| Thu 21 Nov 2002, 17:13 | | Sabmiller Plc - Interim Announcement |
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Sabmiller Plc - Interim Announcement
Release Date: 21/11/2002 09:00:34 Code(s): SAB
SABMILLER PLC - INTERIM ANNOUNCEMENT
SABMILLER PLC
SHARE CODE :SOSAB
ISIN CODE : GB0004835483
GROUP PERFORMANCE IN LINE WITH EXPECTATIONS
London and Johannesburg, 21 November 2002.
SABMiller plc, a leading force in global brewing, today announces its six-month
results to 30 September 2002.
Highlights are:
Financial
2002 2001 %
change
US$m US$m US$ GBP*
Turnover 3,977 83 74
2,176
- excluding Miller 2,670 2,176 23 17
EBITA 553 365 51 44
- excluding Miller 456 365 25 19
Profit before tax 374 302 24 18
Adjusted profit before tax 491 322 52 45
Adjusted earnings per share 26.8 25.7 4 (1)
(US cents)
Adjusted earnings per share 276.7 213.0
(SA cents) - up 30%
Dividend per share (US cents) 6.5 6.5 -
* Percentages expressed in terms of GBP sterling movements are given above in
order to aid comparability with other FTSE companies and are provided for
information only.
Operational
Total beverage volumes up 57% to 75 million hls, organic up 5%
Strong performance from Europe - EBITA up 22%
South African businesses perform well despite currency decline
Africa and Asia profits grow ahead of expectations - EBITA up 52%
Miller integration proceeding as planned
Graham Mackay, Chief Executive, commented:
"Our established businesses have delivered good results and improved margins
across the board, while we focus on integrating and positioning the
strategically important new acquisitions in North and Central America. The
benefits of an increasingly balanced portfolio play an important part in the
group`s overall results. We are working actively on numerous projects at Miller
Brewing Company to improve its performance and are confident that the potential
identified at acquisition will be realised over time."
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.
Incorporated in England and Wales (Registration Number 3528416)
CHIEF EXECUTIVE`S REVIEW
Business review
Operating performance
In the first half of the financial year, our widespread portfolio of businesses
has shown impressive performances in a number of territories in the face of
strong competition and global economic uncertainty. In all our established
businesses, good results have been delivered, and our focus on productivity
across the group has delivered improved margins in many businesses.
The group recorded organic volume growth of 4.7% for lager beer and a similarly
pleasing 7.1% for carbonated soft drinks (CSDs). Results for the half year
reflect the increasing benefit of a balanced and diversified portfolio, and our
businesses in Europe, Africa and Asia, and South Africa have all reported strong
underlying earnings growth. EBITA margins have continued to improve in most of
our businesses, reaching 17% for the group excluding Miller Brewing Company
(Miller), though the lower EBITA margin at Miller has diluted the group`s margin
in comparison with prior year. The acquisition of Miller has significantly
changed the group and, accordingly, results for the half year are not directly
comparable with those of the prior year.
At Miller, the initial focus in this early period has been on the integration of
this business into the group. Since acquisition, more than ten integration
teams have been working on synergy and performance improvement plans, to ensure
long term value delivery. This work is by no means complete, and some of the
implementation programmes will take up to eighteen months to deliver. Whilst
Miller had a difficult three months to 30 September, we are confident that it
will live up to our long term expectations and will deliver synergies for the
group in excess of the initial estimate of US$50 million in year three.
In Central America, the process of integrating the beer and CSD operations in
Honduras and El Salvador is well underway, and we are confident of the synergies
and benefits being delivered. Reduced economic conditions in the region have
necessitated an adjustment downward in performance expectations, and faced with
heightened competition in the CSD businesses, we have strengthened our
management team and increased our marketing and promotional activity.
Conversely, our European operations, benefiting from our strategy of building
strong regional brand portfolios, have delivered excellent results, and
profitability has increased across all countries. This is a very creditable
performance considering the impact of flooding in the Czech Republic and the
highly competitive environments in which we operate. Management has delivered
improved volumes, market shares and margins in the majority of countries, with
particularly strong performances coming from Czech and Poland.
Results from Africa and Asia are also above expectations. We have seen
excellent trading in our larger African territories of Botswana, Mozambique and
Tanzania and market share gains in the more competitive markets; and our equity
accounted associate, Castel, has also delivered good results. In China, our
acquisitions in the prior financial year have been successfully integrated, and
a significant improvement in earnings for the first half has been seen, albeit
from a relatively small base. Our fledgling Indian operation has delivered
positive EBITA.
In South Africa, the rand has been relatively stable throughout the reporting
period though still some 25% down on prior year against the US dollar. Within
this context, the South African operations reported good results. Beer South
Africa grew EBITA margin by 40 basis points, on similar volumes to those of the
prior year. Other Beverage Interests and Hotels and Gaming both increased their
US dollar EBITA and improved their margins.
Despite the intense management activity during these last six months, both pre
and post the Miller acquisition, it is apparent from the above that operating
management in our established businesses has retained its focus and has
continued to deliver value throughout. In addition, over recent months,
management resources have been strengthened at the corporate centre with key
appointments in the Marketing, HR and Finance functions providing improved
support to our wider portfolio of businesses and better coordination of global
initiatives.
Much has been said in the corporate world about governance and the highly
publicised corporate failures over the past year. The group continues to act
prudently in its approach to reporting and management is satisfied that strong
risk management processes and internal controls are in place.
General outlook
Significant management resources are being devoted to integrating Miller into
the group and management remains confident of delivering favourable results in
the medium term.
We remain convinced that the fundamentals are in place throughout the group`s
various businesses to deliver sound performance and cash flows. Rand stability,
if maintained for the balance of the financial year, will assist the group to
report real earnings growth for the full year.
