| Thu 18 Nov 2004, 10:44 | | INTERIM ANNOUNCEMENT |
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SABMILLER PLC - INTERIM ANNOUNCEMENT
SABMILLER PLC
JSE ALPHA CODE : SAB
ISSUER CODE: SOSAB
ISIN CODE: GB0004835483
INTERIM ANNOUNCEMENT
ANOTHER STRONG HALF YEAR
London and Johannesburg, 18 November 2004. SABMiller plc today announces its six
month results to 30 September 2004. Highlights are:
2004 2003
US$m US$m % change
Turnover
7,178 6,282 14
EBITA * 1,141 888 28
Profit before tax 1,196 665 80
Adjusted profit before tax * 1,050 800 31
Adjusted earnings * 583 422 38
Adjusted earnings per share *
- US cents 48.8 35.4 38
- UK pence 26.9 21.9 23
- SA cents 316.9 267.7 18
Adjusted diluted earnings per share 46.8 34.3 36
* (US cents)
Basic earnings per share (US cents) 58.5 25.8 127
Dividends per share (US cents) 12.0 7.5 60
Net cash inflow from operating 1,262 1,088 16
activities
2003 turnover has been restated downward by US$46 million
comprising a downward restatement of US$126 million to reflect the
adoption of FRS5 Reporting the substance of transactions,
application note G - revenue recognition and a US$80 million
upward restatement in respect of the turnover of the Italian
distribution companies excluded at the prior half year.
* EBITA and adjusted profit before tax comprise profit before
interest and tax (US$1,287 million) and profit before tax
(US$1,196 million) respectively before goodwill amortisation
(US$181 million), and before exceptional items (net credit US$327
million - see note 3). The calculation of adjusted earnings and
earnings per share is given in note 5.
Lager beer volumes up 8% to 82 million hls, organic up 5%
Group EBITA up 28%
Strong results from all business segments
Continued progress on Miller turnaround
Strong volume and performance in Beer South Africa
Good performance across the Africa & Asia portfolio
Europe benefiting from strong Russian growth
Interim dividend of 12.0 cents reflects earnings growth and an interim/final re-
balancing
Reported Organic,
2004 growth constant
Pre- % currency
exceptional growth
EBITA %
US$m
North America 306 23 23
Central America 37 15 21
Europe 300 17 11
Africa and Asia 179 34 30
Beer South Africa 249 35 16
Other Beverage 68 65 43
Interests
Hotels and Gaming 33 69 45
Central (31) - -
Administration
Group 1,141 28 21
Statement from Graham Mackay, Chief Executive
`These results are impressive for their strength and their breadth and
demonstrate our ability to deliver good, organic, constant currency growth in
EBITA from all our business segments despite some challenging operating
environments. The turnaround in the performance of Miller was a strong feature.
The strength of our brands, leading positions in many markets and improving mix
effects, underpin our position as one of the leaders in the brewing industry,
with a strong business portfolio, well balanced between established and
developing markets.`
Enquiries:
SABMiller plc Tel: +44 20 7659 0100
Sue Clark Director of Mob: +44 7850 285471
Corporate
Affairs
Gary Leibowitz Vice Mob: +44 7717 428540
President,
Investor
Relations
Nigel Fairbrass Head of Mob: +44 7799 894265
Corporate
Communications
(Finance)
Philip Gawith The Maitland Tel: +44 20 7379 5151
Consultancy
Ltd
A live webcast of the management presentation to analysts
will begin at 9.30am (GMT) on 18 November 2004.
This announcement, a copy of the slide presentation and
video interviews with management are available on the
SABMiller
plc website at www.sabmiller.com . Video interviews with
management can also be found at www.cantos.com.
High resolution images are available for the media to
view and download free of charge from www.vismedia.co.uk
Visit www.thenewsmarket.com/SABMiller to download
broadcast-standard MPEG2 video or order a Beta SP tape.
Registration and video is free and available for
accredited journalists and news producers.
Registered office: Dukes Court, Duke Street, Woking,
Surrey, GU21 5BH
Telephone: +44 1483 264000
Telefax: +44 1483 264103
CHIEF EXECUTIVE`S REVIEW 3
Business review
This was another six months of strong performance across the group with total
organic volumes growing by over 5% and market share growth achieved in each of
our business segments. We have continued to build our business, with
acquisitions in China and Romania, and to make significant investments in brand
marketing, channel development and brewing infrastructure.
In North America the results from Miller Brewing Company are beginning to
reflect the wide ranging actions we have taken to turn around the business with
volume growth resuming and EBITA increasing 23%. Impressive operating
performances in our African and South African businesses have been enhanced by
favourable currency movements. Europe delivered good growth off a high base,
despite poorer weather than the prior year in the early part of summer.
