the those
- assess the Group and Parent Company's ability to continue as a going concern, disclosing, as
    applicable, matters related to going concern; and
- use the going concern basis of accounting unless the Directors either intend to liquidate the Group
    or the Parent Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Parent Company's transactions and disclose with reasonable accuracy at any time the
financial position of the Parent Company and enable them to ensure that its financial statements
comply with the Companies Act 2006. They are responsible for such internal control as they determine
is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic
Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that
comply with applicable law and regulations.

The Directors are responsible for the maintenance and integrity of the Annual Report included on the
Company's website. Legislation in the UK governing the preparation and dissemination of financial
statements        may       differ      from       legislation       in    other        jurisdictions.

n accordance with Disclosure Guidance and Transparency Rule (DTR) 4.1.16R, the financial statements
will form part of the annual financial report prepared using the single electronic reporting format
under DTRs 4.1.17R and 4.1.18R. The auditor's report on these financial statements provides no
assurance over whether the annual financial report has been prepared in accordance with those

Directors' Declaration in Relation to Relevant Audit Information
Having made appropriate enquiries, each of the Directors who held office at the date of approval of
this Annual Report confirms that:
- so far as he or she is aware, there is no relevant audit information of which the Company's
     auditors are unaware; and
- he or she has taken all steps that a Director ought to have taken in order to make himself or herself
     aware of relevant audit information and to establish that the Company's auditors are aware of
     that information.
Responsibility Statement of the Directors in Respect of the Annual Financial Report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of accounting
     standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of
     the Company and the undertakings included in the consolidation taken as a whole; and
-   the Strategic Report and the Directors' Report include a fair review of the development
    and performance of the business and the position of the Company and the undertakings
    included in the consolidation taken as a whole, together with a description of the
    principal risks and uncertainties that they face.
Forward looking statements

This document contains certain forward-looking statements, including 'forward-looking' statements
made within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These
statements are often, but not always, made through the use of words or phrases such as 'believe,'
'anticipate,' 'could,' 'may,' 'would,' 'should,' 'intend,' 'plan,' 'potential,' 'predict,' 'will,'
'expect,' 'estimate,' 'project,' 'positioned,' 'strategy,' 'outlook', 'target' and similar expressions.
These include statements regarding our intentions, beliefs or current expectations concerning,
amongst other things, our results of operations, financial condition, liquidity, prospects, growth,
strategies and the economic and business circumstances occurring from time to time in the countries
and markets in which the Group operates.

In particular, these forward-looking statements include, among other statements, statements
regarding the Group's future financial performance, planned product launches and future regulatory
developments, as well as: (i) certain statements in the Overview section (pages 2 to 13), including the
Our Global Business section, the Chair's Introduction, Chief Executive's Review and Interim Finance
Director's Overview; (ii) certain statements in the Our Strategy section (pages 14 to 27), including the
Our Strategic Navigator section, the Strategic Summary section and the Investment Case section; (iii)
certain statements in the Quality Growth section (pages 28 to 39), including the Strategic Pillar
overview; (iv) certain statements in the Dynamic Business section (pages 40 to 29), including certain
statements in the Strategic Pillar Overview section, the Financial Performance Summary section, the
Treasury and Cash Flow section and the going concern discussions; (v) certain statements in the
Sustainable Future section (pages 60 to 129), including the Leading in Sustainability & Integrity section,
Sustainability highlights section, our material topics, TCFD reporting and Our approach to Taskforce
on Nature-related Financial Disclosures (TNFD) section; (vi) certain statements in the Notes on
Accounts (pages 215 to 311), including note 12(b)(iv); and (vii) certain statements in the Other
Information section (pages 330 to 406), including the Additional Disclosures and Shareholder
Information sections.

All such forward-looking statements involve estimates and assumptions that are subject to risks,
uncertainties and other factors. It is believed that the expectations reflected in this announcement
are reasonable, but they may be affected by a wide range of variables that could cause actual results
and performance to differ materially from those currently anticipated.

Among the key factors that could cause actual results to differ materially from those projected in the
forward-looking statements are uncertainties related to the following: the impact of competition from
illicit trade; the impact of adverse domestic or international legislation and regulation; the inability to
develop, commercialise and deliver the Group's New Categories strategy; the impact of Supply chain
disruptions; adverse litigation and dispute outcomes and the effect of such outcomes on the Group's
financial condition; the impact of significant increases or structural changes in tobacco, nicotine and
New Categories related taxes; translational and transactional foreign exchange rate exposure;
changes or differences in domestic or international economic or political conditions; the ability to
maintain credit ratings and to fund the business under the current capital structure; the impact of
serious injury, illness or death in the workplace; adverse decisions by domestic or international
regulatory bodies; changes in the market position, businesses, financial condition, results
of operations or prospects of the Group; direct and indirect adverse impacts associated with Climate
Change and the move towards a Circular Economy; and Cyber Security caused by the heightened
cyber-threat landscape, the increased digital interactions with consumers and changes to regulation.
Further details on the principal risks that may affect the Group can be found in the 'Group Principal
Risks' section of the Strategic Report on pages 121 to 128 of this document. A summary of all the risk
factors (including the principal risks) which are monitored by the Board through the Group's risk
register is set out in the Additional Disclosures section under the heading 'Group Risk Factors' on pages
353 to 374.

Past performance is no guide to future performance and persons needing advice should consult an
independent financial adviser. The forward-looking statements reflect knowledge and information
available at the date of preparation of this document and the Group undertakes no obligation to
update or revise these forward-looking statements, whether as a result of new information, future
events or otherwise. Readers are cautioned not to place undue reliance on such forward-looking

No statement in this document is intended to be a profit forecast and no statement in this document
should be interpreted to mean that earnings per share of BAT for the current or future financial years
would necessarily match or exceed the historical published earnings per share of BAT.

A review of the reasons why actual results and developments may differ materially from the
expectations disclosed or implied within forward-looking statements can be found by referring to the
information contained under the headings 'Cautionary statement', 'Group Principal Risks' and
'Group Risk Factors' in the Annual Report 20232 and Form 20-F of British American Tobacco p.l.c.
(BAT). Additional information concerning these and other factors can be found in the Company's filings
with the U.S. Securities and Exchange Commission ('SEC'), including the Annual Report on Form 20-F
filed on 2 March 9 February 20234 and Current Reports on Form 6-K, which may be obtained free of
charge at the SEC's website, www.sec.gov, and the Company's Annual Reports, which may be obtained
free of charge from the Company's website www.bat.com.

Although financial materiality has been considered in the development of our Double Materiality
Assessment (DMA), our DMA and any conclusions in this document as to the materiality or significance
of sustainability or ESG matters do not imply that all topics discussed therein are financially material
to our business taken as a whole, and such topics may not significantly alter the total mix of
information available about our securities.

Sponsor: Merrill Lynch South Africa (Pty) Ltd t/a BofA Securities

Date: 12-02-2024 07:05:00
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