We continue to explore opportunities across a wide front as the world brewing
industry shows evidence of further consolidation.
Americas:
North America
2002*
Financial summary US$m
Turnover 1,307
EBITA 102#
EBITA margin (%) 7.8#
Sales volumes (hl 000`s)
Lager - excluding contract brewing 12,734
Lager - contract brewing 3,001
* Three months
# Before integration costs of US$5 million and after one-off FMB launch costs of
US$16 million
The SABMiller integration process regarding Miller is proceeding as planned with
combined teams working on more than ten integration and performance enhancement
projects. A key initiative is the focus on improving brand equity, particularly
the important Miller Lite brand. The majority of the marketing spend is being
directed behind our core brands, and the effectiveness monitored closely. The
`route to market` is an important part of our strategy to rebuild sales
momentum, and we continue to improve distributor relationships to enhance sales
execution and focus on our brands.
As a key component of the SABMiller integration process, substantial work is
being undertaken to enhance the performance culture within Miller in line with
our practices. This greater emphasis on productivity and performance is
expected to result in both medium and long-term benefits. Areas of focus in the
integration process that are expected to yield medium term cost savings and
benefits in excess of the initial estimate of US$50 million, include: synergies
in procurement (e.g. raw materials and packaging); a reduction in IT costs;
sharing of `best practice` in areas such as brewing, control systems, freight
logistics etc; operational efficiencies and greater distribution for the Pilsner
Urquell brand in the United States from leveraging Miller`s distribution system;
and benefits from rationalisation of the many export offices of PU International
and Miller International.
Many of the above integration and performance improvement projects are still in
their initial phases, and their implementation across many functions and the
expected benefits to flow therefrom can only be expected in the medium term.
Domestic sales volumes were down 2.4% compared with the comparable period in the
prior year, despite the introduction of our flavoured malt beverage (FMB)
portfolio. Contract brewing volumes have increased by 28%, primarily driven by
the transfer of Pabst volume to Miller breweries from Pabst Lehigh brewery after
its closure in September 2001. International performance has improved mainly
due to higher export volumes in Mexico and Canada.
Turnover was up 5.1% versus the prior year`s quarter. Domestic beer industry
fundamentals for pricing continue to be strong and the improved pricing on
Miller Lite, Miller Genuine Draft, Milwaukee`s Best and Miller High Life brands
supported the turnover increase. This favourable pricing was partly offset by
price promotion expenses on our core brands. Pricing gains were also offset by
lower domestic shipment volumes. Domestic market share for the nine months to
30 September 2002 was 19.2%, down 0.5% from the prior year period.
EBITA for the second quarter was below the estimated EBITA for the prior year.
This change is due mainly to a decline in domestic volumes as well as
substantial increases in marketing spend directed at our trademark brand, Miller
Lite, and upfront support for our recently launched FMB brands. A positive
component to the margin, which partly offsets the marketing investment, is the
inclusion of the higher margin FMB portfolio of Skyy Blue, Stoli Citrona, Sauza
Diablo, and Jack Daniel`s Hard Cola. The growth of the FMB category in the
United States has slowed, but we intend to continue participating in this new
and important segment of the market.
Central America
2002
Financial summary US$m
Turnover 261
EBITA 35#
EBITA margin (%) 13.2#
Sales volumes (hl 000`s)
Lager 851
Carbonated soft drinks 3,250
Other beverages 1,293
# Before reorganisation costs of US$4 million
During the extensive restructuring and integration of our businesses, there has
been aggressive CSD competitive activity both in El Salvador and Honduras.
This, combined with a weak economic environment in the region, has adversely
affected volumes, revenues and hence margins. For the six months, CSD volumes
have declined 6% and beer volumes are 1% up on the prior period.
In El Salvador, focused CSD promotional activity has arrested the market share
decline. This activity has stimulated the overall market, thus partially
offsetting our market share loss and leaving volumes 3% below prior year. The
fruit juice market has been negatively affected by the activity in the CSD
market, but we have held market share.
In Honduras, CSD volumes were 7% below the prior year, which were artificially
stimulated by abnormal promotional activity. After an initial market share loss
early in the year, our share has been stabilised and the first industry price
increase in almost 2 years has been achieved.
Domestic beer volumes in El Salvador are in line with prior year but export
volumes are below expectation. Honduran beer volumes are growing for the first
time in three years as a result of improved customer service and sales force
management.
The restructuring process continues as planned. The El Salvador packaging
manufacturing operations have been closed with the transfer of key assets to
other group operations. The remaining El Salvador operations are being
integrated and specific cost savings and synergies which exceed those identified
at acquisition are starting to come through. Rationalisation in Honduras is
also producing cost savings and the benefits will reflect in the financials
earlier than in El Salvador as the integration task in this country is
considerably simpler.
We continue to believe that the integrated beer and CSD model will deliver
improved performance when it is fully entrenched.
Europe
2002 2001 %
change
Financial summary US$m US$m US$
Turnover 899 736 22
EBITA 169 138 22
EBITA margin (%) 18.8 18.7
Sales volumes (hl 000`s)
Lager 14,212 12,847 11
SABMiller`s European operations have again produced good operational
performances for the first half of the year, with EBITA up 22% and an
improvement in margin. Our successful strategy of developing strong regional
brand portfolios has resulted in volume growth of 11% and EBITA margin
enhancement, driven by our key markets of Poland and Czech. Central European
currencies have been firm, underpinning results reported in US dollars.