Group beverage volumes totalled 100 million hectolitres (hls), an 8% increase on
the comparable six-month period. Lager beer volumes were up 8% to 82 million
hls, including organic growth of some 5%. Reported EBITA of US$1,141 million (up
28%), reflects strong operating performances with improved pricing and mix in
our key markets. On an organic, constant currency basis, EBITA increased 21%.
Adjusted earnings are up by 38%, to US$583 million, with adjusted earnings per
share of 48.8 US cents, also up 38% on the first six months of the prior year.
An interim dividend of 12.0 US cents per share, a 60% increase, will be paid to
shareholders. This partly reflects the growth in earnings and 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$1,262 million. Gearing decreased to 31.6% as at 30
September, down from March`s 43.3%.
North America
Significant progress has been made in North America. Improved brand building
together with sales and distribution initiatives have resulted in strong growth
from Miller Lite, the largest brand in the portfolio. This has been the key
factor behind an increase in overall company volumes, as detailed in the North
America section below.
Building on the improvements to date, the Miller management team is continuing
to focus on the recovery and medium-term growth of the business, with emphasis
on the four key areas that we have outlined previously.
Central America
Earnings from Central America have recovered from the low level recorded in the
prior year. Whilst the carbonated soft drink (CSD) market remains weak, the
increase in EBITA reflects the success of the prior year`s restructuring work in
both beer and CSDs. Local management continues to strengthen the brand
portfolios and improve distribution for both beer and CSDs.
Europe
In Europe our business delivered a 17% increase in EBITA in the half year, with
11% organic growth in constant currency terms. These results were achieved
despite significantly cooler and wetter weather than in the previous summer.
Strong volume growth in Russia and a significant improvement by Poland in the
second quarter more than offset volume declines in Italy, Hungary and Slovakia.
CHIEF EXECUTIVE`S REVIEW (continued) 4
Africa and Asia
Africa produced pleasing EBITA results in the half year, reflecting revenue
management and operational performances in the key markets of Botswana and
Tanzania, and an increased contribution from Castel. CSD volumes grew
significantly in Angola, as new capacity was commissioned.
Our Chinese associate, China Resources Snow Breweries Ltd (CR Snow), formerly
China Resources Breweries Ltd, has further consolidated its position in China,
through the acquisition of a green field brewery site in Dongguan in Guangdong
province, as announced in August, and the acquisition of the former Lion Nathan
breweries which was completed in October 2004. Organic volumes and EBITA grew
in our existing Chinese operations.
South Africa
Beer South Africa increased its share of the total alcoholic drinks market to
59.8%, with volume growth across all sectors of the beer market and a notably
strong performance in the premium sector. ABI has had an excellent first half
performance, with 8% growth in beverage volumes. For both businesses, higher
volumes, together with robust pricing management, have led to good growth in
earnings which has been enhanced by favourable currency movements.
Outlook
The rate of reported earnings growth achieved in each of the last three six
month reporting periods has been particularly strong. Miller`s turnaround
progress, our Central American restructuring late in the previous financial year
and favourable currency movements are together providing more stretching
comparables for this year`s second half. At the same time SABMiller is
increasing its investments in brand marketing and facing higher global commodity
costs. Our businesses are, however, benefiting from strengthening market
positions and improving mix, and with increased investment are well placed to
deliver sustainable organic growth.
CHIEF EXECUTIVE`S REVIEW (continued) 5
Operational reviews
North America
2004 2003 %
change
Financial summary US$m US$m
Turnover
2,615 2,526 4
EBITA # 306 249 23
EBITA margin (%)# 11.7 9.9
Sales volumes (hl 000s)
Lager - excluding contract brewing 25,427 25,030 2
Lager - contract brewing 5,562 5,734 (3)
Carbonated soft drinks (CSDs) 46 44 5
2003 turnover has been restated downwards by US$53 million to reflect the
adoption of FRS5 Reporting the substance of transactions, application note G -
revenue recognition
# Before exceptional profit on the sale of Tumwater brewery of US$4 million
(2003: before exceptional restructuring costs of US$13 million)
During the first half of the financial year Miller continued to focus on the key
elements of its turnaround strategy: brand building, sales and distribution,
costs and productivity, and organisational capability. The results for the half-
year reflect the progress that has been made on all of these dimensions, and the
medium term turnaround plan remains on schedule.
