| Thu 15 Nov 2007, 9:00 | | SAB - SABMiller Plc - Interim announcement |
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SAB
SOSAB
SAB - SABMiller Plc - Interim announcement
SABMiller Plc
JSEALPHA CODE: SAB
ISSUER CODE: SOSAB
ISIN CODE: GB0004835483
SABMiller
INTERIM ANNOUNCEMENT
SABMILLER REPORTS STRONG GROWTH IN FIRST HALF
SABMiller plc, one of the world`s leading brewers with operations and
distribution agreements in over 60 countries across six continents, today
reports its interim (unaudited) results for the six months to 30 September 2007.
Operational Highlights
Group lager volumes up 15% to 135 million hectolitres (hl), organic growth of
11%
EBITA up 14%, and 10% on an organic constant currency basis
Double digit volume growth in Europe with EBITA up 29%
Miller returns to growth in the US with organic sales to retailers up 1.4% -
EBITA up 19%
Lager volumes in Latin America up 8%, in line with expectations - investment in
brands and distribution depress margin in the current period
Africa & Asia lager volumes increase by 29% - driven by China and India
South Africa lager volume growth of 2% despite the expected loss of premium
volumes
Increased capital investment to provide for continuing growth
Sept Sept Change March
2007 2006 % 2007
US$m US$m US$m
Revenue (a) 10,781 9,344 15 18,620
EBITA (b) 2,036 1,781 14 3,591
Adjusted profit before tax (c) 1,773 1,533 15 3,154
Profit before tax 1,579 1,378 14 2,804
Adjusted earnings (d) 1,036 846 22 1,796
Adjusted earnings per share (d)
US cents 69.1 56.6 22 120.0
UK pence 34.5 30.5 13 63.4
SA cents 492.0 385.2 28 847.2
Basic earnings per share (US cents) 63.9 52.9 20 110.2
Interim dividend per share (US 16.0 14.0 14
cents)
Graham Mackay, Chief Executive Officer of SABMiller, said:
"This has been a good start to the year, demonstrating the strength of our brand
portfolio and the health of our businesses. We have delivered another excellent
performance in Europe, a pleasing return to growth in North America, and our
Asian businesses have continued their momentum and made market share gains. At
the second anniversary of our Bavaria transaction, our volumes have grown
strongly in Latin America and our investment plans remain on track."
Revenue excludes the attributable share of associates` revenue of US$1,242
million (2006: US$1,052 million).
Note 2 provides a reconciliation of operating profit to EBITA which is defined
as operating profit before exceptional items and amortisation of intangible
assets (excluding software) but includes the group`s share of associates`
operating profit, on a similar basis. EBITA is used throughout the interim
announcement.
Adjusted profit before tax comprises EBITA less net finance costs of US$258
million (2006: US$242 million) and share of associates` net finance costs of
US$5 million (2006: US$6 million).
A reconciliation of adjusted earnings to the statutory measure of profit
attributable to equity shareholders is provided in note 5.
Segmental EBITA performance 2007 Reported Organic,
EBITA growth % constant
US$m currency
growth
%
Latin America 438 13 2
Europe 622 29 17
North America 300 19 19
Africa and Asia 277 16 13
South Africa: Beverages 405 (2) 3
South Africa: Hotels and Gaming 58 32 38
Corporate (64) - -
Group 2,036 14 10
BUSINESS REVIEW
The start to the year reflects the momentum in SABMiller`s developing markets,
which are demonstrating stronger and more sustainable growth than in previous
economic cycles. Improving GDP levels and government finances and moderate rates
of inflation are supporting greater local infrastructure investment, which in
turn is enhancing consumer disposable income. The group`s premium portfolio
strategy has also enabled it to capture value from the global drift to higher
margin products in its developing and developed markets, as consumers continue
to trade up. Despite challenging comparative growth rates during the comparable
six months of last year and higher input costs in the current period, the
business has reported organic growth in lager volumes of 11% and an increase in
EBITA of 10% on an organic, constant currency basis. As expected, the group
EBITA margin decreased slightly to 16.9%, 20 basis points below the prior year,
reflecting the change in mix of our segmental profits together with higher
marketing investment and input costs. Industry wide commodity cost increases
have been significant with the impact varying across regions reflecting
differing currency strengths and local sourcing conditions. In aggregate, our
price increases and productivity have offset these input cost rises.
These results, in aggregate, continue to demonstrate the value of the group`s
diverse and strong brand portfolios, which include some 200 local and regional
beers. Total beverage volumes were 159 million hectolitres (hl). Total reported
lager volumes were up 15% to 135 million hl, including the impact of
acquisitions in China and India.
Miller Brewing Company delivered improved results in the US as a result of its
strategy to migrate the business` brand portfolio to higher margin, higher
growth segments. EBITA for the period was 19% higher than the prior year,
driven primarily by price increases and higher volumes, and includes a
favourable cost adjustment of US$16 million in respect of the prior year. Total
sales to retailers (STRs) grew by 1.4% on an organic basis and by 5.9% on a
reported basis, against a US beer industry which, excluding imports, grew at
1.0%. The flagship brand, Miller Lite, returned to solid growth, posting a 2.1%
gain in STRs, at the same time increasing its average case pricing by 2.1%, some
50 basis points ahead of its largest light beer competitor. Miller`s worthmore
brand portfolio also delivered a strong performance.
After six years of double digit EBITA growth, Europe has recorded another
excellent performance with organic constant currency EBITA growth of 17%. This
was driven by volume growth and market share gains in Poland, Russia and
Romania, assisted by warm weather across Eastern Europe during the first
quarter. Europe`s premium brands recorded 13% volume growth, reflecting
successful initiatives to capture value from consumer trends towards premium
products. This growth in higher margin brands, in addition to price increases
and efficiency gains, mitigated the impact of significant increases in the cost
of raw materials, real wage increases and the negative mix effect of the strong
growth in cans in certain markets.
At the second anniversary of the Bavaria acquisition, the implementation of our
strategy to renovate the beer category in Latin America remains on track,
although the speed and scale of the initiatives being implemented has led to
some inevitable market dislocation during the period. Lager volume growth of 8%
for the half year is in line with the group`s medium term expectations,
notwithstanding the high comparatives in the prior period and a slowdown in
spending on consumables in Colombia. The group remains confident that the
substantial activity underway to transform the category will deliver significant
volume and margin growth in the medium term.
The group`s joint-venture in China, CR Snow, continued its very strong
performance, with organic volume growth of 22%, well ahead of the wider Chinese
beer market. All regions posted growth, with market share gains in the Central
and North Eastern provinces. The national brand, Snow, which now accounts for
over 70% of volumes, is expected to become the world`s second largest beer brand
by volume within calendar year 2007. In India, our business grew strongly,
reporting lager volume growth of 28%. Capacity expansion and the integration of
last year`s Foster`s India acquisition represent key areas of progress during
the period. Momentum within Africa continued, with favourable economic
conditions driving good growth in Tanzania, Mozambique and Angola, supported by
ongoing brand renovations and improved execution in both sales and distribution.
Lager volumes in South Africa grew by a pleasing 2% despite the termination of
the Amstel brand licence in March 2007. The expected loss of premium volumes
was mitigated by strong growth in Castle Lite and the successful launch of a new
premium brand offering, Hansa Marzen Gold, which already represents some 3% of
volumes for the half year. Mainstream lager volumes grew by 5%, assisted by the
absence of the National Lottery over the six month period. Total soft drink
volumes were up an impressive 11% as the business also benefited from a robust
economic environment, with GDP growing by 5%.
On 9 October 2007, SABMiller and Molson Coors Brewing Company announced that
they had signed a letter of intent to combine the U.S. and Puerto Rico
operations of their respective subsidiaries, Miller and Coors, in a joint
venture. The transaction will create a stronger, brand-led U.S. brewer with the
scale, resources and distribution platform to compete more effectively in the
increasingly competitive U.S. marketplace. Definitive agreements are expected to
be signed in December 2007, but regulatory clearance is not expected before mid
2008.
Reported EBITA of US$2,036 million was up by 14% and included a 4% contribution
from favourable weighted average currency rates. Net cash generated from
operations before working capital movements was 13% above the prior year,
illustrating the overall strength of the trading performance and our strong cash
characteristics. The group`s gearing decreased during the period to 43.5% from
45.8% at year end. Earnings benefited from currency strength in some major
markets and lower tax rates in certain jurisdictions. Adjusted earnings and
adjusted earnings per share are up by 22%, to US$1,036 million and 69.1 US cents
respectively for the first six month period. An interim dividend of 16 US cents
per share, a 14% increase, will be paid to shareholders on 21 December 2007.
OUTLOOK
We have delivered a good first half performance, benefiting from the weighting
of our portfolio of businesses towards emerging markets, and a focus on
developing our premium brands. We are continuing to invest in our businesses to
drive revenues, which, together with ongoing productivity gains, are offsetting
industry wide cost pressures. We expect to make progress in the balance of the
year but face a more challenging environment.