Growth in the Polish beer market has been strong at around 8%, assisted by good
summer weather. SABMiller`s Kompania Piwowarska (KP) achieved 11% volume growth,
exceeding 31% market share, boosted by the successful launch of a new brand,
Debowe, competing in the strong beer segment. KP`s flagship brand, Tyskie,
showed a year on year volume increase of 10% and Redd`s continues its good
growth momentum.
The Pilsner Urquell group increased its volumes by 6% compared to the prior
year, with all of its drive brands showing growth in a static beer market.
Whilst the floods in August resulted in some lost production, recovery was
quick. The Pilsner Urquell brand performed well with its domestic volumes up 13%
against the previous year, while both Gambrinus and Kozel showed strong growth.
Further operational efficiencies, particularly in relation to procurement, and
3% in real pricing contributed to the achievement of a significant improvement
in earnings. Our acquisition of Pilsner Urquell over three years ago is
continuing to deliver synergy benefits well ahead of our initial projections.
Our volumes in Russia are up 8% and our international premium brands, Miller
Genuine Draft and Holsten, showed significant growth, almost doubling volume
compared to prior year. A new brand, Try Bogatyrya, was introduced into the
growing mainstream segment during July with early volumes in line with
expectations. However, volumes for our local premium brand, Zolotaya Bochka,
have been disappointing and are below prior year levels. The Russian beer
market slowed in the last quarter, and particularly during September, but we
expect the market to continue to show reasonable growth. Significant investment
has been made in marketing behind our brands, impacting profitability during the
period. Work continues on expansion at Kaluga brewery, which will raise
capacity to 3.5 million hectolitres by the next summer season, at a cost of US$
60 million.
In Hungary, the total beer market is estimated to have grown by 5%. Dreher`s
market share grew 1%, with volumes increasing by 7% against prior year.
Profitability and cash flow here continued to improve. The beer market in
Romania grew marginally at around 1.4% and our local operations have increased
market share to approximately 15%. Our Ursus premium brand, as well as
Timisoreana Lux, have driven volume, while ongoing merger synergies and
productivity gains have boosted profits and cash flow.
The market in the Canary Islands has suffered from a decline in international
tourism resulting in a volume decrease of around 2%. However, operational
efficiencies in our two breweries have resulted in an increase in margins. In
Slovakia, the Saris brewery has shown impressive volume growth of 24% over the
previous year, driven to a large extent by the strength of our licensed Czech
brands.
Our international premium brand, Pilsner Urquell, continues to perform well in
the key markets of Germany, USA and the United Kingdom. Sales volumes in these
markets are encouraging, with volumes up 32%, 19% and 38% respectively on the
prior year. In total, volumes of Pilsner Urquell outside the Czech Republic have
increased by 21% to 356,000 hls compared to the same period in the prior year.
Africa and Asia
2002 2001 %
change
Financial summary US$m US$m US$
Turnover 590 430 37
EBITA 114 75 51
EBITA margin (%) 19.3 17.5
Sales volumes (hl 000`s)*
Lager 19,283 12,347 56
Carbonated soft drinks 1,902 1,403 36
Other beverages 5,328 5,208 2
* Castel volumes of 4,971 (2001: 4,681) hls 000`s lager beer and 4,391 (2001:
3,869) hls 000`s carbonated soft drinks and 404 (2001: 275) hls 000`s other
beverages are not included.
Africa
Lager sales volumes grew 2.9% (organic 5.2% after disposals), CSDs grew 35.6%
(organic 14.3%) and traditional beer declined by 6.3%. Strong underlying
operating results were achieved. Although currencies in the African countries
in which we operate stabilised during the calendar year following the sharp
declines experienced in the previous year, the good results of this half-year
were still impacted.
Major contributions to our results came from improved trading conditions in
comparison with last year in Botswana, Mozambique and Tanzania with the latter
benefiting from a good agricultural season. The acquisition activity in Africa
undertaken during the past year namely the acquisitions of the Coca-Cola bottler
in Zambia and the Laurentina Brewery in Maputo, Mozambique from Castel and the
commencement of the rationalisation of the Tanzanian operations, also had a
marked impact.
Continued market share gains in Ghana resulted in volume growth in excess of 50%
for the period, with industry volumes also starting to recover. Some recovery
was achieved in Uganda in terms of both market share and industry volume, the
latter on the back of a modest decrease in excise. However, we have some way to
go to achieve a satisfactory level of performance in Uganda. The recent
introduction of VAT in Botswana has resulted in across-the-board increases in
prices to the consumer, thereby disrupting excellent sales momentum built up
during the earlier part of the period. Economic prospects in Zambia have turned
down due to the effects of a drought and the performance of the key copper
mining sector but plans are under way to extract synergies from our three
beverage businesses. The end of the civil war in Angola continues to benefit
our Luanda and Lubango Coca-Cola bottlers, although smuggled products from
neighbouring territories have a major negative impact on sales growth.
SABMiller`s pan-African premium brands, Castle Lager and Castle Milk Stout, grew
22% over the comparable prior year period.
Castel beverage volumes are up 10.7% and our share of their profits has
increased by almost 30%. The Castel relationship has led to our acquisition of
their operations in Mozambique and discussions are taking place with regard to
CSD interests in Angola. We continue to investigate opportunities for joint
participation in both new territories and areas such as procurement.
Finally, all regulatory and shareholder consents in both Tanzania and Kenya have
now been obtained, paving the way for the completion of the East African
restructuring announced in May this year.
Asia
In China volumes grew 66.5% (organic 7.5%) and profitability more than doubled
as a result of our success in restructuring and consolidating the significant
strategic acquisitions made during the previous financial year.
Overcapacity and pressure on pricing in the Chinese beer market still remain a
concern. However, trading benefited from our ongoing reorganisation of
operations and we continue to play a leading role in the consolidation of the
beer industry.