The first half of the year has been a challenging one for the beer industry as a
whole with poor weather, rising energy and fuel costs and increased competition
from the wine and spirits categories. Total US industry domestic shipment
volumes increased by approximately 1% during the first half of the financial
year, however the rate of growth slowed during the second quarter with US
domestic shipments estimated to have increased by some 0.1%.
Despite these conditions, Miller`s US domestic sales to retailers (STRs) grew by
2.3% over the six months, whilst domestic shipments to wholesalers (STWs) rose
by 2.2%. Second quarter US domestic sales to retailers increased by 1.8%. Total
shipment volumes for the period under review rose by 1.6% to 25.4 million hls.
Export sales were depressed by difficult trading conditions in important
markets, and contract brewing volumes were lower by 3%.
The increase in domestic STRs has been driven by a significant improvement in
the performance of Miller Lite which experienced double-digit growth during the
period under review. These results reflect the improvement in brand health as
well as the impact of our enhanced local market planning and execution. Miller
Genuine Draft continues to decline ahead of its full-calorie market segment and
plans are now being put in place to slow that decline with a view towards
stabilising the brand. Increased focus is now being directed at the key brands
in the economy portfolio, particularly Miller High Life and Milwaukee`s Best.
Turnover during the first half grew by 3.5% versus the restated prior period, to
US$2,615 million. US domestic turnover grew by approximately 5% versus the
restated prior period. Net producer revenue per hl increased above the industry
average. This is the result of a more disciplined approach in adopting price
increases, together with a favourable brand mix following the improvement in
Miller Lite sales, which was partly offset by unfavourable package mix.
Contract brewing revenues declined ahead of volume declines as a result of
unfavourable mix impacts.
Improved efficiencies in our breweries partially offset commodity price
increases, health care and retirement funding costs, investments in
manufacturing and costs associated with building depth in organisational
capabilities. Other general and marketing cost efficiencies were achieved,
however these savings were partially invested in key areas such as information
systems, specialised sales staff, recruitment and increased media and
experiential marketing programmes.
CHIEF EXECUTIVE`S REVIEW (continued) 6
EBITA for the period, of US$306 million, was 23% higher than the prior year`s
US$249 million, driven by the higher turnover, favourable brand mix and cost
efficiencies achieved. Overall EBITA margin increased to 11.7% following the
favourable pricing environment and increased volumes.
Miller continues to progress all four dimensions of its medium-term turnaround
strategy. Improved marketing capabilities and brand building approaches that
have been successful in improving Miller Lite brand health measures are now
being applied to other key brands. The creation of a specialised sales force,
improved alignment with our distributors and activation of below-the-line
marketing activities are driving further improvements in sales and distribution
execution while productivity gains across the value chain are being re-invested
behind key business priorities. Finally, steady progress on building
organisational capability is continuing as performance management becomes
further entrenched, and new talent and personnel development initiatives are
being introduced into the organisation.
Profitability in the second half of the year will be impacted by further
investments in key consumer-facing marketing, further sales force and local
marketing execution costs, innovation expenditure, and higher raw material and
energy costs, as well as increased focus on recruitment, training and
development.
CHIEF EXECUTIVE`S REVIEW (continued) 7
Central America
2004 2003 %
change
Financial summary US$m US$m
Turnover
260 265 (2)
EBITA # 37 32 15
EBITA margin (%)# 14.2 12.1
Sales volumes (hl 000s)
Lager 891 882 1
Carbonated soft drinks (CSDs) 2,886 3,044 (5)
Other beverages 1,410 1,307 8
2003 turnover has been restated downwards by US$17 million to reflect the
adoption of FRS5 Reporting the substance of transactions, application note G -
revenue recognition
# Before exceptional reorganisation costs of US$2 million in 2003
The results in the half year display progress notwithstanding tough trading
conditions, particularly in El Salvador. Disposable incomes in both countries
have been impacted by high fuel costs, and consequent increases in electricity
and public transport costs. Economic growth in El Salvador has slowed
significantly due to the effects of delayed expenditure caused by the
uncertainty in the outcome of the presidential elections and postponement in the
approval of the central government budget. Further progress has been made in
this period to strengthen our portfolio of brands and to improve execution
through customer focused channel marketing. Following the successful
introduction of local premium beer brand Bahia in El Salvador in the prior
period, the brand was launched in Honduras during the current year and continues
to grow share ahead of expectation. Beer volumes rose by 1% across the
business, with strong growth in Honduras being partially offset by a decline in
El Salvador.
