SOUTH AFRICAN BREWERIES Plc - PRELIMINARY RESULTS
SOUTH AFRICAN BREWERIES plc
PRELIMINARY ANNOUNCEMENT
ANOTHER YEAR OF ACHIEVEMENT AND GROWTH
London and Johannesburg, 30 May 2002. South African Breweries plc - one of
the world`s leading brewers, with interests in Africa, Central and Eastern
Europe, Central America and Asia - today announces its preliminary
(unaudited) results for the year to 31 March 2002. Highlights are:
FINANCIAL
2002 2001* % change
US$m US$m US$
Turnover 4,364 4,184 4 7
Trading profit 704 700 1 4
(PBIT)
EBITA 766 720 6 10
Profit before 606 646 (6) (3)
tax
Adjusted PBT 668 666 - 3
Adjusted 350 372 (6) (3)
earnings
Adjusted
earnings per
share
- US cents 48.7 53.3 (9) (6)
- SA cents (up 472.5 390.9
21%)
Dividends per 25.0 25.0
share (US
cents)
Note: The exceptional items of US$8 million net (2001:nil) comprised:
- Pitesti (Romania) brewery closure costs US$9 million;
- Ursus (Romania) asset impairment US$10 million; offset by
- Velke Popovice (Czech) asset impairment reversal US$11 million
EBITA, adjusted PBT and adjusted earnings exclude exceptional items and
goodwill amortisation.
Percentages expressed in terms of sterling movements are given in
order to aid comparability with
other FTSE companies.
* Restated for deferred tax change in accounting policy.
OPERATIONAL AND STRATEGIC
z Total beverage volume growth of 15.5% (organic 4.8%) to 99.4 million
hectolitres
z Total lager beer volumes increase 13.2% (organic 3.5%) to 70.4 million
hectolitres
z SABI Europe lager beer volumes up 5.9% (organic 4.6%) and EBITA up
34.4%
z Beer South Africa volumes improve 1.4% with a margin increase of 60
basis points to 25.8%
z Acquisitions in Central America, India and China have enhanced our
position internationally
z Acquisition of Miller Brewing Company in the United States announced
today
Meyer Kahn, Chairman of SAB plc, states: "Once again SAB`s underlying
operations around the world, despite a global economic slowdown, have
delivered an impressive performance. However, the material adverse currency
moves in sub Saharan Africa affected a sizeable portion of our business and
have led to an adjusted earnings decline of 6% in US dollars (adjusted
earnings per share decline of 9%).
In pursuing our growth strategy globally we have moved into new territory
with our acquisitions in Central America and made a number of important
investments in China, Africa and Central Europe. These enhance our positions
in these territories and further diversify the group`s international
operations and currency exposure.
In line with our strategy to participate actively in the consolidation of
the global beer industry, where we can create value for our shareholders, we
have announced today the acquisition of Miller Brewing Company in the United
States. "
This announcement, a copy of the slide presentation and video interviews
with management are available
on the SAB plc website at www.sabplc.com. Video interviews can also be found
at www.cantos.com.
Incorporated in England and Wales (Registration Number 3528416)
CHIEF EXECUTIVE`S REVIEW 2
Business review
Group operating performance
I am pleased to report another year of good growth in beverage volumes and
strong operational performance in our businesses around the world. Total
beverage sales volumes grew 15.5% (organic growth 4.8%) to just under 100
million hectolitres.
Once again management has concentrated on brand positioning and portfolio
enhancement, overhead productivity and procurement. Benefit from this
attention is evident and, as a result, operational performance across the
group was excellent.
Lager volumes grew 13.2% and importantly, organic volume growth of 3.5% was
achieved. The muted growth of 1.4% in our largest single market, South
Africa, had a dampening effect but it is nevertheless gratifying that last
year`s volume decline there has started to reverse.
Other beverages are becoming an increasingly important segment of our
business. Acquisitions and investments contributed to the volume growth of
27.2% (organic 9.0%) in carbonated soft drinks (CSD`s). Traditional sorghum
beer in Africa grew by 4.4%.
Turning to financial performance, sales volume growth contributed to a
turnover increase, including share of associates, of 4.3% to US$4.4 billion.
EBITA grew 6.4% to US$766 million, and continued focus on productivity and
cost containment helped deliver margin improvement across many of our
businesses, particularly in the larger subsidiaries. EBITDA was similarly
strong, up 5.9% to US$904 million.
Reported results were, however, impacted by the extraordinary 24.4% decline
in the exchange rate of the SA rand, the functional currency of our largest
subsidiary, against the US dollar, as well as relative weakening in other
African currencies. Adjusted earnings were 5.9% down for the year at US$350
million. With a weighted average increase in shares in issue of 3.1% during
the year, adjusted earnings per share decreased by 8.6% to US48.7 cents.
Notwithstanding this decline, strong cash flows enable us to maintain the
final dividend at last year`s level.
The year has been characterised by expansion and acquisition activities in a
number of countries including the opening up of a new region to SAB -
Central America. Our acquisitions in Honduras and El Salvador have created
a leading brewing and soft drinks business within these two countries. We
intend to exploit the synergies that exist between beer and CSD`s in these
markets, and leverage the experiences gained in Africa with combined beer
and CSD businesses.
Elsewhere, we acquired a majority interest in Bere Timisoreana in Romania;
we were active in Africa, with CSD acquisitions in Angola and Zambia and
increased lager beer investments in Uganda and Mozambique. In China we
further strengthened our regional positions with an aggressive acquisition
program, and we made two further investments in India.
Notwithstanding weakening economies and rising unemployment levels,
especially in Poland, our European businesses grew sales volumes by 6.0%
(organic growth 4.8%) to just over 22.5 million hectolitres, with
contribution to this growth coming from virtually all operations. EBITA
growth was impressive at 34.4% to just under US$200 million with an
excellent result coming from Poland (the largest contributor), the Czech
Republic, where restructuring synergies and benefits continue ahead of
expectations, and Russia which is now earnings positive.
Our African and Asian businesses increased sales volumes by 26.0%, though
much of this was acquisition driven, mainly in China. Organic growth was
nevertheless good with lager growing 4.9% and other beverages 12.2%. EBITA
growth for the region of 29.5% has been assisted by the first time inclusion
of our associate Castel.
Socio-political problems, currency weaknesses and certain competitive
pressures in Africa hampered underlying EBITA growth. Acquisition activity
in China, strategically necessary and well-founded, was distracting and time
consuming for local management in the first year of incorporation.
