Announcement of Interim Results for the Six Months Ended June 30, 2001 by Gallaher Group Plc.Business Editors LONDON--(BUSINESS WIRE)--Sept. 5, 2001 Gallaher Group Gallaher Group is a major British based multinational tobacco company. It was traded on the London Stock Exchange and was a constituent of the FTSE 100 Index prior to its April 2007 acquisition by Japan Tobacco. Plc (NYSE NYSE See: New York Stock Exchange : GLH GLH Gallaher Group PLC (stock symbol) GLH guided learning hours (education) GLH Goes Like Hell GLH Green Leafhopper GLH Girl Love Handles GLH Ground Launched Hellfire (missile) ), Gallaher Group Plc announces its interim results for the six months ended June June: see month. , 30 2001.
HIGHLIGHTS
- Turnover (pound)2,292m - up 4.9%
- EBITA (1) (pound)220m - up 10.5%
- Operating Profit (pound)212m - up 7.9%
- PBTA (2) (pound)181m - up 14.7%
- Profit Before Tax (pound)173m - up 11.5%
- Earnings Per Share (3) 21.6p - up 29.3%
- Interim Dividend 8.15p - up 6.5%
(1) Earnings before interest, tax and amortization of intangible
assets.
(2) Profit before tax and amortization of intangible assets.
(3) Fully adjusted: before amortization of intangible assets.
Commenting on the performance, Nigel Northridge, Chief Executive,
said:
- "Gallaher delivered strong profit performance and record
earnings per share growth of 29% in the first half, with our
established markets underpinning an excellent international
performance. Liggett-Ducat performed well during the period
and our acquisition of Austria Tabak will substantially
strengthen Gallaher's platform for growth. Gallaher is in a
strong position to continue building shareholder value."
SUMMARY
- Gallaher reported a strong performance for the six months
ended June 30, 2001, achieving record earnings per share, and
increased turnover and profits. The Group repaid (pound)155m
of debt during the period. On June 22, 2001, Gallaher
announced its proposed acquisition of Austria Tabak.
- International turnover increased by 38.6% to (pound)456.1m,
and international EBITA grew by 46.3% to (pound)65.2m.
Stripping out the contribution of Liggett-Ducat, organic
international EBITA increased by 20.4% to (pound)53.7m.
- Liggett-Ducat's contribution fully met management's
expectations, with the company achieving volume sales growth
of 11%, and an increase in its share of the intermediate price
sector to 16.6% (2000: 8.2%). Gallaher's (pound)40m investment
programme in its Russian factory is proceeding on schedule.
- In Kazakhstan, Gallaher grew volume sales by some 135% to
1.13bn cigarettes.
- The Group achieved strong in-market sales growth in many of
its key Continental Western European markets, and in Asia
Pacific.
- Gallaher has three of the UK's top five best selling cigarette
brands. The Group's effective balance between volume sales,
managing price sector mix, and price increases underpinned the
resilient UK performance. Gallaher's UK EBITA of (pound)154.9m
was broadly unchanged (2000: (pound)154.6m).
- The Group continued to secure ongoing efficiency improvements,
and further expanded operating margins in the UK and in its
organic international operations.
- Gallaher has completed the acquisition of the Austrian
Republic's 41.13% of Austria Tabak, and has launched its offer
for the outstanding shares in issue. Ownership of Austria
Tabak, the leading tobacco company in Austria and Sweden, will
consolidate Gallaher's strength in Continental Western Europe,
and provide the Group with enhanced opportunities for growth
in Central and Eastern Europe.
- Gallaher's successful balance of interests in established
markets and in emerging markets with growth prospects
delivered a strong performance in the first six months of
2001. The strength of its UK presence continues to facilitate
the Group's international expansion. Gallaher's organic
international operations delivered record results, and
Liggett-Ducat performed well. The acquisition of Austria Tabak
will strengthen Gallaher's platform for growth: on completion
of the acquisition, Gallaher will be the fourth largest
cigarette manufacturer in Western Europe, with world-wide
pro-forma volume sales of around 120bn cigarettes. Current
trading is in line with management and market expectations.
- The Board has declared an interim dividend of 8.15p per share
(net), an increase of 6.5% over the 2000 interim dividend of
7.65p (net).
2001 Interim Results Gallaher reported a strong performance for the six months ended June 30, 2001, achieving record earnings per share, and increasing turnover and operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. . The Group continued to secure ongoing efficiency improvements, and further expanded operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in the UK and in its organic international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. . In the UK, Gallaher's effective balance between volume sales, managing price sector mix, and price increases underpinned the Group's resilient See resiliency. performance. In overseas markets, Gallaher's record performance demonstrated the Group's successful strategy of developing domestic brands for indigenous smokers, and Liggett-Ducat's contribution fully met management's expectations. The Board has declared an interim dividend of 8.15p per share (net), an increase of 6.5% over the 2000 interim dividend of 7.65p (net). This dividend will be paid on November November: see month. 20, 2001, to all shareholders on the register at close of business on September September: see month. 14, 2001. For ADS holders, The Bank of New York The Bank of New York, abbrieviated to BNY, was a global financial services company that existed until its merger with the Mellon Financial Corporation on July 2, 2007.[1] The bank now continues under the new name of The Bank of New York Mellon Corporation. will convert the 32.6p (net) ADS dividend into US dollars, and distribute it to ADS holders on November 30, 2001. Financial Review Group turnover in the first half of 2001, at (pound)2,292.4m, was up 4.9%. Earnings before interest, tax and all intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. amortisation Noun 1. amortisation - the reduction of the value of an asset by prorating its cost over a period of years amortization reduction, step-down, diminution, decrease - the act of decreasing or reducing something 2. charges ("EBITA EBITA Earnings Before Interest Taxes Amortization ") grew 10.5% to (pound)220.1m, and operating profit increased by 7.9% to (pound)211.6m, compared to 2000. UK turnover fell marginally to (pound)1,836.3m, a reduction of 1.1%, with a decline in UK volumes (reflecting the underlying operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. of the UK duty paid market) partly offset by price and duty increases. UK EBITA, however, was broadly unchanged at (pound)154.9m (2000: (pound)154.6m), reflecting price increases and cost savings. UK operating profit was broadly maintained at (pound)154.1m (2000: (pound)153.8m). In 2000, and in previous years, Gallaher has earned additional profits from the sale of stock on which UK duty had been paid at rates existing prior to the Government's duty increases. The UK Government introduced regulations that restricted the prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. of