| Thu 13 Nov 2008, 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
INTERIM ANNOUNCEMENT
13 November 2008
GOOD GROWTH ACHIEVED DESPITE DIFFICULT ENVIRONMENT
SABMiller plc, one of the world`s leading brewers with operations and
distribution agreements across six continents, today reports its interim
(unaudited) results for the six months to 30 September 2008.
OPERATIONAL HIGHLIGHTS
- Lager volumes up 3%(1), with organic volumes slightly ahead of the high
prior year base
- Organic constant currency revenue growth of 10%, with leading brands
enabling firm pricing
- Reported EBITA up 9%; up 2% on an organic constant currency basis
- Conditions and performance varied across business segments:
- Latin America performance mixed; EBITA(2) flat
- Europe organic lager volume growth of 2% on very high comparables; share
gains in Poland and Romania; EBITA(2) down 6%
- North America EBITA(2) up 18%, MillerCoors` integration on track
- Africa and Asia EBITA(2) up 7%; Africa lager volume growth remains
strong at 11%; firm pricing in China
- South Africa lager volumes down 1%; mix shifting towards mainstream
(1) Following the inception of the MillerCoors joint venture the group has
revised its volume definitions. Further details of these revised
definitions can be found in the Financial review on page 15.
(2) EBITA growth is shown on an organic constant currency basis.
Sept Sept March
2008 2007 2008
US$m US$m % change US$m
Revenue (a) 11,166 10,781 4 21,410
EBITA (b) 2,225 2,036 9 4,141
Adjusted profit before tax 1,860 1,773 5 3,639
(c)
Profit before tax 2,020 1,579 28 3,264
Adjusted earnings (d) 1,128 1,036 9 2,147
Adjusted earnings per share
(d)
- US cents 75.2 69.1 9 143.1
- UK pence 38.9 34.5 13 71.2
- SA cents 585.8 492.0 19 1,021.2
Basic earnings per share 94.8 63.9 48 134.9
(US cents)
Interim dividend per share 16.0 16.0 -
(US cents)
Graham Mackay, Chief Executive of SABMiller, said:
"Exceptional prior year volume growth and weakening consumer demand in
certain markets presented a challenging start to the year. However, we have
continued to drive revenue growth and offset higher input costs through firm
pricing while protecting volumes and increasing share in some key markets.
This performance demonstrates the advantage of our diversified global
footprint, the strength of our brands and operational capability. Our North
American joint venture, MillerCoors, has made a promising start and is on
track to deliver US$500 million per annum of cost savings by the third year
of combined operations."
a) Revenue excludes the attributable share of associates` and joint
ventures` revenue of US$3,056 million (2007: US$1,242 million).
b) 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` and joint ventures` operating profit, on a similar basis.
EBITA is used throughout the interim announcement.
c) Adjusted profit before tax comprises EBITA less adjusted net finance
costs of US$358 million (2007: US$258 million) and share of associates`
and joint ventures` net finance costs of US$7 million (2007: US$5
million).
d) A reconciliation of adjusted earnings to the statutory measure of profit
attributable to equity shareholders is provided in note 5.
September Organic,
constant
2008 Reported currency
Segmental EBITA performance EBITA growth growth
US$m % %
Latin America 474 8 -
Europe 725 16 (6)
North America 355 18 18
Africa and Asia 311 12 7
South Africa: Beverages 332 (18) (10)
South Africa: Hotels and Gaming 61 3 13
Corporate (33) - -
Group 2,225 9 2
BUSINESS REVIEW
The first half year results reflect the high comparable growth rates achieved
in the same period last year and the moderation of consumer demand in many of
SABMiller`s markets. However, across the group`s diversified global
footprint there were areas of good growth, driven by enhanced operational
execution and investment in brands. Pricing was generally strong
contributing to revenue growth of 10% on an organic constant currency basis.
- The emphasis across the Latin America region on raising the appeal of
the beer category continued to yield results, with the group`s share of
the alcohol market in the region increasing steadily as investment in
new packaging, coupled with improvements to sales and distribution
infrastructure, gained traction. However, the on-going impact of higher
lending rates on consumer confidence in Colombia has slowed volume
growth. Earnings have been impacted by commodity cost pressures,
competition in Peru and increased depreciation following our significant
capital investment programme.
- In Europe, performance was subdued following several years of strong
growth in volume and profit. Total organic lager volumes grew by 2% but
EBITA declined by 6% on an organic constant currency basis reflecting a
mixed picture across the region. Poorer weather, high distributor stocks
and stronger pricing constrained volume growth in most markets,
particularly Russia and the Czech Republic. Volumes in Romania and the
UK grew strongly. We have led industry pricing higher in most markets
and our revenue per hectolitre was up 6% on an organic constant currency
basis, but significant rises in input costs, general cost inflation,
higher investment and depreciation impacted margins.
- The North America segment delivered a strong performance with EBITA up
18% in the first half with a good contribution from Miller Brewing
Company in the first quarter and pleasing initial results from
MillerCoors following its inception on 1 July 2008. On a pro forma1
basis, MillerCoors` US sales to retailers (STRs) rose by 0.7% over the
three months to September after adjusting for an extra trading day. Net
revenue per barrel rose by 3% driven by robust growth of the Coors Light
brand and a good performance from the craft and import portfolios
incorporating Blue Moon, Leinenkugels and Peroni Nastro Azzurro.
MillerCoors is implementing its integration strategy across the business
and is confident of delivering its stated goal of achieving US$500
million per annum of cost synergies by the third year of combined
operations.
- 1)MillerCoors pro forma figures are based on results for Miller and
Coors` US and Puerto Rico operations reported under International
Financial Reporting Standards (IFRS) and US GAAP respectively for the
quarter ended 30 September 2007. Adjustments have been made to reflect
both companies` comparative data on a similar basis including
amortisation of definite-life intangible assets, depreciation reflecting
revisions to property, plant and equipment values and the exclusion of
exceptional items.
- Lager volumes in Africa increased by 11% in markets that have so far
been largely unaffected by the global financial conditions. Angola,
Botswana, Zambia, Tanzania and Mozambique all reported good volume
growth as their economies continued to expand and sales execution was
improved. Traditional beer saw record organic volume growth of 35%,
owing to good performances in Zambia, Malawi and Botswana. In China,
volume growth was ahead of the market as our associate, CR Snow,
recovered from a slow start to the year following the earthquake in
Sichuan and higher pricing. In India, overall market share declined and
in Australia our new venture is performing ahead of expectations.
- Lager volumes in South Africa were down 1% against the prior year in
which the group had less competition in the premium segment. Consumers
continued to feel the effects of higher food and fuel prices. Two price
increases and growth in the mainstream segment from brands such as Hansa
Pilsener and Castle Lager, have partially offset slower premium sales
and the adverse mix effects. However, continuing rises in raw material
and distribution costs, an increase in depreciation as well as some
losses on raw material forward exchange contracts contributed to a
decline in EBITA margin of 360 basis points. The company`s premium
brand portfolio was enhanced by the successful launch of new brands into
the market. Soft drinks volumes grew 2%.
Aggregated beverage volumes were 191 million hectolitres (hl). Aggregated
reported lager volumes were up 9% to 159 million hl including acquisitions in
the Netherlands and China. Reported EBITA of US$2,225 million was up by 9%
and included a benefit of 7% from favourable weighted average currency
exchange rates. The group EBITA margin decreased to 15.6%, 130 basis points
below the prior year, reflecting higher commodity costs and investment across
the group. The capital investment programme continued, increasing capacity
and operational efficiency with brewery expansions in Poland and Romania and
the ongoing construction of new breweries in Russia, Angola and Mozambique.
Net cash generated from operations before working capital movements (EBITDA)
was 5.6% above the prior year, supporting the continued capital investment.
The group`s gearing increased during the period to 53.6% from 49.7% at year
end. Adjusted earnings and adjusted earnings per share are up by 9%, to
US$1,128 million and 75.2 US cents respectively for the first six month
period. An interim dividend of 16 US cents per share will be paid to
shareholders on
5 December 2008.
OUTLOOK
We have achieved good growth over the period despite a difficult environment,
with underlying performance enhanced by beneficial currency movements. The
deterioration in global economic conditions is causing weakening consumer
demand in many of our markets. Cost pressures will continue and the strength
of the US dollar relative to the group`s major currencies is expected to
adversely affect reported results.
Our diversified geographical footprint and strong portfolio of brands puts us
in a strong competitive position. We are reviewing spending and investment
plans in the light of the current uncertain environment but, given our sound
financial position, we will continue to invest selectively to support future
growth.
Enquiries:
SABMiller plc Tel: +44 20 7659 0100
Sue Clark Director of Corporate Affairs Mob: +44 7850 285471
Gary Leibowitz Senior Vice President, Mob: +44 7717 428540
Investor Relations
Nigel Fairbrass Head of Media Relations Mob: +44 7799 894265
A live audiocast of the management presentation to analysts will begin at
9.30am (GMT) on 13 November 2008.
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
Following the inception of the MillerCoors joint venture the group has
revised its volume definitions. Further details can be found in the
Financial review on page 15. All current and prior period volume figures and
growth rates in the following operational reviews are presented under the new
volume definition.
LATIN AMERICA
Sept Sept
Financial summary 2008 2007 %
Group revenue (including share of 2,848 2,453 16
associates) (US$m)
EBITA* (US$m) 474 438 8
EBITA margin (%) 16.6 17.8
Sales volumes** (hl 000)
- Lager 18,260 17,757 3
- Soft drinks 9,467 9,144 4
- Soft drinks (organic) 9,467 9,058 5
*In 2008 before exceptional items of US$Nil million (2007: US$52 million
being integration and restructuring costs in Latin America of US$69 million
less the net profit on the sale of the soft drinks and juice businesses in
Costa Rica and Colombia of US$17 million respectively).
**Volume figures have been restated for the prior period following the
revision of the group`s volume definitions (see page 15).
The region faced a number of challenges in the first half of the year, most
notably in Colombia, and underlying EBITA performance in the period was
muted. The region delivered EBITA growth of 8% aided by favourable exchange
rates but on an organic constant currency basis EBITA was flat. Revenue per
hl on an organic constant currency basis increased by 7% but margins have
been impacted by aggressive competition in the economy segment in Peru,
increased commodity costs and higher depreciation as a result of the capital
investment programme. Fixed cost productivity across the region has been a
major area of focus and has partially mitigated the impact of these margin
pressures. The region continues to build differentiated portfolios and raise
the appeal of the beer category through activities such as the recent Club
Premium launch in Ecuador, the small pack innovation in Colombia and the
focus on the premium Cusquena brand in Peru. At the same time increased
attention is being focused on execution at the point of sale and revenue
enhancement.