CHIEF EXECUTIVE`S REVIEW (continued) 3
Individual results in Africa were once again mixed. Our brewery in Kenya was
impacted by competitive pressure but, as recently announced, we have
restructured our investments in the region in conjunction with East Africa
Breweries Limited and profitability should improve considerably in the
future. While the result on earnings of our strategic alliance with Castel
was essentially neutral in this first year, we increasingly see benefits
from our association with them as synergies in the areas of purchasing,
operational management and new investment become realisable. Castel`s total
volumes grew 7.4% over the prior period with especially strong gains in the
CSD sector.
In Central America, EBITA of US$22 million for the four months since
acquisition was behind expectations, due mainly to the combination of
adverse economic conditions post Hurricane Michele and increased competition
in the CSD sector. Though still early days for SAB`s operational
management, strong brand portfolios in the respective lager and CSD
businesses, evident opportunities to capture the synergies and a skilled
workforce give us undiminished enthusiasm for the potential of these
businesses.
In South Africa, the performance of our beer operations has once again been
creditable. The volume decline in the prior year has been arrested and
growth of 1.4% achieved. Local management`s relentless focus on efficiency
and productivity has delivered EBITA growth of 10.5% in local currency and a
60 basis point increase in margin despite substantial raw material price
increases. ABI delivered well to expectations, with real productivity gains,
margin increases and strong trading profit improvement of 20% in local
currency off positive volume growth; all despite considerable increases in
input costs. Equally impressive was a turnaround in the performance of our
hotel and gaming businesses during the second half year, to deliver a
substantial 53.1% improvement in rand trading profit for the year.
Strategic alternatives for the future of this business are still being
evaluated.
Outlook
There are a number of positive signs for the upcoming financial year.
Europe`s forward momentum, while moderating, should continue and better
results are expected from both Africa and China. There are more positive
signs within our operations in South Africa and the rand is showing some
resilience. Finally, I have every reason to believe that Central America
will deliver on its potential.
Naturally the results of the group will be materially affected by the
inclusion of Miller Brewing Company, whose acquisition will bring both
excitement and hugely increased opportunities to our business. More than
ever we are well positioned to play a leading role in the world beer
industry as change and consolidation accelerate.
CHIEF EXECUTIVE`S REVIEW (continued) 4
SABI - Europe
2002 2001 % change
Financial summary US$m US$m US$
Turnover 1,280 1,097 17
Trading profit * 168 130 29
EBITA ** 198 148 34
Operating margin 13.1 11.9
(%) *
EBITA margin (%) 15.5 13.5
**
Sales volume (hl
000`s)
- Lager 22,359 21,120 6
- Lager comparable 22,099 21,120 5
- Other beverages 178 146 22
* Before exceptional items
** Earnings before interest, taxation and goodwill amortisation, and before
exceptional items.
SABI Europe`s businesses continued their strong operational performance
again this year, up a pleasing 34.4% in EBITA, on volume growth of 6.0%. In
particular, focus on rationalisation, costs and cash management enabled the
division to expand its EBITA margin by 200 basis points and generate
substantial free cash flow. Productivity and procurement initiatives reaped
significant rewards, and brand portfolio and packaging extensions boosted
market shares and margins.
Poland
Volume growth in the Polish beer market came to a halt in the current year,
following several years of strong advances. This was caused by a downturn in
the local economy and the previous government`s imposing large excise
increases. (There are now signs that these may be moderated in future).
SAB`s Kompania Piwowarska performed very well in this market with 6.0%
volume growth, reaching 31% market share for the year from 29.7% in the
prior year. Our value share is greatly in excess of our market share. KP`s
flagship brand, Tyskie Gronie, sold over five million hectolitres and is now
one of Europe`s top ten beer brands by volume. Tyskie Gronie was judged
overall champion beer for bottled and canned lagers at the prestigious
Brewing Industry Awards 2002 which took place at Burton-upon-Trent in the
UK. Redds` success also continues, reaching 50% of the flavoured alcoholic
beverages market inside 18 months.
Czech Republic and Slovakia
The Pilsner Urquell group enjoyed an excellent year. Volumes, market share
and net real revenue all showed strong improvements. Beer industry volumes
continued to decrease, as anticipated, by 1% but the Pilsner Urquell group
achieved growth of 3.2%. Particularly pleasing was a 20% increase in volumes
of our premium brand Pilsner Urquell. This assisted margin development, as
did improvements in brewing raw material procurement, production yields and
overall productivity. The effective national integration of our three
businesses has yielded synergies well ahead of initial expectations.
Slovakia is benefiting from management and marketing integration with the
Czech business and is improving in profitability.
Pilsner Urquell International
The highly successful re-launch of Pilsner Urquell into its key
international markets, in 2001, resulted in a second successive year of 30%
growth in brand volumes outside Czech. In the United States sales reached
1.4 million cases (112,000 hectolitres), representing 54% growth in volume,
and Pilsner Urquell was named one of the "hot brands" of 2001 by Impact
magazine, the leading US beverage trade publication.
CHIEF EXECUTIVE`S REVIEW (continued) 5
There was continued growth in sales in Germany, up by 25% in the year,
against a background of a shrinking market. In Poland, Pilsner Urquell is
now the number one import brand and sales continue to grow. In other
markets, new distributors were appointed to take advantage of import growth
opportunities, whilst in the UK distribution and visibility have improved.
Russia
Volume growth slowed in Russia in the second half, to end the full year
27.2% ahead of prior. While SAB`s own brand Zolotaya Bochka conceded some
market share points, our premium licensed brands, Miller Genuine Draft and
Holsten, showed stunning growth - both trebling in volume. The result of
this favourable mix in brand sales was a significant improvement in margins
and the business produced good operating cash flow.
We have decided to expand further the capacity of the Kaluga brewery from
2.3 million hectolitres to 3.5 million hectolitres at a cost of some US$60
million. This will enhance our competitive capability for additional brands
and packs in this growing market.
Other operations
In Hungary the market contracted some 2%, but our Dreher subsidiary
reflected a small but satisfying market share recovery. This, coupled with
the industry`s real price increases, saw good margin expansion which
assisted operating profits to more than double, albeit off a modest base.
During the year, we announced the acquisition of an 83.7% interest in Bere
Timisoreana, giving our Romanian business critical mass and a market share
of around 14%. This aided a rationalisation of our facilities including the
closure of Pitesti brewery and write down of other assets, the cost of which
was US$19 million. The impact of this has been partly offset by release of
surplus provisions relating to one of the Czech breweries of US$11 million.