A pleasing performance was recorded by our small Indian operation, which
reported positive EBITA for the period.
South Africa:
Beer South Africa
2002 2001 %
change
Financial summary US$m US$m US$
Turnover 524 594 (12)
EBITA 118 132 (10)
EBITA margin (%) 22.6 22.2
Sales volumes (hl 000`s) 11,083 11,113 -
Beer volumes improved during the second quarter of the year reversing the volume
decline of the first quarter and ending the period in line with last year.
Adjusting for the impact of Easter, which fell into the prior financial year,
volumes are up by around 1% in the domestic market.
Notwithstanding steep increases in raw material prices, exacerbated by the
devaluation of the rand towards the end of last year, operating margins showed
an improvement, increasing 40 basis points to 22.6%.
Beer South Africa has gained share of the alcoholic fruit beverage (AFB) and
premium segments of the market. This has been supported by the entry of Redd`s
Dry last year and the launch of Brutal Fruit and Sterling Light Lager earlier
this year. Brutal Fruit enjoyed a particularly successful launch. Given the
unique bottle design of this product, our glass suppliers have been unable to
meet the significant sales demand but we expect these supply issues to be
resolved early in the new year. Sterling Light Lager`s consumer proposition of
low alcohol with the full beer taste has also shown potential for further
performance.
Castle Lager, our flagship brand, will be participating as a key sponsor of the
World Cup Cricket tournament, to be held in South Africa next year, providing an
excellent opportunity to further enhance the brand`s positioning.
Independent customer service ratings of Beer South Africa are at an all time
high with the company further improving its service offering. Focus continues on
the rollout of the refrigeration programme as well as the innovative point of
sale "beer theatre". In addition, emphasis is being placed on the development
and execution of other innovative and promotional concepts.
In regard to legislation, expectations are that the national Liquor Bill will
only be tabled towards the middle of next year. It has again been confirmed that
the assurances by the Minister and the Department of Trade and Industry
regarding the retention by manufacturers of their depots and their ability to
deliver direct to retailers, remain intact.
Following the investigation into horizontal restrictive practices, concluded at
the beginning of the year, the Competition Commission is now investigating
aspects of vertical restrictive practices in the industry. Beer South Africa
remains confident that its conduct and practices are fully compliant.
The rate of decrease of consumer spending on non-durable goods is slowing and
the low price wine surplus is now declining rapidly, and this should have a
positive impact on beer sales going forward.
Other Beverage Interests
2002 2001 %
change
Financial summary US$m US$m US$
Turnover 305 327 (7)
- ABI 228 237 (4)
EBITA 29 25 15
- ABI 22 22 (2)
EBITA margin (%) 9.5 7.7
- ABI 9.4 9.2
Sales volumes (hl 000`s)
Soft drinks 5,146 4,837 6
- ABI 4,962 4,611 8
Amalgamated Beverage Industries
ABI recorded very good volume growth for the period, with the carbonated soft
drinks category growing strongly on a like for like basis at 4.8 %. This growth
is against a background of rising consumer inflation and high interest rates.
A solid financial performance has been delivered, despite significant increases
in the price of raw materials. Strong volume growth, efficiency in production
and control of overheads enabled ABI to offset these increases.
Volumes are expected to continue on a positive trend for the remainder of the
year.
Appletiser
Sales volumes of sparkling fruit beverages in South Africa, which had been in a
three year declining trend, improved significantly following last year`s
repositioning of the flagship Appletiser brand and recorded growth of 19% over
the half year to September 2001. Valpre spring water continued to lead the
market. International sales of sparkling fruit beverages recorded volume growth
of 7% over the prior period.
Notwithstanding significantly increased supplier prices, particularly in respect
of packaging materials and imported ingredients, attributable earnings improved
substantially year on year in local currency.
Wines and Spirits
The merger between Distillers Corporation (SA) Limited and Stellenbosch Farmers`
Winery Group Limited under the name of Distell has enabled the company to make
substantial progress in becoming an effective player in international alcoholic
beverage markets.
That Distell is capable of meeting the challenges of these markets has been
borne out by its performance over the past year: Distell`s rand operating profit
has increased by 42% compared to the prior period. The company will continue
using its merged resources to achieve its overarching goal of becoming a
sizeable market player, building strong and profitable brands across its wine,
spirits and flavoured alcoholic beverage portfolios.
Hotels and Gaming
2002 2001 %
change
Financial summary US$m US$m US$
Turnover 91 89 3
EBITA 17 10 84
EBITA margin (%) 19.2 10.7
Revpar * $28.45 $25.31
* Revenue per available room
Turnover for the first six months of the financial year was significantly up in
local currency on the same period last year, primarily due to the turnaround in
the South African hotel industry which began in December 2001. Our hotel
occupancies at 72% are 9 percentage points up on the same period last year.
Average room rates have shown real growth translating into a rand Revpar
improvement of 40%. The hotel division received a boost from the hosting of the
World Summit on Sustainable Development in late August. The success of this
event confirmed the ability of South Africa`s hospitality industry to compete
internationally and it is hoped that this will help to further tourism interest
in the region. Occupancies are expected to sustain their high levels during the
remainder of the financial year and will be assisted by the hosting of the
Cricket World Cup in February.
The gaming portfolio continues to perform well. The Gauteng market has been
buoyant during the first six months of the financial year showing 14% growth
over the same period last year and Montecasino, Gauteng`s premier casino
complex, improved its market share. Phase 1 of the Suncoast casino development
in Durban, which includes the casino, cinemas and limited restaurant and retail
facilities at a cost of US$ 90 million (R900 million), is scheduled to open on
27 November 2002
Financial information
Segmental analysis
We have expanded the segmental analysis to include the two new segments of North
America and Central America. Information is provided on volumes, turnover, EBITA
and EBITA margin, together with a commentary on each segment.