duty ahead of its Budget in March 2001. A reduction in interest costs associated with the financing of the duty prepayment, however, will largely offset the resulting decrease in operating profits so that the net effect on UK pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta profits is not expected to be significant. International turnover increased by 38.6% to (pound)456.1m. Liggett-Ducat (acquired on August 4, 2000) contributed (pound)106.4m to turnover in the first six months of 2001, from the sale of 24.9bn cigarettes. Organic international turnover of (pound)349.7m grew by 6.3%, mainly reflecting price and duty increases, whilst volume growth in a number of Gallaher's key markets offset volume reductions in the travel sector and in new emerging markets. International EBITA increased by 46.3% to (pound)65.2m, and international operating profit increased by 36.0% to (pound)57.5m. Stripping out the contribution of Liggett-Ducat, international EBITA rose 20.4% to (pound)53.7m (2000: (pound)44.6m), and international operating profit grew by 20.6% to (pound)51.0m. Liggett-Ducat contributed EBITA of (pound)11.5m in the first half of 2001. Operating margin (operating profit as a percentage of turnover excluding duty) was 39.3% (2000: 42.3%), reflecting the growing contribution to Group operating profits of lower margin international businesses, and in particular the acquisition of Liggett-Ducat. UK operating margin increased from 45.6% to 49.4% in 2001, reflecting the price increases and cost reductions noted above. Stripping out the impact of Liggett-Ducat, the organic international operating margin increased to 37.2% (2000: 33.4%), while Liggett-Ducat's pre-amortization operating margin was 12.8%. After charging net interest of (pound)38.9m (2000: (pound)41.3m) and tax of (pound)49.2m (2000: (pound)50.0m), profit for the period was up 17.8% at (pound)123.5m, resulting in a basic earnings per share of 20.2p, up 24.7% compared to 2000. Stripping out the effects of all intangible asset amortization charges, fully adjusted earnings per share increased by 29.3% to 21.6p. The decreased interest cost reflected the impact of the regulations restricting the prepayment of duty ahead of the UK Government Budget in March 2001, and lower UK interest rates. These factors were partly offset by the cost of increased borrowings to finance share buybacks undertaken in 2000, and the acquisition of Liggett-Ducat and the subsequent investment in the expansion of its operations. The Group's effective tax rate fell to 28.5% (2000: 32.3%). The acquisition of Liggett-Ducat, and the UK Government's decision to permit limited onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. mixing of dividends, have removed the requirement to provide for UK taxes on dividends remitted from Gallaher (Dublin Dublin, city, Republic of Ireland Dublin, Irish Baile Átha Cliath, county borough (1991 pop. 915,516), Leinster, capital of the Republic of Ireland, on Dublin Bay at the mouth of the Liffey River. ) Ltd, thereby reducing the effective tax rate. The effective rate is reduced further as a consequence of low-taxed profits arising in Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). and Kazakhstan Kazakhstan or Kazakstan (kä'zäkstän`), officially Republic of Kazakhstan, republic (2005 est. pop. 15,186,000), c.1,050,000 sq mi (2,719,500 sq km), central Asia. , partly offsetting the increase attributable to the presence of increased non-deductible goodwill amortization. Whilst operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. in 2001 showed a high cash conversion rate, a reduction in the amount of duty prepayment prior to the UK Government's Budget in March 2001 meant they were not comparable with those of the prior period. Net debt fell (pound)758.1m from June 2000, and (pound)172.0m since December December: see month. 2000. This again reflects a reduction in the level of UK duty prepayment and the high cash conversion rate in the first six months of 2001. Since the period end (June 30, 2001), Gallaher has raised new bank debt facilities amounting to (pound)1.7bn to finance the acquisition of Austria Austria (ô`strēə), Ger. Österreich [eastern march], officially Republic of Austria, federal republic (2005 est. pop. 8,185,000), 32,374 sq mi (83,849 sq km), central Europe. Tabak (see Acquisition of Austria Tabak), and (pound)900m to replace the Group's existing syndicated bank facilities. Following Gallaher's announcement of its intention to acquire Austria Tabak, the Group's debt rating from Moody's Investors Service Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. has been established at Baa3 with stable outlook. Standard & Poor's has indicated that, providing Gallaher gains complete ownership of Austria Tabak as envisaged, the Group's debt rating will be established at BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. with stable outlook. Operating Review United Kingdom The strength of Gallaher's performance in the UK underlines the success of the Group's balance between volume sales, managing price sector mix, and manufacturer price increases. Gallaher's presence on the ground through the Group's UK Commercial Division has been strengthened following the Division's restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). in 2000, and the Group has continued to spearhead developments which align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. more closely Gallaher's business to the needs of the Group's trade customers and the changing shopping patterns of UK consumers. - Cigarette Three of Gallaher's brands remain in the top five selling brands in the UK market. Following an across-the-board price increase in early March this year, Gallaher has announced a second price increase for 2001, to be implemented on September 11. The Group's share of consumer sales (excluding those brands involving distribution rights only) stood at some 39% in the first six months of 2001. In the first half of the year the UK duty paid market continued to decline, but at a moderately reduced rate of around 7%. Gallaher believes that this reduced rate of decline is related both to the additional resources allocated to H.M. Customs to combat smuggling smuggling, illegal transport across state or national boundaries of goods or persons liable to customs or to prohibition. Smuggling has been carried on in nearly all nations and has occasionally been adopted as an instrument of national policy, as by Great Britain , and to a noticeable decline in cross-channel travel associated with the foot-and-mouth foot-and-mouth , foot-and-mouth disease foot n → fièvre aphteuse foot-and-mouth , foot-and-mouth disease foot n → Maul- und Klauenseuche f epidemic epidemic, outbreak of disease that affects a much greater number of people than is usual for the locality or that spreads to regions where it is ordinarily not present. . Gallaher increased its share of the growing low price sector to 31%. The sector's share of the market grew to over 48% of consumer sales in the first six months of 2001, reflecting both smokers downgrading downgrading A reduction in the quality rating of a security issue, generally a bond. A downgrading may occur for various reasons including a period of losses, or increased