| Thu 20 Nov 2003, 9:05 | | Interim Financial Results |
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SABMiller plc - Interim Financial Results
SABMiller plc
JSE Share Code: SAB
Issuer Code: SOSAB
ISIN: GB0004835483
INTERIM ANNOUNCEMENT
STRONG ORGANIC EARNINGS GROWTH
London and Johannesburg, 20 November 2003. SABMiller plc today announces its six
month results to 30 September 2003. Highlights are:
Financial
2003 2002
US$m US$m # % change
Turnover 6,328 3,977 59
EBITA * 889 553 61
Profit before tax 666 374 78
Adjusted profit before tax 801 479 67
Adjusted earnings 423 257 64
Adjusted earnings per share
- US cents 35.5 26.8 32
- UK pence 22.0 17.8 24
- SA cents 268.3 276.7 (3)
Basic earnings per share (US cents) 25.9 16.7 55
Dividends per share (US cents) 7.5 6.5 15
Net cash inflow from operating 1,088 694 57
activities
# Includes Miller Brewing Company for three months.
* Earnings before interest, taxation and goodwill amortisation,
and before exceptional items (see note 3).
Note: Adjusted profit before tax excludes exceptional items and
goodwill amortisation. The calculation of adjusted earnings is
given in note 5.
Operational
Lager beer volumes up 31% to 76 million hls, organic up 3.2%
Group EBITA up 61%
- organic, constant currency EBITA up 21%
Excellent performance in Europe, EBITA up 51
- organic, constant currency EBITA up 27%
Strong results from Beer South Africa, EBITA up 56%
- organic, constant currency EBITA up 14%
Africa and Asia EBITA up 18%
Miller performance on plan
Statement from Graham Mackay, Chief Executive
"Strong underlying business performance delivered excellent results with group
EBITA up 61% and adjusted earnings per share up 32%. Organic, constant currency
EBITA growth of 21% was impressive with, notably, Europe up 27% and Beer South
Africa up 14%. Our Africa and Asia business once again delivered a good
performance from its widespread portfolio with EBITA up 18%.
In Miller, the emphasis remains firmly on our longer term strategy and action
plans. Progress is being made in each of the four key focus areas, whilst
financial performance remains in line with our expectations. Our Central
America operation is starting to benefit from our initiatives to enhance its
brand portfolio and distribution activities.
We have strengthened our international operations and enhanced our future growth
potential through selective strategic acquisitions, which we have financed from
our strong internal cash flows and available borrowing facilities."
Enquiries:
SABMiller plc Tel: +44 20 7659 0100
Sue Clark Director of Corporate Mob: +44 7850 285471
Affairs
Anna Miller Head of Investor Mob: +44 7973 837070
Salzman Relations
Gary Leibowitz VP of Investor Relations Mob: +44 7717 428540
(USA)
Nigel Fairbrass Head of Financial Media Mob: +44 7799 894265
Philip Gawith The Maitland Consultancy Tel: +44 20 7379 5151
Ltd
A live webcast of the management presentation to analysts will begin
at 9.30am (GMT) on 20 November 2003.
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.
Registered office: Dukes Court, Duke Street, Woking, Surrey, GU21
5BH
Telephone: +44 1483 264000
Telefax: +44 1483 264117
CHIEF EXECUTIVE"S REVIEW 3
Business review
In the first half of the year we have delivered good organic volume increases
and strong earnings growth particularly from our European, South African and
Africa and Asian businesses, whilst continuing to enhance our operations
internationally through selective strategic acquisitions. In North and Central
America we are pursuing vigorously our strategies and action plans and
performance there remains in line with our previously stated expectations.
Total beverage volumes were 93 million hectolitres (hls), a 24% increase on the
comparable six-month period, with organic growth of 2.3%. Lager beer volumes
were up 31% to 76 million hls, representing organic growth of 3.2%. Strong
business performance has delivered reported EBITA of US$889 million (up 61%),
assisted generally by favourable currency movements, in particular the South
African rand. On an organic, constant currency basis, EBITA increased 21%.
Adjusted earnings are up by 64%, to US$423 million, with adjusted earnings per
share of 35.5 US cents, up 32% on the first six months of the prior year.
The board has authorised an interim dividend of 7.5 cents, a rise of 15.4%.
This partly reflects the increase in earnings together with an intention to
raise the interim dividend as a percentage of the full year dividend.