Accounting for volumes
In the determination and disclosure of reported sales volumes the group
aggregates the volumes of all consolidated subsidiaries and its equity accounted
associates, other than associates where the group exercises significant
influence but primary responsibility for day to day management rests with others
(such as Distell and Castel). In these latter cases, the financial results of
operations are equity accounted in terms of UK GAAP, but volumes are excluded.
Miller contract brewing volumes are excluded from total volumes, however
turnover from contract brewing is included within group turnover.
Acquisitions
With effect from 9 July 2002, South African Breweries plc (SAB) purchased the
entire share capital of Miller Brewing Company (Miller) from Philip Morris
Companies Inc. (Philip Morris) in exchange for the issue of 430 million shares
in SAB. The shares issued to Philip Morris comprise two classes of equity
capital; ordinary shares and unlisted participating shares. The total of these
shares is equivalent to an economic interest of 36.03% (excluding the shares
owned by Safari Ltd) in the enlarged SABMiller. Philip Morris` total voting
rights have been capped at 24.99% of the votes exercisable at a general meeting.
Further details of the acquisition are given in note 7.
Goodwill amortisation
Goodwill amortisation at US$105 million is up significantly over the prior
period reflecting the major acquisition activity undertaken over the previous 12
months.
Treasury
Gross borrowings have increased to US$3,558 million from US$1,535 million at 31
March 2002, principally as a result of the US$2 billion of borrowings assumed
with Miller Brewing Company. These borrowings will be refinanced in the next
financial year. Net debt has also increased to US$3,234 million. The average
loan maturity is two years and the average borrowing rate is now below 4.5%.
Interest
Net interest payable of US$74 million is up from US$46 million in the prior year
first half due to the increase in borrowings incurred to fund acquisitions in
the second half of the previous financial year and the borrowings acquired with
Miller Brewing Company in the current financial year.
Taxation
The effective tax rate, before goodwill amortisation, is 30.8%. This, however,
includes an exceptional US$8 million deferred tax credit in relation to tax
losses in one of ABI`s wholly owned subsidiaries which have been assessed in the
period. Excluding this, the effective tax rate before goodwill amortisation is
32.5%. The increase compared to the prior year and the year to 31 March 2002 is
attributable to increased profits in companies with higher effective tax rates
and the lower use of assessed losses.
Associates
The share of operating profit of associates has increased by US$22 million
compared to the same period in the prior year, with the majority of the increase
coming from Castel in Africa and from the successful turn around in China of our
acquisitions made in the prior financial year.
Dividend
The board has declared an unchanged interim dividend of 6.5 US cents. The
dividend will be payable on 20 December 2002 to shareholders on the London and
Johannesburg Registers on Friday, 6 December 2002. The ex-dividend trading dates
as stipulated by the London Stock Exchange will be 4 December 2002 on the London
Exchange and 2 December 2002 on the Johannesburg Exchange as stipulated by
STRATE. As the group reports primarily in US dollars, dividends are declared in
US dollars. They are payable in sterling to shareholders on the UK section of
the register and South African rand to shareholders on the RSA section of the
register. The rates of exchange applicable on 15 November 2002, being the last
practical date before the declaration date will be used for the conversion
($/GBP = 1.5790 and R/$ = 9.6500), resulting in an equivalent interim dividend
of UK 4.1165 pence per share for UK shareholders and SA 62.7250 cents per share
for RSA shareholders.
The pro-rata dividend to be paid in US dollars to Philip Morris on the
430,000,000 listed and unlisted shares held by them is apportioned to the number
of days in which they held the shares for the first half year, and is calculated
at US2.98360 cents a share.
Enquiries:
London
SABMiller plc Tel: +44 20 7659 0100
Nick Chaloner Director of Communications Tel: +44 20 7659 0119
Mob: +44 7880 502 755
Anna Miller Salzman Head of Investor Relations Tel: +44 20 7659 0106
Mob: +44 7973 837 070
Ciaran Baker Head of Corporate Communications Mob: +44 7979 954 493
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
Pictures for the media are available from www.newscast.co.uk
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 14
to 26, which the directors confirm has been prepared on a going concern basis
and follows all applicable accounting standards. The directors consider that the
group has used appropriate accounting policies, consistently applied and
supported by reasonable and prudent judgements and estimates.
On behalf of the board
E A G Mackay M I Wyman
Chief Executive Chief Financial Officer
20 November 2002
INDEPENDENT REVIEW REPORT TO SABMILLER plc
Introduction
We have been instructed by the company to review the financial information,
which comprises the profit and loss account, the statement of total recognised
gains and losses, the balance sheet, the cash flow statement, comparative
figures and associated notes. We have read the other information contained in
the interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors` responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial
data, and based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed.
A review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2002.