Lager volumes in COLOMBIA decreased 3% against high comparatives and as a
result of pressures on discretionary disposable income from high interest
rates and increasing inflation. However, our share of the alcohol market has
increased steadily over the period and stood at 67% at the end of September,
a gain of 130 basis points over the prior year. Revenue growth benefited from
an 8% price increase late last year and we have executed another price
increase of 9% in October. There has been some displacement of volume from
Aguila to Poker in the mainstream segment but the volume of our worthmore
brands Club Colombia and Redd`s grew sharply. The first half has seen the
launch of a new Aguila pack in the Pacific region, a 225ml returnable bottle,
with initial volumes exceeding expectations. In the current environment,
increased focus has been placed on operational efficiencies and improving
service, and together with the benefit of pricing these measures resulted in
an improvement in EBITA margin. In line with the company`s strategy to focus
on the brewing and distribution only of beer and malted beverages, the first
half saw the company announce the disposal of its water brand, Brisa, for a
cash consideration of approximately US$90m. This transaction is expected to
be completed by the end of the financial year.
IN PERU volume growth has been robust in a highly competitive environment.
Lager volumes grew 10% with a particularly strong second quarter. Competition
remains fierce with our two major competitors continuing to discount heavily
and launch new brands, at low price points. During the first part of the
year, with multiple brand launches and competitive activity, the economy
segment grew to 30% of the market. We have been able to gain and hold clear
leadership in this rapidly growing segment with the Pilsen Trujillo brand,
despite selective price increases. In recent months the growth of the segment
has been contained and its share has fallen to 25%. Our overall market share
has stabilised since January and is currently 85%. Sales mix has been helped
by market share gains in our worthmore portfolio with the Cusquena brand
commanding a greater than 8% share. Overall revenue per hl was flat in
constant currency and margins were negatively impacted by commodity cost
pressures. Much work has been done on the portfolio strategy and market
mapping in Peru; new opportunities have been identified and are now being
actively pursued.
In ECUADOR the first half of the year saw management continue to focus on
building momentum through brand renovation and changes to the sales and
distribution processes as well as substantial cooler investment. These
initiatives were backed up by ongoing efforts aimed at achieving uniform
pricing to the consumer across the country. These strategies have reaped
rewards with lager volume growth of 14%. Outstanding growth was achieved by
our local worthmore brand, Club Premium, driven not only by innovative
marketing activation, but also more recently by the launch of the 550ml
returnable bottle. Our flagship mainstream brand Pilsener continued to
perform well following its renovation last year, growing at over 14%. New
tank capacity has been installed at the Guayaquil plant and the modernisation
of the Quito brewery is underway.
In PANAMA the re-launch of our mainstream brand Atlas has met with mixed
reaction in the market and this together with heavy discounting by our
competitors has affected brand volumes. However, the re-launch of our brand
Balboa has been successful with the brand growing strongly whilst growth of
worthmore brands has been achieved, albeit off a low base. Soft drinks have
performed well with growth of 10%.
Total volumes in HONDURAS grew by 7%, with growth in both lager and soft
drinks. Lager volumes grew by 6% driven by worthmore volumes with notable
performances from Barena and Miller brands, positively impacting mix. In June
a price increase averaging 8% was implemented. Increased cooler investment in
the trade, beer outlet penetration and third party sales support have also
assisted volume growth. Soft drinks volume growth was good at 8%, driven by
the company owned brand Tropical which grew at over 15%. This has resulted in
further market share gains with our share up 50 basis points on a 12 month
moving annual basis. However volumes are being affected by a slowdown in the
country`s economy with lower remittances from the USA and increased inflation
affecting disposable income. Soft drinks price increases were also
implemented on our main returnable glass pack (12 oz) as well as family PET
packs (2.5l and 3.0l).
With tough trading conditions across all sectors in EL SALVADOR, the first
half saw a decline of total volume of 1%, with soft domestic volumes
partially offset by growing export sales, while soft drinks growth in the
local market was subdued. High fuel and commodity prices, a slowing of
remittances from the USA and continued political uncertainty have combined to
soften growth. We continue to lead the soft drinks category with a 51% share,
a good increase over the prior year.
EUROPE
Sept Sept
Financial summary 2008 2007 %
Group revenue (including share of 4,010 2,876 39
associates) (US$m)
EBITA* (US$m) 725 622 16
EBITA margin (%) 18.1 21.6
Sales volumes** (hl 000)
- Lager 28,285 25,715 10
- Lager organic 26,219 25,715 2
* In 2008 before net exceptional costs of US$10 million (2007: US$Nil) being
the unwind of fair value adjustments on inventory following the acquisition
of Grolsch.
**Volume figures have been restated for the prior period following the
revision of the group`s volume definitions (see page 15).
EUROPE`S performance was subdued on an organic constant currency basis
following several years of strong growth in volume and profits. Total lager
volume growth was 10% while organic growth was 2%. The half year cycled a
strong comparative period when volumes grew 12% organically. Poorer weather,
high distributor stocks and increased industry pricing constrained volume
growth in most countries, particularly Russia and the Czech Republic, while
in Romania and the UK volumes grew strongly. Significant increases in input
costs particularly barley, malt and hops impacted margins. We have led
industry prices higher in most markets and our revenue per hl was up 6% on an
organic basis. Reported EBITA increased 16% benefiting from earlier strength
in eastern European currencies and the acquisition of Grolsch, while organic
constant currency EBITA declined 6%, as input cost pressures, general cost
inflation, increased investment and depreciation all impacted margin.
In POLAND, our domestic organic lager volumes were up 4% with all brands
ahead of market growth. Consumer demand slowed sharply in the second quarter
with total retail sales expanding at less than half the prior year`s rate.
This, together with a cooler summer, saw industry beer volumes for the first
half grow 1% compared with 8% in the prior period. Tyskie, the country`s
leading brand with a 16% share, achieved 5% growth assisted by a complete
renovation of its packaging and strong marketing centred on the Euro 2008
soccer championships and the Olympic Games. Premium brand Lech was also up 5%
with non-alcoholic variant Lech Free benefiting from the introduction of a
new sleek can, as did premium brand Redd`s, up 17%. Zubr was up 3% with the
introduction of new multi-packs. Our overall organic market share increased
190 basis points to 42%. The integration of Browar Belgia is complete and the
Wojak brand has recently been relaunched. In April, we increased prices by an
average of 4% which assisted in offsetting brewing raw material cost
increases. Capital expenditure is focused on completing the Tychy and Poznan
brewery expansions.
In the CZECH REPUBLIC, the beer industry has experienced a wave of
consolidation. We remain market leader, pursuing value rather than volume in
a market which declined 4% and our market share decreased marginally. However
revenue per hl is up 6%, reflecting our price increase in November 2007.
Noteworthy brand performances came from Kozel up 8% following its crate
upgrade and non-alcoholic Radegast Birell, up 14%, while mainstream Gambrinus
declined by 10%. This decline, mainly in the on-premise channel, is being
addressed with increased focus on higher value outlets. The iconic Pilsner
Urquell brand showed a small decline, mainly reflecting lower tourism in
Prague with the poorer summer weather and strong Czech currency.
Significantly higher commodity costs (barley, hops and fuel) impacted
margins. Capital expenditure has been directed at improving the export
capability at the Plzen brewery.
In ROMANIA, our volumes were up an encouraging 24% and our market share
improved by more than 3%. The beer industry grew 5% as consumer disposable
income has improved through real wage increases, access to credit and overall
economic growth. This excellent performance was supported by our full brand
portfolio, focused line extensions, much expanded off-premise channel
visibility and increased PET packaging availability. The key driver was a
31% growth in Timisoreana to reach 14% market share, with Ciucas up 19%
mainly through growth of its two litre PET package. In the premium segment,
Peroni Nastro Azzurro doubled its volume, Ursus was up 5% and Redd`s far
exceeded our expectations. Average selling prices have been increased by 8%,
which is ahead of consumer price inflation. Brewing capacity is being
expanded to 7 million hl.
In RUSSIA, the beer market slowed, with production statistics showing 3%
growth (prior year 14%). The market has been affected by a number of factors
including poor weather, sustained high inflation and, more recently, sharply
deteriorating economic conditions. Moscow and its surrounding region posted a
9% decline, according to AC Nielsen, while other regions showed some growth.
Our sales to retailers (STRs) showed small growth resulting in a 40 basis
point national market share gain to 6% but some share has been lost in the
premium segment because of our weight in the large Moscow premium market. The
beverage distribution channel generally has started to respond to the softer
market conditions and reduce wholesaler stocks, a trend that will continue
into the second half of the year. As a result, our sales to wholesalers
(STWs) have reduced in the first half by 4%. Zolotaya Botchka was down 8% and
Miller Genuine Draft (MGD) was down 20%. Pilsner Urquell, Redd`s and Holsten
all showed good growth driven by packaging innovation, key account
initiatives and regional distribution gains. Revenue per hl is up 12%
reflecting two price increases during the period. Costs have been impacted by
significant raw material increases, very high wage increases, rail tariffs up
over 40% and an excise increase of 32% in January. In June 2008, we acquired
LLC Vladpivo in the far-east region of Russia and in July we acquired CJSC
Sarmat in the Ukraine. The integration of both acquisitions is progressing
with production, technical and quality upgrade programmes in place. The
construction of our greenfield brewery at Ulyanovsk is continuing according
to plan.
In ITALY, the economy is stagnant and unemployment is increasing. The beer
market declined 6% while our branded volumes were down 2% with a market share
gain of 70 basis points. Brand Peroni was up 1% benefiting from our
sponsorship of the national soccer team at the European championships. Nastro
Azzurro declined 9% as consumers traded down. Trade marketing and
distribution advances in the affluent north of the country have improved
outlet rate of sales and numeric distribution. A new "club" bottle was
introduced enabling Nastro Azzurro to penetrate high-end outlets and brand
Peroni reinforced its gastronomy platform targeting key consumption
occasions. In July, a fire at the Bari brewery interrupted brewing and
damaged cellars, but business continuity actions ensured 96% on-time, in-full
order delivery.
In the NETHERLANDS, consumer confidence indicators are sharply lower and the
beer market decreased 2% mainly in the on-premise channel (down 4%). This
decline in the on-premise channel can be partly attributed to the smoking ban
introduced in July. Although volume declined 1%, our market share grew by 20
basis points. The launches of a new swing-top green bottle and the innovative
"Cheersch" home-draught system helped volumes. The pricing environment is
very challenging, in a highly concentrated retail environment, and a 30%
excise increase has been announced for January. Integration activities are on
track.
In HUNGARY, beer industry volumes contracted 7% as a result of deteriorating
macroeconomic conditions and the continuing impact of fiscal austerity
measures. Dreher`s volumes were down 11% partly reflecting wholesaler de-
stocking. Revenue per hectolitre is up 10% reflecting favourable pricing. In
the UNITED KINGDOM, the premium lager market continues its decline, down 3%.
Our volumes were up 17% with Peroni Nastro Azzurro ahead by 41% and Pilsner
Urquell up 19%.
NORTH AMERICA
30 Sept 30 Sept
Financial summary 2008 2007 %
Group revenue (including share of 2,916 2,782 5
joint ventures) (US$m)
EBITA* (US$m) 355 300 18
EBITA margin (%) 12.2 10.8
Sales volumes** (hl 000)
- Lager - excluding contract 25,282 26,191 (3)
brewing
- Lager - contract brewing *** 3,276 4,065 (19)
- Soft drinks 39 54 (28)
* In 2008 before an exceptional credit of US$437 million being the profit on
the deemed disposal of the Miller business and exceptional costs of US$23
million in relation to the integration and restructuring costs for
MillerCoors, together with the group`s share of MillerCoors` integration and
restructuring costs of US$17 million and the group`s share of the unwind of
the fair value inventory adjustment of US$7 million (2007: US$Nil).