The balance sheet remains strong and net cash inflow generated from operating
activities reached US$1,088 million. In August SABMiller launched a successful
US$2,000 million debt offering. The credit rating agencies, Moody"s and
Standard & Poor"s, attached ratings of Baa1 stable and BBB+ stable respectively,
to the bonds.
North America
In North America the Miller management team is building a foundation for the
stabilisation, recovery and long-term growth of the business emphasising the
four key focus areas we outlined at the end of the previous financial year.
Within the second fiscal quarter, improved market execution and advertising
stimulated sales of the Miller Lite brand. However overall company volumes
continued to decline albeit at a slower rate. The new marketing approach to re-
energise the Miller brands has been launched and initial reaction has been good.
Central America
The EBITA contribution from our Central American business was below prior year.
However, the first half results do not reflect benefits from the extensive work
that has been taking place to strengthen our brand portfolios and improve
distribution for both beer and CSDs. Sales trends from September have improved
and we are confident that we will begin to see the benefits coming through
during the second half.
Europe
Our European businesses delivered a 51% increase in EBITA in the half year,
assisted by generally good summer weather, with 27% organic growth in constant
currency terms. We anticipate continued growth in our key European markets,
supported by favourable economic and structural trends as new countries enter
the European Union. We will build on our strong in-country positions to take
advantage of the growing demand for international premium brands. In Italy the
integration of our newly acquired operation, Peroni, is proceeding according to
our expectations.
CHIEF EXECUTIVE"S REVIEW 4
(continued)
Africa and Asia
Our portfolio of businesses, combined with our Castel alliance, diversifies
country risk and gives us a unique footprint across the African continent. The
African countries produced a good EBITA performance in the half year with
benefits from the East African restructuring initiatives, strong operational
performances and an increased contribution from Castel.
We have further consolidated our position in China through the acquisition in
June of a 29.6% stake in Harbin, and we have established ourselves as the number
two brewer in India, through a joint venture with the Shaw Wallace group of
companies.
South Africa
Further opportunities to grow volumes and drive margin improvement continue to
be pursued by Beer South Africa. We aim to continue our growth in share of the
total alcoholic drinks market in the medium term through the introduction of new
products and driving the shift from other alcoholic drinks to beer.
In the last month the uncertainty surrounding the introduction of new liquor
legislation has been removed, with the Government committing itself to ensuring
that the new Bill would not adversely affect the industry"s efficiency.
Outlook
Over the last ten years the Company has pursued a clear strategy to build an
international beer business with a global footprint. This strategy of rapid
geographic expansion positions the company to deliver sustainable earnings
growth by building on our strong domestic operations in growing markets, through
the turnaround of the Miller business over time, from developing our positions
in large emerging markets, such as China and India, and by distributing our
portfolio of international premium brands through our global platform.
Our businesses are well placed to continue the momentum of organic growth.
However the rate of reported earnings growth achieved in the first six months,
which was enhanced by favourable currency movements, is not expected to be
repeated in the second half of the year.
CHIEF EXECUTIVE"S REVIEW 5
(continued)
Americas:
North America
2003 2002*
Financial summary US$m US$m
Turnover 2,579 1,307
EBITA # 249 102
EBITA margin (%) # 9.7 7.8
Sales volumes (hl 000"s)
Lager - excluding contract brewing 25,030 12,734
Lager - contract brewing 5,734 3,001
Carbonated soft drinks 44 21
* Three months
# Before exceptional restructuring costs of US$13 million in 2003 (2002: before
integration costs of US$5 million and after
one-off FMB launch costs of US$16 million).
Throughout 2003, subdued economic conditions, the Iraq conflict and poor weather
in some areas combined to curtail growth in the US beer industry, resulting in
an industry volume decline of 1.4% for the first nine months of the calendar
year. Within this challenging environment, Miller shipments continued a decline
that began in the early 1990s. On a pro forma basis, domestic sales to
retailers fell by 4.4%, whilst total shipment volumes fell by 5.7% to 25.0
million hls.
Accounting for more than a third of Miller"s total volume, Miller Lite
performance began to demonstrate an improving trend during the period, with
sales to retailers down approximately 1%. Within the second fiscal quarter,
improved market execution and Miller Lite advertising that emphasises the beer"s
low-carbohydrate characteristics, stimulated sales. However, broader Miller
volume performance was negatively impacted by a substantial decline in flavoured
malt beverage ("FMB") sales and weakness in Miller Genuine Draft. Miller High
Life continued to post stable results, whilst the balance of the economy brands
declined. Pilsner Urquell continued to grow off a low base as further
distribution and marketing gains were realised.