PricewaterhouseCoopers
Chartered Accountants
London
20 November 2002
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
for the six months ended 30 September
Six Six Year
months months ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
Notes US$m US$m US$m
Turnover (including share of 2
associates` turnover)
Continuing operations 2,670 2,176 4,364
Acquisitions 1,307 - -
Total continuing operations 3,977 2,176 4,364
Less: share of associates` (388) (317) (647)
turnover (all continuing)
Group turnover 2 3,589 1,859 3,717
Net operating costs (3,205) (1,553) (3,098)
Group operating profit
Continuing operations 345 306 619
Acquisitions 39 - -
Total continuing operations 384 306 619
Share of operating profit of 2 64 42 85
associates (all continuing)
Profit on ordinary activities 2 448 348 704
before interest and taxation
Net interest payable (74) (46) (98)
Group (65) (38) (83)
Associates (9) (8) (15)
Profit on ordinary activities 374 302 606
before taxation
Taxation on profit on ordinary 3 (148) (91) (208)
activities
Profit on ordinary activities 226 211 398
after taxation
Equity minority interests (66) (50) (105)
Profit for the financial period 160 161 293
Basic earnings per share (US 4 16.7 23.2 40.7
cents)
Headline earnings per share (US 4 26.7 25.2 48.0
cents)
Adjusted basic earnings per 4 26.8 25.7 48.7
share (US cents)
Diluted earnings per share (US 4 16.7 22.9 40.3
cents)
Adjusted diluted earnings per 4 26.1 25.4 47.7
share (US cents)
Dividend per share (US cents) 6.5 6.5 25.0
CONSOLIDATED BALANCE SHEETS
at 30 September
30/9/02 30/9/01 31/3/02
Unaudited Unaudited Audited
US$m US$m US$m
Fixed assets
Intangible assets 6,486 904 1,804
Tangible assets 3,098 1,737 1,858
Investments 1,145 1,073 1,096
Investments in associates 497 432 462
Other fixed asset investments 648 641 634
10,729 3,714 4,758
Current assets
Stock 407 202 238
Debtors 829 353 405
Investments 5 297 45
Cash at bank and in hand 319 195 245
1,560 1,047 933
Creditors - amounts falling due (1,547) (903) (1,160)
within one year
Interest bearing debt (212) (176) (240)
Other (1,335) (727) (920)
Net current assets 13 144 (227)
Total assets less current 10,742 3,858 4,531
liabilities
Creditors - amounts falling due (3,362) (1,284) (1,311)
after one year
Interest bearing debt (3,346) (1,278) (1,295)
Other (16) (6) (16)
Provisions for liabilities and (651) (179) (166)
charges
Net assets 6,729 2,395 3,054
Ordinary shareholders` funds 6,002 2,046 2,309
Equity minority interests 727 349 745
Capital employed 6,729 2,395 3,054
CONSOLIDATED CASH FLOW STATEMENTS
for the six months ended 30 September
Six months Six Year
months ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
Notes US$m US$m US$m
Net cash inflow from operating 5 694 466 975
activities
Dividends received from 13 6 13
associates
Returns on investments and
servicing of finance
Interest received 19 19 35
Interest paid (78) (46) (100)
Interest element of finance - - (12)
lease rental payments
Dividends received from other 1 2 2
investments
Dividends paid to minority (84) (71) (96)
interests
Net cash outflow from returns
on investments and servicing
of finance (142) (96) (171)
Taxation paid (137) (97) (179)
Capital expenditure and
financial investments
Purchase of tangible fixed (186) (133) (266)
assets
Sale of tangible fixed assets 11 7 16
Purchase of investments (15) (65) (61)
Sale of investments 3 13 12
Net cash outflow for capital
expenditure and financial
investments (187) (178) (299)
Acquisitions and disposals
Purchase of subsidiary (46) (82) (672)
undertakings
Sale of subsidiary undertakings - 1 1
Net cash/(overdraft) acquired 6 (15) (2)
with subsidiary undertaking
Purchase of shares from (7) (15) (32)
minorities
Purchase of shares in (6) (8) (57)
associates
Net funding from/(to) 4 (4) (6)
associates
Net cash outflow for (49) (123) (768)
acquisitions and disposals
Equity dividends paid to (141) (128) (173)
shareholders
Management of liquid resources
Sale/(purchase) of short-term 40 (247) 12
liquid instruments
Cash withdrawn from short-term - 3 7
deposits
Net cash inflow/(outflow) from
management of liquid
Resources 40 (244) 19
Financing
Issue of shares 1 3 401
Issue of shares to minorities 3 1 1
New loans raised 155 1,111 1,189
Repayment of loans (219) (663) (892)
Net cash (outflow)/inflow from (60) 452 699
financing
Increase in cash in the period 6 31 58 116
CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 September
Six months Six Year
months ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Profit for the financial period 160 161 293
Currency translation differences on 154 (79) (212)
foreign currency net investments
Other movements 2 - 8
Total recognised gains and losses 316 82 89
for the period
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS` FUNDS
for the six months ended 30 September
Six months Six Year
months ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Profit for the financial period 160 161 293
Other recognised gains and losses 156 (79) (204)
relating to the period (net)
Dividend declared by SABMiller plc * (63) (45) (187)
Issue of shares to SABMiller 3,440 3 401
shareholders
Net increase in shareholders` funds 3,693 40 303
Shareholders` funds at start of 2,309 2,006 2,006
period
Shareholders` funds at end of period 6,002 2,046 2,309
* Dividend received on shares held by Safari Limited netted off.
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The consolidated financial statements have been prepared under the historical
cost convention in accordance with Accounting Standards applicable in the United
Kingdom, and, on the basis of the accounting policies, all of which have been
applied consistently throughout the period and the preceding year as set out on
pages 70 to 74 of the 2002 annual report.
The group financial statements consolidate those of the company and all of its
subsidiary undertakings together with the attributable share of the results of
associated undertakings. The principal subsidiary and associated undertakings
are all coterminous with those of the company, except for the group`s
significant associated undertaking, Distell Group Limited (formerly Distillers
Corporation (SA) Limited and Stellenbosch Farmers` Winery Group Limited), which
has a statutory accounting reference date of 30 June and is therefore accounted
for three months in arrears.
The financial information in this report does not constitute statutory accounts
within the meaning of s240 of the Companies Act 1985 (as amended).