** Volume figures have been restated for the prior period following the
revision of the group`s volume definitions (see page 15).
*** Includes 172 (hl 000) relating to our share of contract brewing volumes
produced by MillerCoors, the joint venture, on behalf of Miller Brewing
International (MBI). These volumes are included in the `lager - excluding
contract brewing` total when sold to third parties by MBI.
North America delivered a strong performance in the first half with a good
contribution from Miller Brewing Company in the first quarter and strong
initial results from MillerCoors following its inception on 1 July 2008.
Results in the segment were further enhanced by the realisation of some
profits on the sale of hops as surpluses in Miller were sold. EBITA was up
18% for the six months when compared to the prior year.
FIRST QUARTER
In the first quarter of our financial year, prior to the creation of the
MillerCoors joint venture, Miller Brewing Company achieved a strong increase
in EBITA, as a result of industry leading domestic net revenue per barrel and
effective cost management, despite softer volumes in Miller`s core markets.
Miller`s US domestic STRs were down 2.0% while reported STWs decreased by
0.6%, as distributor inventories increased ahead of the summer peak.
Contract brewing volumes were down 5.0%. Miller Lite STRs decreased 1.6% due
to high prior year comparables and volume declines in the on-premise channel.
Miller`s worthmore portfolio STRs increased 8.1% with an ongoing benefit from
the launching of Miller Chill and strong double-digit growth in Peroni Nastro
Azzurro. Miller High Life continued to perform well delivering a 0.9%
increase, and Steel Reserve grew 1.7%. The MGD 64 test in the Midwest and
West regions performed ahead of expectations leading to a national roll-out.
Domestic net revenue per barrel grew 3.3% driven mainly by favourable pricing
and brand mix, and Miller`s EBITA margin increased as a result of the higher
pricing, improved brand mix, and lower fixed costs despite pressure on input
costs and an increase in marketing investment.
SECOND QUARTER
The Miller Brewing Company and the Coors Brewing Company combined their US
and Puerto Rico operations with effect from 1 July 2008 to form MillerCoors.
In the three months to 30 September, on a pro forma basis1, MillerCoors US
STRs rose by 0.7% after adjusting for the extra trading day in the period
(2.3% unadjusted), whilst MillerCoors STWs declined by 0.5% due to reductions
in distributor inventory levels in the quarter.
The company`s flagship premium light brand STRs were up 1.4% (3.0%
unadjusted) versus the prior year. Coors Light STRs increased 6.8% (8.5%
unadjusted), due to gains in both distribution and rate of sale, while Miller
Lite STRs decreased 3.6% (2.1% unadjusted) due to volume declines in the
Midwest and Pacific regions as the brand cycled a strong volume comparison in
the prior year.
The craft and import portfolio rose 5.0% (6.6% unadjusted), led by the strong
performance of Blue Moon, Leinenkugel`s and Peroni Nastro Azzurro. The
domestic above-premium portfolio, which includes Miller Chill, Sparks and
Killian`s Irish Red, experienced a double-digit decline as Miller Chill
cycled tough comparatives from the previous year, while facing a new
competitive entry to the category.
The premium regular segment grew 0.2% as Coors Banquet delivered double-digit
growth offsetting Miller Genuine Draft declines. Below premium brands grew
2.3 percent as Keystone Light posted double-digit gains and Miller High Life
continued to generate solid growth.
MGD 64 continued to show strength ahead of expectations as consumers and
retailers responded favourably to the national launch of this innovative
premium light beer. During its national roll-out, MGD 64 gained traction
across the country as STRs rose 77% over prior year compared to MGD Light
volume a year earlier.
Pricing remained strong as net revenue per barrel increased 3.0% on a pro
forma basis. MillerCoors` revenue growth outlook for the balance of the year
is expected to remain strong, as the company implemented selective price
increases on the majority of its beer volume in September and October this
year. Net sales mix was virtually unchanged, with strong growth by the
company`s premium light, craft and import brands largely offset by cycling
significant Miller Chill load-in volumes in the prior year.
Cost of goods sold per barrel increased, as reductions related to legacy
savings initiatives by Miller Brewing Company (Project Unicorn) and Coors
Brewing Company (Resources for Growth) were more than offset by increased
commodity and fuel pricing costs.
Marketing, general and administrative expense decreased due to the non-
recurrence of prior year Miller Chill launch costs, which were partially
offset by MGD 64 launch costs this year.
MillerCoors is working aggressively to deliver its stated goal of achieving
US$500 million of cost synergies in the first three years of combined
operations commencing 1 July 2008. The company plans to deliver its initial
commitment of US$50 million of cost synergies in the first year of combined
operations ending 30 June 2009. These savings will be divided approximately
evenly between the second half of 2008 and the first half of 2009. In
addition, MillerCoors is on track to deliver US$350 million of savings in
year two with approximately US$175 million delivered in the second half of
2009. The remaining US$100 million of savings will be delivered in year three
ending 30 June 2011.
In the first quarter of operation, MillerCoors began its brewery network
optimisation project to shift volume and brew both Miller and Coors products
throughout its expanded network of eight major breweries. The projects will
be phased in at the breweries over the next 18 months. The moves will reduce
shipping distances which will drive products to market quicker, generating
significant savings. The company continues to integrate its information
systems to enable robust data sharing and analysis within the commercial
enterprise, further minimise duplicate systems and reduce costs. The
MillerCoors employee selection process is nearing completion, and the full
sales organisation selection will be completed in November 2008.
AFRICA AND ASIA
30 Sept 30 Sept
Financial summary 2008 2007 %
Group revenue (including share of 2,255 1,703 32
associates and joint ventures) (US$m)
EBITA (US$m) 311 277 12
EBITA margin (%) 13.8 16.3
Sales volumes* (hl 000)
- Lager 32,184 30,712 5
- Lager organic 31,269 30,712 2
- Soft drinks 4,084 4,553 (10)
- Soft drinks organic 4,078 3,659 11
- Other alcoholic beverages 2,091 1,523 37
*Volume figures have been restated for the prior period following the
revision of the group`s volume definitions (see page 15).
Africa performed strongly with total organic sales volume growth of 14% over
prior year. Asia delivered lager volume growth of 4%, with significant price
increases in China. Pricing was strong with revenue, on an organic constant
currency basis, up 31% in Africa and 24% in Asia. EBITA from the region was
up 12%, 7% on organic constant currency basis, despite significant input cost
pressure.
AFRICA
Lager volumes for Africa grew 11% for the period, while soft drinks advanced
12%. Traditional beer grew strongly to record 35% organic growth, due to very
good performances in Zambia, Botswana and Malawi. Despite increasing global
uncertainty and the threat of a global economic slowdown, our African markets
showed strong volume growth momentum.
TANZANIA grew strongly with lager volumes increasing by 9%. Sales volume
growth accelerated to double digits in the second quarter due to focused in-
trade activities aimed at regaining market share in a competitive
environment. Our brand portfolio is strongly positioned to capture growth by
competing across all the key segments in the market. Ndovu, Safari and Eagle
all performed well over the period. Rising input costs were evident but were
mitigated by operating efficiencies and a stable local currency. We have
commenced building a new 0.5 million hl brewery in the Southern region to
meet demand in that area.
MOZAMBIQUE continued to grow, albeit at lower levels after five years of
exceptional growth. The brand portfolio is in good shape, appropriately
differentiated across all segments to drive consumer demand. Volumes in the
North have continued to grow at a faster rate than in the South and we have
commenced building a brewery in Nampula which will enable us to develop the
Northern area further.
BOTSWANA performed well over the period with lager volumes advancing 31% on
prior year, while traditional beer posted growth of 16%. The recently
launched new returnable bottle has driven greater affordability, reducing the
cost per serving and now represents 12% of total volumes. There was an
element of stock build by the trade in anticipation of the imposition by the
government of a 30% duty on alcohol. We continue to work with the government
around this issue, but we believe that a levy will be imposed in the second
half which will dampen volumes.
ANGOLA remains an attractive market with an economy that is growing extremely
fast. Our soft drinks volumes grew 16% in the period, but continued to be
restrained by poor infrastructure in the country. The key point of entry (the
Luanda harbour) is constantly congested and limits our ability to meet
demand. Some of these pressures will be alleviated through investments by our
suppliers in local can and bottle manufacturing facilities. In turn we are
expanding our own capacity through the construction of a new 2 million hl
soft drinks facility and the construction of a brewery in Luanda North. In
the South, our brewery performed well with volume growth of 31%, following
our investment in new capacity.
In the premium segment, we have launched Peroni Nastro Azzurro and Miller
Genuine Draft in key markets with favourable results. We plan to launch
Grolsch to further enhance our premium brand portfolio while continuing our
activities in the regional premium segment with brands such as Castle Lager,
Redd`s and Castle Milk Stout.
Traditional sorghum-based beer grew exceptionally strongly, with excellent
results from Zambia, Malawi and Botswana. The category continues to play an
important part in our African portfolio and is less vulnerable to
international commodity cost increases given its use of local raw materials.
CASTEL enjoyed further growth over the period with lager volumes advancing 9%
on the back of excellent growth in Angola and Ethiopia and an acquisition in
Guinea which accounted for 1% of growth. The soft drinks portfolio grew by
12% with good growth in most markets and strong performances in the Congo,
Tunisia and Algeria.
EBITA margins for our African businesses came under pressure from increasing
commodity costs, however robust pricing and the portfolio benefit of having
soft drinks and traditional beer mitigated some of these cost pressures.
ASIA
In CHINA, our associate CR Snow experienced a slow start to the year, with
flat organic volumes following unprecedented price increases, and the effects
of an earthquake in Sichuan, one of our key markets. However, the second
quarter showed recovery in volume growth, and market share gains as the
consequences of the earthquake began to abate and consumers began to accept
the new pricing levels in the context of increasing inflation across many
consumer goods categories. However, heavy flooding in certain markets still
influenced our overall performance in the second quarter. EBITA growth of 21%
was achieved against a background of marginal volume growth and rising
commodity costs. We believe that the pricing actions will have a positive
impact on the long-term profitability of the Chinese market.
Growth in INDIA moderated, largely as a result of a deliberate reduction in
supply to the key Andhra Pradesh market initiated in response to local
government restrictions on pricing. Overall market share (including Andhra
Pradesh) declined as a result, but good trading momentum was experienced in
all other regions, with the northern region in particular outperforming.
Our new venture in AUSTRALIA continues to perform well. In VIETNAM our
business is performing below expectations, with corrective action planned.
SOUTH AFRICA: BEVERAGES
30 Sept 30 Sept
Financial summary 2008 2007 %
Group revenue (including share of 2,007 2,016 -
associates) (US$m)
EBITA (US$m) 332 405 (18)
EBITA margin (%) 16.5 20.1
Sales volumes* (hl 000)
- Lager 12,307 12,478 (1)
- Soft drinks 7,396 7,253 2
- Other alcoholic beverages 572 533 7
*Volume figures have been restated for the prior period following the
revision of the group`s volume definitions (see page 15).