Turnover during the first half fell 5.9% versus the pro forma adjusted prior
year1, to US$2,579 million. The maintenance of firm pricing policies and
implementation of general price increases were offset by the impacts of adverse
brand, package and geographic mix. Overall international revenues reflected a
stable performance whilst contract brewing revenues declined in line with
expected volume declines.
EBITA for the period, of US$249 million before exceptional restructuring charges
of US$13 million, was down 2.7% versus the pro forma adjusted prior year1.
However, marketing expenditure in the first half has been lower than initially
expected, due to a delay in the timing of marketing spend of some US$35 million
in anticipation of the planned Miller brand marketing activity that commenced in
early November 2003. These costs will now be incurred in the second half of the
financial year, instead of the period under review. EBITA for the six months to
30 September reflects the results of lower sales revenues, an increase in the
cost of malt and the negative mix impacts referred to above. These impacts were
partly offset by lower fixed manufacturing costs (following the Tumwater
facility closure), lower administrative costs (following headquarters and other
cost restructuring), and reduced and more focused marketing expenditure (driven
by lower FMB spending). Our expectation that full year EBITA will trend lower
than comparable prior periods remains unchanged.
(1) Pro forma adjusted prior year turnover was US$2,740 million, consisting of
US$1,307 million (as shown above) plus US$1,433 million under the ownership of
Altria during the period April-June 2002. Pro forma adjusted prior year EBITA
was US$256 million, consisting of US$102 million (as shown above) plus US$16
million of one-time costs associated with the launch of FMBs, plus US$138
million under the ownership of Altria during the period April-June 2002.
_______________________________
CHIEF EXECUTIVE"S REVIEW 6
(continued)
North America (continued)
The new management of Miller has begun to build a foundation for the
stabilisation and long-term recovery of the business. After conducting a
thorough analysis of business positioning and overall health, Miller will
relentlessly focus on four strategic aspects to improve operations: brand
building and portfolio shaping; sales and distribution execution; cost
leadership and productivity; and organisational effectiveness.
As part of our first area of focus, progress has been made in upgrading our
Miller brand family advertising, including an emphasis on the superior intrinsic
qualities of these beers. In November, we unveiled the early results of that
new approach, built on well-grounded consumer insights and targeted brand
profiles. Our advertising is now supported by multiple agencies operating to
precise briefs that ensure disciplined execution against strategy.
Our second initiative focuses on strengthening our ability to develop and
execute tailored local market plans. Implementation in key markets is on
schedule, and is accompanied by progress towards improving the effectiveness of
our local marketing expenditures.
Our third area of focus is directed at cost savings to counter the impact of the
current volume decline and provide a competitive cost base for the future.
Opportunities have been identified to reduce variable and overhead costs,
including a recent reduction in the corporate employee base (by a net 200) and
transition of our information systems from the previous Altria platform. We
also continue to integrate our pension, health care, treasury and other
functions previously performed by Altria.
Finally, our performance management system is beginning to stabilise the
business as we establish different structures, skills and behaviours, based on
clear accountability. We are investing and building the capacity and skills of
the organisation through selective recruitment in the crucial areas of marketing
and sales.
We firmly believe that the combination of these efforts will result in a
stabilisation of the Miller business within the timeframe of two to three years
as previously described.
CHIEF EXECUTIVE"S REVIEW 7
(continued)
Central America
2003 2002 %
change
Financial summary US$m US$m
Turnover 282 261 8
EBITA # 32 35 (9)
EBITA margin (%)# 11.4 13.2
Sales volumes (hl 000"s)
Lager 882 851 4
Carbonated soft drinks 3,044 3,250 (6)
Other beverages 1,307 1,293 1
# Before exceptional reorganisation costs of US$2 million (2002: before
reorganisation costs of US$4 million).
During the period under review progress was made in converting the business into
a market-focused enterprise with a strong portfolio of relevant brands. Beer
volumes rose by 4% as we strengthened our brand portfolio, established
differentiated brand identities and further improved our El Salvador
distribution coverage. Our mainstream portfolio initiatives included significant
brand rejuvenation through refocused advertising, enhanced labels and improved
pack ranges. We are targeting the premium segment, and we are also
strengthening our economy offerings to compete more effectively with low-priced
spirits.