2. Segmental analysis
Six months Six months Year
ended
Turnover ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Business segment analysis
Americas:
North America 1,307 - -
Central America 261 - 186
Europe 899 736 1,280
Africa and Asia 590 430 946
Associates` share (253) (175) (367)
337 255 579
South Africa:
Beer South Africa 524 594 1,112
Other Beverage Interests 305 327 676
Associates` share (98) (106) (212)
207 221 464
Hotels and Gaming 91 89 164
Associates` share (37) (36) (68)
54 53 96
Group 3,977 2,176 4,364
Associates` share (388) (317) (647)
3,589 1,859 3,717
2. Segmental analysis (continued)
Six months Six months Year
ended
Operating profit ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Business segment analysis
Americas:
North America 39 - -
Central America 7 - 7
Europe 151 124 168
Africa and Asia 109 72 162
Associates` share (48) (31) (51)
61 41 111
South Africa:
Beer South Africa 118 132 287
Other Beverage Interests 29 25 95
Associates` share (8) (5) (19)
21 20 76
Hotels and Gaming 17 10 28
Associates` share (8) (6) (15)
9 4 13
Central administration (22) (15) (35)
Group - excluding exceptional 448 348 712
items
Associates` share (64) (42) (85)
384 306 627
Exceptional items
Europe - - (8)
Group - including exceptional 448 348 704
items
Associates` share (64) (42) (85)
384 306 619
Six months Six months Year
ended
EBITA ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Business segment analysis
Americas:
North America 97 - -
Central America 31 - 22
Europe 169 138 198
Africa and Asia 114 75 171
Associates` share (49) (32) (54)
65 43 117
South Africa:
Beer South Africa 118 132 287
Other Beverage Interests 29 25 95
Associates` share (8) (5) (19)
21 20 76
Hotels and Gaming 17 10 28
Associates` share (8) (6) (15)
9 4 13
Central administration (22) (15) (35)
Group - excluding exceptional 553 365 766
items
Associates` share (65) (43) (88)
488 322 678
Exceptional items
Europe - - (8)
Group - including exceptional 553 365 758
items
Associates` share (65) (43) (88)
488 322 670
Six months Six months Year
ended
EBITDA ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Business segment analysis
Americas:
North America 133 - -
Central America 54 - 41
Europe 223 175 293
Africa and Asia 86 64 151
South Africa:
Beer South Africa 143 160 343
Other Beverage Interests 29 28 89
Hotels and Gaming 12 8 21
Central administration (31) (15) (33)
Group - excluding exceptional 649 420 905
items
Exceptional items
Europe - - (1)
Group - including exceptional 649 420 904
items
3. Taxation on profit on ordinary activities
Six months Six months Year
ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Current taxation 135 75 174
Prior year adjustments (1) - (1)
Withholding taxes and secondary 4 4 10
taxation on companies
Share of associates` taxation charge 12 8 21
Deferred taxation* (2) 4 4
148 91 208
Effective tax rate, before goodwill 30.8* 28.6 31.2
amortisation and exceptional items
(%)
* Effective tax rate before tax credit of US$8 million on ABI assessed loss was
32.5%.
4. Earnings per share
Six months Six months Year
ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US cents US cents US cents
Basic earnings per share 16.7 23.2 40.7
Headline earnings per share 26.7 25.2 48.0
Adjusted basic earnings per share 26.8 25.7 48.7
Diluted earnings per share 16.7 22.9 40.3
Adjusted diluted earnings per share 26.1 25.4 47.7
The calculation of basic earnings per share has been based on the profit for the
financial period as shown below, and on a weighted average number of shares in
issue of 960,541,589 (2001: 697,888,455).
At 30 September 2002 there were 10,161,900 share options outstanding under the
RSA Executive Share Purchase Scheme, 5,307,146 share options outstanding under
the SABMiller plc Executive Share Option Scheme (Approved Scheme and Unapproved
(No 2) Scheme combined) and 1,040,902 conditional awards under the Performance
Share Award Scheme, which have not yet vested. The calculation of diluted
earnings per share is based on a weighted average number of shares in issue of
1,034,447,184 after adjusting for 73,905,595 weighted potentially dilutive
shares arising from the share options and the guaranteed convertible bond, and
the profit for the financial period as shown below, adjusted for an interest
saving of US$13 million on the 4.25% guaranteed convertible bond. The average
share price of SABMiller plc since the beginning of the financial period, used
in determining the number of potentially dilutive shares, is US$7.66 compared
with an average strike price on the outstanding options of US$5.59.
The group has also presented an adjusted basic earnings per share figure to
exclude the impact of amortisation and other non-recurring items in order to
present a more meaningful comparison for the periods shown in the consolidated
financial statements. Adjusted earnings per share has been based on adjusted
headline earnings for each financial period and on the same number of weighted
average shares in issue as the basic earnings per share calculation. Headline
earnings per share has been calculated in accordance with the Institute of
Investment Management and Research (`IIMR`)`s Statement of Investment Practice
No. 1 entitled `The Definition of Headline Earnings`. The adjustments made to
arrive at headline earnings and adjusted earnings are as follows:
Six months Six months Year
ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Profit for the financial period 160 161 293
Amortisation of goodwill 105 17 54
Brewery closure costs in Pitesti - - 9
(Romania)
Asset impairment provision in Ursus - - 10
(Romania)
Reversal of impairment provision in - - (11)
Velke Popovice (Czech)
Impairment costs in Africa - - 2
Loss/(profit) on sale of fixed 3 (1) (4)
assets and investments
Taxation effects of the above items (1) - -
Minority interests` share of the (10) (1) (7)
above items
Headline earnings 257 176 346
Integration/reorganisation costs * 9 4 7
Taxation effects of the above items (1) (1) (2)
Deferred tax adjustment due to (8) - -
assessed loss (ABI)
Minority interests` share of the - - (1)
above items
Adjusted earnings 257 179 350
* Comprises integration costs of Miller (US$5 m) and reorganisation costs in
Central America (US$4 m) in the current period.