Industry volumes in Romania declined 8% in the last 12 months, however our
operations are now much better positioned to maintain their positive
operating cash flow.
The Canary Islands` operations have produced encouraging gains in market
share, despite the first full year of production by a new domestic
competitor.
SABI - Africa and Asia
2002 2001 % change
Financial summary US$m US$m US$
Turnover 946 700 35
Trading profit 162 130 25
EBITA 171 132 30
Operating margin 17.2 18.5
(%)
EBITA margin (%) 18.1 18.9
Sales volume (hl
000`s) *
- Lager 23,141 17,116 35
- Lager comparable 17,953 17,116 5
- Carbonated soft 3,648 2,685 36
drinks (CSD`s)
- Traditional 7,625 7,301 4
sorghum
- Other beverages 2,579 2,260 14
* Castel volumes of 9,633,000 hectolitres lager, 7,489,000 hectolitres CSD`s
and 569,000 hectolitres other beverages are not included
CHIEF EXECUTIVE`S REVIEW (continued) 6
Africa
African beverage volumes grew organically by 8.8% to end above 18 million
hectolitres, aided by excellent performances from the Coca-Cola bottling
business in Luanda, Angola, market share gains in the competitive Ghanaian
market and advances by our traditional sorghum beer businesses in Zambia,
Malawi and Tanzania. Lager beer volumes grew organically 4.1%. In Zimbabwe
our associate, Delta Corporation, grew their beer and soft drinks volumes by
22.4% despite the difficult environment. However, in Uganda, an increase in
excise, passed on to the consumer, resulted in a drop in volumes.
Good EBITA growth was recorded by Zambia, Ghana and Malawi. In Tanzania,
Botswana and Mozambique, however, little or no dollar growth was shown. The
full impact of good operational performances in tough conditions in many of
the countries was not translated into reported US dollar results due to weak
currencies.
A number of value-adding acquisitions were made during the year. These
included 45% of the Coca-Cola bottler in Luanda, Angola; 60% of the Coca-
Cola bottler in Southern Angola; a further 54.6% of Nile Breweries in
Uganda; 13.5% of Cervejas de Mozambique and 90% of the Coca-Cola bottler in
Zambia. The last mentioned allows for consolidation benefits from
integrating this into the Zambian beer business, a formula already
successfully implemented in Botswana, Swaziland and Lesotho.
Subsequent to the year end, two important consolidation transactions were
concluded. A landmark deal was signed on 15 May 2002 between SAB and East
African Breweries Limited (EABL), the two major brewers in East Africa. This
sees Castle Brewing Kenya Ltd being sold by SAB to EABL in return for a 20%
stake in their Kenya Breweries Limited subsidiary. Tanzania Breweries
Limited (TBL), will acquire its EABL-owned competitor in exchange for 20% in
Tanzania Breweries to be funded through a share issue with the additional
volumes more than compensating for the dilution effect on SAB`s shareholding
in TBL. Each of these transactions will deliver enhanced earnings. In
Mozambique, we acquired Laurentina Cervejas SARL and its well known
Laurentina brand.
Many of our currencies in the sub region were unfortunately impacted by
adverse political considerations and the strong US dollar. Worse affected
amongst these were the Mozambican metical (24.7%), the Zimbabwean dollar
(75.8%), the Botswana pula (13.7%) and the rand-linked currencies of Lesotho
and Swaziland (24.4%). As a result, it was difficult to convert volume and
turnover gains into increased US dollar earnings. However, this effect was
countered somewhat by productivity gains and savings contributed by Sabex,
our Johannesburg-based purchasing and logistics division.
First time results from our 20% shareholding in the Castel group met
expectations. Beer and soft drinks volumes grew by 7.4% over prior year
while the CFA franc, Castel`s main operating currency, is pegged against the
euro, thereby stabilising US dollar earnings.
Asia
China Resources Breweries, SAB`s Chinese joint venture company, concluded a
successful year in terms of strategic acquisitions. Market leadership in our
existing stronghold in the North East of the country was achieved by
purchasing five strategically located breweries in the region. CRB also
became the leading brewer in Sichuan province, the country`s most populous
and one of the fastest growing beer markets, by entering a majority-owned
joint venture with the Blue Sword group (10 breweries, 9 million hectolitre
capacity). Total capacity now stands at 30 million hectolitres and CRB is
firmly positioned as the country`s number two brewer.
Our Chinese business has now consolidated its management structure and
geographic presence into three regions: North East, Central and West, with a
corporate head office established in Beijing.
CHIEF EXECUTIVE`S REVIEW (continued) 7
Second half profitability in China was unfavourably impacted by the above
acquisitions which were effective just before or during the winter period
when sales dip sharply, resulting in negative contribution from these
businesses, and management`s attention was also concentrated on the task of
restructuring. However, management believes the operations are well
positioned to deliver profitable growth, and improvement was already evident
from these acquisitions towards year end.
The year also saw expansion by our Indian subsidiary with the acquisition of
Mysore Breweries Limited and Rochees Brewery (subject to FIPB approval),
thereby gaining a foothold in four of the five largest beer-consuming states
in the country. Castle Lager was successfully launched as a premium brand
in the cities of Delhi and Mumbai.
SABI - Central America
2002*
Financial summary US$m
Turnover 186
Trading profit 7
EBITA 22
Operating margin (%) 3.5
EBITA margin (%) 11.9
Sales volume (hl 000s)
- Lager 624
- Carbonated soft drinks (CSD`s) 2,231
- Other beverages 824
* Four months
The Central America businesses in El Salvador and Honduras were acquired
with effect from 28 November 2001. The first four months of operations have
been used to ensure continued volume growth, particularly with increased
competitor activity in both countries, and form an effective operating
relationship with our Bevco partners.
Each business is focussing on improving efficiencies whilst we extract
synergies from distribution systems and shared support services, both within
and across the two countries. Non-core businesses are being assessed, made
more efficient and competitive, and then either incorporated or
rationalised. Major opportunities exist in the area of procurement, where
supplier numbers can be optimised, bulk ordering utilised to obtain better
prices, and cross business and country planning used to limit inventory of
raw materials, finished goods and machine spares. Consideration is being
given to shared service centres to further improve cost efficiencies and
operational effectiveness for Bevco.
Brand development has primarily been in the soft drink arena as we support
The Coca-Cola Company to increase its product range and therefore overall
volumes. New carbonated soft drink flavours (e.g. Fanta in Honduras) and non-
carbonated beverages (e.g. Powerade in El Salvador) have been successfully
introduced in addition to a focus on ensuring that proper pack pricing
architecture is in place. In the beer business a 500 ml bottle has been
introduced in Honduras and brand rationalisation continues in both markets.