Aggregate CSD volumes fell by 5%, which reflects the price-based competitive
activity that has intensified in El Salvador. Whilst our CSD market share is
relatively stable in Honduras, volume share has been lost in El Salvador. We
have implemented price increases in both markets to improve the profitability of
the CSD market, and we plan to introduce lower-priced offerings in selected
market segments to compete on a price basis with the competition. We continue to
support our sector leadership in focusing on attribute rather than price-based
competition. The growth in other beverage volumes reflects increased sales of
bottled water.
Turnover for the period grew by 1% on a constant currency basis, reflecting
improved pricing for both beer and CSDs. Improved revenue management through
brand segmentation and portfolio management has yielded benefits, and continues
to support price increases across the business. This improved pricing, strong
control of operating costs, and the lower cost base in the business following
the restructuring activities have led to higher EBITA (21% up in constant
currency terms) and EBITA margin.
CHIEF EXECUTIVE`S REVIEW (continued) 8
Europe
2004 2003 %
change
Financial summary US$m US$m
Turnover
1,617 1,370 18
EBITA # 300 256 17
EBITA margin (%)# 18.5 18.7
Sales volumes (hl 000s)
Lager 19,797 17,961 10
Other beverages - 63 (100)
2003 turnover has been restated upward by a net US$33 million comprising a
downward restatement of US$47 million to reflect the adoption of FRS5 Reporting
the substance of transactions, application note G - revenue recognition and an
upward restatement of US$80 million to reflect the turnover of the Italian
distribution companies excluded in the prior half year.
#Before exceptional Naples brewery closure costs of US$23 million.
Total lager volumes for the half-year grew 10% (4% on an organic basis),
negatively influenced in the early part of summer by significantly cooler and
wetter weather than in the previous year, whilst good sales in September boosted
second quarter growth. Strong volume growth in Russia and a significant
improvement in Poland in the second quarter more than offset volume declines in
Italy, Hungary and Slovakia.
The division produced satisfactory profit growth, with pre-exceptional EBITA up
17% (11% in organic constant currency terms). This consolidates the previous two
years` performance, which each had annual growth in organic constant currency
EBITA in excess of 20%. The reported EBITA margin has been impacted by the
inclusion of a full six months for Birra Peroni and Dojlidy where margins are
currently lower than the average of our Europe operations.
The Polish beer market expanded by around 1% with the fastest growth continuing
to be in lower priced segments. Kompania Piwowarska`s total volumes increased by
a commendable 12%, with organic growth of 9%, resulting in an increase in market
share to 34% on a year to date basis. This growth reflects successful sales and
merchandising initiatives executed in the growing key account and on premise
channels. The relaunch of the Lech brand in June led to a sharp increase in
sales at a premium price point with strong growth in the second quarter. Zubr
continues to grow rapidly in the lower mainstream segment, with its latest year
to date national brand share exceeding 6%. Tyskie remains the largest Polish
brand with a national volume share of over 16%. The Dojlidy integration is
complete, with synergies in line with plan. Continuing industry real price
declines and increasing investment in sales and marketing constrained Polish
profitability.
In Czech, total industry volumes declined by an estimated 5% compared to the
high base set by last year`s exceptionally warm dry summer. Plzensky Prazdroj
gained 60 points of market share within this declining market, and its overall
volumes were down 2% on the prior half year. Our international premium brand,
Pilsner Urquell, grew by 2% domestically. Profit performance benefited from
real improvements in prices, brand mix, and the continued strength of the Czech
currency.
In Russia, Transmark`s strong volume growth continued at 51%, including growth
in Miller Genuine Draft sales volumes of over 80%. All of our brands are
focused in the premium segment, which grew by 32% in the period under review,
within a beer industry which grew at around 10%. Profitability increased
significantly as our Russian operations also benefited from greater economies of
scale in relation to marketing, production and overhead expenses. Recently, new
legislation governing the beer industry in Russia has led to advertising
restrictions being implemented in September. New consumption laws, mainly
related to outdoor drinking, have been proposed but have not as yet been
finalised. It is too early to estimate their impact on the Russian beer
industry or on our operations in particular.
CHIEF EXECUTIVE`S REVIEW (continued) 9
The Italian domestic beer market declined by an estimated 7%, following the
exceptional summer in 2003 and reflecting a poor consumer spending environment.
This, together with the termination of the Anheuser-Busch licence as
anticipated, resulted in Birra Peroni volumes declining 12% on an organic basis.
Margins have reduced as a result of this volume decrease, a soft pricing
environment, consumer down-trading and channel switching into the off-premise
market. Our cost reduction programme is on track and, from January 2005, the
Padua brewery will produce Miller Genuine Draft for all our EU operations.