Enquiries
SABMiller plc
Tel: +44 20 76590100
Sue Clark
Director of Corporate Affairs
Mob: +44 7850 285471
Gary Leibowitz
Senior Vice President, Investor Relations
Mob: +44 7717 428540
Nigel Fairbrass
Head of Media Relations
Mob: +44 7799 894265
A live webcast of the management presentation to analysts will begin at 9.00am
(GMT) on 15 November 2007.
This announcement, a copy of the slide presentation and video interviews with
management are available on the SABMiller
plc website at www.sabmiller.com . Video interviews with management can also be
found at www.cantos.com.
High resolution images are available for the media to view and download free of
charge from www.newscast.co.uk
Copies of the press release and detailed Interim Announcement are available from
the Company Secretary at the Registered Office, or from 2 Jan Smuts Avenue,
Johannesburg, South Africa
Registered office: SABMiller House, Church Street West, Woking, Surrey GU21 6HS
Incorporated in England and Wales (Registration Number 3528416)
Telephone: +44 1483 264000
Telefax: +44 1483 264117
OPERATIONAL REVIEW
LATIN AMERICA
Financial Summary Sept 2007 Sept 2006 %
US$m US$m
Revenue 2,453 2,012 22
EBITA* 438 387 13
EBITA margin (%) 17.8 19.2
Sales volumes (hl 000)
Lager 17,757 16,460 8
Soft drinks 9,144 9,730 (6)
Soft drinks - organic 9,144 9,284 (2)
*In 2007 before exceptional items of US$52 million (30/09/2006: US$24 million)
being integration and restructuring costs in Latin America, less the net profit
on the sale of soft drink and juice businesses in Costa Rica and Colombia
respectively.
The implementation of our strategy to renovate the beer category in the region
is on track with good initial signs of success. Lager volume growth of 8% for
the half year has been achieved, notwithstanding high comparatives in the prior
period, and we remain confident that our initiatives to transform the category
will deliver significant volume and profit margin growth in the medium term.
Reported EBITA performance for the first half has been aided by favourable
exchange rates. Organic constant currency EBITA growth was 2%, reflecting
substantial upfront investment in brand renovations and new brand launches.
Higher US dollar raw materials costs were offset by local currency appreciation,
pricing and productivity benefits. The EBITA margin declined by 140 basis
points, including 40 basis points from changes to invoicing of distribution
costs. These changes have also increased reported revenue growth by 200 basis
points but have no net effect on EBITA.
Lager volumes in Colombia increased by almost 8%, with slower growth recorded in
the latter part of the period, as higher consumer credit costs impacted spending
on consumables, and as the business started cycling high comparative growth
numbers. Beer`s share of the alcohol market has increased steadily over the
period. Renovation of our brand portfolio has further widened the appeal of the
beer category and the recent upgrade of the market-leading Aguila brand, re-
launched with a new packaging design in an enlarged 330ml bottle, has led to
brand volumes increasing 9%. In the premium segment, volume growth has been
encouraging and Club Colombia grew by 50% in the half year. With the
introduction of the national pricing model in December last year, retail mark-
ups and regional pricing variability were reduced. Structural route-to-market
changes and an increase in the sales force numbers and trade marketing
capabilities are being implemented, with increased focus on extracting
operational efficiencies and improving service reliability. The speed and scale
of the initiatives being implemented including major changes to the route-to-
market has led to some market dislocation over the period and had a minor impact
on volumes. Investment in production capacity has progressed and the new Valle
brewery outside Cali will be commissioned by the end of the calendar year,
increasing capacity by 2.2 million hl. Further capital has been invested in
product quality, in distribution, and in upgrading bottles.
Our Peru operations have achieved lager volume growth of 10% despite
unseasonably cold weather and an earthquake in August which lowered volume
momentum towards the end of the period. There has been continuing strong price
discounting by competition especially with the entry of a low-priced brand from
a new competitor. Our flagship brand Cristal continues to show positive momentum
following its relaunch, but has been affected by the intense competition and our
overall market share fell to 88% in September, on a monthly basis, from 92% in
March 2007. The business continues to invest in marketing, brand renovation,
improving capability at the point of sale and capacity.
Trading at our Ecuador operation was difficult with the loss of six trading days
due to "dry" election days. Lager volumes grew by 4% with the flagship
mainstream brand Pilsener growing at 5% over very strong comparatives in the
prior period. Pilsener was relaunched in the latter part of September while
activities to improve visibility and availability continue. Our Club brand was
also relaunched and positioned in the premium segment.
In Panama our lager volumes grew by over 12% in a market that has grown by 10%.
Both our flagship brands Atlas and Balboa were successfully relaunched and prior
year above-inflation price increases have further boosted revenue. Minority
interests of 6.7% were acquired, increasing our effective interest to 95%.
Lager volumes in Honduras grew by 3%, aided by growth in the premium segment,
while soft drinks reported growth of 9%. In El Salvador our soft drink market
share has grown by nearly one percentage point to 47.7%. Lager volumes have
grown by nearly 4% off high growth in the prior period, driven by the premium
Golden Light brand, which continues to show double digit growth.
Our integration activities in the South America region are drawing to a close
with a final exceptional charge recorded in the period of US$52 million. This
includes a US$17 million net profit on the disposal of the juice business in
Colombia and soft drinks business in Costa Rica, which have been completed in
the period.
EUROPE
Financial summary Sept 2007 Sept 2006 %
US$m US$m
Revenue 2,876 2,279 26
EBITA 622 485 29
EBITA margin (%) 21.6 21.3
Sales volumes (hl 000)
Lager 25,715 23,041 12
Europe achieved an excellent result with lager organic volumes up 12% and EBITA
growth of 29%. Volumes were assisted by warm weather in the earlier months, with
Poland, Russia and Romania all delivering strong double digit volume increases.
While volume growth moderated in the later months, most operations improved
market share over the half year. Reported EBITA growth of 29% was boosted by
currency translation gains and was 17% up on an organic constant currency basis.
There were significant increases in raw material costs, real wage increases and
the continued growth of can volumes in certain markets. The pricing environment
during the period under review has shown some signs of improvement.
In Poland, strong economic fundamentals as well as generally warmer weather
underpinned 8% growth in the beer market. Our domestic volumes were up 14% and
market share for the six month period improved. Tyskie, Poland`s leading brand
with annual volumes of 5.7 million hectolitres and market share over 16%
continued its strong recovery and grew 11% while Zubr, the second biggest brand
in the market, was up 23% with upgraded brand imagery, new packaging and
increased media and trade presence. In the local premium segment, Lech was 12%
ahead with strong trade activation utilising associations with music and active
lifestyles. Our flavoured beer Redd`s, with its three variants, is the fastest
growing brand in the premium segment. Expansion projects currently under way
will increase overall annual capacity to over 17 million hl by next summer.
Volumes in the Czech Republic were up 3%, slightly ahead of the market, and
market share improved slightly. Improved sales mix has been achieved reflecting
the continued focus on premium and mainstream brands. All brands have benefited
from a comprehensive packaging upgrade over the past 18 months including labels,
proprietary bottles, new crates, cans, multipacks and all secondary packaging.
Pilsner Urquell grew 5%, supported by a successful on-trade outlet expansion
programme focused on high visibility outlets, and tailored shopper activation in
hypermarkets. A new specialty beer, Master, introduced in draught in April has
been well accepted by the on-trade as a super premium to complement the existing
portfolio. Volumes of our largest brand, Gambrinus, were slightly down as we
deliberately withdrew from competitive rounds of discounting. Kozel continued
its strong momentum and was up by 21%. In order to address the sharp escalation
in the cost of brewing raw materials, price rises averaging 5.8% have been
announced.
In Russia volumes were up 18%, ahead of the beer market which grew by an
estimated 14%, reflecting the combined effects of warmer spring weather and
improving consumer spending. Real income growth is driving share gains for the
premium segment. Miller Genuine Draft was 21% ahead, driven by expanding
distribution of the new half litre bottle and Zolotaya Bochka, the fastest
growing local premium brand, was up 22% buoyed by focused marketing investment.
Redd`s grew by 31% supported by strong brand communication targeted at female
consumers. New initiatives with distributors targeting smaller cities have
started to increase reach, with the sales force and cooler placements expanded
significantly to increase retail coverage in more than 120,000 outlets.
Construction of the new brewery at Ulyanovsk,
1,000 km east of Moscow, is on schedule to open early in 2009 with an initial
capacity of 3 million hl and the ability to expand further as required.
In Italy, with generally warmer weather and a modestly improving economy, the
beer market grew by an estimated 1%. Against this, Birra Peroni has delivered
overall domestic volume growth of 2% as branded volumes gained 4% and private
label volumes were reduced by 24% with the continuation of the managed exit from
this segment. Focus on the on-trade, in the more affluent North, has led to
volume growth in this region of 7%. This performance has been achieved with
above-inflation price increases implemented early in the year. Our premium brand
Nastro Azzurro was up 8%, completing ten quarters of market share growth, and
premiumisation of the brand continues with selected prestige sponsorships and
the launch of limited edition packs. Peroni volumes were 6% higher than prior
year, with extensive activation of national football and rugby team
sponsorships, expansion of draught particularly in the Northern provinces, and
significant packaging renovation.