debt service required by restructuring a firm's capital to include more debt and less from the premium sector, and also some transfer of purchases back into the UK duty paid market from non-UK duty paid sources. The Group sustained its commanding lead of the premium sector, with over half the volume sales of this segment of the market, and the Group also maintained its strong leadership of the low tar sector in the first six months of 2001. The Group introduced new pack designs for Silk Cut Silk Cut is brand of low tar cigarette produced by the Gallaher Group. The packaging is characterised by a distinctive stark white packet with the brand name in a purple square. Tobacco only makes up 75% of the filling; the rest is Cytrel. and Mayfair May·fair A fashionable district in the West End of London, England. It was named after an annual fair held in the district until 1708. during the first half, with advertising and extensive below-the-line marketing activity supporting the new imagery, and new pack designs for Dorchester Dorchester, town, England Dorchester (dôr`chĭstər), town (1991 pop. 13,734), county seat of Dorset, S central England. Dorchester is a busy agricultural market, especially for sheep and lambs. were introduced in August. To meet the changing dynamics of the UK market, Gallaher launched Sterling, an exclusive brand range for the Multiple Grocer channel, this year. - Cigar Hamlet Hamlet Tragic hero who tarries and broods over revenge and suicide. [Br. Lit.: Hamlet] See : Indecision Hamlet introspective, vacillating Prince of Denmark. [Br. Lit. remains the UK's number one cigar brand, spearheading Gallaher's commanding leadership of the cigar market at some 48% of consumer sales. Hamlet Miniatures improved its leading position in the small cigar sector, achieving double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" volume growth again. Gallaher widened its distribution of the Hamlet Cigar Bar A cigar bar is an establishment that caters to patrons who smoke cigars. While cigar bars have been around for years, interest in them developed in the 1990s when cities and government entities began instituting smoking bans but provided exceptions for establishments that in the Leisure channel, and continued to support its brands through topical topical /top·i·cal/ (top´i-k'l) pertaining to a particular area, as a topical antiinfective applied to a certain area of the skin and affecting only the area to which it is applied. top·i·cal adj. advertising and promotional support. - Tobacco The UK duty paid hand rolling tobacco market has also benefited from Customs' activities and the reduction in cross-channel travel. Gallaher's hand rolling tobacco volume sales grew sharply in the first half, by some 25%. This growth was led by Amber Leaf, and in particular by the increased market share of the brand's innovative piece pack. Gallaher's number one brand, Condor, continues to front the Group's leading position in the pipe tobacco market. International Gallaher sold 33.4bn cigarettes in its overseas markets in the first half of 2001. The success of the Group's strategy to build domestic brands for indigenous smokers underpinned Gallaher's record performance. With strong indigenous volume growth in many of Gallaher's key markets offsetting volume reductions in the travel sector and in new emerging markets, the Group maintained its like-for-like international organic sales at 8.5bn cigarettes. - Republic of Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. Gallaher extended its commanding leadership of the cigarette market in the Republic of Ireland, to over 49%, lifting its volumes by 6%. Benson Benson may mean: Places in England:
performance, achieving the number one brand position in the first six months of 2001. Gallaher extended its brand portfolio to include Mayfair Lights and Menthol menthol, white crystalline substance with a characteristic pungent odor. It is derived from the oil of the peppermint plant, Mentha piperita (see mint), or prepared synthetically from coal tar. in the first half, and commenced distribution of Camel and More in August. - Continental Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). Gallaher grew in-market cigarette sales in France by over 3%, increasing its market share to 2.8%. This strong performance was led by Benson & Hedges American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Blend which lifted in-market sales sharply, by some 22%. The Group's in-market sales in Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). stood at some 460m cigarettes, with the Benson & Hedges house maintaining its share of consumer sales. In Greece Greece, Gr. Hellas or Ellas, republic (2005 est. pop. 10,668,000), 50,944 sq mi (131,945 sq km), SE Europe. It occupies the southernmost part of the Balkan Peninsula and borders on the Ionian Sea in the west, on the Mediterranean Sea in the south, on , Gallaher continued to outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. the market, increasing in-market sales by over 5%. Silk Cut, and, in particular, Benson & Hedges Special Filter, led the Group's growth in market share, to 5%. Old Holborn Holborn: see Camden, England. lifted in-market sales sharply again, by some 44%. Gallaher's sharp growth in volume sales in Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. continues, with in-market sales up some 19% on 2000, compared to a total market growth rate of some 6%. The Group's brand portfolio was enhanced in January January: see month. with the launch of Benson & Hedges Red, which has achieved its target levels of distribution, and brand awareness amongst indigenous smokers, during the period. Related to the factors outlined previously, invoiced sales in the travel sector (RMOs, duty free, Belgium Belgium (bĕl`jəm), Du. België, Fr. La Belgique, officially Kingdom of Belgium, constitutional kingdom (2005 est. pop. 10,364,000), 11,781 sq mi (30,513 sq km), NW Europe. and Luxembourg Luxembourg, province, Belgium Luxembourg, Du. Luxemburg, province (1991 pop. 232,813), 1,706 sq mi (4,419 sq km), SE Belgium, in the Ardennes, bordering on the Grand Duchy of Luxembourg in the east and on France in the south. ) were 847m cigarettes (2000: 1.1bn units). Gallaher was the fastest growing tobacco company in Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. in the first half of 2001, sharply lifting in-market sales by some 38%. This strong performance, leveraging off the establishment of an on-shore sales network in 2000, was led by Benson & Hedges American Blend, which more than doubled its in-market sales in the period. And, albeit from small bases, Gallaher recorded increased in-market sales in Austria, Switzerland Switzerland (swĭt`sərlənd), Fr. Suisse, Ger. Schweiz, Ital. Svizzera, officially Swiss Confederation, federal republic (2005 est. pop. 7,489,000), 15,941 sq mi (41,287 sq km), central Europe. , Gibraltar Gibraltar (jĭbrôl`tər), British crown colony (2005 est. pop. 27,900), 2.5 sq mi (6.5 sq km), on a narrow, rocky peninsula extending into the Mediterranean Sea from SW Spain. and Portugal Portugal (pôr`chəgəl), officially Portuguese Republic, republic (2005 est. pop. 10,566,000), 35,553 sq mi (92,082 sq km), SW Europe, on the western side of the Iberian Peninsula and including