Overall CSD volumes fell by 6%, reflecting the competitive activity that
intensified in El Salvador in the latter half of 2002. We have strengthened our
marketing of Coke and other branded products, reinforcing attributes that
resonate with consumers. Trends improved from September, and Honduras moved
into growth against a backdrop of firm pricing.
Turnover for the period grew by 8% (11% excluding the impact of currency
movements) as a result of price increases for both beer (in Honduras) and CSDs,
reduced discounting, beer brand and channel mix, and a CSD package mix shift
towards higher-priced, non-returnable bottles and cans.
Lower EBITA and margins stemmed in part from lower CSD sales volumes and the
resulting impact on the operating leverage of the business. In addition, CSD
package mix shifts and increases in certain materials costs had a significant
negative impact on gross margins. These impacts were, however, partly offset by
lower fixed costs resulting from a wide-ranging restructuring programme embarked
upon in the prior year. Asset rationalisation (between beer and CSD
activities), greater focus on cost efficiencies in marketing, sales,
distribution and production and employee headcount reductions all led to
overhead cost savings.
Our efforts to stimulate further growth in beer consumption and a gradual
recovery of the CSD profit pool will continue. Financial results for the second
half of this year will benefit from our initiatives and more favourable
comparisons with the weaker prior year period.
CHIEF EXECUTIVE"S REVIEW 8
(continued)
Europe
2003 2002 %
change
Financial summary US$m US$m
Turnover 1,337 899 49
EBITA 256 169 51
EBITA margin (%) 19.2 18.8
Sales volumes (hl 000"s)
Lager 17,961 14,212 26
Other beverages 63 75 (16)
The European operations recorded a very strong performance for the first half of
the year with organic beer volume up 8% versus prior year, driven primarily by a
strong performance in Russia and higher sales in the Czech Republic compared to
the same period in the prior year when sales were affected by severe flooding.
The recently acquired Peroni business saw its volumes grow ahead of our
expectations, with hot weather playing a significant part. EBITA for Europe on
an organic, constant currency basis was ahead by 27%, before benefiting from
stronger currencies primarily in the Czech Republic, Poland and Hungary. Margin
enhancement resulted mainly from improved productivity and pricing generally
ahead of local costs. We expect that earnings growth in the next six months will
be affected by the marked seasonality of the Italian market and increased
marketing spend, including the launch of Miller Genuine Draft in Italy.
The Polish beer market grew by around 4%, with Kompania Piwowarska total volumes
up by 5%, and organic volumes marginally ahead of the same period last year.
Changes within our distributor incentive programme caused some short term volume
difficulties in the second quarter however these have since been resolved and
volume growth has resumed. Our strong Kompania Piwowarska brand portfolio,
which includes the leading Tyskie brand, drove double-digit EBITA growth for the
first six months, with price increases outpacing costs. We are pleased with the
progress of the recently acquired Dojlidy business, where the brand portfolio
has been significantly restructured. The Zubr brand, acquired with Dojlidy, is
already generating a substantial increase in sales.
Results in the Czech Republic were boosted this year by higher sales compared to
the prior year, when sales were somewhat affected by severe flooding. Volumes
grew 5%, in line with the market, and within this, our premium brand, Pilsner
Urquell, was up by 13%, which assisted margin development. A firm currency
enhanced an impressive earnings performance.
Despite significant competition in all segments of the Russian market, which
grew 8% over the period, our business has posted substantial volume growth, of
68%. Sales of Miller Genuine Draft were up over 80% and the recent launch of
our Czech beer, Kozel, has been highly successful. Significant investment in
marketing initiatives continues and notwithstanding this, profitability improved
further. In Hungary volumes increased by over 5%, we gained market share, and
EBITA grew strongly, reflecting sales price increases and cost savings.
In May, SABMiller acquired 60% of Birra Peroni SpA for Euro246 million (US$295
million, including acquisition costs). Industry volume growth in Italy has been
strong, at around 12%, against a poor period last year impacted by very bad
weather. Our market share is level at 25% and Peroni maintains its position as
the largest brand in the market. Management is currently evaluating the overall
brand portfolio and positioning, as well as reviewing route to market strategies
and key operating practices. The business has marked seasonality and this,
together with the introduction of Miller Genuine Draft, will impact Peroni"s
earnings in the remainder of this year. Overall, the business is performing in
line with our expectations at the time of the acquisition.