In Romania our volumes surged 37% with market share up 450 basis points to
24.9%, in a market up 12%, driven by a robust economy and growing consumer
spending. Now largely freed of the capacity constraints which applied during
the first half of last year, our portfolio is better matched to consumer demand
through mainstream and economy PET offerings supported by anchor distributors,
improved marketing and in trade execution. Our local premium brand Ursus Premium
grew by 15% and its on-premise share stands at 15%, while Timisoreana Lux was up
67% boosted by the new two litre PET pack, and is now the market leader with
annual sales of well over 2 million hl. These two brands are now the top two
brands in the important on-premise channel. Production capacity is being further
expanded to 6.3 million hl.
In Hungary the fiscal austerity measures continue to impact domestic
consumption, and there are no signs yet of an end to the intense price
discounting. Despite this, and the introduction of PET offerings by two
competitors, our volumes grew 4%, ahead of a declining market.
In the UK we continue to build on last year`s success, with volumes up 42%
against an overall market where volumes have fallen. Peroni Nastro Azzurro grew
33% with new packs, a successful national advertising campaign, and a
significant increase in draught installations. Our Polish brands, Tyskie and
Lech, introduced last year, have been successfully integrated into the portfolio
and are performing very strongly.
NORTH AMERICA
Financial summary Sept Sept %
2007 2006
US$m US$m
Revenue 2,782 2,632 6
EBITA* 300 253 19
EBITA margin (%) 10.8 9.6
Sales volumes (hl 000)
Lager - excluding contract brewing 26,191 24,693 6
- contract brewing 4,065 5,224 (22)
Soft drinks 54 49 10
Lager - domestic sales to retailers (STRs) 24,556 23,177 6
* In 2007 including an amount of US$16m from a settlement with Ball Metal
Beverage Container Corporation in respect of can purchases in the prior year
(2006: nil).
Miller Brewing Company drove improved results in the period through disciplined
execution of its strategy to migrate the brand portfolio to higher margin,
higher growth segments, while aggressively controlling costs to continue
investments in brand marketing and product innovation.
Solid volume and pricing performance for the flagship Miller Lite brand, strong
overall portfolio pricing and mix gains, with improved volume performance from
higher margin brands, combined to produce a 3.9% increase in domestic net
revenue per barrel.
During the period, US beer industry shipments to wholesalers (STWs) grew by
1.6%. Excluding imports, the US industry grew by 1.0%. Miller`s US domestic
sales to retailers (STRs) increased by 5.9% over the six months and 1.4% on an
organic basis, while reported domestic STWs increased by 6.7%. Contract brewing
volumes were lower by 22%, due primarily to Miller`s acquisition of the Sparks
and Steel Reserve brands last year which were previously brewed under contract,
and were down only 5% on an organic basis.
Miller Lite returned to solid growth in the period, posting a 2.1% increase in
STRs supported by a strong marketing campaign focused on product intrinsic
values. Miller Lite was up 3.3% in the on-premise channel and average case
pricing was up 2.1% across all channels, 50 basis points more than its largest
domestic light beer competitor.
After just six weeks of market testing, Miller decided in April to fast track a
national launch of Miller Chill, its new chelada-style light beer. The brand
reached 74% off-premise and 30% on-premise distribution by 1 August 2007 with
strong consumer trial and repeat purchase fuelling its success. Miller Chill
provided significant incremental volume and margin enhancement as it reached a
0.8% value share during the peak summer sales season. While the brand is
demonstrating expected seasonality, as at the end of October 2007 it had
achieved STRs of 380,000 barrels, and it is well on its way to exceeding the
first year retail volume target of 400,000 barrels.
Miller`s worthmore brand portfolio grew volumes in the high-single digits. This
strong performance was driven by 27% growth of the Leinenkugel`s franchise,
following the continued rollout of the Sunset Wheat variant, which is now
available in 42 states, as well as the regional launch of Summer Shandy. Peroni
Nastro Azzurro grew by 54% in the US using its global Italian style positioning.
Sparks volume grew by 10.8% on a proforma basis during its first full year in
the Miller system.
Miller High Life also returned to growth, with STRs up 1.0% on the back of a
strong national marketing campaign focused on common sense values and average
case prices were up 2.9% in supermarkets nationally. The Milwaukee`s Best
franchise STRs declined 4.0% in the face of strong competitive pressure in the
economy segment. The declining trend for Miller Genuine Draft STRs continued
with volumes down 9.3%, in line with its market segment. Icehouse STRs were up
2.0%, a significant trend improvement following new brand positioning.
Total revenue increased by 5.8% versus the prior period, while US domestic
revenue excluding contract brewing increased by 10%. Brewing materials costs
were up compared to the prior year as grain, barley and other ingredient costs
increased.
EBITA for the period was 19% higher than the prior year, driven primarily by
price increases and higher volumes, and includes a retrospective cost
adjustment. In October 2007 Miller settled a dispute with the Ball Metal
Beverage Container Corporation, which will result in a one-time payment to
Miller of some $70 million, a portion of which is attributable to our contract
brewing partners. An amount of US$16 million relates to materials supplied to
Miller during the prior financial year and this benefit has been included in the
period under review. The settlement also includes a one-off gain of US$17
million which will be reported in the second half in respect of other
contractual changes. The balance attributable to Miller is being recognised as
normal costs of goods sold, across both halves of the current year.
Miller`s EBITA margin increased to 10.8% from 9.6%, as unit revenue
improvements, favourable mix and the effect of the Ball settlement exceeded
increases in marketing and other costs. Marketing investment will remain at a
high level in the second half as we invest behind brand momentum and
innovations.
AFRICA & ASIA
Financial summary Sept Sept %
2007 2006
US$m US$m
Group revenue (including share of 1,703 1,356 26
associates)
EBITA 277 240 16
EBITA margin (%) 16.3 17.7
Sales volumes (hl 000)*
Lager 52,830 40,854 29
Lager organic 49,406 40,854 21
Soft drinks 4,193 6,914 (40)
Soft drinks - organic 4,193 3,438 22
Other alcoholic beverages 2,966 3,126 (5)
* Excludes Castel lager volumes of 8,441 hl 000 (2006: 7,563 hl 000) and soft
drinks of 7,256 hl 000 (2006: 6,659 hl 000). Soft drinks volumes include
sparkling and non-sparkling beverages.
The strong growth in Africa & Asia continued in the period under review, with
lager volume growth of 29% (representing organic growth of 21%) and reported
EBITA growth of 16%, despite currency weakness in certain of our countries.
EBITA margin reduced from 17.7% to 16.3% as a result of the higher growth in
lower margin Asia markets and a slight reduction in Africa margins due to rising
costs.
AFRICA
Momentum within Africa continued in the first half with organic lager growth of
6% and total organic volume growth of 7%, both excluding Zimbabwe. Underlying
this performance is continued economic growth in most countries, improved
execution in both sales and distribution and ongoing brand renovations.
Tanzania achieved lager volume growth of 8% in the six months. Performance was
driven by an improving economy, improved distribution and market place
activities including the re-formulation of the premium Ndovu Lager to 100% malt,
the introduction of new long neck bottle for Kilimanjaro and the launch of Eagle
lager in the North East aimed at capturing share at the subsistence end of the
market. The launch of Eagle will be rolled out on a national basis later in the
year.
Mozambique continued its excellent performance by posting lager growth of 8%,
its fourth consecutive first half year period of similar growth. The
performance was underpinned by continued economic development, a stable currency
and a well balanced brand and pack portfolio that provides the consumer with
multiple brand and pack options at differing price points. A new brewhouse was
commissioned late in the prior year and a number of capacity projects have
delivered improved operating efficiencies.
Angola continues to grow rapidly with a buoyant economy and our soft drink
business continues its strong growth, recording 12% volume growth despite supply
side constraints. Profitability was impeded by the ending of an import tax
holiday and higher can volumes which carry lower margins. Results for this year
include our share of earnings from the recently privatised Empresa de Cervejas
N`gola, our brewery in Southern Angola, which is performing ahead of expectation
and is currently undergoing a capacity expansion.
Botswana has returned to growth in both lager and soft drinks operations. The
economic pressure and inflationary impacts that followed the 2005 devaluations
have largely been absorbed and are no longer impacting performance. Lager
volumes are up 11% and soft drinks up 19%. We have completed the brand
renovation of the market leading lager, St. Louis, and have recently launched a
new returnable lager bottle aimed at reducing the cost per serving to the
consumer.
Castel performed well with robust economic conditions in the countries in which
they operate underpinning 10% total volume growth, and strong growth was
recorded in its key markets of Cameroon, Ethiopia and Angola.
ASIA
China continued its strong performance with underlying organic volume growth of
22%, ahead of industry growth. All regions posted growth over the prior period,
with the North East and Central regions out-performing the others despite
increased competitor activity. The Snow brand extended its position as China`s
number one brand by volume with a 9% overall market share and it now represents
over 70% of the brand portfolio.