the Madeira Islands and the Azores in the . - Commonwealth of Independent States Commonwealth of Independent States (CIS), community of independent nations established by a treaty signed at Minsk, Belarus, on Dec. 8, 1991, by the heads of state of Russia, Belarus, and Ukraine. Between Dec. 8 and Dec. Liggett-Ducat sold 24.9bn cigarettes in the first half of 2001 (2000 like-for-like: 22.4bn cigarettes, comprising Gallaher's invoiced sales of 145m cigarettes in Russia, and Liggett-Ducat's invoiced sales of 22.3bn cigarettes). This strong volume growth, of 11%, maintained Liggett-Ducat's position as the leading tobacco manufacturer in Russia, producing over 15% of domestically manufactured volumes. In addition to increasing its share of consumer sales in Russia, to 12.3% (2000: 9.6%), Liggett-Ducat successfully developed export sales to surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. markets, in particular Belarus Belarus or Byelarus (both: byĕ'lər  s`), formerly Belorussia, officially Republic of Belarus, republic (2005 pop. 9,799,000), c. and Ukraine Ukraine (y`krān, ykrān`), Ukr. Ukraina, republic (2005 est. pop. , during the period. Certain of theGroup's key brands in the region have established solid positions in Ukraine, and, so as to maximize the benefits of these brands' awareness, Gallaher is considering an opportunity to commence local manufacture. In Russia, the intermediate and higher priced sectors' shares of the market continued their improving trend, and accounted for over 60% of consumer sales in the first half of 2001 (2000: 51.3%). Spearheaded by the sustained growth of LD, which more than trebled its volumes in the period, Liggett-Ducat's share of the intermediate price sector rose to 16.6% in the first six months, from 8.2%. Reflecting the company's strategy to balance its mix of sales to include higher-margin volumes, Liggett-Ducat also achieved a 2.8% share of consumer sales in the higher price sector. In Kazakhstan, Gallaher sold almost as many cigarettes in the first half of 2001 as in the full year 2000. This sharp growth, of some 135% to 1.13bn cigarettes in the period, demonstrates the success of the Group's strategy to enhance its brand portfolio, and to expand its sales, merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. and distribution capabilities, in this market. Following the introduction of State Line in 2000, Gallaher launched two LD variants in early 2001, and has begun importing four niche variants of Sobranie Sobranie is a word in several Slavic languages for parliament, and can refer to:
through the 10% threshold in the latter part of the period. - Asia Pacific Gallaher lifted in-market sales by some 55% in Asia Pacific, with the strong growth particularly led by the performance of Sobranie Classic in Taiwan and the benefits from new duty free listings at Seoul, Tapai and Singapore. In China, sales continue to progress well, with an increase in Gallaher's Official Import Quota Import Quota Puts limits on the quantity of certain products that can be legally imported into a particular country during a particular time frame. There is a Fixed quota, which is a maximum quantity not to be exceeded, and tariff rate surcharge, which permits additional quantities this year. The Group's co-operation with Shanghai Shanghai (shăng`hī`, shäng`hī`), city (1994 est. pop. 12,980,000), in, but independent of, Jiangsu prov., E China, on the Huangpu (Whangpoo) River where it flows into the Chang (Yangtze) estuary. Tobacco, which was strengthened through the launch of Chunghwa in the UK in January, has boosted sales of Sobranie in the Shanghai region by over 15%. - New emerging markets/Contract manufacture Invoiced volumes, of 698m cigarettes (2000: 1.3bn units), to new emerging markets in the first half were reduced, with a change in emphasis of sales. Having initiated new exports to a wide variety of markets in Africa and the Middle East in 2000, the Group is now focusing on a number of key markets, through particular distributors. With minimal marketing support to date, Dorchester International has developed a presence in certain markets, including: in Nigeria, where Gallaher has assumed an existing distribution network; and, in Syria where the brand has established a strong market position. Contract manufacture arrangements for new brands, including GB Classic and Fame, commenced in January. In the first half of 2001, the Group manufactured 382m cigarettes under contract for BAT. Manufacturing Gallaher continues to invest in its operations to improve efficiencies and quality, while maintaining manufacturing flexibility to support the Group's sales and marketing requirements. As part of Gallaher's focus on maintaining the Group's position at the forefront of European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. efficiency, Gallaher is well-advanced in its plans to install SAP systems into its UK cigarette and tobacco manufacturing facilities, and in the introduction of an Enterprise Resource Planning See ERP. (application, business) Enterprise Resource Planning - (ERP) Any software system designed to support and automate the business processes of medium and large businesses. System in its Republic of Ireland factory. Gallaher's investment in its UK cigarette factory, to meet the changing needs of the UK market and to improve the Group's export sales capacity, continues. The results from the performance trials of new mid-speed making and packing cigarette machinery during the first half of 2001 show encouraging improvements in productivity, quality and flexibility. In addition, preparation is well underway to install two new Ultra High Speed making and packing complexes, during the second half of the year. In the first six months of 2001, Gallaher reduced UK cigarette unit costs by 2.9% in real terms over the 2000 full year figure. Following its installation at the end of 2000, the new machinery in the tobacco factory to meet the growing demand for the Amber Leaf piece pack was commissioned during the first half. Tobacco unit costs were up, by 3.5% in real terms over the 2000 full year figure, reflecting the significant growth in UK hand rolling tobacco volumes with their associated smaller pack sizes, and the disruptive disruptive /dis·rup·tive/ (-tiv) 1. bursting apart; rending. 