Birra Peroni has commenced the restructuring of its marketing, merchandising,
route-to-market and production operations, and in October announced the closure
of the Naples brewery. A charge of US$23 million has been taken in the period
under review to reflect a reduction in the carrying value of the fixed assets at
Naples, and in the second half of the year there will be a further restructuring
charge, including the cost of redundancies, bringing the total exceptional
charge for the year to an estimated US$40-50 million.
Our Romanian operations are significantly outperforming the industry`s 2% growth
with organic volumes up 14%. Ursus has become the country`s leading beer brand
and its growth is driving margin enhancement, while Timisoreana Lux`s increasing
popularity and availability is driving volume. Revenues grew significantly ahead
of volumes, driven by positive price and mix trends, and profitability was
further enhanced by improving economies of scale. In June we acquired SC Aurora
SA for approximately US$26 million. This acquisition provides us with a leading
regional brand in Romania and the first PET pack in our European operations.
In Hungary the domestic market has declined some 13%, losing significant volumes
to heavily discounted cans imported from Germany following that country`s
imposition of a can deposit system. A large number of local economy brands have
also been introduced. Dreher`s volume loss is in line with the market, and
profitability has been impacted accordingly.
The Slovakian market declined by some 13% following a significant excise
increase last year, and whilst our market share has increased, our volumes are
down 8%. In the Canaries, our volumes are level with prior year, with market
share unchanged, whilst productivity gains have assisted margins.
CHIEF EXECUTIVE`S REVIEW (continued) 10
Africa and Asia
2004 2003 %
change
Financial summary US$m US$m
Turnover
870 735 18
EBITA # 179 134 34
EBITA margin (%)# 20.6 18.2
Sales volumes (hl 000s)*
Lager 23,851 20,691 15
Carbonated soft drinks (CSDs) 2,000 1,671 20
Other beverages 6,113 5,354 14
2003 turnover has been restated downward by US$9 million to reflect the
adoption of FRS5 Reporting the substance of transactions, application note G -
revenue recognition
#Excludes exceptional profit of US$96 million on the disposal of the group`s
interest in Harbin Brewery Group Limited (Harbin)
* Castel volumes of 6,397 (2003: 6,091) hls 000s lager beer, 4,215 (2003: 4,967)
hls 000s carbonated soft drinks and 1,337 (2003: 1,964) hls 000s other beverages
are not included.
Africa
Our portfolio of African operations delivered a pleasing increase in volume for
the six months to September, with good beer volume gains in Mozambique and
Tanzania. The net result was an increase of 5% in total African lager volumes
compared to prior year, with good growth in Castle brand volumes. During 2004,
the management responsibility for sales to Angola was transferred from Beer
South Africa to the Africa division. On a pro-forma comparable basis, the
increase in lager volume would have been 3% over the prior half year. CSD
volumes also increased, with good gains in Angola as the economy improved, new
packs were introduced and capacity was increased. In Zimbabwe, beer and CSD
volumes staged a recovery from the prior year`s low levels.
Beer volumes in Castel, in which we have a 20% interest, grew by 5%, whilst
lower volumes of CSD and other beverages were due to the sale of their Moroccan
soft drinks business in the prior year. EBITA has increased over the prior year,
reflecting strong operating performance.
Overall EBITA performance was strong, reflecting the volume growth in Mozambique
and Tanzania together with benefits from productivity gains in Botswana, where
volumes were impacted by a devaluation of the currency. Local currency EBITA
growth is in line with reported growth, as currencies have generally held firm
against the US dollar.
Asia
We have further consolidated our position in the Chinese beer market, through
our associate, which changed its name to China Resources Snow Breweries Ltd. We
announced acquisitions of additional breweries in Zhejiang and Anhui provinces.
We are also entering attractive new markets which feature higher average beer
selling prices through a further acquisition in Jiangsu province, which offers
access to the greater Shanghai market, and through the construction of a new
brewery in Guangdong province. Together, these four additions will comprise
incremental production capacity of 15.8 million hls, an increase of 37% (versus
31 March 2004), at an average cost to CR Snow of approximately $30 per hl.
Our Chinese beverage volume growth for the first six months was 23%, and volumes
of the Snow brand grew by over 30%. Organic beer volume growth was 10%, compared
with a prior half year that had been impacted by the SARS epidemic. Good EBITA
growth was recorded against the prior half year, with the benefit from increased
volumes being partially offset by a somewhat soft pricing environment and an
increase in input costs.
We continue to hold our joint venture with the Shaw Wallace group of companies
in India as an investment for accounting purposes pending completion of the
transaction. Sales volumes for the joint venture recorded a double-digit
increase for the period, almost twice the rate experienced by the overall Indian
market.