Input cost increases were evident and, while prices were increased in some
regions, this led to overall margin pressure during the period. In addition the
ongoing integration of new acquisitions and greenfield commissioning costs
further added to overall margin pressures.
The business disposed of its non core Southern region water business in May
2007, thus creating a focused lager beer business.
India once again grew strongly in the first six months posting lager volume
growth of 28%, (up 20% on an organic basis) with industry growth of 16%. Ongoing
capacity expansion, the development of a well balanced brand portfolio and the
integration of last year`s Foster`s India acquisition represent key areas of
progress over the period, with volumes of the Fosters` brand up 47% on a
proforma basis.
SOUTH AFRICA: BEVERAGES
Financial summary Sept Sept %
2007 2006
US$m US$m
Group revenue (including share of associates) 2,016 1,950 4
EBITA 405 411 (2)
EBITA margin (%) 20.1 21.1
Sales volumes (hl 000)
Lager 12,478 12,237 2
Soft drinks 7,253 6,506 11
The South African economy continued its growth trend in the first six months of
the financial year, recording GDP growth of 5%. Consumer demand remained strong
and the suspension of the National Lottery was a favourable factor.
Lager volumes grew by 2% in the first half of the year. Total soft drink volumes
were up 11% as the soft drink business benefited from the positive economic
environment and some trade restocking in earlier months following carbon dioxide
shortages at the end of the prior year.
Our mainstream lager volumes grew by 5% and flavoured alcoholic beverages (FABs)
achieved strong growth. The expected loss in premium volumes was softened by the
strong growth in Castle Lite (up 74%) and the successful launch of a new premium
offering, Hansa Marzen Gold, in May 2007, which represents some 3% of volumes
for the half year, and the launch of Peroni Nastro Azzurro in draught format.
Volume growth was impacted by supply and production constraints experienced at
the end of the second quarter, compounded by reduced production flexibility
during new brand and pack introductions, including the implementation of our
mainstream renovation programme.
Price increases in January 2007 in lager and soft drinks, which were below
inflation, together with organic volume growth increased revenue by 8% in
constant currency. Revenue growth reflects negative sales mix in lager and the
faster growth of soft drinks.
Margins were adversely affected by higher raw material and packaging input
costs, driven by rising dollar commodity prices, exacerbated by a weaker rand
during the period, compared to the prior year. Input costs for the full year are
expected to show further increases as higher priced glass imports impact
packaging costs.
Distribution costs were higher as our direct delivery customer base increased in
line with our main market penetration initiative. Outlets serviced increased by
7% in the first half of this year to over 21,500. Despite significant progress
being made earlier in the year in licensing outlets, administrative delays at
local government level have slowed progress. Distribution costs also rose from
coastal breweries having to partially supply inland sales areas with non-
returnable packs.
Marketing investments were made in brand and pack renovations and new product
development. Castle received a packaging upgrade across all packs as did Hansa
Pilsner, which was renovated to match the contemporary Hansa Marzen Gold
packaging. Extensive new product development work undertaken in the first half
of the year will deliver further innovations in the market over the next twelve
months. The phased replacement of the 750ml returnable mainstream bottle
commenced in April 2007, and to date, three of our seven breweries are producing
mainstream brands in the new bottle and our consumers` response has been
positive.
Constant currency EBITA growth of 3% reflects the impact of higher raw material
and distribution costs as well as the investment in market facing initiatives.
EBITA margins are 100 basis points lower at 20.1%, also reflecting the change in
sales mix with lower premium lager volumes and higher mainstream lager volumes
in the period.
During the first six months the negative impact of the termination of the Amstel
brand on SA Beverages earnings has been mitigated by the unavailability of the
product in the market in the first quarter as well as the successful launch of
our new premium brand, Hansa Marzen Gold. Consequently, we have revised our
estimate of the impact on current year EBITA from US$80 million to between
US$40m and US$50m, which will impact EBITA and margin mainly in the second half
as the brand has recently returned to the market in bottle form.
Sales of Appletiser continued to show strong volume growth, up 25%, with double
digit growth recorded in South Africa and internationally. Distell has grown in
both its domestic and international markets, primarily in the cider, ready to
drink and spirits categories. Profitability has also been improved by operating
efficiencies.
SOUTH AFRICA: HOTELS AND GAMING
Financial summary Sept Sept %
2007 2006
US$m US$m
Group revenue (share of associates) 193 167 16
EBITA 58 44 32
EBITA margin (%) 30.1 26.6
Revenue per available room (Revpar) - US$ 68.29 58.46 17
The group is a 49% shareholder in the Tsogo Sun group, which reported a good
first half year result with an increase of 32% in EBITA over the prior period.
The South African economy continued to grow with consumer spending and demand
for hotel accommodation remaining high. The gaming division enjoyed robust
growth during the period with new gaming capacity and market growth influencing
results. Good occupancy levels continue to be achieved, with strong growth in
room rate improving revpar by 17% over the prior period.
FINANCIAL REVIEW
ACCOUNTING POLICIES
The accounting policies followed are the same as those published within the
Annual Report and Accounts for the year ended 31 March 2007. The Annual report
and accounts for the year ended 31 March 2007 are available on the company`s
website, www.sabmiller.com.
SEGMENTAL ANALYSIS
The group`s operating results on a segmental basis are set out in the segmental
analysis of operations, and the disclosures are in accordance with the basis on
which the businesses are managed and according to the differing risk and reward
profiles. SABMiller believes that the reported profit measures - before
exceptional items and amortisation of intangible assets (excluding software),
and including associates on a similar basis (i.e. before interest, tax and
minority interests) - provide additional information on trends and allow for
greater comparability between segments. Segmental performance is reported after
the specific apportionment of attributable head office service costs.
ACCOUNTING FOR VOLUMES
In the determination and disclosure of reported sales volumes, the group
aggregates 100% of the volumes of all consolidated subsidiaries and its equity
accounted associates, other than associates where the group exercises
significant influence but primary responsibility for day to day management rests
with others (such as Castel and Distell). In these latter cases, the financial
results of operations are equity accounted in terms of IFRS but volumes are
excluded. Contract brewing volumes are excluded from total volumes; however
revenue from contract brewing is included within revenue. Reported volumes
exclude intra-group sales volumes.
ORGANIC, CONSTANT CURRENCY COMPARISONS
The group discloses certain results on an organic, constant currency basis, to
show the effects of acquisitions net of disposals and changes in exchange rates
on the group`s results. Organic results exclude the first twelve months`
results of acquisitions and the last twelve months` results of disposals.
Constant currency results have been determined by translating the local currency
denominated results for the period ended 30 September 2007 at the exchange rates
for the comparable period in the prior period.
ACQUISITIONS AND DISPOSALS
On 3 August, the group announced the acquisition of 99.96% of Browar Belgia Sp
zoo, the fourth largest brewer in Poland. The transaction is subject to
approval from the Office of Competition and Consumer Protection, which is
expected during December 2007.
On 9 October, SABMiller plc and Molson Coors Brewing Company announced that they
have signed a letter of intent to combine the US and Puerto Rico operations of
their respective subsidiaries, Miller and Coors, in a joint venture to create a
stronger, brand-led US brewer with the scale, resources and distribution
platform to compete more effectively in the increasingly competitive US
marketplace. The transaction is subject to negotiation of definitive agreements,
which is expected by the end of 2007. Closing of the transaction is also
subject to obtaining clearances from the US competition authorities and certain
other regulatory clearances and third-party consents, as required, and is not
expected before mid 2008.
During the period the group completed the disposals of its soft drinks business
in Costa Rica and the juice business in Colombia which were announced in the
prior year. Our associate in China also completed the disposal of a non-core
water business.
EXCEPTIONAL ITEMS
Items that are material either by size or incidence are classified as
exceptional items. Further details on the treatment of these items can be found
in note 3. Net exceptional charges of US$52 million have been recorded (2006:
US$27 million) during the period. These relate to final restructuring costs of
US$69 million (2006: US$27 million) incurred in Latin America, partially offset
by a net profit of US$17 million on disposal of soft drink businesses in Costa
Rica and Colombia.
BORROWINGS AND NET DEBT
Gross debt, comprising borrowings of the group together with the fair value of
derivative assets or liabilities held to manage interest rate and foreign
currency risk of borrowings, has increased to US$7,555 million from US$7,358
million at 31 March 2007. Net debt comprising gross debt net of cash and cash
equivalents has increased to US$7,054 million from US$6,877 million at 31 March
2007. An analysis of net debt is provided in note 8. The group`s gearing
(presented as a ratio of debt/equity) has decreased to 43.5% from 45.8% at 31
March 2007. On 16 July 2007, the group`s holding company for its South African
operations raised R1,600 million (approximately US$230 million) in 5-year notes.
The notes, issued under a R4,000 million Domestic Medium Term Note Programme,
are guaranteed by SABMiller plc and are listed on BESA, the South African Bond
Exchange. The net proceeds of the bond issue have been used to repay part of
existing loan facilities that were utilised by The South African Breweries Ltd.