2. causing confusion or disorder. effect of installing and commissioning new machinery to meet the growing demand for some of our products, such as Old Holborn for Greece. A second high speed cigar-wrapping machine complex is now in production at the cigar factory, and Gallaher intends to install a third such machine by the end of the year. In addition, the Group has completed two key environmental improvements: the factory fridge plants were replaced to remove the use of ozone depleting gases; and, the heavy oil fuelled burners were replaced with new gas fired units, providing both reduced emissions and energy efficiency savings. Gallaher reduced cigar unit costs by 1.8% in real terms over the 2000 full year figure. In the latter part of 2000, Gallaher began the (pound)40m investment program in its Russian Russian associated in some way with Russia. Russian blue a breed of cats with short, dense, silver-tipped blue-colored coat and vivid green eyes. factory, to enable Liggett-Ducat to maximize the opportunities available to the company going forward. In total, Gallaher plans to install seven new making and packing cigarette complexes, and a second primary line. Two complexes were installed in 2000, and a further three complexes were installed, and the additional primary line began production, during the first half of 2001. The remaining two complexes will be installed during the second half. Although the new machinery is not yet running at its anticipated eventual capacity, Liggett-Ducat has already increased its production rate to roughly 4.4bn cigarettes a month. Gallaher expects that once the investment program is completed, and the machinery is fully commissioned, Liggett-Ducat will achieve significant productivity and quality improvements, whilst also being in a more advantageous position to develop new sales. In Kazakhstan, the planned installation of a primary facility to enable the factory to improve efficiencies, and to underpin the Group's enhanced brand portfolio in this market, is proceeding on schedule. Gallaher expects to begin commissioning the primary in October 2001. Acquisition of Austria Tabak On June 22, 2001, Gallaher announced that it intended to acquire the Austrian Republic's 41.13% shareholding in Austria Tabak at a price of (pound)85 per share and that, once this transaction was completed, the Group would make an offer for the outstanding shares in Austria Tabak. During August, the Group acquired 171,499 shares in Austria Tabak (0.078% of the share capital) in the open market, at an average price of (pound)83.86 per share. On August 23, 2001, Gallaher completed the purchase of the 41.13% shareholding for (pound)769m ((pound)485m), and on August 29, 2001 the Group launched the offer for the remaining shares at (pound)85 per share. This price values the entire issued share capital of Austria Tabak at (pound)1,870m, and, pursuant to the acquisition, Gallaher will also assume Austria Tabak's indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. (which stood at (pound)283m at June 30, 2001). Gallaher arranged initial finance for the acquisition by way of new debt facilities. On June 26, 2001, the Group refinanced (pound)150m of its initial debt funding through the placing of new ordinary shares, which were admitted to the Official List of the UK Listing Authority, and began trading on the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. , on July 2, 2001. On August 28, 2001, Gallaher announced that, subject to market conditions, it will refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. more of the Group's bank debt facilities through the launch of a benchmark Euro-denominated bond in September 2001. Having identified the acquisition of Austria Tabak as an attractive investment opportunity, Gallaher does not envisage en·vis·age tr.v. en·vis·aged, en·vis·ag·ing, en·vis·ag·es 1. To conceive an image or a picture of, especially as a future possibility: envisaged a world at peace. 2. a resumption RESUMPTION. To reassume; to promise again; as, the resumption of payment of specie by the banks is general. It also signifies to take things back; as the government has resumed the possession of all the lands which have not been paid for according to the requisitions of the law, and the of the Group's share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program in the near term. Gallaher believes that the acquisition of Austria Tabak, the leading tobacco company in Austria and Sweden, represents an exciting opportunity for the Group to consolidate its strength in Europe, giving Gallaher greater international coverage and an enhanced brand portfolio, particularly in the American blend sector, and opportunities for growth in Central and Eastern Europe The term "Central and Eastern Europe" came into wide spread use, replacing "Eastern bloc", to describe former Communist countries in Europe, after the collapse of the Iron Curtain in 1989/90. . The acquisition will also provide Gallaher with access to proven distribution skills in a wide range of markets, complementing Liggett-Ducat's expertise in emerging markets. Outlook Gallaher's successful balance of interests in established markets and in emerging markets with growth prospects delivered a strong performance in the first six months of 2001. The strength of its UK presence continues to facilitate the Group's international expansion. Gallaher's organic international operations delivered record results, and Liggett-Ducat performed well. The acquisition of Austria Tabak will strengthen Gallaher's platform for growth: on completion of the acquisition, Gallaher will be the fourth largest cigarette manufacturer in Western Europe, with world-wide pro-forma volume sales of around 120bn cigarettes. Current trading is in line with management and market expectations. Regulation and Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Within the EU, a new directive on tobacco products has been adopted. The measures include: reducing maximum tar and nicotine nicotine, C10H14N2, poisonous, pale yellow, oily liquid alkaloid with a pungent odor and an acrid taste. It turns brown on exposure to air. yields of cigarettes and introducing maximum yields of carbon monoxide carbon monoxide, chemical compound, CO, a colorless, odorless, tasteless, extremely poisonous gas that is less dense than air under ordinary conditions. It is very slightly soluble in water and burns in air with a characteristic blue flame, producing carbon dioxide; for cigarettes. These proposals would apply to cigarettes marketed in the EU and manufactured in the EU for export to the rest of the world. The directive also has provisions regarding non-tobacco ingredients, including additives. The directive requires that, within the EU, packaging for tobacco products must carry new and significantly larger health warnings on the front and back of all packs of tobacco products, and additional consumer information. The directive also prohibits the use of the terms 'low tar', 'light', 'ultra light', 'mild', or any other similar terms. The EU Commission has also been granted a mandate to negotiate with the World Health Organization a Framework Convention on Tobacco Control. Following the annulment annulment Legal invalidation of a marriage. It announces the invalidity of a marriage that was void from its inception. It is to be distinguished from dissolution or divorce. To justify annulment, the marriage contract must have a defect (e.g. of the 1998 EU tobacco advertising, promotion and sponsorship directive, the EU Commission has recently published proposals for a new directive relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the advertising of tobacco products and related sponsorship. The UK Government has given an election manifesto MANIFESTO. A solemn declaration, by the constituted authorities of a nation, which contains the reasons for its public acts towards another. 