The economic outlook in South Africa has deteriorated over the first half of
the year as consumers continue to feel the effects of higher food and fuel
prices. Rising inflation, which is up 7% to 13% over the year to July 2008,
and higher interest rates, have restricted economic growth, culminating in a
5.5% year-on-year decline in retail sales as at August 2008.
Volume performance across both the beer and soft drinks operations was
satisfactory but premium volume performance was adversely affected by higher
food and fuel prices and in beer, increased competition in the segment. EBITA
declined 10% on an organic constant currency basis and margins reduced as the
business experienced the impacts of higher commodity and diesel costs, a
weakening currency, higher incremental costs associated with the direct store
delivery strategy and higher container depreciation costs, as a result of the
replacement of the 750ml returnable bottle population. Despite the current,
tough operating environment, the business increased its investment in
marketing spend, which included core brand packaging upgrades, new premium
brand introductions and marketing campaigns.
Beer volumes for the six months were 1% down on the prior year, driven by
lower premium sales which were partially offset by growth in mainstream beer
sales as consumers traded down due to the tough economic environment. Lower
Hansa Marzen Gold and Castle Lite sales accounted for the bulk of the decline
in premium sales, partly due to the return to wide availability of a
competitor premium brand.
Our brand portfolio was bolstered by the recent launch of three new brands.
Grolsch, the iconic Dutch premium lager brand acquired by the group in the
previous year, was launched in June this year in both the 450ml swing top and
330ml returnable packs. In addition, Blakes and Doyle, a premium, dry apple
ale was launched in September to expand our range of flavoured alcoholic
beverages. Dreher, also launched in September, is a premium lager brand from
Hungary with three distinctive hop varieties brewed to deliver an aromatic,
flavoursome beer. Over and above these new brand additions, Miller Genuine
Draft received a comprehensive pack renovation.
Soft drinks volumes grew 2% driven by growth in sparkling soft drinks.
Alternative beverages declined by 1% partially driven by the discontinuation
of a number of low margin fruit cordial brands.
Revenue grew by 9% on an organic constant currency basis. Price increases
taken on both beer and soft drinks products in the first quarter of this
calendar year contributed to this revenue growth, although the increases were
below inflation. As a result of the continuing commodity cost pressures in
the beer and soft drinks businesses, further price increases were taken in
the second quarter of the year. Prices of bulk mainstream beer returnable
packs were increased from 1 September and a marginal increase was taken
across all soft drinks products in August.
Despite revenue growth, higher raw material input costs, substantially higher
fuel prices and incremental container depreciation costs saw margins
contracting over the first half of the year. Brewing raw material costs, in
particular barley and hops, as well as increased resin and sugar prices in
the soft drinks business, accounted for the bulk of the raw material cost
increases.
Distribution costs, which rose in excess of 30% in the prior year, were up a
further 19%. The weakening rand, coupled with higher international crude oil
prices, drove local diesel prices up in excess of 60%. Better fleet
utilisation efficiencies in the current year partially mitigated incremental
distribution costs associated with increased outlet servicing.
Container depreciation costs have increased significantly in the first six
months of the year as a result of the injection of new 750ml returnable
bottles in line with the replacement of the old bottle population. This
project, which commenced in April 2007, is largely complete and all seven
breweries were running the new 750ml bottles by September 2008.
EBITA for the period declined by 10% on an organic constant currency basis as
revenue benefits generated from price increases were more than offset by
higher raw material, distribution and depreciation costs as well as lower
sales volumes and adverse mix effects in the beer business. EBITA was also
adversely impacted by the reversal of foreign currency gains booked in the
prior financial year on procurement-related contracts. EBITA margins declined
to 16.5%.
The formulation of the liquor industry`s Broad Based Black Economic
Empowerment (BBBEE) sector code continues with the involvement of the
Department of Trade and Industry and key industry players.
Sales of APPLETISER showed reduced growth affected by supply constraints.
DISTELL continues to exhibit strong domestic and international volume and
revenue growth combined with operating efficiencies that have yielded
improved profitability.
SOUTH AFRICA: HOTELS AND GAMING
30 Sept 30 Sept
Financial summary 2008 2007 %
Group revenue (share of associates) 186 193 (3)
(US$m)
EBITA* (US$m) 61 58 3
EBITA margin (%) 32.5 30.4
Revenue per available room (Revpar) - 75.56 68.29 11
US$
* In 2008 before exceptional costs of US$9 million in relation to the fair
value mark-to-market losses on financial instruments (2007: US$Nil).
The group is a 49% shareholder in the Tsogo Sun group, the half year results
of which were influenced by slower economic growth resulting from higher
inflation and interest rates, with consumer spending patterns affected by
lower available disposable income. The gaming division was negatively
impacted by a new competitor casino to Montecasino. In the hotels division,
trading in the first quarter was good, although the second quarter was
affected by reduced trade in the corporate, government and leisure segment.
Increases in room rates led to revpar 11% above the prior year.
FINANCIAL REVIEW
NEW ACCOUNTING STANDARDS AND RESTATEMENTS
The accounting policies followed are the same as those published within the
Annual Report and Accounts for the year ended 31 March 2008 as amended for
the changes set out in note 1, which have had no material impact on group
results. The Annual Report and Accounts for the year ended 31 March 2008 are
available on the company`s website, www.sabmiller.com. The balance sheet as
at 31 March 2008 has been restated for further adjustments relating to
initial accounting for business combinations, further details of which are
provided in note 12.
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 and joint ventures on a
similar basis (i.e. before interest, tax and minority interests) - provide to
shareholders 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.
DISCLOSURE OF VOLUMES
Following the inception of the MillerCoors joint venture, the group has
revised its volume definitions.
In the determination and disclosure of sales volumes, the group aggregates
100% of the volumes of all consolidated subsidiaries and its equity accounted
percentage of all associates` and joint ventures` volumes. Contract brewing
volumes are excluded from volumes although revenue from contract brewing is
included within revenue. Volumes exclude intra-group sales volumes. This
measure of volumes is used in the segmental analyses as it more closely
aligns with the consolidated group revenue and EBITA disclosures.
In the determination and disclosure of aggregated sales volumes, the group
aggregates 100% of the volumes of all consolidated subsidiaries, associated
companies and joint ventures. Contract brewing volumes are excluded from
aggregated volumes although revenue from contract brewing is included within
revenue. Aggregated 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 six months ended 30 September 2008
at the exchange rates for the comparable period in the prior year.
In relation to the MillerCoors joint venture no adjustments have been made in
the calculation of organic results as the group`s share of the joint venture
is deemed to be comparable with 100% of the Miller business in the
comparative period.
ACQUISITIONS AND JOINT VENTURES
On 17 June 2008 the group acquired the Russian brewer LLC Vladpivo and on 4
July 2008, it acquired a 99.84% interest in the Ukrainian brewer CJSC Sarmat.
The total cost of both acquisitions was US$75 million.
On 30 June 2008, SABMiller and Molson Coors Brewing Company announced that
they had completed the transaction to combine the US and Puerto Rico
operations of their respective subsidiaries, Miller and Coors, in a joint
venture, MillerCoors, which began operating as a combined entity on 1 July
2008. SABMiller has a 58% economic interest in MillerCoors and Molson Coors
has a 42% economic interest. Voting interests are shared equally between
SABMiller and Molson Coors, and each of SABMiller and Molson Coors has equal
board representation.
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 to the financial information.
Net exceptional credits of US$371 million (2007: US$52 million net charges)
included net exceptional charges of US$33 million (2007: US$Nil) relating to
our share of joint ventures` and associates` exceptional charges reported
during the period. The net exceptional credit included a US$437 million
profit on the deemed disposal of 42% of the US and Puerto Rico operations of
Miller, partly offset by a charge of US$23 million related to MillerCoors`
integration and restructuring costs and a charge of US$10 million relating to
the unwinding of fair value adjustments on inventory relating to the
acquisition of Grolsch. Our share of joint ventures` and associates`
exceptional items include a charge of US$17 million relating to our share of
MillerCoors` integration and restructuring costs, US$7 million relating to
our share of the unwinding of fair value adjustments on inventory in
MillerCoors and a charge of US$9 million relating to fair value mark-to-
market losses on financial instruments in Tsogo Sun. In 2007, the net
exceptional charge included final restructuring costs in Latin America of
US$69 million, partly offset by a net profit of US$17 million on the disposal
of soft drinks businesses in Costa Rica and Colombia.
BORROWINGS AND NET DEBT
Gross debt at 30 September 2008, comprising borrowings 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$9,741 million from
US$9,733 million at 31 March 2008. Net debt comprising gross debt net of
cash and cash equivalents has increased to US$9,391 million from US$9,060
million at 31 March 2008 mainly reflecting capital expenditure and the
acquisitions of CJSC Sarmat and LLC Vladpivo. An analysis of net debt is
provided in note 10b. The group`s gearing (presented as a ratio of
debt/equity) has increased to 53.6% from 49.7% at 31 March 2008. The
weighted average interest rate for the gross debt portfolio at 30 September
2008 was 8.1% (31 March 2008: 7.3%).
On 17 July 2008, SABMiller plc announced the completion of a US$1,250 million
bond issue. The notes have been issued pursuant to Rule 144A and Regulation
S under the US Securities Act of 1933 (as amended), in two tranches: US$550
million of 5.5 year notes with a coupon of 5.70% and US$700 million of 10
year notes with a coupon of 6.50%. The net proceeds of the bond issue have
been used to repay certain existing indebtedness.
On 28 July 2008, SABMiller plc announced the establishment of a Euro5,000
million Euro Medium Term Note Programme to allow the group to further
diversify its sources of funding in the future, although no notes have been
issued under the programme at this time.
On 15 August 2008 US$600 million 4.25% Guaranteed Notes 2008, originally
issued by Miller Brewing Company but assumed by SABMiller plc on 30 June 2008
matured and were refinanced in full by a three year committed bank facility.
Subsequent to 30 September 2008 the maturity date on the US$1,000 million 364
day facility was extended from October 2008 to 7 October 2009 with a one year
term-out option.
FINANCE COSTS
Net finance costs increased to US$384 million, a 49% increase on the prior
period`s US$258 million. Finance costs in the current year include a net loss
from the mark to market adjustments of various derivatives amounting to US$26
million (2007: US$nil million) which are of a capital nature and for which
the group has been unable to obtain hedge accounting. This loss has been
excluded from the determination of adjusted earnings per share. Adjusted net
finance costs were US$358 million, up 39%, reflecting an increase in net debt
resulting from the group`s capital expenditure programmes and the
acquisitions of CJSC Sarmat, LLC Vladpivo and Grolsch. Interest cover, based
on EBITDA and adjusted net finance costs, has decreased to 6.6 times from 8.6
times in the prior comparable period.
PROFIT BEFORE TAX
Adjusted profit before tax of US$1,860 million increased by 5% reflecting
performance improvements across the businesses and translation of results
into US dollars. On a statutory basis, profit before tax of US$2,020 million
was up 28% on prior year including the impact of exceptional items and the
mark to market movements in finance costs as noted above.