5. Reconciliation of operating profit to net cash inflow from operating
activities
Six months Six months Year
ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Operating profit 384 306 619
Depreciation: Tangible fixed assets 134 85 176
Depreciation: Containers 20 13 34
Container breakages and shrinkage 8 5 10
Amortisation of intangible fixed 104 16 51
assets
Dividends received from other (1) (2) (2)
investments
Loss/(profit) on sale of fixed 3 - (3)
assets
Brewery closure costs in Pitesti - - 8
(Romania)
Asset impairment provision in Ursus - - 10
(Romania)
Reversal of impairment provision in - - (11)
Velke Popovice (Czech)
Deferred income - - 1
Other non-cash movements (3) (3) 11
Net cash inflow from operating
activities before working
capital movements (`EBITDA`) 649 420 904
Increase in stock (30) - (7)
Increase in debtors (33) (55) (37)
Increase in creditors 108 101 115
Net cash inflow from operating 694 466 975
activities
6. Reconciliation of net cash flow to movement in net debt
Six months Six months Year
ended
ended ended 31/3/02
30/9/02 30/9/01
Unaudited Unaudited Audited
US$m US$m US$m
Increase in cash 31 58 116
Net cash outflow/(inflow) from 64 (448) (297)
decrease/(increase) in debt and
lease financing
Cash (inflow)/outflow from (40) 244 (19)
(decrease)/increase in liquid
resources
Change in net debt resulting from 55 (146) (200)
cash flows
Loans and finance leases acquired (2,019) (4) (261)
with subsidiary undertakings
Exchange movements (23) 23 54
Amortisation of bond costs (2) - (3)
Movement in net debt in the period (1,989) (127) (410)
Opening net debt (1,245) (835) (835)
Closing net debt (3,234) (962) (1,245)
7. Acquisitions
With effect from 9 July 2002, South African Breweries plc (SAB) purchased the
entire share capital of Miller Brewing Company (Miller) from Philip Morris
Companies Inc. (Philip Morris) in exchange for the issue of 430 million shares
in SAB. The shares issued to Philip Morris comprise two classes of equity
capital; ordinary shares and unlisted participating shares. The total of these
shares is equivalent to an economic interest of 36.03% (excluding the shares
owned by Safari Ltd) in the enlarged SABMiller. Philip Morris` total voting
rights have been capped at 24.99% of the votes exercisable at a general meeting.
The fair values of the assets and liabilities acquired, which are considered to
be provisional as a number of matters are still under consideration, are as
follows:
Book Fair value Provision
al
value adjustment fair
s value
US$m US$m US$m
Tangible fixed assets 961 172 1,133
Intangible fixed assets 357 (357) -
Other investments 2 - 2
Stock 131 - 131
Debtors (1) 503 (120) 383
Cash and cash equivalents 6 - 6
Creditors due within one year (408) 34 (374)
Creditors due after one year (2,007) 7 (2,000)
Provisions for liabilities and (469) 6 (463)
charges
Minority interests (24) 18 (6)
Net assets acquired (948) (240) (1,188)
Goodwill 4,671
Consideration 3,483
Total consideration is comprised as
follows:
Shares issued 3,438
Cash costs 45
3,483
In accordance with the group`s accounting policy, the goodwill of US$4,671
million arising on consolidation has been stated on the group`s balance sheet as
an intangible asset and is being amortised over 20 years.
(1) The principal adjustment relates to the reversal of pension and other post
retirement benefit assets following a SSAP 24 valuation.
8. Post balance sheet events
East Africa
The regulatory and shareholder consents required to effect the East African
transaction announced in May this year have progressed according to plan,
culminating with Tanzania Breweries` shareholders unanimously voting in favour
of the transaction at an Extraordinary General Meeting held in Dar es Salaam on
8 November 2002. All consents are now to hand and formal closure of the
transaction is expected shortly.
ADMINISTRATION
SABMiller plc
(Registration No. 3528416)
Company Secretary
A O C Tonkinson
Registered Office
Dukes Court, Dukes Street
Woking
Surrey GU21 5BH
England
Telefax +44-1483-264117
Telephone +44-1483-264000
Head Office
One Stanhope Gate
London W1K 1AF
Telefax +44-20-7659-0111
Telephone +44-20-7659-0100
Internet address
http://www.sabmiller.com/
Investor Relations
anna.millersalzman@sabmiller.com
Telephone +44-20-7659-0100
Independent Auditors
PricewaterhouseCoopers
1 Embankment Place
London WC2N 6RH
England
Telefax +44-20-7804-4770
Telephone +44-20-7583-5000
Registrar (United Kingdom)
Capita IRG plc
Balfour House
390-398 High Road
Ilford, Essex IG1 1NQ
United Kingdom
Telefax +44-20-8478-7717
Telephone +44-20-8639-2000
Registrar (South Africa)
Computershare
70 Marshall Street
9th Floor
Johannesburg 2000
South Africa
Telefax +27-11-370-5312
Telephone +27-11-370-5487
United States ADR Depositary
The Bank of New York
ADR Department
620 Avenue of the Americas, Floor 6,
New York, NY 10011
United States of America
Telefax +1-212-462-6215
Telephone +1-212- 462- 6667
Internet http://www.adrbny.com/
Toll free 1-888-269-2377 (USA & Canada)
Date: 21/11/2002 09:00:18 AM Produced by the JSE SENS Department