Appropriate service levels are being determined for the different customer
segments and investments made in containers and coolers.
The focus for the new financial year will be on business rationalisation;
improved efficiencies in sales, distribution and manufacturing; sales volume
and revenue growth, particularly addressing low per capita beer consumption;
and, standardisation across all operations.
CHIEF EXECUTIVE`S REVIEW (continued) 8
Beer South Africa
2002 2001 % change
Financial US$m US$m US$ R
summary
Turnover 1,112 1,365 (19) 8
Trading profit 287 343 (16) 11
Operating and 25.8 25.2
EBITA margin
(%)
Sales volume 24,246 23,904 1
(hl 000`s)
Despite the ongoing tough trading conditions, particularly in the first half
of the financial year, Beer South Africa was able to see out the year on a
note of growth. Overall volume growth of 1.4% was achieved for the year,
reversing the negative 1.1% at the half year. The operating margin improved
by 60 basis points to 25.8% and an admirable compound five year EVAr growth
of 19% was delivered. Operating profit grew by 10.5% from R2,520 million to
R2,785 million.
Volumes recorded growth in the important second half of the year, supported
by promotional activity and an earlier Easter period. The factors
negatively affecting volume growth, as reported previously, remain in place
but in certain respects the impact is lessening. However, higher interest
rates, the steep rise in staple food prices, the rising fuel price and
continued wine surplus will adversely impact beer consumer propensity to
spend. Exports experienced a strong performance particularly in the Angolan
and Namibian markets.
Throughout the year efforts have been directed at investing for growth
including the building and enhancing of our powerful brand portfolio. As
measured by AC Nielsen, Beer South Africa improved its market share in the
premium and flavoured alcoholic beverages categories whilst maintaining its
leading position and share in the mainstream category despite significant
competitive activities.
High raw material increases experienced during the past year were primarily
driven by the weaker rand. Programmes introduced in recent years including
raw material procurement and related hedging activity, as well as technical
innovations on certain materials and brewery usage improvements, contained
these increases. Further productivity benefits were delivered by the World
Class Manufacturing programme, the general spend procurement initiative,
improved brewery and distribution efficiencies, lower headcount and the fact
that once off costs were reduced from the previous year. The performance of
our premium and AFB brand portfolio also delivered a positive mix effect.
These benefits were to some extent offset by real expenditure increases in
marketing, information systems, overall compensation, training and
development as well as corporate social investment.
All aspects of the balance sheet were closely managed, in particular working
capital, which for the seventh consecutive year showed progressive
improvement. Capital expenditure in the current year was reduced following
the previous large scale investments at SA Maltsters, Ibhayi and systems
development.
Following the promulgation of the Competition Act in 1998, Beer SA has
introduced a proactive compliance programme. Three formal investigations
which were initiated by the Competition Commission have been satisfactorily
concluded. The Commission has notified the company that the 2000
investigation into horizontal restrictive practices in the industry would
not be referred to the Competition Tribunal.
While progress on the revised Liquor Bill, following the Constitutional
Court judgement, appears slow, the DTI has indicated that it intends having
a new Act promulgated within the next twelve months. Based on previous
assurances from the Ministry, expectations remain that a rigid three tier
system will not be imposed on the industry.
CHIEF EXECUTIVE`S REVIEW (continued) 9
Other Beverage Interests *
2002 2001 % change
Financial US$m US$m US$ R
summary
Turnover 676 816 (17) 10
- ABI 500 585 (15) 13
Trading profit 95 106 (10) 19
- ABI 79 88 (10) 20
Operating and 14.0 13.0
EBITA margin
(%)
- ABI 15.8 15.0
Sales volume 11,912 11,485 4
(hl 000`s)**
ABI (hl 000`s) 11,488 10,968 5
* ABI, Appletiser, Distell
** Distell volumes not included
ABI
ABI`s volume growth for the period was boosted by good performance in the
second half of both carbonated and other soft drinks, as well as the first
time inclusion of two small businesses. Total volume for the period ended
4.7% above prior year (organic 3.8%).
Financial performance was enhanced by operational efficiencies and
productivity in administrative and support functions and through
rationalisation initiatives. Operating margin continues to improve, despite
a decline in the earnings of ABI`s associate company, Coca-Cola Canners.
There has been a strong emphasis on improving market execution, resulting in
mainstream carbonated soft drink volumes showing satisfactory growth.
Appletiser
Appletiser had a very successful year with strong growth in volumes and a
pleasing increase in trading profit.
Good volume growth was achieved in South Africa, where the Appletiser brand
has been repositioned and additional resources committed to both sales and
brand marketing activities. Double-digit volume growth was achieved in
international markets.
Distell
The group`s 30% equity accounted interest in the listed associate, Distell,
delivered a much improved operating performance in spite of a decline in
sales volumes, as greater emphasis on product profitability in the domestic
market was reflected in a favourable sales mix at improved margins. Rand
weakness helped to enhance export earnings and attributable adjusted
earnings, after reorganisation costs, were up nearly 40% in local currency
terms.
The Competition Commission enquiry into the 1 July 2000 merger between SFW
and Distillers is nearing resolution and Distell management are hopeful of a
satisfactory outcome.
CHIEF EXECUTIVE`S REVIEW (continued) 10
Hotels and Gaming
2002 2001 % change
Financial US$m US$m US$ R
summary
Turnover 164 206 (20) 5
Trading profit 28 25 12 53
(see note)
Operating and 17.4 12.1
EBITA margin
(%)
"Revpar" R232.80 R205.70 13
Note: Adjusting for the write-off of pre-opening expenses and other non-
recurring items, including the
impairment of Monyaka, taking account of the disposal of Southern Sun`s
20% interest in Sun
International in the prior year, trading profit for the year would have
been US$30 million
(2001:US$30 million) on turnover of US$164 million (2001:US$189
million).
Hotel division continued to manage proactively both its portfolio and cost
structures in response to market conditions. Trading in the fourth quarter
was encouraging, to leading to an annual average occupancy of 65.7% (2001:
65.4%). Revpar increased by 13.2% to R232.80. Portfolio changes included the
disposal of the Sunnyside Park Hotel and the termination of leases for the
Oudtshoorn and Wilderness Garden Courts. The Cape Sun Inter-Continental was
rebranded a Holiday Inn and the 157 room Dar-es-Salaam Holiday Inn opened to
strong trading.
