Principal Risks and Uncertainties

The principal risks and uncertainties to which the Group is exposed are unchanged from those identified in our 2008 Annual Report and Accounts. The principal risks and uncertainties, together with our approach to managing them, are set out in the Principal Risks and Operating Environment section of our 2008 Annual Report and Accounts, and cover the following areas: 

  • the degree of regulation in the Group’s markets;
  • the levels of excise duty applied in the many markets in which the Group operates;
  • the Group’s performance being dependent on key markets and customers;
  • the Group’s exposure to tobacco-related litigation;
  • the integration of Altadis raising liabilities or problems which affect the Group’s ability to integrate without significant disruption to either business;
  • the potential impact of competition law in the Group’s markets;
  • the levels of the Group’s borrowings and prevailing interest rates.

The Office of Fair Trading Investigation

As consistently reported in our Annual Reports from 2003 to 2008, the Office of Fair Trading (OFT) has been conducting an ongoing investigation into the retail pricing of tobacco products in the UK. On 25 April 2008, the OFT announced that it had issued a Statement of Objections (SO) to certain tobacco manufacturers and retailers, including Imperial Tobacco Limited. On 11 July 2008, the OFT announced that six companies had reached early resolution agreements and had agreed to pay individual penalties with a combined maximum value of £173.3 million.

Imperial Tobacco was not one of those companies. We take compliance with competition law very seriously and reject any suggestion that we have acted in any way contrary to the interests of consumers. Imperial Tobacco has co-operated fully with the OFT throughout and continues to do so. We provided our submission to the OFT responding to the allegations in August 2008 and await any further developments.

Looking Forward

It is the Board’s view that the principal risks and uncertainties surrounding the Group in the second half of the financial year remain those set out in the 2008 Annual Report and Accounts. There has been a material change in the economic conditions in the markets in which the Group operates, which may adversely impact the Group’s performance, but it is the Board’s opinion that the Group’s combination of product and geographic diversity, its leading positions in many markets, and the focus on cost efficiency and cash management are such that the Group is well positioned to manage these risks despite the uncertain external environment. The Board also considers that having taken into account the Group’s plans and financial commitments the Group has sufficient resources to meet its expected requirements over the next twelve months.