The average borrowing rate for the total debt portfolio at 30 September 2007 was
7.9% (2006: 6.9%), compared to 7.6% at 31 March 2007.
FINANCE COSTS
Net finance costs increased to US$258 million (2006: US$242 million), reflecting
the change in the composition in net debt with more non US dollar related debt,
funding of the acquisition of minority interests in the second half of the prior
year and the increased interest rates noted above.
PROFIT BEFORE TAX
Profit before tax of US$1,579 million was up 14% on prior year, reflecting
performance improvements across the businesses, despite higher exceptional items
(as described above).
TAXATION
Our effective tax rate, 33.5%, is lower than the prior year period under review
(35.7%), and also lower than the prior year full year rate (34.5%). This
reflects a more favourable geographic mix of profits across the group, local
statutory rate reductions and ongoing management of our effective tax rate.
EARNINGS PER SHARE
The group presents adjusted basic earnings per share to exclude the impact of
the amortisation of intangible assets (excluding software) and other non-
recurring items, which include post-tax exceptional items, in order to present a
more meaningful comparison for the years shown in the consolidated financial
statements. Adjusted basic earnings per share of 69.1 US cents were up by 22%
on the prior period, reflecting the improved performance noted above. An
analysis of earnings per share is shown in note 5 to the financial statements.
CASH FLOW
Net cash generated from operating activities before working capital movements
(EBITDA) increased by 13%, to US$2,229 million, compared to the prior period.
The ratio of EBITDA to revenue decreased slightly in the period to 20.7% (2007:
21.0%).
RISKS AND UNCERTAINTIES
The principal risks and uncertainties for the first six months and remaining six
months of the financial year remain as reflected on page 9 of the 2007 Annual
Report. In addition there is a risk relating to the proposed joint venture
transaction concerning Miller and Coors in the US and Puerto Rico. The
transaction is subject to the receipt of consents and approvals from government
entities that could delay or prevent completion of the transaction or impose
conditions on the joint venture, which could result in an adverse effect on the
business or financial condition of the joint venture or on Miller if the
transaction does not proceed to completion, as well as on our business and
financial results.
CURRENCIES: SOUTH AFRICAN RAND/COLOMBIAN PESO
During the period, the rand strengthened by 5% against the US dollar and ended
at R6.89 to the US dollar compared to R7.29 at 31 March 2007, whilst the
weighted average rand/dollar rate weakened by 5% to R7.12 compared with R6.81 in
the prior period. The peso has strengthened by 8% against the US dollar ending
the period at COP2,023 to the US dollar, compared to COP2,190 at 31 March 2007
and the weighted average COP/dollar rate strengthened by 17% to COP2,030
compared with COP2,437 in the prior period.
DIVIDEND
The board has declared a cash interim dividend of 16 US cents per share. The
dividend will be payable on 21 December 2007 to shareholders registered on the
London and Johannesburg registers on 30 November 2007. The ex-dividend trading
dates will be 28 November 2007 on the London Stock Exchange and 26 November 2007
on the JSE Limited. As the group reports in US dollars, dividends are declared
in US dollars. They are payable in South African rand to shareholders on the
Johannesburg register, in US dollars to shareholders on the London register with
a registered address in the United States (unless mandated otherwise), and in
sterling to all remaining shareholders on the London register. Further details
relating to dividends are provided in note 6.
The rate of exchange applicable for US dollar conversion into both South African
rand and sterling was determined yesterday. The rate of exchange determined for
converting to South African rand was US$:ZAR = 6.6412 resulting in an equivalent
interim dividend of 106.2592 SA cents per share. The rate of exchange for
converting to sterling was GBP:US$ = 2.0752 resulting in an equivalent interim
dividend of 7.7101 UK pence per share.
From the commencement of trade on 15 November 2007 until the close of business
on 30 November 2007, no transfers between the London and Johannesburg registers
will be permitted, and from the close of business on 23 November 2007 until the
close of business on 30 November 2007, no shares may be dematerialised or
rematerialised.
This statement, which should be read in conjunction with the independent review
report of the auditors set out below, is made to enable shareholders to
distinguish the respective responsibilities of the directors and the auditors in
relation to the consolidated interim financial information, set out on pages 18
to 33, which the directors confirm has been prepared on a going concern basis.
The directors consider that the group has used appropriate accounting policies,
consistently applied and supported by reasonable and appropriate judgements and
estimates.
A copy of the interim report of the group is placed on the company`s website.
The directors are responsible for the maintenance and integrity of information
on the company`s website. Information published on the internet is accessible
in many countries with different legal requirements. Legislation in the United
Kingdom governing the preparation and dissemination of the financial statements
may differ from legislation in other jurisdictions.
The directors confirm that this condensed set of financial statements has been
prepared in accordance with IAS 34 as adopted by the European Union, and the
interim report herein includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8.
The directors of SABMiller plc are listed in the SABMiller plc Annual Report for
the year ended 31 March 2007. Ms Nancy De Lisi retired from office on 30 April
2007 and Mr Dinyar Devitre, nominated by Altria Group, Inc. to replace Ms De
Lisi was appointed to the board on 16 May 2007. A list of current directors is
maintained on the SABMiller plc website: www.sabmiller.com.
On behalf of the board
E A G Mackay
Chief executive
M I Wyman
Chief financial officer
15 November 2007
INDEPENDENT REVIEW REPORT OF HALF-YEARLY CONSOLIDATED FINANCIAL INFORMATION TO
SABMILLER plc
INTRODUCTION
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2007, which comprises the summarised income statement, summarised
balance sheet, statement of recognised income and expense, cash flow statement
and related notes. We have read the other information contained in the half-
yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements.
DIRECTORS` RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom`s Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
OUR RESPONSIBILITY
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity` issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom`s Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 November 2007
CONSOLIDATED INCOME STATEMENTS
For the six months ended 30 September
Notes Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 Audited US$m
Unaudited Unaudited
US$m US$m
Revenue 2 10,781 9,344 18,620
Net operating expenses (9,091) (7,829) (15,593)
Operating profit 2 1,690 1,515 3,027
Operating profit 1,742 1,542 3,120
before exceptional
items
Exceptional items 3 (52) (27) (93)
Net finance costs (258) (242) (428)
Interest payable and (354) (388) (668)
similar charges
Interest receivable 96 146 240
Share of post-tax 147 105 205
results of associates
Profit before taxation 1,579 1,378 2,804
Taxation 4 (497) (470) (921)
Profit for the 1,082 908 1,883
financial period
Profit attributable to 124 118 234
minority interests
Profit attributable to 958 790 1,649
equity shareholders
1,082 908 1,883
Basic earnings per 5 63.9 52.9 110.2
share (US cents)
Diluted earnings per 5 63.5 52.6 109.5
share (US cents)
All operations are continuing.