CHIEF EXECUTIVE`S REVIEW (continued) 11
South Africa:
Beer South Africa
2004 2003 %
change
Financial summary US$m US$m
Turnover 1,096 831 32
EBITA 249 184 35
EBITA margin (%) 22.7 22.2
Sales volumes (hl 000s) 11,992 11,651 3
Beer volumes for the six months to September grew by 3%, reflecting favourable
economic conditions and an increased share of the total liquor market. During
2004, the management responsibility for exports to Angola was transferred to the
Africa and Asia division. On a pro-forma comparable basis, the increase in
volume would have been 4% over the prior half year.
Volume growth has been achieved across all market segments, with particularly
strong growth in premium beers, including Castle Lite, Amstel and Miller Genuine
Draft, and alcoholic fruit beverages, including Redds and Brutal Fruit. Beer
South Africa increased its share of the total alcoholic drinks market over the
last 12 months by 1.5 percentage points to 59.8% with market share gains being
achieved in all segments. Pleasingly our share of the growing premium beer
market has continued to increase assisted by our move to provide premium
products in bigger volume (660ml) packs. Overall volume growth has been driven
by successful brand marketing, price point management and well-executed
promotions.
Price increases have been achieved with turnover increasing by 13% in local
currency, and rand-based turnover per hectolitre growing by around 10%, assisted
by favourable mix trends. Manufacturing efficiencies were maintained at high
levels, and together with the increased volumes, this has led to a 16% increase
in South African rand EBITA, notwithstanding reduced export volumes. This result
has been enhanced by the strengthening of the rand, leading to a 35% increase in
reported EBITA over the prior year. EBITA margin of 22.7% reflects the benefits
from additional volume and cost efficiencies.
A new corporate branding campaign was launched during the period under review,
with the corporate advertisement, `Inspired by a nation`, receiving positive
comments. At the same time, the Castle brand was relaunched with enhanced
packaging to an enthusiastic initial response. At the recent Loerie awards,
South Africa`s premier marketing and advertising awards, Beer South Africa was
recognised as the marketing organisation of the year.
The process to normalise the trade via the licensing of informal retailers in
most provinces is progressing slowly. Development of a BEE (Black Economic
Empowerment) charter for the liquor manufacturing and distribution sector has
commenced. This involves key players in the liquor industry and is expected to
be completed in 2005.
CHIEF EXECUTIVE`S REVIEW (continued) 12
Other Beverage Interests
2004 2003 %
change
Financial summary US$m US$m
Turnover 588 455 29
- ABI 455 353 29
EBITA # 68 42 65
- ABI 57 32 80
EBITA margin (%)# 11.5 9.0
- ABI 12.5 9.0
Total sales volumes (hl 000s) 5,778 5,374 8
- ABI volumes 5,675 5,261 8
# Before exceptional profit of US$13 million on the disposal of trademarks in
2003.
Amalgamated Beverage Industries (ABI)
For the six months to 30 September 2004 ABI achieved a positive performance with
beverage volumes growing 8% to 5.67 million hls. Volume growth was supported by
successful promotions, increases in consumer disposable income and relatively
good weather conditions. Growth of PET packages has been strong during the
reporting period, as has growth of the 300 ml glass bottle pack.
EBITA increased by 80% to US$57 million, reflecting the benefits of higher
volumes, price increases, productivity gains and a strong rand/US dollar rate,
partially offset by increased container costs.
Our offer to acquire all of the shares in ABI which we do not already own, for a
cash consideration of R91.00 per share, was approved by the ABI minority
shareholders on 9 November 2004. This will involve a total consideration of
approximately R3,800 million (US$585 million). Application will be made to the
High Court of South Africa for the sanctioning of the scheme.
Appletiser
Total organic volumes in South Africa grew by over 30%, with resurgence in
demand and new pack sizes being introduced, and international volumes also grew.
Distell
Turnover in local currency grew by some 14% over the prior half year, driven by
strong international growth and a favourable sales mix, including good
performance in the spirits category.
CHIEF EXECUTIVE`S REVIEW (continued) 13
Hotels and Gaming
2004 2003 %
change
Financial summary US$m US$m
Turnover 132 100 32
EBITA # 33 19 69
EBITA margin (%)# 24.8 19.4
Revpar (US$) * $46.07 $37.79 22
# Excludes exceptional profit of US$11 million on the disposal of fixed assets
* Revenue per available room
Since 31 March 2003, SABMiller has been 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$33 million.
The gaming market has continued to grow strongly, up 16% in the Gauteng
Province, reflecting buoyant consumer spending. Gaming has also benefited from
effective marketing initiatives, including two successful casino promotions.