TAXATION
The effective tax rate of 31.0% (2007: 33.5%) before amortisation of
intangible assets (other than software) and exceptional items and the
adjustment to interest noted above, is below that of the prior year,
principally reflecting a more favourable geographic mix of profits across the
group, local statutory rate reductions and ongoing initiatives to manage our
effective tax rate.
EARNINGS PER SHARE
The group presents adjusted basic earnings per share to exclude the impact of
amortisation of intangible assets (other than software) and other non-
recurring items, which include post-tax exceptional items, in order to
present a more meaningful comparison for the periods shown in the
consolidated financial statements. Adjusted basic earnings per share of 75.2
US cents were up 9% on the comparable period in the prior year, reflecting
the improved performance noted above. An analysis of earnings per share is
shown in note 5 to the condensed financial information. On a statutory basis,
basic earnings per share are up 48% to 94.8 US cents.
GOODWILL AND INTANGIBLE ASSETS
Goodwill has decreased primarily due to the contribution of the Miller
business to the MillerCoors joint venture and the deemed disposal of a 42%
interest in the Miller business including the goodwill. The goodwill
associated with the joint venture is included within the investment in the
joint venture. Intangible assets have decreased since March as a result of
the MillerCoors transaction partially offset by the identification and
valuation of brands acquired with Grolsch.
CAPITAL EXPENDITURE
The group has continued to invest in the business, and capital expenditure
for the six months was US$1,245 million (2007: US$850 million) including
brewery expansions in Poland and Romania and new breweries in Russia, Angola
and Mozambique. With effect from 1 July 2008, the capital expenditure for
the MillerCoors joint venture is excluded from the consolidated capital
expenditure reported.
Capital expenditure as reflected in US dollars has also been increased by the
strengthening of currencies against the US dollar in certain markets. Capital
expenditure including the capitalisation of intangible software costs is
US$1,268 million (2007: US$884 million).
CASH FLOW
Net cash generated from operations before working capital movements (EBITDA)
increased by 5.6% to US$2,355 million compared to the prior comparable
period. The ratio of EBITDA to revenue is 21.1% (2007: 20.7%). Net cash
generated from operating activities, of US$1,178 million is down 16%
reflecting an increase in working capital, due principally to an increase in
debtors in Europe, reflecting higher pricing, the payment of accrued
retention bonuses in North America and an increase in inventory held in
Africa and Asia together with higher net interest paid.
TOTAL EQUITY
Total equity decreased from US$18,245 million (as restated) at 31 March 2008
to US$17,527 million at 30 September 2008. The decrease arose principally
due to currency translation movements on foreign currency investments and
dividend payments partly offset by profit in the period.
CURRENCIES: SOUTH AFRICAN RAND/COLOMBIAN PESO
The rand weakened against the US dollar during the six months and ended the
period at R8.30 to the US dollar, while the weighted average rand/dollar rate
weakened by 9% to R7.79 compared with R7.12 in the comparable period. The
Colombian peso (COP) weakened against the US dollar during the six months and
ended the period at COP2,175 to the US dollar compared with COP1,822 at 31
March 2008, while the weighted average COP/dollar rate strengthened by 10% to
COP1,827 compared to COP2,030 in the comparable period.
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 8 of the 2008
Annual Report. These are summarised as follows:
- The risk that, as the industry consolidates, the group does not participate
in attractive value-adding transactions, which may inhibit its ability to
leverage additional scale benefits.
- The risk that expected benefits from scale, entering new growth markets and
spreading the group`s best operating practices may not be captured or may be
inadequate, such that an appropriate return on capital is not achieved over
time.
- The risk that significant growth opportunities are not realised because the
group fails to ensure the relevance and attractiveness of its brands and the
enhancement of its brand marketing.
- The risk that the group`s growth potential is jeopardised due to a failure
to develop and retain a global management capability at a high level, or to
maintain its effective organisational leadership process which captures
shared learning and leverages global synergies and expertise.
- The risk that an increase in regulatory constraints and restrictions on
alcohol products, including sales and marketing activities or an increase in
excise duties have an adverse impact on the group`s business.
- The risk that margins could fall because the group fails to ensure an
adequate supply of brewing and packaging raw materials at competitive prices.
In light of the current economic uncertainty and the recent crises in the
global financial markets, the following additional risks have been
identified:
- The group is exposed to the risk of a recession that could adversely affect
demand for the group`s products, and the prices that can be achieved in the
relevant markets.
- Debt financing, refinancing or additional equity funding may not be
available to the group or may be materially more expensive due to the current
lack of liquidity in the markets and the general lack of confidence in the
equity markets.
DIVIDEND
The board has declared a cash interim dividend of 16.0 US cents per share.
The dividend will be payable on Friday 5 December 2008 to shareholders
registered on the London and Johannesburg registers on Friday 28 November
2008. The ex-dividend trading dates will be Wednesday 26 November 2008 on the
London Stock Exchange (LSE) and Monday 24 November 2008 on the JSE Limited
(JSE). 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 South African
rand and sterling was determined yesterday. The rate of exchange determined
for converting to South African rand was US$:ZAR 10.4888 resulting in an
equivalent interim dividend of 167.8208 SA cents per share. The rate of
exchange determined for converting to sterling was GBP:US$ 1.5220 resulting
in an equivalent interim dividend of 10.5125 UK pence per share.
From the commencement of trade on Thursday 13 November 2008 until the close
of business on Friday 28 November 2008, no transfers between the London and
Johannesburg registers will be permitted, and from Monday 24 November 2008
until Friday 28 November 2008, no shares may be dematerialised or
rematerialised, both days inclusive.
DIRECTORS` RESPONSIBILITY FOR FINANCIAL REPORTING
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 21 to 38, 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 interim financial
information has been prepared in accordance with IAS 34 as adopted by the
European Union, and the interim management report herein includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8 of the
Disclosure and Transparency Rules of the United Kingdom`s Financial Services
Authority.
The directors of SABMiller plc are listed in the SABMiller plc Annual Report
for the year ended 31 March 2008. Rob Pieterse and Maria Ramos were appointed
to the board on 15 May 2008 and Lord Renwick of Clifton retired from the
board on 31 July 2008. A list of current directors is maintained on the
SABMiller plc website: www.sabmiller.com.
On behalf of the board
E A G Mackay M I Wyman
Chief executive Chief financial officer
13 November 2008
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
information in the half-yearly financial report for the six months ended 30
September 2008, which comprises the income statement, 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 information.
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 IFRS as adopted by the European Union. The
condensed set of financial information 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 information 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 information in the half-yearly
financial report for the six months ended 30 September 2008 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 London
Chartered Accountants 13 November 2008
SABMiller plc
CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September
Six months Six months Year
ended ended ended
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
Notes US$m US$m US$m
Revenue 2 11,166 10,781 21,410
Net operating expenses (9,011) (9,091) (17,962)
Operating profit 2 2,155 1,690 3,448
Operating profit before 1,751 1,742 3,560
exceptional items
Exceptional items 3 404 (52) (112)
Net finance costs (384) (258) (456)
Interest payable and similar (654) (354) (721)
charges
Interest receivable and 270 96 265
similar income
Share of post-tax results of 249 147 272
associates and joint ventures
Profit before taxation 2,020 1,579 3,264
Taxation 4 (455) (497) (976)
Profit for the financial 1,565 1,082 2,288
period
Profit attributable to 142 124 265
minority interests
Profit attributable to equity 1,423 958 2,023
shareholders
1,565 1,082 2,288
Basic earnings per share (US 5 94.8 63.9 134.9
cents)
Diluted earnings per share (US 5 94.3 63.5 134.2
cents)
All operations are continuing.
The notes on pages 25 to 38 form an integral part of this condensed interim
financial information.
CONSOLIDATED BALANCE SHEET
at 30 September
30/9/08 30/9/07 31/3/08*
Unaudited Unaudited Unaudited
Notes US$m US$m US$m
Assets
Non-current assets
Goodwill 7 10,030 13,783 15,122
Intangible assets 7 4,197 4,062 5,036
Property, plant and 8 8,077 7,433 9,113
equipment
Investments in joint 9 5,133 - -
ventures
Investments in associates 9 1,765 1,524 1,825
Available for sale 35 50 53
investments
Derivative financial 294 37 208
instruments
Trade and other receivables 127 190 240
Deferred tax assets 351 142 341
30,009 27,221 31,938
Current assets
Inventories 1,300 1,048 1,362
Trade and other receivables 1,759 1,822 1,866
Current tax assets 152 105 190
Derivative financial 45 3 45
instruments
Cash and cash equivalents 10b 350 501 673
3,606 3,479 4,136
Total assets 33,615 30,700 36,074
Liabilities
Current liabilities
Derivative financial (45) (21) (34)
instruments
Borrowings 10b (1,569) (1,227) (2,062)
Trade and other payables (2,686) (3,012) (3,302)
Current tax liabilities (541) (513) (540)
Provisions (276) (282) (314)
(5,117) (5,055) (6,252)
Non-current liabilities
Derivative financial (302) (310) (497)
instruments
Borrowings 10b (8,255) (6,174) (7,596)
Trade and other payables (239) (312) (338)
Deferred tax liabilities (1,731) (1,440) (1,949)
Provisions (444) (1,190) (1,197)
(10,971) (9,426) (11,577)
Total liabilities (16,088) (14,481) (17,829)
Net assets 17,527 16,219 18,245
Equity
Share capital 158 158 158
Share premium 6,192 6,162 6,176
Merger relief reserve 3,395 3,395 3,395
Other reserves 710 1,177 2,215
Retained earnings 6,387 4,688 5,602
Total shareholders` equity 16,842 15,580 17,546
Minority interests in 685 639 699
equity
Total equity 17,527 16,219 18,245
*As restated see note 12.
The notes on pages 25 to 38 form an integral part of this condensed interim
financial information.