Positive organic volume performances in all other countries, particularly
Romania where sales volumes grew by over 16% and market share growth was
achieved, were helped by the generally good summer weather and led to notable
EBITA improvements.
CHIEF EXECUTIVE"S REVIEW 9
(continued)
Africa and Asia
2003 2002 %
change
Financial summary US$m US$m
Turnover 744 590 26
EBITA 134 114 18
EBITA margin (%) 18.0 19.3
Sales volumes (hl 000"s)*
Lager 20,677 19,283 7
Carbonated soft drinks 1,671 1,902 (12)
Other beverages 5,369 5,328 1
* Castel volumes of 6,091 (2002: 4,971) hls 000"s lager beer and 4,967 (2002:
4,391) hls 000"s carbonated soft drinks and
1,964 (2002: 404) hls 000"s other beverages are not included.
Africa
Our portfolio of businesses, combined with our Castel alliance, diversifies
country risk and gives us a unique footprint across the African continent. The
benefits of this are seen in the performance for the six months to September
with good beer volume gains in Uganda, driven by the Eagle brand, Mozambique,
Tanzania and Swaziland, offset by a decline in Botswana and a significant
reduction in Zimbabwe. The net result was unchanged total African lager volumes
compared to prior year (excluding Castel sales). A similar pattern was apparent
in CSD volumes, with good gains in Angola, offset by steep declines in Zimbabwe.
EBITA performance was strong, with benefits from the East African restructuring
initiatives that were started last year, and strong operational performances in
Botswana, Ghana and Uganda, the latter two enjoying further market share gains
over the period. In addition, currency strength in Botswana, Swaziland and
Lesotho improved the overall reported performance.
Beverage volumes in Castel, in which we have a 20% interest, were up 33%, and
our share of their reported EBITA has increased accordingly. We are currently
negotiating our interest in Castel"s recent acquisitions in Algeria and Morocco,
in line with our strategic alliance arrangements.
Asia
Our Chinese beverage volume growth for the first six months was 8%. Within
this, organic beer volume growth was up by 3%, impacted by the SARS epidemic,
with a marginal increase in EBITA. In June SABMiller announced the acquisition
of a 29.6% stake in Harbin from its largest shareholder, China Enterprise
Development Fund ("CEDF"), for HK$675 million (approximately US$87 million) in
cash.
In May SABMiller became the strong number two brewer in the high growth Indian
beer market, through a joint venture with the Shaw Wallace group of companies.
The integration process is underway, and the business is performing to our
initial expectations despite the high level of monsoon rainfall.
CHIEF EXECUTIVE"S REVIEW 10
(continued)
South Africa:
Beer South Africa
2003 2002 %
change
Financial summary US$m US$m
Turnover 831 524 59
EBITA 184 118 56
EBITA margin (%) 22.2 22.6
Sales volumes (hl 000"s) 11,651 11,083 5
Beer volumes for the six months to September grew by 5.1%, boosted by the timing
of Easter. Volume growth has been assisted by effective trade promotions, price
point management and increased availability of alcoholic fruit beverages (AFBs),
and through the introduction of the premium brands, Pilsner Urquell and Miller
Genuine Draft.
Strong operational performance is evident across the business, with
manufacturing efficiencies at an all-time high. Together with the benefit of
increased pricing, this has led to a 14% increase in South African rand EBITA.
This performance has been enhanced by the strengthening of the rand, leading to
a 56% increase in EBITA over the prior year. EBITA margin of 22.2% is impacted
negatively by the launch costs of our premium brands, raw material hedging and a
reduced margin on our export business due to the strength of the local currency.
Beer South Africa increased its share of the total alcoholic drinks market to
58.3%, with gains in the mainstream, premium and AFB segments through successful
brand marketing and improved promotions. Strong growth in the premium segment
is driven mainly by Amstel, Castle Lite, Pilsner Urquell and Miller Genuine
Draft, whilst Brutal Fruit has recorded further robust growth in the AFB
segment. We expect Pilsner Urquell and Miller Genuine Draft to replace all of
the previous Heineken volume following the ending last year of our joint venture
arrangement. In addition, the availability of low priced wine has reduced over
the past few months, with a consequential increase in wine retail selling
prices.