Tsogo Sun operations at the Montecasino complex reported encouraging trading
results especially in view of the highly competitive Gauteng gambling
market. The Hemingways Casino and Hotel in East London was opened but
trading to date has been somewhat disappointing. The Nelspruit and Witbank
casinos traded in line with expectations and work has commenced on
delivering the final aspects of the bid commitments for these two licenses.
In December 2001 the Gauteng Gambling Board awarded the previously disputed
sixth license in the West Rand, to which award Tsogo Sun has launched a
legal challenge. In Durban, Kwa-Zulu Natal, Tsogo Sun has resolved the legal
challenge to its license award and as a consequence will have a reduced
shareholding in the project but will retain management control. Building
work for the first phase of this R1.4 billion development is in progress and
trading should commence in December 2002.
Overall, trading profit in SA rand terms improved by 53.1% (12.0% in US
dollars) as a result of the improved operating margins from 12.1% in 2001 to
17.4% in 2002. The outlook for the forthcoming year is positive. Strategic
options for this investment continue to be investigated.
Financial review
Segmental analysis
As included in the interim results, segmental disclosures have been expanded
to report SAB International in three distinct segments, including the
recently acquired Central American interests.
Accounting for volumes
Reported volumes exclude equity accounted 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 cases
the financial results of operations are equity accounted in terms of UK
GAAP.
CHIEF EXECUTIVE`S REVIEW (continued) 11
Profit before tax
Profit before tax, excluding exceptional items and goodwill amortisation, of
US$668 million was up 0.4% on prior year, reflecting the impact of increased
interest charges as the group borrowed to fund expansion and investment in
the current year.
Exceptional items
SABI Europe recorded net exceptional items of US$8 million comprising
brewery closure costs in Romania at Pitesti US$9 million and an impairment
of Ursus US$10 million offset by a release of a prior period impairment
provision in the Czech Republic (US$11 million).
Treasury
New borrowings included the US$328 million private bond placing and the
US$600 million convertible bond. The combination of these new borrowings and
the issuance of 64.7 million new shares in December 2001 have been utilised
in the funding of acquisitions. Following these activities, the group`s
gearing increased at the year end to 40.8% from last year`s 36.5%.
Nevertheless, the group has substantial unutilised borrowing facilities.
Interest
Net interest rose sharply as the group borrowed to fund new acquisitions
and, at US$98 million, was up on the prior year`s US$54 million. Interest
cover is still satisfactory at more than 7.0 times.
Taxation
The year under review saw an increase in the group`s effective tax rate, to
31.2%, from last year`s restated 29.3%.
Goodwill
Intangible assets increased by US$937 million, due primarily to the
inclusion of goodwill of US$930 million arising on the Central American
acquisition in December 2001. Goodwill in ABI is considered to have an
indefinite life (consistent with prior years), all other goodwill being
amortised over 20 years. The attributable charge for the year under review
rose to US$46 million from last year`s US$20 million.
Cash flow
Net cash inflow from operating activities before working capital movement
(EBITDA) rose to US$904 million, from last year`s US$854 million. The ratio
of EBITDA to group turnover showed further improvement to 24.3%.
Currency
During the financial year, the US dollar again demonstrated strength in
international currency markets ending the financial year at R11.40 to the US
dollar in South Africa. As a result the weighted average rand/dollar rate
declined by 24.4% to R9.71 (compared with R7.34 last year). Dollar strength
also negatively impacted certain of the operating currencies of our African
businesses.
Dividend
The board has proposed an unchanged final dividend of US18.5 cents making a
total of US25.0 cents per share for the year. Shareholders will be asked to
ratify this proposal at the annual general meeting, scheduled for 31 July
2002. In the event that ratification takes place, the dividend will be
payable on 6 August 2002 to shareholders on either register on 5 July 2002.
The ex-dividend trading date, as stipulated by the LSE and JSE respectively
will be 3 July 2002 on the London Stock Exchange and on 1 July 2002 on the
Johannesburg Stock Exchange. As the group reports primarily in US dollars,
dividends are declared in US dollars. They are payable in sterling to
shareholders on the UK section of the register and in South African rand to
shareholders on the RSA section of the register. The rates of exchange
applicable on 24 May 2002, being the last practical date before the
declaration date, will be used for conversion ($/ = 1.4575 and R/$ =
10.0500), resulting in an equivalent final
CHIEF EXECUTIVE`S REVIEW (continued) 12
dividend of UK 12.6930 pence per share for UK shareholders and SA 185.9250
cents per share for RSA shareholders. The equivalent total dividend for the
year for UK shareholders is UK 17.2931 pence (2001: UK 17.6309 pence) and
for RSA shareholders is SA 250.6000 cents (2001: SA 197.3663 cents).
Annual report and accounts
The group`s unaudited summarised financial statements and certain
significant explanatory notes follow. The annual report will be mailed to
shareholders early in July 2002 and the annual general meeting of the
company will be held at 11h00 on 31 July 2002.
Enquiries:
London
South African Breweries Tel: +44 20 7659 0100
plc
Nick Chaloner Director of Tel: +44 20 7659 0119
Communications
Mob: +44 7880 502 755
Anna Miller Salzman Head of Investor Tel: +44 20 7659 0106
Relations
Ciaran Baker Head of Corporate Tel: +44 20 7659 0120
Communications
Mob: +44 7979 954 493
This announcement, a copy of the slide presentation and video interviews
with management are available on the
SAB plc website at www.sabplc.com. Video interviews can also be found at
www.cantos.com.
Pictures for the media are available from www.newscast.co.uk
Copies of the press release and the detailed Preliminary Announcement are
available from the Company Secretary
at the Registered Office, or from 2 Jan Smuts Avenue, Johannesburg, South
Africa.