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September
Six months Six months Year
ended ended ended
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
Notes US$m US$m US$m
Cash flows from operating
activities
Cash generated from 10a 2,017 2,128 4,276
operations
Interest received 122 104 228
Interest paid (511) (378) (730)
Tax paid (450) (447) (969)
Net cash from operating 1,178 1,407 2,805
activities
Cash flows from investing
activities
Purchase of property, plant (1,245) (850) (1,978)
and equipment
Proceeds from sale of 22 42 110
property, plant and
equipment
Purchase of intangible (34) (34) (59)
assets
Purchase of investments - (5) -
Proceeds from sale of 1 - 5
investments
Proceeds from sale of - - 2
associates
Proceeds on disposal of - 71 71
shares in subsidiaries
Overdraft disposed with 2 - -
subsidiaries
Acquisition of subsidiaries (67) - (1,284)
(net of cash acquired)
Purchase of shares from (2) (2) (49)
minorities
Funding to joint ventures (123) - -
Funding to associates - (29) (179)
Purchase of shares in (5) - -
associates
Dividends received from 81 - -
joint ventures
Dividends received from 119 47 91
associates
Dividends received from 1 - 1
other investments
Net cash used in investing (1,250) (760) (3,269)
activities
Cash flows from financing
activities
Proceeds from the issue of 16 25 39
shares
Purchase of own shares for (26) (9) (33)
share trusts
Proceeds from borrowings 2,466 2,679 6,492
Repayment of borrowings (1,878) (2,725) (5,038)
Capital element of finance (3) (2) (7)
lease payments
Net cash (24) 2 (16)
(payments)/receipts on net
investment hedges
Dividends paid to (640) (537) (769)
shareholders of the parent
Dividends paid to minority (118) (87) (197)
interests
Net cash (used)/generated (207) (654) 471
in financing activities
Net cash from operating, (279) (7) 7
investing and financing
activities
Effects of exchange rate 42 (18) (113)
changes
Net decrease in cash and (237) (25) (106)
cash equivalents
Cash and cash equivalents 188 294 294
at 1 April
Cash and cash equivalents 10b (49) 269 188
at period end
The notes on pages 25 to 38 form an integral part of this condensed interim
financial information.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the six months ended 30 September
Six months Six months Year
ended ended ended
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
US$m US$m US$m
Currency translation differences on (1,589) 812 2,029
foreign currency net investments
Actuarial (losses)/gains on defined (37) - 31
benefit plans
Fair value (losses)/gains on (3) - 2
available for sale investments
Fair value gains/(losses) net 136 (90) (225)
investment and cash flow hedges
Transfer to profit on disposal of (4) - -
Miller`s US and Puerto Rico business
Tax on items taken directly to equity 10 - (8)
Share of associates` and joint (38) - -
ventures` losses recognised directly
in equity
Net (losses)/gains recognised (1,525) 722 1,829
directly in equity
Profit for the period 1,565 1,082 2,288
Total recognised income/(expense) for 40 1,804 4,117
the period
- attributable to equity shareholders (91) 1,662 3,795
- attributable to minority interests 131 142 322
The notes on pages 25 to 38 form an integral part of this condensed interim
financial information.
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The condensed consolidated interim financial information (the `financial
information`) comprises the unaudited results of SABMiller plc for the six
months ended 30 September 2008 and 30 September 2007, together with the
audited results for the year ended 31 March 2008, restated for further
unaudited adjustments relating to initial accounting for business
combinations. Further details of these adjustments are provided in note 12.
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 12 November 2008. The annual financial statements for the year ended 31
March 2008, approved by the Board of Directors on 2 June 2008, 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 2008, which have been prepared in accordance with IFRS as adopted by
the European Union.
Items included in the financial information of each of the group`s entities
are measured using the currency of the primary economic environment in which
the entity operates (the functional currency). The consolidated financial
information is presented in US dollars which is the group`s presentational
currency.
ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 March 2008, which were published
in June 2008, 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 interpretations are mandatory for the first time in the
financial year ending 31 March 2009 and are relevant for the group.
- IFRIC 14 `IAS 19 - the limit on a defined benefit asset, minimum funding
requirements and their interaction`. This interpretation has not had any
impact on the group.
As a result of SABMiller entering into the MillerCoors joint venture, joint
ventures have now become a material item in the group`s financial statements.
This has also that meant that the investments in immaterial joint ventures
previously classified as investments in associates have now been reclassified
as investments in joint ventures together with the MillerCoors joint venture.
The group`s accounting policy for joint ventures is as follows:
JOINT VENTURES
Joint ventures are contractual arrangements which the group has entered into
with one or more parties to undertake an economic activity that is subject to
joint control. Joint control is the contractually agreed sharing of control
over an economic activity, and exists only when the strategic, financial and
operating decisions relating to the activity require the unanimous consent of
the parties sharing the control.
The group`s share of the recognised income and expenses of joint ventures is
accounted for using the equity method from the date joint control is achieved
to the date joint control ceases. The date joint control commences is not
necessarily the same as the closing date or any other date named in the
contract.
2. SEGMENTAL INFORMATION (UNAUDITED)
The segmental information presented below includes the reconciliation of GAAP
measures presented on the face of the income statement to non-GAAP measures
which are used by management to analyse the group`s performance.
Six months Segment Share of Group Segment Share of Group
ended revenue asso- revenue revenue asso- revenue
30 September: 2008 ciates` 2008 2007 ciates` 2007
US$m and joint US$m US$m and joint US$m
ventures` ventures`
revenue revenue
2008 2007
US$m US$m
Latin America 2,842 6 2,848 2,453 - 2,453
Europe 3,992 18 4,010 2,876 - 2,876
North America 1,501 1,415 2,916 2,782 - 2,782
Africa and Asia 1,063 1,192 2,255 869 834 1,703
South Africa: 1,768 425 2,193 1,801 408 2,209
- Beverages 1,768 239 2,007 1,801 215 2,016
- Hotels and - 186 186 - 193 193
Gaming
11,166 3,056 14,222 10,781 1,242 12,023
Year ended 2008 2008 2008
31 March:
US$m US$m US$m
Latin America 5,239 12 5,251
Europe 5,242 6 5,248
North America 5,120 - 5,120
Africa and Asia 1,853 1,514 3,367
South Africa: 3,956 886 4,842
- Beverages 3,956 490 4,446
- Hotels and - 396 396
Gaming
21,410 2,418 23,828
Operating profit
The following table provides a reconciliation of operating profit (segment
result) to operating profit before exceptional items.
Six months ended Operating Excep- Opera- Opera- Excep- Opera-
30 September: profit tional ting ting tional ting
2008 items profit profit items profit
US$m 2008 before 2007 2007 before
US$m excep- US$m US$m excep-
tional tional
items items
2008 2007
US$m US$m
Latin America 411 - 411 328 52 380
Europe 695 10 705 620 - 620
North America 642 (414) 228 293 - 293
Africa and Asia 136 - 136 133 - 133
South Africa: 304 - 304 380 - 380
Beverages
Corporate (33) - (33) (64) - (64)
2,155 (404) 1,751 1,690 52 1,742
Year ended 2008 2008 2008
31 March:
US$m US$m US$m
Latin America 892 61 953
Europe 947 - 947
North America 411 51 462
Africa and Asia 330 - 330
South Africa: 962 - 962
Beverages
Corporate (94) - (94)
3,448 112 3,560
EBITA
This comprises operating profit before exceptional items, amortisation of
intangible assets (excluding software) and includes the group`s share of
associates and joint ventures operating profit on a similar basis. The
following table provides a reconciliation of operating profit before
exceptional items to EBITA.
Six months ended Operating Share of Amortisation EBITA
30 September: profit before associates` of intangible 2008
exceptional and joint assets US$m
items ventures` (excluding
2008 operating software) -
US$m profit before group and
exceptional share of
items associates`
2008 and joint
US$m ventures`
2008
US$m
Latin America 411 - 63 474
Europe 705 2 18 725
North America 228 113 14 355
Africa and Asia 136 172 3 311
South Africa: 304 89 - 393
- Beverages 304 28 - 332
- Hotels and Gaming - 61 - 61
Corporate (33) - - (33)
Group 1,751 376 98 2,225
Six months ended Operating Share of Amortisation EBITA
30 September: profit before associates` of intangible 2007
exceptional and joint assets US$m
items ventures` (excluding
2007 operating software) -
US$m profit before group and
exceptional share of
items associates`
2007 and joint
US$m ventures`
2007
US$m
Latin America 380 - 58 438
Europe 620 - 2 622
North America 293 - 7 300
Africa and Asia 133 141 3 277
South Africa: 380 82 1 463
- Beverages 380 25 - 405
- Hotels and Gaming - 57 1 58
Corporate (64) - - (64)
Group 1,742 223 71 2,036
Year ended 2008 2008 2008 2008
31 March:
US$m US$m US$m US$m
Latin America 953 - 118 1,071
Europe 947 1 4 952
North America 462 - 15 477
Africa and Asia 330 231 7 568
South Africa: 962 203 2 1,167
- Beverages 962 64 - 1,026
- Hotels and Gaming - 139 2 141
Corporate (94) - - (94)
Group 3,560 435 146 4,141
The group`s share of associates` and joint ventures` operating profit is
reconciled to the share of post-tax results of associates and joint ventures
in the income statement as follows:
Six months Six months Year
ended ended ended
30/9/08 30/9/07 31/3/08
US$m US$m US$m
Share of associates` and joint 376 223 435
ventures` operating profit
before exceptional items
Share of associates` and joint (33) - -
ventures` exceptional items
Share of associates` and joint (7) (5) (11)
ventures` net finance cost
Share of associates` and joint (65) (55) (120)
ventures` tax
Share of associates` and joint (22) (16) (32)
ventures` minority interests
249 147 272
Excise duties of US$2,271 million (2007: US$2,187 million) have been incurred
during the six months as follows: Latin America US$721 million (2007: US$621
million); Europe US$734 million (2007: US$551 million); North America US$239
million (2007: US$468 million); Africa and Asia US$241 million (2007: US$201
million) and South Africa US$336 million (2007: US$346 million).
Beer volumes increase during the summer months leading to higher revenues
being recognised in the first half of the year in the Europe and North
America segments. Due to the spread of the business between Northern and
Southern hemispheres, the results for the group as a whole are not highly
seasonal in nature.
The following table provides a reconciliation of EBITDA (the net cash inflow
from operating activities before working capital movements) before cash
exceptional items to EBITDA after cash exceptional items. A reconciliation
of profit for the period for the group to EBITDA after cash exceptional items
for the group can be found in note 10a.
Six months ended EBITDA Cash EBITDA EBITDA Cash EBITDA
30 September: before excep- 2008 before excep- 2007
cash tional US$m cash tional US$m
excep- items excep- items
tional 2008 tional 2007
items US$m items US$m
2008 2007
US$m US$m
Latin America 621 - 621 545 (10) 535
Europe 902 - 902 732 - 732
North America* 244 (20) 224 372 - 372
Africa and Asia 185 - 185 172 - 172
South Africa: 414 - 414 453 - 453
Beverages
Corporate 9 - 9 (35) - (35)
2,375 (20) 2,355 2,239 (10) 2,229
Year ended 2008 2008 2008
31 March:
US$m US$m US$m
Latin America 1,319 (17) 1,302
Europe 1,203 - 1,203
North America 569 (2) 567
Africa and Asia 404 - 404
South Africa: 1,073 - 1,073
Beverages
Corporate (31) - (31)
4,537 (19) 4,518
* EBITDA excludes the results of associates and joint ventures and hence the
decline in EBITDA for North America is due to the US and Puerto Rico
operations of the Miller business being contributed into the MillerCoors
joint venture during the period.
3. EXCEPTIONAL ITEMS
Six months Six months Year ended
ended 30/9/08 ended 30/9/07 31/3/08
Unaudited Unaudited Audited
US$m US$m US$m
Subsidiaries` exceptional
items included in operating
profit:
Latin America - (52) (61)
Integration and restructuring - (69) (78)
costs
Profit on disposal of - 17 17
subsidiaries
Europe
Unwinding of fair value (10) - -
adjustments on inventory
North America 414 - (51)
Profit on disposal of Miller`s 437 - -
US and Puerto Rico business
MillerCoors` integration and (23) - (51)
restructuring costs
Exceptional items included in 404 (52) (112)
operating profit
Share of associates` and joint
ventures` exceptional items:
North America (24) - -
MillerCoors` integration and (17) - -
restructuring costs
Unwinding of fair value (7) - -
adjustments on inventory
Hotels and Gaming
Fair value losses on financial (9) - -
instrument
Share of associates` and joint (33) - -
ventures` exceptional items
Taxation credits relating to 19 20 40
subsidiaries` and the group`s
share of associates` and joint
ventures` exceptional items:
2008
SUBSIDIARIES` EXCEPTIONAL ITEMS
EUROPE
On acquisition the Grolsch inventory was fair valued to market value. The
uplift is charged to the income statement as the inventory is sold. US$10
million was charged to operating profit in the period.