In September 2003 the National Assembly approved the new Liquor Bill, which
accommodates most of the industry"s concerns, and in particular allows companies
to hold licences in both manufacturing and distribution. There is to be an
automatic conversion of existing licences and licence holders must demonstrate
within twelve months that they meet certain criteria set by the Minister of
Trade and Industry. We believe that the criteria are sound. During the
legislative process the Government committed itself to ensuring that the Bill
would not adversely affect the industry"s efficiency.
CHIEF EXECUTIVE"S REVIEW 11
(continued)
Other Beverage Interests
2003 2002 %
change
Financial summary US$m US$m
Turnover 455 305 49
- ABI 353 228 55
EBITA * 42 29 45
- ABI 32 22 45
EBITA margin (%) * 9.0 9.5
- ABI 9.0 9.4
Sales volumes (hl 000"s)
Soft drinks 5,374 5,146 4
- ABI 5,261 4,962 6
* Before exceptional profit of US$13 million on disposal of trademarks in
2003.
Amalgamated Beverage Industries (ABI)
For the six months to 30 September 2003 ABI achieved a positive performance with
beverage volumes growing 6% to 5.26 million hectolitres. Volume growth was
supported by increases in consumer disposable income, the timing of Easter and
new pack and flavour innovations. Vanilla Coke was successfully launched and
contributed to growth in brand Coke and ABI moved into the cordial market with
the launch of the new Bibo cordial.
EBITA increased by 45% to US$32 million, as a result of higher volumes, price
increases, and improved market execution and efficiency improvements, assisted
by currency strength. The factors were offset to a degree by product input cost
pressures and negative mix effects.
Appletiser
Total volumes in South Africa were in line with prior year, with earnings
benefiting from the strength of the rand. Appletiser has continued to invest in
marketing in the UK, with the objectives of improved brand awareness and volume
growth over time.
The Just Juice and Valpre spring water brands were sold to a subsidiary of The
Coca-Cola Company with effect from 24 April 2003, and the profit on disposal of
these trademarks of US$13 million is excluded from the EBITA tabled above.
Distell
Turnover in local currency is broadly in line with prior year, whilst earnings
have increased following the merger between Distillers Corporation and
Stellenbosch Farmers" Winery. This increase in earnings has been enhanced by
the strengthening rand exchange rate.
CHIEF EXECUTIVE"S REVIEW 12
(continued)
Hotels and Gaming
2003# 2002 %
change
Financial summary US$m US$m
Turnover 100 91 10
EBITA 19 17 12
EBITA margin (%) 19.4 19.2
Revpar * $37.79 $28.45 33
# SABMiller 49% share of the new Tsogo Sun Group formed on 31 March 2003.
SABMiller 100% share of Hotels and 50% share of Gaming.
* Revenue per available room.
With effect from 31 March 2003, SABMiller disposed of 51% of its hotel
operations and a 1% interest in its gaming business, and as a result became a
49% shareholder in the Tsogo Sun Group (TSG). The business reported a strong
first half performance and our share of EBITA for the period was US$19 million.
The gaming market has grown strongly, up 12% in the Gauteng district, with TSG
benefiting from the opening of phase II of the Suncoast development in Durban.
While hotel occupancies were down on the same period last year this was offset
by an increase in average room rates.
CHIEF EXECUTIVE"S REVIEW 13
(continued)
Financial information
Segmental analysis
Information is provided on volumes, turnover, EBITA and EBITA margin, together
with a commentary on each segment, in accordance with the basis on which the
businesses are managed.
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.
Contract brewing volumes are excluded from total volumes, however turnover from
contract brewing is included within group turnover. Reported volumes exclude
intra-group sales.
Constant currency comparisons
The group has made some disclosures of its results on a constant currency basis,
to analyse the effects of changes in exchange rates. Constant currency results
have been determined by translating the local currency denominated results for
the six months to 30 September 2003 at the exchange rates for the comparable
period in the prior year.
Acquisitions
The acquisition of a 60% interest in Birra Peroni SpA, the number two brewer in
Italy, with options to increase the holding in the future, was completed on 4
June 2003, although control passed to SABMiller on 21 May 2003 when the
SABMiller appointed directors assumed control of the business. Consequently the
business has been accounted for from 21 May 2003. The acquisition was funded in
cash from existing resources.
