Adjusting items

6 Months Ended

Jun. 30, 2026

Analysis of income and expense [abstract]

3. Adjusting Items

Adjusting items are significant items of income or expense in profit from operations, net finance costs, taxation, the Group’s

share of the post-tax results of associates and joint ventures, diluted earnings per share, which individually or, if of a similar type,

in aggregate, are relevant to an understanding of the Group’s underlying financial performance because of their size, nature or

incidence. In identifying and quantifying adjusting items, the Group consistently applies a policy that defines criteria that are

required to be met for an item to be classified as adjusting. These items are separately disclosed in the segmental analyses or in

the notes to the accounts as appropriate.

The Group believes that these items are useful to users of the Group financial statements in helping them to understand the

underlying business performance and are used to derive the Group’s non-GAAP measures of adjusted profit from operations,

adjusted operating margin, adjusted net finance costs, adjusted taxation and adjusted diluted earnings per share, all of which are

before the impact of adjusting items and which are reconciled from profit from operations, diluted earnings per share, net

finance costs and taxation.

In addition, the non-GAAP measure of adjusted profit from operations is presented with the additional adjustment to reflect the

settlement of the Canadian litigation, and is referred to as "as adjusted for Canada"1. This measure is also reconciled from profit

from operations.

1.The adjustment in respect of Canada is discussed on pages 47 and 48, with the adjustment based upon a percentage (2026: 85%; 2025: 100%) of the net income after taxes earned from

all sources, excluding New Categories, in Canada.

Adjusting items included in profit from operations

Adjusting items are significant items in the profit from operations that individually or, if of a similar type, in aggregate, are

relevant to an understanding of the Group’s underlying financial performance.

In summary, in the six months ended 30 June 2026, the Group incurred £1,160 million (30 June 2025: £325 million) of adjusting

items within profit from operations:


		Six months ended 30 June
		2026	2025
		£m	£m
(a)	Restructuring	370	13
(b)	Amortisation and impairment of trademarks and similar intangibles	796	804
(b)	Impairment of goodwill	—	72
(c)	Credit in respect of Romania's other taxes	(2)	(22)
(c)	Credit in respect of settlement of historical litigations with ITG brands	(149)	—
(c)	Other adjusting items (including Engle)	171	30
(c)	Charges in connection with disposal of subsidiaries	12	—
(d)	Credit in respect of the Canada Approved Plans	(38)	(575)
	Charges in connection with disposal of associate	—	3
	Total adjusting items included in profit from operations	1,160	325

(a) Restructuring and integration costs

To further support our transformation and underpin investment initiatives to drive long-term sustainable profit and cash flow

growth, we are undertaking a structured time-bound programme (referred to as Fit2Win) to review processes and ways of

working which will generate efficiencies and facilitate faster, more agile and effective decision making.

Having commenced in 2025, the programme is expected to complete in 2027 and includes a comprehensive review of our

overhead optimisation opportunities, route to market and digitalisation in order to deliver more effective, data-driven digital ways

of working. The programme has also undertaken a global bottom-up review of our manufacturing assets and machinery, which

will facilitate an upgrade to more efficient, next generation technologies to support our ongoing transformation. Accordingly, we

have recognised an additional one-off, non-cash expense/charge of £228 million in 2026. During H1 2026, the programme has

also identified additional potential optimisation opportunities, with a further £100 million of costs expected to be incurred over

the life of the programme.

Including the above, we now expect associated one-off costs of approximately £950 million (being non-cash items of £330 million

and cash items of £620 million), with c.£840 million expected to be treated as adjusting items within adjusted profit from

operations.

By 30 June 2026, total costs of £482 million have been incurred since the programme commenced in 2025, with £459 million

treated as adjusting items within profit from operations, of which £370 million was recognised in the six months ended 30 June

2026.

(b) Amortisation and impairment of trademarks and similar intangibles

(b)(i) Amortisation

Acquisitions in previous years have resulted in the capitalisation of trademarks and similar intangibles, including those which are

amortised over their expected useful lives, which do not exceed 30 years. The element of the total amortisation and impairment

charge treated as an adjusting item was £796 million (30 June 2025: £804 million) and is included within depreciation,

amortisation and impairment costs in the income statement.