NORTH AMERICA
A profit of US$437 million arose on the deemed disposal of the US and Puerto
Rico operations of the Miller business into the MillerCoors joint venture
(see note 12 for further details). A charge of US$23 million was incurred
during the period for staff retention and for certain integration costs
within operating profit.
SHARE OF ASSOCIATES` AND JOINT VENTURES` EXCEPTIONAL ITEMS
NORTH AMERICA
The group`s share of MillerCoors` integration and restructuring costs of
US$17 million mainly related to retrenchment costs and the group`s share of
MillerCoors` charge to operating profit in the period relating to the unwind
of the fair value adjustment to inventory of US$7 million.
HOTELS AND GAMING
The group`s share of losses relating to fair value mark to market adjustments
on financial instruments amounted to US$9 million.
TAXATION CREDITS
Taxation credits of US$19 million arose in relation to exceptional items
during the period and include US$10 million in relation to MillerCoors
although the tax credit is recognised in Miller Brewing Company -
see note 4.
2007
LATIN AMERICA
Integration and restructuring costs of US$69 million associated with the
consolidation of Bavaria were incurred during the period.
A net US$17 million profit on disposal was recognised in Latin America on the
disposal of soft drinks businesses in Costa Rica and Colombia in the six
months ended 30 September 2007 and the year ended 31 March 2008.
4. TAXATION
Six months Six months Year ended
ended ended 30/9/07 31/3/08
30/9/08
Unaudited Unaudited Audited
US$m US$m US$m
Current taxation 453 466 926
- Charge for the period1 452 486 935
- Adjustments in respect of 1 (20) (9)
prior years
Withholding taxes and other 52 40 64
taxes
Total current taxation 505 506 990
Deferred taxation (50) (9) (14)
- Charge for the period2 (42) (11) 8
- Adjustments in respect of (8) 8 (17)
prior years
- Rate change - (6) (5)
Total taxation 455 497 976
Effective tax rate, before 31.0 33.5 32.5
amortisation of intangibles
(excluding software) and
exceptional items (%)
1 The current tax charge for the period includes a UK corporation tax charge
of US$Nil million (2007: US$Nil).
2 The deferred tax charge for the period includes a UK corporation tax credit
of US$Nil million (2007: US$9 million credit).
The effective tax rate is calculated using operating profit before
exceptional items including the share of associates` and joint ventures`
operating profit on the same basis less adjusted net finance costs (net
finance costs, the share of associates` and joint ventures` net finance costs
and adjustments to finance costs determined in the calculation of adjusted
earnings), and tax before exceptional items including the share of
associates` and joint ventures` tax on the same basis. This calculation is
on a basis consistent with that used in prior years and is also consistent
with other group operating metrics.
Although the US and Puerto Rico operations of the Miller business were
contributed into the MillerCoors joint venture during the period, MillerCoors
is not a taxable entity therefore the tax balances and obligations remain
with Miller Brewing Company as a 100% subsidiary of the group. This
subsidiary`s tax charge will include tax (including deferred tax) on the
group`s share of the MillerCoors` taxable profits.
5. EARNINGS PER SHARE
Six months Six months Year ended
ended 30/9/08 ended 30/9/07 31/3/08
Unaudited Unaudited Audited
US cents US cents US cents
Basic earnings per share 94.8 63.9 134.9
Diluted earnings per share 94.3 63.5 134.2
Headline earnings per share* 65.8 62.5 133.0
Adjusted basic earnings per 75.2 69.1 143.1
share
Adjusted diluted earnings per 74.8 68.7 142.4
share
* Six months ended 30 September 2007 re-stated to comply with the new
headline earnings definitions contained within the South African Circular
8/2007.
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
Millions of Millions of Millions of
shares shares shares
The weighted average number
of shares was:
Ordinary shares 1,506 1,503 1,504
ESOP trust ordinary shares (6) (4) (4)
Basic shares 1,500 1,499 1,500
Dilutive ordinary shares from 7 10 8
share options
Diluted shares 1,507 1,509 1,508
The calculation of diluted earnings per share excludes 13,913,075 (2007:
6,046,925) share options that were anti-dilutive for the period because the
exercise price of the option exceeds the fair value of the shares during the
year and 6,371,049 (2007: 6,818,498) share options that were anti-dilutive
for the period because the performance conditions attached to the options
have not been met. These options could potentially dilute earnings per share
in the future.
ADJUSTED AND HEADLINE EARNINGS
The group presents 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 periods shown in the consolidated financial statements. Adjusted
earnings per share has been based on adjusted headline earnings for each
financial period 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 new South African Circular 8/2007
entitled "Headline Earnings" which forms part of the listing requirements for
the JSE Ltd (JSE). The adjustments made to arrive at headline earnings and
adjusted earnings are as follows:
Six months Six months Year
ended ended ended
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
US$m US$m US$m
Profit for the financial period 1,423 958 2,023
attributable to equity holders of
the parent
Headline Adjustments
Impairment of property, plant and - - 5
equipment
Profit on disposal of property, - (4) (12)
plant and equipment
Profit on disposal of subsidiaries (437) (17) (17)
Tax effects of the above items - - (4)
Share of joint ventures` and 2 - -
associates` headline adjustments,
net of tax and minority interests
Headline earnings* 988 937 1,995
Other Adjustments
Integration and restructuring costs 23 68 129
Loss/(gain) on fair value movements 26 - (35)
on capital items**
Unwind of fair value adjustments on 10 - -
inventory
Amortisation of intangible assets 86 70 141
(excluding capitalised software)
Tax effects of the above items (48) (40) (88)
Minority interests` share of the (2) - -
above items
Share of joint ventures` and 45 1 5
associates` other adjustments, net
of tax and minority interests
Adjusted earnings 1,128 1,036 2,147
* Six months ended 30 September 2007 re-stated to comply with the new
headline earnings definitions contained within the South African Circular
8/2007.
** This does not include all fair value movements but includes those in
relation to capital items for which hedge accounting cannot be applied.
6. DIVIDENDS PAID AND PROPOSED
Dividends paid were as follows:
Six months Six months Year
ended ended ended
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
US cents US cents US cents
Prior year final dividend paid per 42.0 36.0 36.0
ordinary share
Current year interim dividend paid - - 16.0
per ordinary share
The interim dividend declared of 16.0 US cents per ordinary share is payable
on 5 December 2008 to ordinary shareholders on the register as at 28 November
2008 and will absorb an estimated US$240 million of shareholders` funds.
7. GOODWILL AND INTANGIBLE ASSETS
Goodwill Intangible
assets
Unaudited Unaudited
US$m US$m
Net book amount
At 1 April 2008 * 15,122 5,036
Exchange adjustments (1,140) (544)
Arising on increase in share of 1 -
subsidiary undertakings
Arising on acquisition of subsidiary 45 9
undertakings (provisional)
Additions - separately acquired - 34
Contributed to joint ventures (3,998) (232)
Amortisation - (108)
Transfers from other assets - 2
At 30 September 2008 10,030 4,197
* As restated (see note 12).
GOODWILL
Goodwill arising on the formation of the joint venture is recorded within the
investment in joint ventures.
8. PROPERTY, PLANT AND EQUIPMENT
Six months Six months Year
ended ended ended
30/9/08 30/9/07 31/3/08*
Unaudited Unaudited Unaudited
US$m US$m US$m
Net book amount at beginning of 9,113 6,750 6,750
period
Exchange adjustments (720) 355 775
Additions 1,122 795 2,000
Arising on acquisition of 135 - 586
subsidiary undertakings
Disposals (22) (45) (98)
Contributed to joint ventures (1,043) - -
Depreciation (459) (410) (848)
Other movements (49) (12) (52)
Net book amount at end of period 8,077 7,433 9,113
* As restated (see note 12).
9. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
Investments in Investments in
joint ventures associates
Unaudited Unaudited
US$m US$m
At 1 April 2008 * - 1,825
Exchange adjustments 3 (78)
Additions 5,142 5
Reclassification between joint venture and 30 (30)
associates
Share of (losses)/gains recognised in (48) 10
reserves
Share of results retained 87 162
Dividends (81) (129)
At 30 September 2008 5,133 1,765
* As restated (see note 12).
10A. RECONCILIATION OF PROFIT FOR THE PERIOD TO NET CASH GENERATED FROM
OPERATIONS (UNAUDITED)
Six months Six months Year
ended ended ended
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
US$m US$m US$m
Profit for the period 1,565 1,082 2,288
Taxation 455 497 976
Share of post-tax results of (249) (147) (272)
associates and joint ventures
Interest receivable (270) (96) (265)
Interest payable and similar 654 354 721
charges
Operating profit 2,155 1,690 3,448
Depreciation:
Property, plant and equipment 345 297 633
Containers 114 113 215
Container breakages, shrinkage 12 11 27
and write-offs
Loss / (profit) on sale of - 8 (12)
property, plant and equipment
Impairment of property, plant and - - 5
equipment
Amortisation of intangible assets 108 94 190
Unrealised net loss/(gain) from 20 3 (26)
fair value hedges
Profit on disposal of (437) (17) (17)
subsidiaries
Dividends received from other (1) (1) (1)
investments
Charge with respect to share 39 28 58
options
Other non-cash movements - 3 (2)
Net cash generated from 2,355 2,229 4,518
operations before working capital
movements (EBITDA)
Net outflow in working capital (338) (101) (242)
Net cash generated from 2,017 2,128 4,276
operations
Cash generated from operations includes cash outflows relating to exceptional
costs of US$20 million in respect of integration and restructuring costs
relating to MillerCoors (2007: US$10 million).