Registered office: Dukes Court, Duke Street, Woking, Surrey, GU21 5BH
Telephone: +44 1483 26 4000
Telefax: +44 1483 26 4117
South African Breweries plc
Consolidated Profit and Loss Accounts
For the years ended 31 March 13
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
Notes US$m US$m Rm Rm
Turnover
(including share of
associates` turnover) 2 4,364 4,184 42,373 30,689
Less: share of
associates` turnover (647) (560) (6,276) (4,105)
Group turnover 2 3,717 3,624 36,097 26,584
Net operating costs 3 (3,098) (2,987) (30,090) (21,913)
Group operating profit 619 637 6,007 4,671
Share of operating
profit of associates 2 85 63 828 461
Profit on ordinary
activities before
interest and taxation 704 700 6,835 5,132
Net interest payable (98) (54) (956) (395)
Group (83) (43) (810) (313)
Associates (15) (11) (146) (82)
Profit on ordinary
activities before
taxation 606 646 5,879 4,737
Taxation on profit on
ordinary activities 5 (208) (195) (2,021) (1,430)
Profit on ordinary
activities after taxation 398 451 3,858 3,307
Equity minority interests (105) (99) (1,020) (729)
Profit for the financial
year 2 93 352 2,838 2,578
Dividends (187) (174) (1,813) (1,279)
Retained profit 106 178 1,025 1,299
Basic earnings per
ordinary share
(US/SA cents) 6 40.7 50.4 395.0 369.8
Adjusted basic earnings
per ordinary share
(US/SA cents) 6 48.7 53.3 472.5 390.9
Diluted earnings per
ordinary share
(US/SA cents) 6 40.3 50.3 390.9 368.7
Adjusted diluted
earnings per ordinary
share (US/SA cents) 6 47.7 53.1 463.6 389.7
Dividends per ordinary
share (US cents) 25.0 25.0
South African Breweries plc
Consolidated Balance Sheets
at 31 March 14
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
Notes US$m US$m Rm Rm
Fixed assets
Intangible assets 7 1,804 867 20,570 6,938
Tangible assets 1,858 1,784 21,180 14,268
Investments 1,096 1,016 12,488 8,126
Investments in associates 462 364 5,263 2,912
Other fixed asset investments 634 652 7,225 5,214
4,758 3,667 54,238 29,332
Current assets
Stock 238 205 2,714 1,637
Debtors 405 309 4,611 2,472
Investments 10 45 53 514 422
Cash at bank and in hand 10 245 165 2,793 1,324
933 732 10,632 5,855
Creditors - amounts
falling due within one year (1,160) (1,064) (13,217) (8,514)
Interest bearing 10 (240) (206) (2,736) (1,651)
Other (920) (858) (10,481) (6,863)
Net current liabilities (227) (332) (2,585) (2,659)
Total assets less current
liabilities 4,531 3,335 51,653 26,673
Creditors - amounts falling
due after one year (1,311) (854) (14,950) (6,828)
Interest bearing 10 (1,295) (847) (14,761) (6,778)
Other (16) (7) (189) (50)
Provisions for liabilities
and charges 8 (166) (189) (1,887) (1,512)
Net assets 3,054 2,292 34,816 18,333
Shareholders` funds 2,309 2,006 26,323 16,051
Equity minority interests 745 286 8,493 2,282
Capital employed 3,054 2,292 34,816 18,333
South African Breweries plc
Consolidated Cash Flow Statements
For the years ended 31 March 15
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
Notes US$m US$m Rm Rm
Net cash inflow from
operating activities 9 975 859 9,463 6,298
Dividends received from
associates 13 15 122 107
Returns on investments
and servicing of finance
Interest received 35 36 339 267
Interest paid (112) (74) (1,082) (543)
Interest element of
finance lease rental
payments - (2) (1) (12)
Dividends received from
other investments 2 3 23 25
Dividends paid to
minority interests (96) (71) (935) (524)
Net cash outflow from
returns on investments
and servicing of finance (171) (108) (1,656) (787)
Taxation paid (179) (179) (1,738) (1,310)
Capital expenditure and
financial investments
Purchase of tangible
fixed assets (266) (350) (2,583) (2,566)
Sale of tangible fixed assets 16 19 157 136
Purchase of investments (61) (15) (589) (110)
Sale of investments 12 22 113 161
Net cash outflow for
capital expenditure
and financial investments (299) (324) (2,902) (2,379)
Acquisitions and disposals
Purchase of subsidiary
undertakings 11 (672) (4) (6,524) (33)
Sale of subsidiary
undertakings 1 9 9 66
Net cash disposed with
subsidiary undertakings - (1) - (5)
Net overdraft acquired
with subsidiary undertakings (2) - (16) -
Purchase of shares from
minorities 11 (32) (453) (317)
(3,323)
Settlement of deferred
creditor (PU) - (230) - (1,680)
Purchase of shares in
associates (57) (42) (553) (312)
Net funding to associates (6) (38) (58) (278)
Sale of associate - 59 - 431
Net cash outflow for
acquisitions and disposals (768) (700) (7,459) (5,134)
Dividends paid to ordinary
shareholders (173) (177) (1,683) (1,300)
Management of liquid resources
Sale of short-term liquid
instruments 12 50 119 365
Cash withdrawn from short-term deposits 7 14 69 106
Net cash inflow from management of liquid resources 10 19 64 188
471
Financing
Issue of shares 401 3 3,901 23
Issue of shares to
minorities 1 1 9 5
New loans raised 10 1,189 741 11,544 5,433
Repayment of loans 10 (892) (254) (8,664) (1,860)
Net cash inflow from
financing 699 491 6,790 3,601
Increase / (decrease)
in cash in the year 10 116 (59) 1,125 (433)
South African Breweries plc
Consolidated Statements of Total Recognised Gains and Losses
For the years ended 31 March 16
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
US$m US$m Rm Rm
Profit for the 293 352 2,838 2,578
financial year
Currency
translation
differences on
foreign
currency net (212) (226) 5,271 1,404
investments
Share of - 1 (4) 6
movements in
reserves of
associates
Other 8 (7) 79 (46)
movements
Total 89 120 8,184 3,942
recognised
gains and
losses for the
year
Consolidated Reconciliation of Movements in Shareholders` Funds
For the years ended 31 March
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
US$m US$m Rm Rm
Profit for the 293 352 2,838 2,578
financial year
Other (204) (232) 5,346 1,364
recognised
gains and
losses
relating to
the year (net)
Dividends (187) (174) (1,813) (1,279)
declared by
SAB plc *
Issue of 401 3 3,901 23
shares to SAB
shareholders
Net increase / 303 (51) 10,272 2,686
(decrease) in
shareholders`
funds
Shareholders` 2,006 2,057 16,051 13,365
funds at start
of year
Shareholders` 2,006 2,161 16,051 14,042
funds at the
start of year
as previously
reported
Prior year - (104) - (677)
adjustment in
respect of
deferred
taxation
Shareholders` 2,309 2,006 26,323 16,051
funds at end
of year
* Dividends received on shares held by Safari Limited netted off.
The amount of cumulative goodwill in respect of purchased subsidiary and
associated undertakings which has been set off against shareholders` funds
prior to 31 March 1998 was US$151 million (R1,718 million) at 31 March 2002
(2001: US$172 million (R1,375 million).