2. On the declaration of war, a manifesto is usually issued in which the nation declaring the war, states the reasons commitment to ban tobacco advertising. In August 2001, it published a consultation document regarding the draft EU directive (European Union Directive) A set of privacy requirements that took effect in 1998 and ordered European member nations to enact compliant legislation. It deals with the establishment of Data Protection Authorities, people's rights to personal information and enforcement. . Over the years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time Group has had the opportunity of dialogue with successive Governments and politicians of all parties and has co-operated on a range of issues related to tobacco and smoking. Gallaher is committed to maintain this dialogue and is currently in discussions regarding additives and constituents. In the Republic of Ireland, the Government has published a bill that would, if passed, establish a Tobacco Control Agency. The Bill also includes provision for a comprehensive ban on tobacco advertising and sponsorship, and measures relating to the regulation of the manufacture and sale of tobacco products. In November 1999, the UK Government announced that, instead of its commitment to increase duty on tobacco products by an average of at least 5% per annum Per annum Yearly. in excess of the rate of inflation, it would in future form its Budget judgments on the appropriate level and timing of increases taking into account a wide variety of factors, including the Government's health objectives. In the March 2001 Budget announcement, tobacco duty was increased in line with inflation. Gallaher has given a cautious welcome to the Government's Budget decision. Gallaher believes the widening price differentials between the UK and Continental Western Europe and other parts of the world have led to the significant increase in the smuggled smug·gle v. smug·gled, smug·gling, smug·gles v.tr. 1. To import or export without paying lawful customs charges or duties. 2. To bring in or take out illicitly or by stealth. market for cigarettes in recent years. As an anti-smuggling measure, the Government has introduced regulations prohibiting manufacturers and importers from supplying cigarettes and hand rolling tobacco without the statement "UK duty paid" printed on the packaging. Display and sale of unmarked packs have been illegal from July 2001. Gallaher continues to support HM Customs and Excise Customs and Excise n (BRIT) → Aduanas fpl y Arbitrios Customs and Excise n (Brit) → administration f des douanes activity to stop smuggling of tobacco products and welcomes the UK Government's measures to strengthen Customs' activities. The Group has a history of co-operation with HM Customs and Excise investigations into smuggling and readily provides information on its sales and its customers. As at August 31, 2001, Gallaher is involved as defendant in six individual cases in Scotland and Northern Ireland Northern Ireland: see Ireland, Northern. Northern Ireland Part of the United Kingdom of Great Britain and Northern Ireland occupying the northeastern portion of the island of Ireland. Area: 5,461 sq mi (14,144 sq km). Population (2001): 1,685,267. where plaintiffs seek damages for ailments claimed to have resulted from tobacco use. All those cases are dormant Latent; inactive; silent. That which is dormant is not used, asserted, or enforced. A dormant partner is a member of a partnership who has a financial interest yet is silent, in that he or she takes no control over the business. . There are no current or pending claims in England and Wales England and Wales are both constituent countries of the United Kingdom, that together share a single legal system: English law. Legislatively, England and Wales are treated as a single unit (see State (law)) for the conflict of laws. against Gallaher. In the Republic of Ireland writs WRITS, JUDICIAL, practice. In England those writs which issue from the common law courts during the progress of a suit, are described as judicial writs, by way of distinction from the original one obtained from chancery. 3 Bl. Com. 282. have been issued against Gallaher on behalf of 175 plaintiffs, although no statements of claims have yet been served. Gallaher is not a party to smoking and litigation anywhere else in the world. Although it is not possible to predict the outcome of pending litigation Gallaher believes that it has meritorious mer·i·to·ri·ous adj. Deserving reward or praise; having merit. [Middle English, from Latin merit defenses to all these actions and claims. The pending actions will be vigorously contested.
Gallaher Group Plc
Group Profit and Loss Account
SIX MONTHS ENDED JUNE 30, 2001
Six months Six months Year
ended ended ended
June 30, June 30, Dec. 31,
2001 2000 2000
US$m (1) (pound)m (pound)m (pound)m
Turnover 3,223.1 2,292.4 2,185.3 4,453.5
Duty (2,465.7) (1,753.7) (1,721.3) (3,414.8)
Other costs and overheads
less other operating income (459.9) (327.1) (267.9) (604.8)
Operating profit 297.5 211.6 196.1 433.9
Interest (54.7) (38.9) (41.3) (94.0)
Profit on ordinary
activities before taxation 242.8 172.7 154.8 339.9
Taxation (69.2) (49.2) (50.0) (91.3)
Profit on ordinary
activities after taxation 173.6 123.5 104.8 248.6
Dividends (74.3) (52.9) (47.1) (145.6)
Retained profit for the period 99.3 70.6 57.7 103.0
Earnings per
ordinary
share - basic 28.4c 20.2p 16.2p 39.3p
- adjusted (a) 29.5c 21.0p 16.2p 39.9p
- fully adjusted (b) 30.4c 21.6p 16.7p 41.0p
- diluted 28.3c 20.1p 16.2p 39.2p
Dividend per
ordinary
share - interim 11.5c 8.15p 7.65p
- total for 2000 23.75p
The turnover and profit figures above are directly related to
continuing operations.
There is no difference between the profit on ordinary activities
before taxation and the retained profit for the period stated above
and their historical cost equivalents.
(a) Adjusted - before goodwill amortization arising on the acquisition
of Liggett-Ducat.
(b) Fully adjusted - before all intangible asset amortization.
(1) US dollar equivalents are provided for reader convenience at the
June 30, 2001 exchange rate of (pound)1:US$1.406.
Group Balance Sheet
AT JUNE 30, 2001
June 30, 2001 June 30, Dec. 31,
2000 2000
US$m (1) (pound)m (pound)m (pound)m
Fixed assets
Intangible assets 512.3 364.4 161.7 366.4
Tangible assets 461.2 328.0 187.9 295.1
Investments 3.9 2.8 3.4 2.3
977.4 695.2 353.0 663.8
Current assets
Stocks 268.1 190.7 1,038.6 267.4
Debtors 864.4 614.8 561.4 594.8
Non-liquid investments 2.4 1.7 1.6 1.6
Cash and liquid investments 76.2 54.2 42.9 78.6
1,211.1 861.4 1,644.5 942.4
Creditors: amounts falling
due within one year
Borrowings (807.6) (574.4) (837.4) (101.4)
Other (918.4) (653.2) (394.4) (578.2)
(1,726.0) (1,227.6) (1,231.8) (679.6)
Net current
(liabilities)/assets (514.9) (366.2) 412.7 262.8
Creditors: amounts falling
due after more than one year
Borrowings (1,000.5) (711.6) (1,195.4) (1,381.0)
Other (9.3) (6.6) (7.0) (6.8)
(1,009.8) (718.2) (1,202.4) (1,387.8)
Provisions for liabilities
and charges (124.2) (88.4) (115.9) (88.3)
Net liabilities (671.5) (477.6) (552.6) (549.5)
Capital and reserves
Called up share capital 86.3 61.4 62.3 61.3
Share premium account 149.6 106.4 101.3 105.9
Capital redemption reserve 11.1 7.9 6.8 7.9
Other reserve (1,281.1) (911.2) (911.2) (911.2)
Profit and loss account 362.6 257.9 188.2 186.6
Equity shareholders' funds (671.5) (477.6) (552.6) (549.5)
Net debt (1,731.9) (1,231.8) (1,989.9) (1,403.8)
(1) US dollar equivalents are provided for reader convenience at the
June 30, 2001 exchange rate of (pound)1:US$1.406.