CONSOLIDATED BALANCE SHEETS
at 30 September
Notes 30/9/07 30/9/06 31/3/07
Unaudited Unaudited Audited US$m
US$m US$m
Assets
Non-current assets
Goodwill 13,783 12,678 13,250
Intangible assets 4,062 3,741 3,901
Property, plant and 7 7,433 6,169 6,750
equipment
Investments in 1,524 1,049 1,351
associates
Available for sale 50 42 52
investments
Derivative financial 37 72 34
instruments
Trade and other 190 95 181
receivables
Deferred tax assets 142 359 164
27,221 24,205 25,683
Current assets
Inventories 1,048 801 928
Trade and other 1,822 1,304 1,471
receivables
Current tax assets 105 52 103
Derivative financial 3 66 6
instruments
Loan participation - 190 -
deposit
Cash and cash 8 501 657 481
equivalents
3,479 3,070 2,989
Assets in disposal - - 64
groups held for sale
3,479 3,070 3,053
Total assets 30,700 27,275 28,736
Liabilities
Current liabilities
Derivative financial (21) (4) (5)
instruments
Borrowings 8 (1,227) (1,157) (1,711)
Trade and other (3,012) (2,493) (2,746)
payables
Current tax (513) (354) (429)
liabilities
Provisions (282) (205) (266)
(5,055) (4,213) (5,157)
Liabilities directly - - (19)
associated with
disposal groups held
for sale
(5,055) (4,213) (5,176)
Non-current
liabilities
Derivative financial (310) (136) (204)
instruments
Borrowings 8 (6,174) (6,326) (5,520)
Trade and other (312) (61) (269)
payables
Deferred tax (1,440) (1,537) (1,393)
liabilities
Provisions (1,190) (1,265) (1,173)
(9,426) (9,325) (8,559)
Total liabilities (14,481) (13,538) (13,735)
Net assets 16,219 13,737 15,001
Equity
Share capital 9 158 158 158
Share premium 10 6,162 6,123 6,137
Merger relief reserve 10 3,395 3,395 3,395
Other reserves 10 1,177 (78) 466
Retained earnings 10 4,688 3,593 4,250
Total shareholders` 15,580 13,191 14,406
equity
Minority interests 10 639 546 595
Total equity 16,219 13,737 15,001
CONSOLIDATED CASH FLOW STATEMENTS
For the six months ended 30 September
Notes Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 Ayduted
Unaudited Unaudited US$m
US$m US$m
Cash flows from
operating
activities
Cash generated from 11 2,128 2,152 4,018
operations
Interest received 104 94 231
Interest paid (378) (347) (719)
Interest element of - (1) -
finance lease
payments
Tax paid (447) (371) (801)
Net cash from 1,407 1,527 2,729
operating
activities
Cash flows from
investing
activities
Purchase of (850) (462) (1,191)
property, plant and
equipment
Proceeds from sale 42 25 110
of property, plant
and equipment
Purchase of (34) (240) (270)
intangible assets
Purchase of (5) - (3)
investments
Proceeds from sale - 1 1
of investments
Proceeds from sale - - 81
of associates
Proceeds on 71 - 7
disposal of share
in subsidiaries
Acquisition of - (145) (131)
subsidiaries (net
of cash acquired)
Purchase of shares (2) (34) (200)
from minorities
Purchase of shares (29) (8) (186)
in associates
Dividends received 47 73 102
from associates
Dividends received - 1 1
from other
investments
Net cash used in (760) (789) (1,679)
investing
activities
Cash flows from
financing
activities
Proceeds from the 25 24 38
issue of shares
Purchase of own (9) (8) (30)
shares for share
trusts
Proceeds from 2,679 3,710 5,126
borrowings
Repayment of (2,725) (3,702) (5,663)
borrowings
Capital element of (2) (9) (7)
finance lease
payments
Decrease in loan - - 200
participation
deposit
Net cash receipts 2 - 42
on net investment
hedges
Dividends paid to (537) (473) (681)
shareholders of the
parent
Dividends paid to (87) (68) (161)
minority interests
Net cash used in (654) (526) (1,136)
financing
activities
Net cash from (7) 212 (86)
operating,
investing and
financing
activities
Effects of exchange (18) 26 (18)
rate changes
Net (decrease) / (25) 238 (104)
increase in cash
and cash
equivalents
Cash and cash 294 398 398
equivalents at 1
April
Cash and cash 8 269 636 294
equivalents at
period end
CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSES
For the six months ended 30 September
Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 Audited
Unaudited Unaudited US$m
US$m US$m
Currency translation 812 (302) 362
differences on foreign
currency net investments
Actuarial gains/(loss) on - - (5)
defined benefit plans
Fair value moves on - - 7
available for sale
investments
Tax on items taken directly - - 2
to equity
Net investment hedges (90) 106 (2)
Net profits/(losses) 722 (196) 364
recognised directly in
equity
Profit for the period 1,082 908 1,883
Total recognised income for 1,804 712 2,247
the period
- attributable to equity 1,662 606 2,010
shareholders
- attributable to minority 142 106 237
interests
NOTES TO THE FINANCIAL STATEMENTS
BASIS OF PREPARATION
The financial information comprises the unaudited results of SABMiller plc for
the six months ended 30 September 2007 and 30 September 2006, together with the
audited results for the year ended 31 March 2007. The financial information in
this report is not audited and does not constitute statutory accounts within the
meaning of s240 of the Companies Act 1985 (as amended). The board of directors
approved this financial information on 15 November 2007. The annual financial
statements for the year ended 31 March 2007, which represent the statutory
accounts for that year have been filed with the Registrar of Companies. The
auditors` report on those accounts was unqualified and did not contain a
statement made under s237(2) or (3) of the Companies Act 1985.
The unaudited financial information in this interim announcement has been
prepared in accordance with the Disclosure and Transparency Rules of the
Financial Services Authority, and with IAS 34 `Interim Financial Reporting` as
adopted by the European Union. The interim financial information should be read
in conjunction with the annual financial statements for the year ended 31 March
2007, which have been prepared in accordance with IFRSs as adopted by the
European Union.
The subsidiary and associated undertakings in the group operate in the local
currency of the country in which they are based. From a presentational
perspective, the group regards these operations as being US dollar-based as the
transactions of these entities are, insofar as is possible, evaluated in US
dollars. In management accounting terms all companies report in US dollars. The
directors of the company regard the US dollar as the presentational currency of
the group, being the most representative currency of its operations. Therefore
the consolidated interim financial statements are presented in US dollars.
ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 March 2007, which were published in
June 2007, as described in those financial statements. The financial statements
are prepared under the historical cost convention, except for the revaluation to
fair value of certain financial assets and liabilities, share based payments,
and pension assets and liabilities.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the financial year ending 31 March 2008.
- IFRS 7 Financial Instruments: Disclosures, IAS 1 Amendments to Capital
Disclosures, and IFRS 4 Insurance Contracts revised implementation guidance. As
this interim report contains only condensed financial statements, and as there
are no material financial instrument related transactions in the period, full
IFRS 7 disclosures are not required at this stage. The full IFRS 7 disclosures,
including the sensitivity analysis to market risk and capital disclosures
required by the amendment of IAS 1, will be given in the annual financial
statements.
- IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in
Hyperinflationary Economies. This interpretation is not relevant for the group.
- IFRIC 8 Scope of IFRS 2. This interpretation has not had any impact on the
recognition of share-based payments in the group.
- IFRIC 9 Reassessment of Embedded Derivatives. This interpretation has not had
any impact on the group.
- IFRIC 10 Interim Financial Reporting and Impairment. This interpretation has
not had any impact on the group.
SEGMENTAL INFORMATION (UNAUDITED)
Revenue
The following table provides a reconciliation of group revenue (including share
of associates` revenue) to segment revenue.
Six months Segment Share of Group Segment Share of Group
ended 30 revenue asso- revenue revenue asso- revenue
September: 2007 ciates` 2007 2006 ciates` 2006
US$m revenue US$m US$m revenue US$m
2007 US$m 2006 US$m
Latin 2,453 - 2,453 2,003 9 2,012
America
Europe 2,876 - 2,876 2,279 - 2,279
North 2,782 - 2,782 2,632 - 2,632
America
Africa and 869 834 1,703 681 675 1,356
Asia
South
Africa:
- Beverages 1,801 215 2,016 1,749 201 1,950
- Hotels - 193 193 - 167 167
and Gaming
South 1,801 408 2,209 1,749 368 2,117
Africa:
Total
10,781 1,242 12,023 9,344 1,052 10,396
Year ended
31 March:
Latin 4,373 19 4,392
America
Europe 4,078 - 4,078
North 4,887 - 4,887
America
Africa and 1,455 1,219 2,674
Asia
South
Africa:
- Beverages 3,827 447 4,274
- Hotels - 340 340
and Gaming
South 3,827 787 4,614
Africa:
Total
18,620 2,025 20,645
OPERATING PROFIT
The following table provides a reconciliation of operating profit (segment
result) to operating profit before exceptional items.
Operating Excep- Opera- Operat- Excep- Operat-
profit tional ting ing tional ing
2007 US$m items profit profit items profit
2007 before 2006 2006 before
US$m excep- US$m US$m excep-
tional tional
items items
2007 2006 US$m
US$m
Six months
ended 30
September:
Latin 328 52 380 311 24 335
America
Europe 620 - 620 484 - 484
North 293 - 293 251 - 251
America
Africa and 133 - 133 124 - 124
Asia
South 380 - 380 387 - 387
Africa:
Beverages
Corporate (64) - (64) (42) 3 (39)
1,690 52 1,742 1,515 27 1,542
Year ended 2007 2007 2007
31 March:
US$m US$m US$m
Latin 746 64 810
America
Europe 706 24 730
North 366 - 366
America
Africa and 272 - 272
Asia
South 1,043 - 1,043
Africa:
Beverages
Corporate (106) 5 (101)
3,027 93 3,120
EBITA
The following table provides a reconciliation of operating profit before
exceptional items to EBITA.
Operating Share of Amortisation EBITA
profit before associates` of intangible 2007
exceptional operating assets US$m
Six months items profit before (excluding
ended 30 exceptional software) 2007
September: items 2007 US$m
US$m
Latin America 380 - 58 438
Europe 620 - 2 622
North America 293 - 7 300
Africa and 133 141 3 277
Asia
South Africa:
Beverages 380 25 - 405
Hotels and - 57 1 58
Gaming
South Africa: 380 82 1 463
Total
Corporate (64) - - (64)
Group 1,742 223 71 2,036
Operating Share of Amortisation EBITA
profit before associates` of intangible 2006
exceptional operating assets US$m
Six months items 2006 profit before (excluding
ended 30 US$m exceptional software) 2006
September: items 2006 US$m
US$m
Latin America 335 - 52 387
Europe 484 - 1 485
North America 251 - 2 253
Africa and 124 115 1 240
Asia
South Africa:
Beverages 387 24 - 411
Hotels and - 44 - 44
Gaming
South Africa: 387 68 - 455
Total
Corporate (39) - - (39)
Group 1,542 183 56 1,781
Year ended 31
March:
2007 US$m 2007 US$m 2007 US$m 2007
US$m
Latin America 810 - 105 915
Europe 730 - 3 733
North America 366 - 9 375
Africa and 272 193 2 467
Asia
South Africa:
Beverages 1,043 59 - 1,102
Hotels and - 100 - 100
Gaming
South Africa: 1,043 159 - 1,202
Total
Corporate (101) - - (101)
Group 3,120 352 119 3,591
The group`s share of associates` operating profit is reconciled to the share of
post-tax results of associates in the income statement as follows:
Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 US$m
US$m US$m
Share of associates` operating 223 183 352
profit
Share of associates` net (5) (6) (9)
finance cost
Share of associates` tax (55) (52) (102)
Share of associates` minority (16) (20) (36)
interests
147 105 205
Excise duties of US$2,187 million (2006: US$1,887 million) have been incurred
during the six months as follows: Latin America US$621 million (2006: US$497
million); Europe US$551 million (2006: US$442 million); North America US$468
million (2006: US$461 million); Africa and Asia US$201 million (2006: US$152
million) and South Africa US$346 million (2006: US$335 million).