With effect from 21 May 2003, SABMiller"s Indian subsidiary, Mysore Breweries
Limited, and Shaw Wallace and Company Limited (Shaw Wallace) entered into a
joint venture agreement whereby the brewing interests and licences of the two
businesses will be combined in one company, Shaw Wallace Breweries Limited, in
which each will hold 50% upon completion.
SABMiller completed the acquisition of a 29.6% stake (28.1% effective interest)
in Harbin Brewery Group Limited, China"s fourth largest brewer, on 29 June 2003.
Goodwill amortisation
Goodwill amortisation at US$178 million for the half year is significantly
higher than prior periods reflecting the major acquisition activity undertaken
over the past 18 months.
Treasury
Gross borrowings have increased to US$3,947 million from US$3,523 million at 31
March 2003, principally as a result of the borrowings made to fund acquisitions,
whilst net debt has also increased to US$3,344 million. In August 2003 the
US$2,000 million bank facility assumed with Miller Brewing Company was
refinanced with the successful issue of US$1,100 million ten-year bonds and
US$600 million five-year bonds by Miller Brewing Company, with effective
interest rates of 5.21% and 3.94% respectively, the balance being repaid from
surplus cash resources. Concurrently SABMiller plc also issued US$300 million
30-year bonds with an effective interest rate of 6.41%. The effective interest
rates are after taking into account hedges, which were put in place prior to the
issuance of the bonds, to protect against rising interest rates. The average
loan maturity, in respect of the US$ fixed term debt portfolio is some 8 years,
whereas the various other currency borrowings tend to be of a one year revolving
nature and the average borrowing rate is now 5.3%.
CHIEF EXECUTIVE"S REVIEW 14
(continued)
Interest
Net interest payable of US$88 million is up from US$74 million in the prior
period due to the increase in borrowings incurred regarding the acquisitions
undertaken over the past eighteen months.
Taxation
The effective tax rate, before goodwill amortisation and exceptional items, is
34.5%. This compares to 32.5% in the prior year, excluding the exceptional
deferred tax credit. The increase compared to the prior year and the year to 31
March 2003 is attributable to an increased proportion of profits being earned in
companies with higher effective tax rates, principally Miller.
Associates
The share of operating profit of associates has increased by US$19 million
compared to the same period in the prior year, with the majority of the increase
coming from Castel in Africa and from the Hotels and Gaming division, now
treated as an associate following the partial disposal at 31 March 2003.
Dividend
The board has declared an interim dividend of 7.5 US cents per share. The
dividend will be payable on 22 December 2003 to all shareholders registered on
the London and Johannesburg Registers on 5 December 2003. The ex-dividend
trading dates as stipulated by the London Stock Exchange will be 3 December 2003
on the London Exchange and 1 December 2003 on the Johannesburg Securities
Exchange as stipulated by STRATE. As the group reports primarily in US dollars,
dividends are declared in US dollars. They are payable in sterling to
shareholders on the UK section of the register and South African rand to
shareholders on the RSA section of the register. The rates of exchange
applicable on 14 November 2003, being the last practical date before the
declaration date will be used for the conversion ($/GBP = 1.6853 and R/$ =
6.6875), resulting in an equivalent interim dividend of UK 4.4502 pence per
share for UK shareholders and SA 50.1563 cents per share for RSA shareholders.
To comply with the requirements of STRATE in South Africa, from the close of
business on 28 November 2003 until the close of business on 5 December 2003 no
transfers between the UK and South African Registers will be permitted and no
shares will be materialised or dematerialised.
DIRECTORS" RESPONSIBILITY FOR FINANCIAL 15
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 16
to 28, 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.
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.
On behalf of the board
E A G Mackay M I Wyman
Chief Executive Chief Financial Officer
20 November 2003
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.
This report has been prepared for and only for the company for the purpose of
the Listing 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.