Hotel occupancies were in line with prior year, and the growth in revpar in
local currency of 5% was enhanced by the strength of the rand against the US
dollar.
CHIEF EXECUTIVE`S REVIEW (continued) 14
Financial review
Segmental analysis
Our operating results are set out in the segmental analysis of operations, and
the disclosures accord with the manner in which the group is managed. SABMiller
believes that the reported profit measures - before exceptional items and
amortisation of goodwill - provide additional and more meaningful information on
trends to shareholders and allow for greater comparability between segments.
Segmental performance is reported after the specific apportionment of
attributable head office service costs.
Accounting for volumes
In the determination and disclosure of reported sales volumes, the group
aggregates the volumes of all consolidated subsidiaries and its equity accounted
associates, other than associates where the group exercises significant
influence but primary responsibility for day to day management rests with others
(such as Castel and Distell). In these latter cases, the financial results of
operations are equity accounted in terms of 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 volumes.
New accounting standards and restatements
The reported turnover for the six months ended 30 September 2003 has been
restated following the adoption of FRS5 - Reporting the substance of
transactions, application note G - revenue recognition. The change reduced each
of turnover and net operating costs by US$126 million for the six months ended
30 September 2003 in respect of the following segments - US$53 million in North
America, US$47 million in Europe, US$17 million in Central America and US$9
million in Africa and Asia. The reclassifications related respectively to
freight costs, distribution costs, and turnover-related taxes for the latter two
items. In addition, each of turnover and net operating costs has been increased
by US$80 million in respect of the turnover of the Italian distribution
companies excluded at the prior half year. There was no impact on EBITA.
The group has also adopted UITF 38 Accounting for ESOP trusts, which has
resulted in a reclassification of shares held in both employee share trusts and
the Safari Ltd investment, from other fixed asset investments, reducing net
assets by US$627 million at 30 September 2003. This amount has been deducted in
arriving at shareholders` funds. The revised UITF 17 Employee share schemes has
also been adopted. The reported profits for the six months ended 30 September
2003 were reduced by US$1 million as a result.
Organic, constant currency comparisons
The group has made some disclosures of its results on an organic, constant
currency basis, to analyse the effects of acquisitions net of disposals and
changes in exchange rates on the group`s results. Organic results exclude the
first twelve months` results of acquisitions and the last twelve months` results
of disposals. Constant currency results have been determined by translating the
local currency denominated results for the six months ended 30 September 2004 at
the exchange rates for the comparable period in the prior year.
Acquisitions
The acquisition of a 94.93% interest in SC Aurora SA in Romania was completed on
10 June 2004, with the holding increased to 99.58% subsequently. The
acquisition was funded in cash from existing resources.
CHIEF EXECUTIVE`S REVIEW (continued) 15
Profit before tax
Profit before tax of US$1,196 million was up 80% on prior period, reflecting
performance improvements from all our business segments, the impact of
favourable exchange rates, and the impact of exceptional items as described
below.
Exceptional items
The group recorded net exceptional costs within operating profit of US$19
million, being US$23 million brewery closure costs in Italy and US$4 million
profit on the disposal of the Tumwater brewery at Miller. Exceptional profits
of US$346 million were recorded after operating profit and comprised US$96
million profit on the disposal of the group`s 29.4% stake in Harbin Brewery
Group Limited (Harbin), US$239 million profit on the disposal of the group`s 21%
investment in Edgars Consolidated Stores Ltd (Edcon) and US$11 million share of
associate`s profit on the disposal of fixed assets in Hotels and Gaming.
This compares to prior period exceptional costs within operating profit of US$15
million, comprising integration and restructuring costs of US$13 million within
Miller, and Central America restructuring costs of US$2 million. Exceptional
profits of US$58 million were recorded after operating profit in the prior
period and comprised the surplus on the pension fund of a disposed operation of
US$45 million and the profit on the disposal of trademarks in Appletiser of
US$13 million.
Treasury
Gross borrowings have decreased marginally to US$3,680 million from US$3,707
million at 31 March 2004. Net debt has decreased to US$2,401 million from
US$3,025 million at 31 March 2004 reflecting the increase in cash generated from
operating activities and from the disposal of investments. The group`s gearing
has decreased to 31.6% from last March`s 43.3%.
The average loan maturity in respect of the US$ fixed rate debt portfolio is 4.9
years. The average borrowing rate for the total debt portfolio at 30 September
2004 was 5.1% (2003: 5.3%).