Group Cash Flow Statement
SIX MONTHS ENDED JUNE 30, 2001
Six months Six
ended months Year
June 30, 2001 ended ended
June 30, Dec. 31,
2000 2000
US$m(1) (pound)m (pound)m (pound)m
Net cash inflow/(outflow) from
operating activities 558.2 397.0 (820.1) 296.8
Returns on investments and
servicing of finance (50.9) (36.2) (37.7) (94.0)
Taxation (51.5) (36.6) (21.3) (80.1)
Capital expenditure (70.6) (50.2) (16.8) (77.4)
Financial investment (2.0) (1.4) (2.0) (2.0)
Acquisitions - purchase of
subsidiary (1.8) (1.3) - (249.5)
Equity cash dividends paid (138.5) (98.5) (98.7) (146.3)
Net cash inflow/(outflow) before
management of liquid resources and 242.9 172.8 (996.6) (352.5)
financing
Management of liquid resources (7.0) (5.0) 1.2 8.7
Financing
(Decrease)/increase in debt (218.5) (155.4) 1,164.7 546.7
Issue of ordinary shares 0.3 0.2 0.6 3.3
Purchase of own shares - - (119.8) (167.8)
Net cash (outflow)/inflow from
financing (218.2) (155.2) 1,045.5 382.2
Increase in net cash in the period 17.7 12.6 50.1 38.4
Reconciliation of Movements in Equity Shareholders' Funds
SIX MONTHS ENDED JUNE 30, 2001
Six months Six
ended months Year
June 30, 2001 ended ended
June 30, Dec. 31,
2000 2000
US$m(1) (pound)m (pound)m (pound)m
Profit on ordinary activities after
taxation 173.6 123.5 104.8 248.6
Dividends (74.3) (52.9) (47.1) (145.6)
Exchange adjustments on foreign
currency net investments 1.3 0.9 2.8 2.6
Amounts deducted from profit
and loss reserve in respect of
shares (0.3) (0.2) - (1.8)
issued to the QUEST
Issue of ordinary shares 0.8 0.6 0.6 5.2
Purchase of own shares - - (122.1) (166.9)
Net increase/(decrease) in equity
shareholders' funds 101.1 71.9 (61.0) (57.9)
Opening equity shareholders' funds (772.6) (549.5) (491.6) (491.6)
Closing equity shareholders' funds (671.5) (477.6) (552.6) (549.5)
(1) US dollar equivalents are provided for reader convenience at the
Jun 30, 2001 exchange rate of (pound)1:US$1.406.
Reconciliation of Operating Profit to Net Cash Flow from
Operating Activities
SIX MONTHS ENDED JUNE 30, 2001
Six months Six
ended months Year
June 30, 2001 ended ended
June 30, Dec. 31,
2000 2000
US$m(1) (pound)m (pound)m (pound)m
Operating profit 297.5 211.6 196.1 433.9
Depreciation of tangible fixed
assets 27.1 19.3 14.3 32.9
Amortization of intangible fixed
assets 12.0 8.5 3.1 10.6
Amortization of other fixed assets 1.1 0.8 0.6 1.6
Loss/(profit) on sale of tangible
fixed assets 1.1 0.8 (1.0) 0.9
(Increase)/decrease in debtors (31.6) (22.5) 67.7 41.5
Decrease/(increase) in stocks 108.4 77.1 (835.9) (50.9)
Increase/(decrease) in creditors
and provisions 142.6 101.4 (265.0) (173.7)
Net cash inflow/(outflow) from
operating activities 558.2 397.0 (820.1) 296.8
Reconciliation of Net Cash Flow to Movement in Net Debt
SIX MONTHS ENDED JUNE 30, 2001
Six months Six
ended months Year
June 30, 2001 ended ended
June 30, Dec. 31,
2000 2000
US$m(1) (pound)m (pound)m (pound)m
Increase in net cash in the
period 17.7 12.6 50.1 38.4
Increase/(decrease) in liquid
resources 7.0 5.0 (1.2) (8.7)
Decrease/(increase) in debt 218.5 155.4 (1,164.7) (546.7)
Change in net debt resulting
from cash flows 243.2 173.0 (1,115.8) (517.0)
Exchange adjustments (1.4) (1.0) 0.2 (0.7)
Loans acquired with subsidiary - - - (11.8)
Movement in net debt in the
period 241.8 172.0 (1,115.6) (529.5)
Opening net debt (1,973.7) (1,403.8) (874.3) (874.3)
Closing net debt (1,731.9) (1,231.8) (1,989.9) (1,403.8)
(1) US dollar equivalents are provided for reader convenience at the
June 30, 2001 exchange rate of (pound)1:US$1.406.
Segmental Information (by Destination)
SIX MONTHS ENDED JUNE 30, 2001
Six months Six
ended months Year
June 30, 2001 ended ended
June 30, Dec. 31,
2000 2000
US$m(1) (pound)m (pound)m (pound)m
Turnover
UK 2,581.8 1,836.3 1,856.2 3,691.6
International 641.3 456.1 329.1 761.9
3,223.1 2,292.4 2,185.3 4,453.5
Duty
UK 2,143.4 1,524.5 1,518.5 2,984.0
International 322.3 229.2 202.8 430.8
2,465.7 1,753.7 1,721.3 3,414.8
Operating profit
UK
- before amortization of
intangible assets 217.8 154.9 154.6 347.6
- amortization of intangible
assets (1.1) (0.8) (0.8) (1.6)
- after amortization of
intangible assets 216.7 154.1 153.8 346.0
International
- before amortization of
intangible assets 91.7 65.2 44.6 96.9
- amortization of intangible
assets (10.9) (7.7) (2.3) (9.0)
- after amortization of
intangible assets 80.8 57.5 42.3 87.9
Total
- before amortization of
intangible assets 309.5 220.1 199.2 444.5
- amortization of intangible
assets (12.0) (8.5) (3.1) (10.6)
- after amortization of
intangible assets 297.5 211.6 196.1 433.9
Acquisition
Within the International
segment, Liggett-Ducat
contributed the following
amounts:
Turnover 149.6 106.4 - 73.4
Duty 22.9 16.3 - 9.3
Operating profit
- before amortization of
intangible assets 16.1 11.5 - 4.9
- amortization of intangible
assets (7.0) (5.0) - (4.1)
- after amortization of
intangible assets 9.1 6.5 - 0.8
(1) US dollar equivalents are provided for reader convenience at the
June 30, 2001 exchange rate of (pound)1:US$1.406.