South African Breweries plc
Notes to the Financial Statements 17
1. Basis of preparation
The consolidated financial statements present the financial record for the
years ended 31 March 2002 and 31 March 2001.
Financial information in respect of South African businesses are reported in
South African rand as this was the dominant functional currency of The South
African Breweries Limited (SAB Limited) group prior to its reconstruction
and listing on the London Stock Exchange on 8 March 1999. The subsidiary
and associated undertakings that comprise the SAB International businesses
operate in the local currency of the country in which they are based. From a
functional perspective, the group regards these operations as being US
dollar-based as the transactions of these entities are, insofar as is
possible, evaluated in US dollars. In management accounting terms these
companies report in US dollars.
The directors of the company regard the US dollar as the functional currency
of the group, being the most representative currency of its operations.
However, as a result of the large number of South African shareholders, the
consolidated financial statements continue to be presented in both rand and
US dollars. The exchange rates of rand to US dollars used in preparing the
consolidated financial statements were as follows:
Weighted Closing
average rate rate
Year ended 31 March 2001 7.34 8.00
Year ended 31 March 2002 9.71 11.40
The weighted average exchange rates have been calculated based on an average
of the exchange rates prevailing at each month end during the relevant year
and weighted according to the turnover of the group`s businesses.
In accordance with s240 of the Companies Act, 1985, as amended, the above
statements do not set out the full group financial statements of SAB plc and
its subsidiary undertakings. Group financial statements for 2002 will be
delivered to the Registrar of Companies in due course. The board of
directors approved this financial information on 30 May 2002. The financial
information for the year ended 31 March 2001 does not comprise statutory
accounts but has been extracted from the statutory accounts for that year,
which have been delivered to the Registrar of Companies, adjusted for a
change in the accounting policy for deferred taxation. The auditors` report
was unqualified and did not contain a statement made under s237(2) or (3) of
the Companies Act, 1985.
Safari Limited
On 27 September 1999, it was announced that SAB would purchase 10% of its
own shares via a special purpose vehicle (Safari Limited) established and
financed by South African Breweries International (Finance) BV, a wholly-
owned overseas subsidiary of SAB. The purchase by Safari Limited was at an
initial price of R44.05 per share representing a total cost of R3,408
million (US$560 million). In terms of the agreement, a top up payment of
R5.95 per share, representing a total cost of R460 million (US$58 million)
was made to the selling shareholders on 3 April 2001. SAB shares acquired
by Safari Limited remain in issue and provide additional flexibility in the
financing of future acquisitions by the SAB group.
Supplementary information
The accompanying supplementary information, which is unaudited, presents the
profit and loss accounts and cash flow statements of the SAB plc group for
the second six month period of the years ended 31 March 2002 and 31 March
2001.
Accounting policies
These preliminary financial statements should be read in conjunction with
the annual financial statements and the accounting policies laid down
therein (which will be distributed in early July 2002). They have been
prepared under the historical cost convention in accordance with accounting
standards applicable in the United Kingdom (UK GAAP), and, with the
exception of deferred taxation, all have been applied consistently
throughout the current and preceding year, as set out in the annual report
for the year ended 31 March 2001.
In December 2000 the Accounting Standards Board published FRS19 (Deferred
tax), which requires a form of `full` provision for accounting for deferred
tax (called the `incremental liability` approach) that replaces the
`partial` provision method as used by SAB plc. The results reflect the
adoption of the `full` provision approach. The cumulative cost of
recognising the unprovided liability relating to previous years has been
recognised in the accounts as a prior year adjustment and comparative
figures for 2001 have been restated. The effect of this change in accounting
policy is as follows:
Year ended Year ended
31 March 2001 31 March 2001
Unaudited Unaudited
US$m Rm
Increase in deferred
taxation provision and
decrease in
shareholders`
funds at start of the (104) (677)
year
Effect on profit for the (7) (57)
financial year
Increase in tax charge (9) (64)
Decrease in equity 2 7
minority interest
Decrease / (increase) in 19 (6)
currency translation
differences
Increase in other (2) (10)
movements
Decrease in (94) (750)
shareholders` funds at
end of year
South African Breweries plc
Notes to the Financial Statements (continued) 18
2. Segmental analysis
Turnover Operating Operating
profit margin
2002 2001 2002 2001 2002 2001
Unaudited Restated Unaudited Restated Unaudited Restate
Note US$m US$m US$m US$m % %
Business
segment
analysis
SABI Europe 1,280 1,097 168 130 13.1 11.9
SABI Africa 946 700 162 130 17.2 18.5
and Asia
Associates` (367) (206) (51) (23) 13.8 11.3
share
579 494 111 107 19.3 21.5
SABI Central 186 - 7 - 3.5 -
America
Beer South 1,112 1,365 287 343 25.8 25.2
Africa
Other Beverage 676 816 95 106 14.0 13.0
Interests
Associates` (212) (264) (19) (24) 9.0 9.1
share
464 552 76 82 16.3 14.8
Hotels and 164 206 28 25 17.4 12.1
Gaming
Associates` (68) (90) (15) (16) 22.5 17.2
share
96 116 13 9 13.7 7.8
Central - - (35) (34) - -
Administration
Group - 4,364 4,184 712 700 16.3 16.7
excluding
exceptional
items
Associates` (647) (560) (85) (63) 13.2 11.2
share
3,717 3,624 627 637 16.9 17.6
Exceptional 4
items
SABI Europe - - (8) - - -
Group - 4,364 4,184 704 700 16.1 16.7
including
exceptional
items
Associates` (647) (560) (85) (63) 13.2 11.2
share
3,717 3,624 619 637 16.6 17.6
Geographical
market
analysis
Europe 1,280 1,097 139 104
Rest of Africa 967 710 169 136
and Asia
Associates` (367) (206) (51) (23)
share
600 504 118 113
Central 186 - 7 -
America
South Africa 1,931 2,377 397 460
Associates` (280) (354) (34) (40)
share
1,651 2,023 363 420
Exceptional 4
items
Europe - - (8) -
Group - 4,364 4,184 704 700
including
exceptional
items
Associates` (647) (560) (85) (63)
share
3,717 3,624 619 637
Analyses by business are based on the group`s management structure. There is
no material difference between the source and the destination of turnover.
Turnover between segments is immaterial.