In April 2004 SABMiller plc and SABMiller Finance BV signed a five-year US$1,000
million revolving credit bank facility agreement. This replaced the US$720
million facility in existence at 31 March 2004.
Interest
Net interest costs increased to US$91 million, a 3% increase on the prior
period`s US$88 million, due primarily to the effects of a full six months`
higher interest rates payable on the fixed debt issued in August 2003.
Taxation
The effective tax rate, before goodwill amortisation and exceptional items, is
34.8%, broadly in line with the prior period and our expectation for the full
year.
Goodwill
Intangible assets decreased by US$126 million compared to 31 March 2004, due
primarily to the amortisation charge for the period of US$173 million partly
offset by foreign exchange movements and the goodwill arising on acquisitions.
Goodwill in ABI is considered to have an indefinite life (consistent with prior
years), all other goodwill being amortised over 20 years.
Cash flow
Net cash inflow from operating activities before working capital movement
(EBITDA) rose to US$1,282 million from last half year`s US$1,034 million. The
ratio of EBITDA to group turnover increased in the period to 19.9% (2003: 18.2%
restated).
CHIEF EXECUTIVE`S REVIEW (continued) 16
Dividend
The board has declared an interim dividend of 12.0 US cents per share. The
dividend will be payable on 20 December 2004 to all shareholders registered on
the London and Johannesburg Registers on 3 December 2004. The ex-dividend
trading dates will be 1 December 2004 on the London Stock Exchange and 29
November 2004 on the JSE Securities Exchange South Africa. As the group reports
in US dollars, dividends are declared in US dollars. They are payable in
sterling to shareholders on the UK section of the register and in South African
rand to shareholders on the RSA section of the register. The rates of exchange
applicable on 12 November 2004, being the last practical date before the
declaration date, will be used for conversion ($/GBP = 1.8499 and R/$ = 6.1189),
resulting in an equivalent interim dividend of 6.487 UK pence per share for UK
shareholders and 73.4268 SA cents per share for RSA shareholders.
To comply with the requirements of STRATE in South Africa, from the close of
business on 26 November 2004 until the close of business on 3 December 2004, no
transfers between the UK and South African Registers will be permitted and no
shares may be dematerialised or rematerialised.
DIRECTORS` RESPONSIBILITY FOR FINANCIAL REPORTING 17
This statement, which should be read in conjunction with the independent review
report of the auditors set out below, is made to enable shareholders to
distinguish the respective responsibilities of the directors and the auditors in
relation to the consolidated interim financial information, set out on pages 18
to 32, 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
18 November 2004
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 2004.
PricewaterhouseCoopers LLP
Chartered Accountants
London
18 November 2004
SABMiller plc
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
for the six months ended 30 September 18
Six months Six months Year ended
ended ended 31/3/04
30/9/04 30/9/03
Restated
Unaudited Unaudited Audited
Notes US$m US$m US$m
Turnover (including share of 2 7,178 6,282 12,645
associates` turnover)
Less: share of associates` (735) (585) (1,279)
turnover
Group turnover 2 6,443 5,697 11,366
Net operating costs (5,625) (5,085) (10,043)
Group operating profit 2 818 612 1,323
Share of operating profit of 2 123 83 189
associates
Profit on disposal of 3 335 - -
investments
Share of associate`s profit on 3 11 - -
disposal of fixed assets
Profit on disposal of trademarks 3 - 13 13
Surplus on pension fund of 3 - 45 47
disposed operation
Share of associate`s profit on 3 - - 7
disposal of CSD business and
brands in Morocco and a brand in
Angola
Profit on ordinary activities 1,287 753 1,579
before interest and taxation
Net interest payable (91) (88) (188)
Group (78) (71) (152)
Associates (13) (17) (36)
Profit on ordinary activities 1,196 665 1,391
before taxation
Taxation on profit on ordinary 4 (397) (271) (579)
activities
Profit on ordinary activities 799 394 812
after taxation
Equity minority interests (100) (86) (167)
Profit for the financial period 699 308 645
Basic earnings per share (US 5 58.5 25.8 54.1
cents)
Headline earnings per share (US 5 48.8 34.6 76.7
cents)
Adjusted basic earnings per 5 48.8 35.4 77.6
share (US cents)
Diluted earnings per share (US 5 56.0 25.3 53.0
cents)
Adjusted diluted earnings per 5 46.8 34.3 75.2
share (US cents)
Dividend per share (US cents) 12.0 7.5 30.0
SABMiller plc
CONSOLIDATED BALANCE SHEETS
at 30 September 19
30/9/04 30/9/03 31/3/04
Restated
Unaudited Unaudited Audited
US$m US$m US$m
Fixed assets