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 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
London
20 November 2003
SABMiller plc
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
for the six months ended 30 September 16
Six months Six months Year
ended
ended ended 31/3/03
30/9/03 30/9/02
Unaudited Unaudited Audited
Notes US$m US$m US$m
Turnover (including share of 2 6,328 3,977 9,112
associates" turnover)
Less: share of associates" (585) (388) (817)
turnover
Group turnover 2 5,743 3,589 8,295
Net operating costs (5,130) (3,205) (7,492)
Group operating profit 2 613 384 803
Share of operating profit of 2 83 64 126
associates
Profit on disposal of trademarks 3 13 - -
Surplus on pension fund of 3 45 - -
disposed operation
Profit on partial disposal of 3 - - 4
subsidiary
Profit on ordinary activities 754 448 933
before interest and taxation
Net interest payable (88) (74) (163)
Group (71) (65) (142)
Associates (17) (9) (21)
Profit on ordinary activities 666 374 770
before taxation
Taxation on profit on ordinary 4 (271) (148) (349)
activities
Profit on ordinary activities 395 226 421
after taxation
Equity minority interests (86) (66) (125)
Profit for the financial period 309 160 296
Basic earnings per share (US 5 25.9 16.7 27.5
cents)
Headline earnings per share (US 5 34.7 26.7 52.6
cents)
Adjusted basic earnings per 5 35.5 26.8 54.0
share (US cents)
Diluted earnings per share (US 5 25.4 16.6 27.4
cents)
Adjusted diluted earnings per 5 34.4 26.0 52.7
share (US cents)
Dividend per share (US cents) 7.5 6.5 25.0
SABMiller plc
CONSOLIDATED BALANCE SHEETS
at 30 September 17
30/9/03 30/9/02 31/3/03
Unaudited Unaudited Audited
US$m US$m US$m
Fixed assets
Intangible assets 6,645 6,486 6,451
Tangible assets 3,617 3,098 3,244
Investments 1,692 1,145 1,365
Investments in associates 1,029 497 705
Other fixed asset investments 663 648 660
11,954 10,729 11,060
Current assets
Stock 557 407 456
Debtors 1,046 829 802
Investments 17 5 2
Cash at bank and in hand 586 319 559
2,206 1,560 1,819
Creditors - amounts falling due (2,662) (1,547) (4,027)
within one year
Interest bearing debt (850) (212) (2,409)
Other (1,812) (1,335) (1,618)
Net current (liabilities)/assets (456) 13 (2,208)
Total assets less current 11,498 10,742 8,852
liabilities
Creditors - amounts falling due (3,163) (3,362) (1,130)
after one year
Interest bearing debt * (3,097) (3,346) (1,114)
Other (66) (16) (16)
Provisions for liabilities and (862) (651) (743)
charges
Net assets 7,473 6,729 6,979
Ordinary shareholders" funds 6,637 6,002 6,201
Equity minority interests 836 727 778
Capital employed 7,473 6,729 6,979
* Includes US$592 million (30/9/02: US$588 million, 31/3/03: US$590 million)
4.25% guaranteed convertible bonds.
SABMiller plc
CONSOLIDATED CASH FLOW STATEMENTS
for the six months ended 30 September 18
Six months Six months Year
ended
ended ended 31/3/03
30/9/03 30/9/02
Unaudited Unaudited Audited
Notes US$m US$m US$m
Net cash inflow from operating 6 1,088 694 1,568
activities
Dividends received from 11 13 27
associates
Returns on investments and
servicing of finance
Interest received 20 19 39
Interest paid (72) (73) (159)
Interest element of finance (1) (5) (11)
lease rental payments
Dividends received on other 3 1 3
investments
Dividends paid to minority (85) (84) (137)
interests
Net cash outflow from returns on
investments and servicing
of finance (135) (142) (265)
Taxation paid (244) (137) (286)
Capital expenditure and
financial investments
Purchase of tangible fixed (258) (186) (445)
assets
Sale of tangible fixed assets 14 11 16
Purchase of investments (4) (15) (21)
Sale of investments 6 3 3
Net cash outflow for capital
expenditure and financial
investments (242) (187) (447)
Acquisitions and disposals
Purchase of subsidiary (331) (46) (52)
undertakings
Net (overdraft)/cash acquired (98) 6 6
with subsidiary undertaking
Sale of subsidiary undertakings 30 - 44
Net cash disposed with (8) - (42)
subsidiary undertakings
Proceeds from pension fund of 45 - -
disposed operation
Proceeds from disposal of 13 - -
trademarks
Purchase of shares from (16) (7) (8)
minorities
Purchase of shares in associates (247) (6) (6)
Net funding from associates 1 4 4
Net cash outflow for (611) (49) (54)
acquisitions and disposals
Equity dividends paid to (219) (141) (203)
shareholders
Management of liquid resources
Sale of short-term liquid - 40 43
instruments
Cash (placed in)/withdrawn from (15) - 1
short-term deposits