10B. ANALYSIS OF NET DEBT (UNAUDITED)
Net debt is analysed as follows:
As at As at As at
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Unaudited
US$m US$m US$m
Borrowings (9,414) (7,154) (9,160)
Borrowings-related derivative 83 (154) (75)
financial instruments
Overdrafts (399) (232) (485)
Finance leases (11) (15) (13)
Gross debt (9,741) (7,555) (9,733)
Cash and cash equivalents 350 501 673
(excluding overdrafts)
Net debt (9,391) (7,054) (9,060)
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
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
US$m US$m US$m
Cash and cash equivalents 350 501 673
(balance sheet)
Overdrafts (399) (232) (485)
Cash and cash equivalents (cash (49) 269 188
flow)
The movement in net debt is analysed as follows:
Cash and Over- Borrow- Deriva- Finance Total Net
cash drafts ings tive leases gross debt
equiva- finan- borrow-
lents cial ings
(exclud- instru-
ing over- ments
drafts)
US$m US$m US$m US$m US$m US$m US$m
At 1 April 673 (485) (9,160) (75) (13) (9,733) (9,060)
2008
Exchange (20) 62 465 - 1 528 508
adjustments
Cash flow (311) 22 (588) (7) 3 (570) (881)
Acquisitions 8 - (155) - - (155) (147)
Disposals - 2 - - - 2 2
Other - - 24 165 (2) 187 187
movements
At 350 (399) (9,414) 83 (11) (9,741) (9,391)
30 September
2008
The group does not have any material exposure to sub-prime lending or
collateralised debt obligations. The group has sufficient headroom to enable
it to conform to covenants on its existing borrowings. The group has
sufficient working capital and undrawn financing facilities to service its
operating activities and ongoing capital investment. The group has the
following undrawn committed borrowing facilities available at 30 September in
respect of which all conditions precedent have been met at that date:
As at As at As at
30/9/08 30/9/07 31/3/08
Unaudited Unaudited Audited
US$m US$m US$m
Amounts falling due:
Within one year 1,056 1,366 980
Between one and two years 11 19 157
Between two and five years 736 1,003 53
In five years or more 12 - 32
1,815 2,388 1,222
Subsequent to 30 September 2008 the maturity date on the US$1,000 million 364
day facility, shown as falling due within one year in the table above, was
extended to 7 October 2009, with a one- year term out option.
11. COMMITMENTS, CONTINGENCIES AND GUARANTEES
Except as stated below there have been no material changes to commitments,
contingencies or guarantees as disclosed in the annual financial report for
the year ended 31 March 2008.
COMMITMENTS
Contracts placed for future capital expenditure for property, plant and
equipment not provided in the financial statements amount to US$692 million
at 30 September 2008.
In the annual financial report for the year ended 31 March 2008, the group
disclosed commitments relating to contracts placed for future expenditure for
Miller relating to various long-term non-cancellable advertising and
promotion commitments. As a result of the contribution of the Miller
business into the MillerCoors joint venture, this commitment will no longer
be disclosed as a commitment of the group, but will be reported as a
commitment of the joint venture.
GUARANTEES
The following changes to guarantees occurred during the period:
Debt securities (`the Notes`) To 30 June 2008 From 1 July 2008
US$600,000,000 4.25% Notes SABMiller plc as SABMiller plc
issued by Miller due 2008 guarantor assumes the
(`2008 Notes`) US Guarantors(1) liability - no
guarantor.
US$1,100,000,000 5.50% Notes SABMiller plc as SABMiller plc
issued by Miller due 2013 guarantor assumes the
(`2013 Notes`) US Guarantors(1) liability - no
guarantor.
US$300,000,000 6.625% Notes Miller and US MillerCoors LLC as
issued by SABMiller due 2033 Guarantors (1) guarantor
(`2033 Notes`)
US$300,000,000 Floating Rate Miller and US No guarantors
Notes issued by SABMiller due Guarantors (1)
2009 (`2009 Notes`)
US$600,000,000 6.20% Notes Miller and US No guarantors
issued by SABMiller due 2011 Guarantors (1)
(`2011 Notes`)
US$850,000,000 6.50% Notes Miller and US No guarantors
issued by SABMiller due 2016 Guarantors (1)
(`2016 Notes`)
(1) Defined as MBC1, LLC a limited liability company organised under the laws
of the State of Wisconsin, MBC2, LLC, a limited liability company organised
under the laws of the State of Wisconsin, Miller Products Company, LLC
(formerly Miller Products Company), a limited liability company organised
under the laws of the State of Wisconsin, Miller Breweries West, L.P., a
Wisconsin limited partnership and Miller Breweries East, LLC (formerly Miller
Breweries East, Inc.), a limited liability company organised under the laws
of the State of Wisconsin.
The 2008 Notes were repaid on 15 August 2008 and there are no outstanding
guarantees in relation to these notes.
12. BUSINESS COMBINATIONS AND DISPOSALS
Acquisitions
On 17 June 2008, SABMiller plc completed the acquisition of the Russian
brewer LLC Vladpivo and on 4 July 2008 it completed the acquisition of a
99.84% interest in the Ukrainian brewer CJSC Sarmat.
The following table represents the assets and liabilities acquired in respect
of all business combinations entered into during the six months ended 30
September 2008:
Carrying values
pre-acquisition
and provisional
fair value
US$m
Intangible assets 9
Property, plant and equipment 135
Inventories 36
Trade and other receivables 16
Current tax assets 4
Cash and cash equivalents 8
Borrowings (155)
Trade and other payables (19)
Net deferred tax liabilities (4)
Net assets acquired 30
Provisional goodwill 45
Consideration 75
Goodwill represents, amongst other things, intangible assets yet to be
recognised separately from goodwill, and the value of the assembled
workforce.
From the date of acquisition to 30 September 2008 the following amounts have
been included in the group`s income statement for the period:
US$m
Income statement
Revenue 35
Operating loss (8)
Loss before tax (11)
If the date of the acquisitions made in the six months ended 30 September
2008 had been 1 April 2008, then the group`s revenue, operating profit and
profit before tax for the six months ended 30 September 2008 would have been
as follows:
US$m
Income statement
Revenue 11,204
Operating profit 2,062
Profit before tax 1,920
DISPOSAL INTO A JOINT VENTURE
On 30 June 2008, SABMiller plc and Molson Coors Brewing Company announced
that they had closed the transaction to combine the US and Puerto Rico
operations of their respective subsidiaries, Miller and Coors, in a joint
venture to create MillerCoors a stronger, brand-led US brewer in the
increasingly competitive US marketplace. MillerCoors began operating as a
combined entity on 1 July 2008. SABMiller has a 58% economic interest in
MillerCoors and Molson Coors has a 42% economic interest. Voting interests
are shared equally between SABMiller and Molson Coors, and each of SABMiller
and Molson Coors has equal board representation. A profit of US$437 million
arose on the deemed disposal of the US and Puerto Rico operations of the
Miller business into the MillerCoors joint venture.
INITIAL ACCOUNTING
The initial accounting under IFRS 3, `Business Combinations`, for the Grolsch
and Browar Belgia acquisitions had not been completed as at 31 March 2008.
During the six months ended 30 September 2008, adjustments to provisional
fair values in respect of the Grolsch and Browar Belgia acquisitions have
been made. As a result comparative information for the year ended 31 March
2008 has been presented in this interim financial information as if the
adjustments to provisional fair values had been made from the transaction
dates of 12 February 2008 and 8 January 2008 respectively. The impact on the
prior period income statement has been reviewed and no material adjustments
to the income statement as a result of the adjustments to provisional fair
values are required. The following table reconciles the impact on the
balance sheet reported for the year ended 31 March 2008 to the comparative
balance sheet presented in this interim financial information.
BALANCE SHEET
Adjustments
At 31/3/08 to provisional At 31/3/08
fair values As restated
Audited Unaudited Unaudited
US$m US$m US$m
Assets
Non-current assets
Goodwill 15,600 (478) 15,122
Intangible assets 4,383 653 5,036
Property, plant and equipment 9,037 76 9,113
Other non-current assets 2,666 1 2,667
31,686 252 31,938
Current assets
Inventories 1,350 12 1,362
Trade and other receivables 1,871 (5) 1,866
Other current assets 906 2 908
4,127 9 4,136
Total assets 35,813 261 36,074
Liabilities
Current liabilities
Trade and other payables (3,273) (29) (3,302)
Other current liabilities (2,930) (20) (2,950)
(6,203) (49) (6,252)
Non-current liabilities
Trade and other payables (338) - (338)
Provisions (1,160) (37) (1,197)
Other non-current liabilities (9,868) (174) (10,042)
(11,366) (211) (11,577)
Total liabilities (17,569) (260) (17,829)
Net assets 18,244 1 18,245
Total equity 18,244 1 18,245
13. RELATED PARTY TRANSACTIONS
The MillerCoors joint venture is deemed to be a related party from 1 July
2008. Since 1 July 2008 group companies have sold beer to and purchased hops
from MillerCoors. MillerCoors has also entered into a distribution agreement
with a group company and carried out contract brewing on behalf of group
companies. The group has also received a dividend of US$81 million. Details
of transactions with MillerCoors will be disclosed in the annual report for
the year ended 31 March 2009 and are not material for disclosure for the
current period.
Other than as described above, there have been no material changes to the
nature or relative quantum of related party transactions as described in the
2008 Annual Report.
Changes to key management during the period were as follows: Rob Pieterse and
Maria Ramos were appointed to the board on 15 May 2008 and Lord Renwick of
Clifton retired from the board on 31 July 2008. On 1 July 2008 and 30
September 2008 respectively, Tom Long and Johann Nel ceased to be members of
Excom. Consequently, there were 23 key management at 30 September 2008 (31
March 2008: 24). Norman Adami was appointed as a member of Excom with effect
from 1 October 2008.
14. POST BALANCE SHEET EVENTS
Subsequent to 30 September 2008 the maturity date on the US$1,000 million 364
day facility was extended to 7 October 2009 with a one year term-out option.
FORWARD-LOOKING STATEMENTS
This announcement does not constitute an offer to sell or issue or the
solicitation of an offer to buy or acquire ordinary shares in the capital of
SABMiller plc (the "Company") or any other securities of the Company in any
jurisdiction or an inducement to enter into investment activity.
This announcement includes `forward-looking statements` with respect to
certain of SABMiller plc`s plans and its current goals and expectations
relating to its future financial condition, performance and results. Although
SABMiller plc believes that the expectations reflected in the forward-looking
statements are reasonable, SABMiller plc`s actual future financial condition,
performance and results may differ materially from the plans, goals and
expectations set forth in SABMiller plc`s forward-looking statements. These
statements contain the words "anticipate", "believe", "intend", "estimate",
"expect" and words of similar meaning. All statements other than statements
of historical facts included in this announcement, including, without
limitation, those regarding the Company`s financial position, business
strategy, plans and objectives of management for future operations (including
development plans and objectives relating to the Company`s products and
services) are forward-looking statements. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors
that could cause the actual results, performance or achievements of the
Company to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Such
forward-looking statements are based on numerous assumptions regarding the
Company`s present and future business strategies and the environment in which
the Company will operate in the future. These forward looking statements
speak only as at the date of this announcement. The Company expressly
disclaims any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statements contained herein to reflect any
change in the Company`s expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based. The
past business and financial performance of SABMiller plc is not to be relied
on as an indication of its future performance.
ADMINISTRATION
SABMILLER PLC
(Registration No. 3528416)
COMPANY SECRETARY
John Davidson
REGISTERED OFFICE
SABMiller House
Church Street West
Woking
Surrey, England
GU21 6HS
Telefax +44 1483 264117
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 (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 Mellon
Depositary Receipts Division
101 Barclay Street
New York, NY 10286
United States of America
Telephone +1 212 815 3700
Email: shrrelations@bnymellon.com
Internet: http:// www.adrbnymellon.com
Toll free +1 888 BNY ADRS or +1 888 269 2377 (toll-free)
(USA & Canada only)
Date: 13/11/2008 09:00:08 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
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