Beer volumes increase during the summer months leading to higher revenues being
recognised in the first half of the year in the Europe and North America
segments. Due to the spread of the business between Northern and Southern
hemispheres, the results for the group as a whole are not highly seasonal in
nature.
The following table provides a reconciliation of EBITDA (the net cash inflow
from operating activities before working capital movements) before cash
exceptional items to EBITDA after cash exceptional items. A reconciliation of
group EBITDA after cash exceptional items can be found in note 11.
Six months EBITDA Excep- EBITDA EBITDA Excep- EBITDA
ended 30 before tional 2007 before tional 2006
September: cash items US$m cash items US$m
excep- 2007 excep- 2006
tional US$m tional US$m
items items
2007 2006
US$m US$m
Latin America 545 (10) 535 493 (17) 476
Europe 732 - 732 577 - 577
North America 372 - 372 325 - 325
Africa and Asia 172 - 172 159 - 159
South Africa: 453 - 453 458 - 458
Beverages
Corporate (35) - (35) (28) (3) (31)
2,239 (10) 2,229 1,984 (20) 1,964
Year ended 31 2007 2007 2007
March: US$m US$m US$m
Latin America 1,147 (25) 1,122
Europe 936 (7) 929
North America 510 - 510
Africa and Asia 340 - 340
South Africa: 1,200 - 1,200
Beverages
Corporate (65) (5) (70)
4,068 (37) 4,031
EXCEPTIONAL ITEMS
Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 Audited US$m
Unaudited Unaudited
US$m US$m
Subsidiaries` exceptional
items included in operating
profit:
Latin America (52) (24) (64)
Integration and (69) (24) (64)
restructuring costs
Profit on sale of 17 - -
subsidiaries
Europe - - (24)
Integration and - - (7)
restructuring costs
Profit on sale of land in - - 14
Italy
Adjustment to goodwill - - (31)
Corporate
Bavaria integration costs - (3) (5)
Exceptional items included (52) (27) (93)
in operating profit
Taxation credit 20 8 30
2007
LATIN AMERICA AND CORPORATE
Integration and restructuring costs associated with the consolidation of Bavaria
of US$69 million were incurred during the period (six months ended 30/09/06:
US$27 million; year ended 31/03/07: US$69 million).
A net US$17 million profit on disposal has been recognised in Latin America on
the disposal of soft drinks businesses in Costa Rica and Colombia in the six
months ended 30 September 2007.
TAXATION
Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 Audited US$m
Unaudited Unaudited
US$m US$m
Current taxation 466 384 780
Charge for the period1 486 377 833
Adjustments in respect of (20) 7 (53)
prior years
Withholding taxes and other 40 48 119
taxes
Total current taxation 506 432 899
Deferred taxation (9) 38 22
Charge for the period2 (11) 33 82
Adjustments in respect of 8 5 5
prior years
- Recognition of deferred - - (31)
tax asset in connection with
the acquisition of Birra
Peroni
Rate change (6) - (34)
Total taxation 497 470 921
Effective tax rate, before 33.5 35.7 34.5
amortisation of intangibles
(excluding software) and
exceptional items (%)
The effective tax rate is calculated including share of associates` operating
profit before exceptional items and share of associates` tax before exceptional
items. This calculation is on a basis consistent with that used in prior years
and is also consistent with other group operating metrics.
The current tax charge for the period includes a UK corporation tax charge of
US$Nil (six months ended 30/9/06: US$4 million; year ended 31/3/07: US$Nil).
The deferred tax charge for the period includes a UK corporation tax credit of
US$9.3 million (six months ended 30/9/06: US$5 million; year ended 31/3/07: US$9
million).
EARNINGS PER SHARE
Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 Audited US
Unaudited Unaudited cents
US centes US cents
Basic earnings per share 63.9 52.9 110.2
Diluted earnings per share 63.5 52.6 109.5
Headline earnings per share 65.7 55.4 116.4
Adjusted basic earnings per 69.1 56.6 120.0
share
Adjusted diluted earnings 68.7 56.3 119.3
per share
30/9/07 30/9/06 31/3/07
Unaudited Unaudited Audited
Millions of Millions of Millions of
shares shares shares
The weighted average number
of shares was:
Ordinary shares 1,503 1,498 1,500
ESOP trust ordinary shares (4) (4) (4)
Basic shares 1,499 1,494 1,496
Dilutive ordinary shares 10 9 9
from share options
Diluted shares 1,509 1,503 1,505
The calculation of diluted earnings per share excludes 6,046,925 (2007:
6,039,681) share options that were antidilutive for the year because the
exercise price of the option exceeds the fair value of the shares during the
period, and 6,818,498 (2007: 7,707,155) share options that were anti-dilutive
for the year because the performance conditions attached to the options have not
been met. These options could potentially dilute earnings per share in the
future.
324,374 share options and awards were granted after 30 September 2007 and before
the date of signing of these financial statements.
ADJUSTED AND HEADLINE EARNINGS
The group has also presented an adjusted earnings per share figure to exclude
the impact of amortisation of intangible assets (excluding capitalised software)
and other non-recurring items in order to present a more useful comparison for
the years shown in the consolidated financial statements. Adjusted earnings per
share has been based on adjusted headline earnings for each financial year and
on the same number of weighted average shares in issue as the basic earnings per
share calculation. Headline earnings per share has been calculated in accordance
with the UK Society of Investment Professionals (UKSIP) formerly the Institute
of Investment Management and Research Statement of Investment Practice No.1
entitled `The Definition of Headline Earnings`. The adjustments made to arrive
at headline earnings and adjusted earnings are as follows:
Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 Audited US$m
Unaudited Unaudited
US$m US$m
Profit for the financial 958 790 1,649
period attributable to
equity holders of the parent
(Profit) / loss on - (1) (10)
derivatives on capital items
1
Amortisation of intangible 71 56 119
assets (excluding
capitalised software)
Impairment of property, - 2 13
plant and equipment
Profit on sale of (17) - -
subsidiaries
Profit on sale of property, (4) (6) (20)
plant and equipment
Adjustment to goodwill - - 31
Tax effects of the above (23) (17) (43)
items
Minority interest effects - 3 2
Headline earnings (basic) 985 827 1,741
Integration / reorganisation 51 19 55
costs (net of tax effects)
Adjusted earnings 1,036 846 1,796
This does not include all derivative movements but includes those in relation to
capital items for which hedge accounting cannot be applied.
DIVIDENDS PAID AND PROPOSED
Dividends paid are as follows:
Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/06 Audited US
Unaudited Unaudited cents
US cents US cents
Prior year final dividend 36.0 31.0 31.0
paid per ordinary share
Current year interim - - 14.0
dividend paid per ordinary
share
The interim dividend declared of 16.0 US cents per ordinary share is payable on
21 December 2007 to ordinary shareholders on the register as at 30 November 2007
and will absorb an estimated US$241 million of shareholders` funds.
PROPERTY, PLANT AND EQUIPMENT
Net book value at:
Six months Six months Year ended
ended ended 31/3/07
30/9/07 30/9/07 Audited US$m
Unaudited Unaudited
US$m US$m
At beginning of period 6,750 6,337 6,337
Exchange adjustments 355 (223) 98
Additions 795 450 1,232
Disposals (45) (19) (94)
Depreciation (410) (355) (737)
Other movements (12) (21) (86)
At end of period 7,433 6,169 6,750
Contracts placed for future capital expenditure not provided in the financial
statements amount to $606 million.