Gallaher Group Plc Notes to the Interim Statement 1. Basis of preparation of the accounts The interim report has been prepared using accounting policies consistent with those of Gallaher Group Plc for the year ended December 31, 2000. The accounts for the six months to June 30, 2001, and those for the comparative period, are unaudited. The figures for the year ended December 31, 2000 are an abridged version of the Group's published financial statements for that year which contain an unqualified audit report and which have been filed with the registrar of companies The introduction to this article provides insufficient context for those unfamiliar with the subject matter. Please help [ improve the introduction] to meet Wikipedia's layout standards. You can discuss the issue on the talk page. . 2. Taxation The tax charges have been calculated using a forecast of the effective tax rate for each full year, based on a UK corporation tax rate of 30% and adjusted for the effect of significant events arising in each six month period. 3. Earnings per share Basic, adjusted and fully adjusted earnings per ordinary share are calculated using the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of have been calculated by taking into account the weighted average number of shares that would be issued on conversion into ordinary shares of options held under the employee sharesave scheme.
Six months Six months Year ended
ended ended Dec. 31,
June 30, 2001 June 30, 2000 2000
Earnings ((pound)m):
Basic 123.5 104.8 248.6
Adjustment for goodwill
amortization arising on
the acquisition of 5.0 - 4.1
Liggett-Ducat
Adjusted earnings 128.5 104.8 252.7
Adjustment for all other
intangible asset
amortization 3.5 3.1 6.5
Fully adjusted earnings 132.0 107.9 259.2
Weighted average number of
shares:
Ordinary shares in issue 613,535,247 648,024,582 634,726,766
Shares held by the employee
share trusts (1,997,012) (1,811,838) (1,957,911)
Shares used in the
calculation of basic,
adjusted and fully adjusted 611,538,235 646,212,744 632,768,855
earnings per share
Potentially dilutive share
options 1,812,681 837,165 1,197,728
Shares used in the
calculation of diluted
earnings per share 613,350,916 647,049,909 633,966,583
4. Contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. In Saudi Arabia Saudi Arabia (sä `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. a former distributor of Gallaher InternationalLimited ("GI") has begun mediation mediation, in law, type of intervention in which the disputing parties accept the offer of a third party to recommend a solution for their controversy. Mediation has long been a part of international law, frequently involving the use of an international commission, against a number of companies and GI, relating to the termination of a distribution agreement in October 1995 and claiming damages of US$39,750,000. The process is at an early stage. The UK Inland Revenue Inland Revenue Noun (in Britain and New Zealand) a government department that collects major direct taxes, such as income tax Noun 1. has indicated to Gallaher that it will deny relief for UK corporation tax purposes in respect of interest payable by Gallaher on its borrowings taken out in connection with the demerger demerger n (Comm) → Abspaltung f, Demerger m (or any refinancing Refinancing An extension and/or increase in amount of existing debt. thereof). Gallaher believes that the Inland Revenue's position is incorrect, and Gallaher intends to claim tax relief for the interest and, if necessary, challenge the Inland Revenue's position during any subsequent tax audit and in the courts. Fortune Brands, Inc. has agreed to indemnify To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their policyholders against damage caused by such things as fire, theft, and flooding, which Gallaher for 50% of the taxes attributable to such possible loss of tax relief, if any, subject to a maximum indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from of (pound)65m, as well as 50% of the tax, if any, incurred by Gallaher on this indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. payment. Gallaher Group Plc Independent Review Report to Gallaher Group Plc Introduction We have been instructed by the Company to review the financial information set out on pages 11 to 16 and we have read the other information contained in the interim report for any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the Financial Services Authority The Financial Services Authority ("FSA") is an independent non-departmental public body and quasi-judicial body that regulates the financial services industry in the United Kingdom. Its main office is based in Canary Wharf, London, with another office in Edinburgh. require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures Analytical Procedures is one of financial audit skill which help an auditor understand the client's business and changes in the business, to identify potential risk areas and to plan other audit procedures. to the financial information and the underlying financial data, and based thereon there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that , assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information for the six months ended June 30, 2001. PricewaterhouseCoopers Chartered Accountants London September 4, 2001 Gallaher Group Plc Cautionary statement This announcement includes forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the US Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . All statements other than statement of historical fact included in this announcement, including, without limitation, statements regarding Gallaher's future financial position, strategy, projected sales, costs and results, plans, litigation outcomes and timetables, ability to complete the acquisition of Austria Tabak Aktiengesellschaft, and if completed, the successful integration of Austria Tabak Aktiengesellschaft into our group, and objectives of management for future operations, may be deemed to be forward-looking statements. Although Gallaher believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors could cause actual results to differ materially from Gallaher's expectations including, without limitation, changes in general economic conditions, foreign exchange rate fluctuation Fluctuation A price or interest rate change. , competitive product and pricing pressures, the impact of excise tax Excise Tax 1. An indirect tax charged on the sale of a particular good. 2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS. Notes: 1. increases, regulatory developments, the uncertainties of litigation, difficulties in completing and integrating acquisitions and production or distribution disruptions, as well as other uncertainties detailed from time to time in Gallaher's filings with the US Securities and Exchange Commission. The risks included here are not exhaustive. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, investors should not assume that we agree with any statement or report issued by any analyst irrespective of irrespective of prep. Without consideration of; regardless of. irrespective of preposition despite the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility. Definitions The terms "Gallaher" and "Group" refer to Gallaher Group Plc and its subsidiaries. The term "Liggett-Ducat" refers to the Liggett-Ducat group of companies. The term "Austria Tabak" refers to Austria Tabak Aktiengesellschaft. The term "BAT" refers to British American Tobacco British American Tobacco Plc (LSE: BATS, AMEX: BTI, KLSE: BAT) is the second largest listed tobacco company in the world. It is based in London, England and is a constituent of the FTSE 100 Index with a market capitalisation of over £29 billion as of June 2005. p.l.c. The term "Fortune Brands" refers to Fortune Brands, Inc. (formerly American Brands, Inc.). |
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