(b)(ii) Ongoing impairment review of trademarks and similar assets

The Group reviews and monitors the performance of its non-financial assets (including goodwill) in line with the requirements of

IAS 36 Impairment of Assets. In preparing the Half-Year Report for the six months ended 30 June 2026, the Group has assessed if

any impairment indicators exist requiring a further detailed impairment assessment to be undertaken.

In the U.S., no changes have occurred in the legislative environment, nor in the macro-economic environment, during the six

months ended 30 June 2026 that present an indicator of a potential impairment for either Reynolds American goodwill or for the

definite- or indefinite-lived brands.

As part of the standard year-end impairment process, a detailed impairment review will be undertaken for all trademarks in line with

IAS 36 Impairment of Assets. This will include the entire Reynolds American portfolio to ensure the book values remain supportable.

(b)(iii) Impairment of goodwill

In the six months ended 30 June 2026, no impairment trigger has been identified in respect of goodwill (including in respect of

the U.S. and Canada), having recognised a goodwill impairment charge of £72 million in the six months ended 30 June 2025 in

respect of the Peru cash-generating unit.

In the six months ended 30 June 2026, the Group incurred a net charge of £32 million (30 June 2025: £8 million) of other adjusting

items. These included:

–A credit of £149 million as the Group settled historical litigation with ITG Brands;

–A net loss associated with the disposal of the business in Cuba of £12 million;

–A credit of £2 million (30 June 2025: £22 million) in respect of the partial release of a provision recognised in December 2024 in

relation to an excise assessment of activities undertaken in the Ploiesti factory in Romania; and

–Other costs of £171 million (30 June 2025: £30 million), mainly related to foreign exchange reclassified from reserves to the

income statement as a consequence of the cessation of a physical presence in certain countries. In the six months ended 30

June 2025, other costs mainly related to litigation costs including Engle progeny cases.

(d) Changes in provision in relation to Canada Approved Plans

The Group's estimated share of the undiscounted future liability in relation to the court-sanctioned plan of compromise and

arrangement to resolve all Canadian tobacco litigation in relation to the Group and other parties (the Approved Plans) in Canada

has not materially changed.

The Group recognised a net credit of £38 million in the six months ended 30 June 2026 due to minor revisions to the

assumptions, including the pre-tax discount rate decreasing from 3.86% at 31 December 2025 to 3.79% at 30 June 2026. This

compares to a net credit of £575 million (in the six months ended 30 June 2025) mainly in respect of pricing and volume decline

assumptions.

Based on our current estimate, it is expected that payments in respect of our estimated share of the future liability will continue

for at least 40 years.

At 30 June 2026, net of translational FX movements, unwinding of discount and the above factors, the non-current provision for

the future payments is £2,752 million (31 December 2025: £2,794 million).

Within current trade and other payables, an amount of £83 million is due to be paid in the second half of 2026.

Management uses judgement to determine the key assumptions used to calculate the present value of the provision. Changes to

key assumptions can significantly impact the amount expected to be paid and the years over which payments are expected to be

made.

A combination of changes in several assumptions, including the future financial performance (excluding New Categories) of

Imperial Tobacco Canada Limited's and Imperial Tobacco Company Limited's (together, ITCAN) and each of the other companies

(JTI-MacDonald Corp (a subsidiary of Japan Tobacco International) and Rothmans, Benson & Hedges Inc. (a subsidiary of Philip

Morris International Inc.)) and the performance of the combustibles industry as a whole, may materially impact the provision.

Refer to note 4 for the unwinding of the discount in the six months ended 30 June 2026. Please refer to pages 319 to 320 of the

Group's Annual Report and Accounts for the year ended 31 December 2025 and pages 162 to 163 of the 2025 Form 20-F for

further information on the Approved Plans including the impact of possible changes to key assumptions.