NET DEBT
Net debt is analysed as follows:
As at As at As at
30/9/07 30/9/06 31/3/07
Unaudited Unaudited Unaudited
US$m US$m US$m
Borrowings (7,154) (7,260) (7,029)
Borrowings-related (154) (96) (127)
derivative financial
instruments
Overdrafts (232) (206) (187)
Finance leases (15) (17) (15)
Gross debt (7,555) (7,579) (7,358)
Loan participation deposit - 190 -
Cash and cash equivalents 501 657 481
(excluding overdrafts)
Net debt (7,054) (6,732) (6,877)
Cash and cash equivalents on the Balance Sheet are reconciled to cash and cash
equivalents on the Cash Flow as follows:
As at As at As at
30/9/07 30/9/06 31/3/07
Unaudited Unaudited Audited US$m
US$m US$m
Cash and cash equivalents 501 657 481
(Balance Sheet)
Overdrafts (232) (206) (187)
Legal right of offset - 185 -
Cash and cash equivalents 269 636 294
(Cash Flow)
ANALYSIS OF NET DEBT
Net debt is analysed as follows:
Total Borrow- Deriva- Finan- Total Net
cash and ings tive cial gross debt
cash US$m financial leases borrow- US$m
equiva- instru- US$m ings
lents ments US$m
US$m US$m
At 31 March 294 (7,029) (127) (15) (7,171) (6,877)
2007
Exchange (18) (161) - (1) (162) (180)
adjustments
Cash flow (7) 46 (9) 2 39 32
Other - (10) (18) (1) (29) (29)
movements
At 30 269 (7,154) (154) (15) (7,323) (7,054)
September
2007
SHARE CAPITAL
Ordinary Non-voting Deferred Nominal
shares of convertible shares of value
10 US shares of GBP1 each
cents each 10 US cents
each
`000 `000 `000 US$m
At 1 April 2006 1,497,845 77,368 50 158
Issue of shares - 2,823 - - -
share purchase,
option and award
scheme
At 30 September 1,500,668 77,368 50 158
2006
Issue of shares - 1,520 - - -
share purchase,
option and award
scheme
At 31 March 2007 1,502,188 77,368 50 158
Issue of shares - 2,018 - - -
share purchase,
option and award
scheme
At 30 September 1,504,206 77,368 50 158
2007
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Share Share Merger Safari Foreign
capital premium relief and EBT currency
US$m US$m reserve shares translation
US$m US$m reserve*
US$m
At 1 April 2006 158 6,099 3,395 (655) 102
Currency - - - - (290)
translation
movements on
foreign currency
investments
Net investment - - - - 106
hedges - fair
value losses in
period
Deferred tax - - - - -
charge on items
taken to equity
Acquisitions - - - - - -
minority
interests
Other movements - - - - 4
Profit for the - - - - -
financial year
Dividends paid - - - - -
Issued capital - 24 - - -
Payment for - - - (8) -
purchase of own
shares for share
trusts
Equity settled - - - - -
share incentive
plans
At 30 September 158 6,123 3,395 (663) (78)
2006
At 31 March 2007 158 6,137 3,395 (683) 459
Currency - - - - 794
translation
movements on
foreign currency
investments
Net investment - - - - (90)
hedges - fair
value gains in
period
Other movements - - - - -
Profit for the - - - - -
financial year
Dividends - - - - -
Issued capital - 25 - - -
Payment for - - - (9) -
purchase of own
shares for share
trusts
Cash flow hedge - - - - 7
fair value
deferred to
equity
Equity settled - - - - -
share incentive
plans
At 30 September 158 6,162 3,395 (692) 1,170
2007
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY (continued)
Available Retained Total Minority Total
for sale earnings US$m interest equity
reserve* US$m US$m US$m
US$m*
At 1 April 2006 - 3,944 13,043 542 13,585
Currency - - (290) (12) (302)
translation
movements on
foreign currency
investments
Net investment - - 106 - 106
hedges - fair
value losses in
period
Deferred tax - (9) (9) - (9)
charge on items
taken to equity
Acquisitions - - - - (10) (10)
minority
interests
Other movements - (10) (6) (2) (8)
Profit for the - 790 790 118 908
financial year
Dividends paid - (473) (473) (90) (563)
Issued capital - - 24 - 24
Payment for - - (8) - (8)
purchase of own
shares for share
trusts
Equity settled - 14 14 - 14
share incentive
plans
At 30 September - 4,256 13,191 546 13,737
2006
At 31 March 2007 7 4,933 14,406 595 15,001
Currency - - 794 18 812
translation
movements on
foreign currency
investments
Net investment - - (90) - (90)
hedges - fair
value gains in
period
Other movements - (2) (2) - (2)
Profit for the - 958 958 124 1,082
financial year
Dividends - (537) (537) (98) (635)
Issued capital - - 25 - 25
Payment for - - (9) - (9)
purchase of own
shares for share
trusts
Cash flow hedge - - 7 - 7
fair value
deferred to
equity
Equity settled - 28 28 - 28
share incentive
plans
At 30 September 7 5,380 15,580 639 16,219
2007
* These are classified as `Other Reserves` on the Group Consolidated Balance
Sheet.
RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH GENERATED FROM OPERATIONS
Six months Six months Year ended
ended ended 30/9/06 31/3/07
30/9/07 Unaudited US$m Audited US$m
Unaudited
US$m
Profit for the year 1,082 908 1,883
Taxation 497 470 921
Share of post-tax (147) (105) (205)
results of associates
Interest receivable (96) (146) (240)
Interest payable and 354 388 668
similar charges
Operating profit 1,690 1,515 3,027
Depreciation:
Property, plant and 297 270 550
equipment
Containers 113 85 187
Container breakages, 11 11 44
shrinkage and write-
offs
Loss/(profit) on sale 8 (6) (6)
of property, plant and
equipment
Exceptional profit on - - (14)
sale of property, plant
and equipment (Europe)
Impairment of property, - 2 13
plant and equipment
Amortisation of 94 81 162
intangible assets
Net (gain) / loss from 3 (8) (2)
fair value hedges
(Gain) on disposal of (17) - -
subsidiaries
Dividends received from (1) (1) (1)
other investments
Charge with respect to 28 14 31
share options
Restructuring and - - 10
integration costs
(Latin America,
Corporate)
Adjustment to goodwill - - 31
(Europe)
Other non-cash 3 1 (1)
movements
Net cash generated from 2,229 1,964 4,031
operations before
working capital
movements (EBITDA)
Net inflow / (outflow) (101) 188 (13)
in working capital
Net cash generated from 2,128 2,152 4,018
operations
Cash generated from operations include cash outflows relating to exceptional
costs of US$10 million in respect of South America integration and restructuring
costs (six months ended 30/09/2006: US$20 million).
BUSINESS ACQUISITIONS AND DISPOSALS
There have been no material acquisitions or disposals during the period under
review.
RELATED PARTY TRANSACTIONS
The group`s significant related parties are its associates as described in the
SABMiller plc Annual Report for the year ended 31 March 2007. There have been
no material changes to the type of related party transactions described therein.
CONTINGENCIES AND COMMITMENTS
A ZAR1.6 billion interest-bearing bond was issued during the period under
review. The interest rate applicable to this bond is 9.935% pa. The bond is a
five year, bullet repayment bond with a semi-annual coupon, commencing on 19
July 2007, maturing on 19 July 2012.
Other than the above, there have been no material changes in contingencies and
commitments for the period under review.
SUBSEQUENT EVENTS
On 9 October, SABMiller plc and Molson Coors Brewing Company announced that they
had signed a letter of intent to combine the US and Puerto Rico operations of
their respective subsidiaries, Miller and Coors, in a joint venture to create a
stronger, brand-led US brewer with the scale, resources and distribution
platform to compete more effectively in the increasingly competitive US
marketplace. The transaction is subject to negotiation of definitive agreements,
which is expected by the end of 2007. Closing of the transaction is also
subject to obtaining clearances from the US competition authorities and certain
other regulatory clearances and third-party consents, as required, and is not
expected before mid 2008.
SABMILLER PLC
(Registration No. 3528416)
COMPANY SECRETARY
John Davidson
REGISTERED OFFICE
SABMiller House
Church Street West
Woking
Surrey, England
GU21 6HS
Telefax +44 1483 264103
Telephone +44 1483 264000
HEAD OFFICE
One Stanhope Gate
London, England
W1K 1AF
Telefax +44 20 7659 0111
Telephone +44 20 7659 0100
INTERNET ADDRESS
http://www.sabmiller.com
INVESTOR RELATIONS
investor.relations@sabmiller.com
Telephone +44 20 7659 0100
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
1 Embankment Place
London, England
WC2N 6RH
Telefax +44 20 7822 4652
Telephone +44 20 7583 5000
REGISTRAR (UNITED KINGDOM)
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, England
BR3 4TU
Telefax +44 20 8658 3430
Telephone +44 20 8639 2157 (outside UK)
Telephone 0870 162 3100 (from UK)
REGISTRAR (SOUTH AFRICA)
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg
PO Box 61051
Marshalltown 2107
South Africa
Telefax +27 11 370 5487
Telephone +27 11 370 5000
UNITED STATES ADR DEPOSITARY
The Bank of New York
ADR Department
101 Barclay Street
New York, NY 10286
United States of America
Telefax +1 212 815 3050
Telephone +1 212 815 2051
Internet: http:// www.bankofny.com
Toll free +1 888 269 2377 (USA & Canada only)
Date: 15/11/2007 09:00:25 Produced by the JSE SENS Department.
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