South African Breweries plc
Notes to the Financial Statements (continued) 19
2. Segmental analysis (continued)
Net operating EBITA EBITA margin
assets
2002 2001 2002 2001 2002 2001
Unaudited Restated Unaudited Restated Unaudited Restated
Note US$m US$m US$m US$m % %
Business
segment
analysis
SABI Europe 1,253 1,091 198 148 15.5 13.5
SABI Africa
and Asia 728 472 171 132 18.1 18.9
Associates`
share (306) (162) (54) (23) 14.6 11.3
422 310 117 109 20.3 22.1
SABI Central
America 1,135 - 22 - 11.9 -
Beer South
Africa 263 415 287 343 25.8 25.2
Other
Beverage
Interests 355 520 95 106 14.0 13.0
Associates`
share (74) (103) (19) (24) 9.0 9.1
281 417 76 82 16.3 14.8
Hotels and
Gaming 140 159 28 25 17.4 12.1
Associates`
share (82) (100) (15) (16) 22.5 17.2
58 59 13 9 13.7 7.8
Central
Administration (193) (148) (35) (34) - -
Group -
excluding
exceptional
items 3,681 2,509 766 720 17.6 17.2
Associates`
share (462) (365) (88) (63) 13.6 11.2
3,219 2,144 678 657 18.3 18.1
Exceptional
items 4
SABI Europe - - (8) - - -
Group -
including
exceptional
items 3,681 2,509 758 720 17.4 17.2
Associates`
share (462) (365) (88) (63) 13.6 11.2
3,219 2,144 670 657 18.0 18.1
Geographical
market analysis
Europe 1,078 959 170 121
Rest of
Africa and
Asia 762 498 177 139
Associates`
share (306) (162) (54) (23)
456 336 123 116
Central
America 1,135 - 22 -
South
Africa 706 1,052 397 460
Associates`
share (156) (203) (34) (40)
550 849 363 420
Exceptional
items 4
Europe - - (8) -
Group -
including
exceptional
items 3,681 2,509 758 720
Associates`
share (462) (365) (88) (63)
3,219 2,144 670 657
South African Breweries plc
Notes to the Financial Statements (continued) 20
2. Segmental analysis (continued)
Turnover Operating Operating
profit margin
2002 2001 2002 2001 2002 2001
Unaudited Restated Unaudited Restated Unaudited Restate
Note Rm Rm Rm Rm % %
Business
segment
analysis
SABI Europe 12,432 8,045 1,631 958 13.1 11.9
SABI Africa 9,180 5,135 1,579 951 17.2 18.5
and Asia
Associates` (3,564) (1,508) (493) (171) 13.8 11.3
share
5,616 3,627 1,086 780 19.3 21.5
SABI Central 1,809 - 64 - 3.5 -
America
Beer South 10,797 10,014 2,785 2,520 25.8 25.2
Africa
Other Beverage 6,565 5,986 920 774 14.0 13.0
Interests
Associates` (2,053) (1,935) (186) (176) 9.0 9.1
share
4,512 4,051 734 598 16.3 14.8
Hotels and 1,590 1,509 276 180 17.4 12.1
Gaming
Associates` (659) (662) (149) (114) 22.5 17.2
share
931 847 127 66 13.7 7.8
Central - - (338) (251) - -
Administration
Group - 42,373 30,689 6,917 5,132 16.3 16.7
excluding
exceptional
items
Associates` (6,276) (4,105) (828) (461) 13.2 11.2
share
36,097 26,584 6,089 4,671 16.9 17.6
Exceptional 4
items
SABI Europe - - (82) - - -
Group - 42,373 30,689 6,835 5,132 16.1 16.7
including
exceptional
items
Associates` (6,276) (4,105) (828) (461) 13.2 11.2
share
36,097 26,584 6,007 4,671 16.6 17.6
Geographical
market
analysis
Europe 12,432 8,045 1,356 759
Rest of Africa 9,385 5,207 1,637 1,003
and Asia
Associates` (3,564) (1,508) (493) (171)
share
5,821 3,699 1,144 832
Central 1,809 - 64 -
America
South Africa 18,747 17,437 3,860 3,370
Associates` (2,712) (2,597) (335) (290)
share
16,035 14,840 3,525 3,080
Exceptional 4
items
Europe - - (82) -
Group - 42,373 30,689 6,835 5,132
including
exceptional
items
Associates` (6,276) (4,105) (828) (461)
share
36,097 26,584 6,007 4,671
Analyses by business are based on the group`s management structure. There is
no material difference between the source and the destination of turnover.
Turnover between segments is immaterial.
South African Breweries plc
Notes to the Financial Statements (continued) 21
2. Segmental analysis (continued)
Net operating EBITA EBITA margin
assets
2002 2001 2002 2001 2002 2001
Unaudited Restated Unaudited Restated Unaudited Restated
Note Rm Rm Rm Rm % %
Business
segment
analysis
SABI Europe 14,281 8,726 1,926 1,083 15.5 13.5
SABI Africa
and Asia 8,297 3,771 1,658 970 18.1 18.9
Associates`
share (3,492) (1,302) (519) (171) 14.6 11.3
4,805 2,469 1,139 799 20.3 22.1
SABI
Central
America 12,942 - 215 - 11.9 -
Beer South
Africa 2,998 3,327 2,785 2,520 25.8 25.2
Other
Beverage
Interests 4,043 4,155 920 774 14.0 13.0
Associates`
share (848) (821) (186) (176) 9.0 9.1
3,195 3,334 734 598 16.3 14.8
Hotels
and Gaming 1,602 1,275 276 180 17.4 12.1
Associates`
share (931) (799) (149) (114) 22.5 17.2
671 476 127 66 13.7 7.8
Central
Administration (2,204) (1,182) (338) (251) - -
Group -
excluding
exceptional
items 41,959 20,072 7,442 5,276 17.6 17.2
Associates`
share (5,271) (2,922) (854) (461) 13.6 11.2
36,688 17,150 6,588 4,815 18.3 18.1
Exceptional
items 4
SABI Europe - - (82) - - -
Group -
Including
exceptional
items 41,959 20,072 7,360 5,276 17.4 17.2
Associates`
share (5,271) (2,922) (854) (461) 13.6 11.2
36,688 17,150 6,506 4,815 18.0 18.1
Geographical
Market
analysis
Europe 12,284 7,669 1,651 885
Rest of
Africa and
Asia 8,681 3,985 1,716 1,021
Associates`
share (3,492) (1,302) (519) (171)
5,189 2,683 1,197 850
Central
America 12,942 - 215 - -
South
Africa 8,052 8,418 3,860 3,370
Associates`
share (1,779) (1,620) (335) (290)
6,273 6,798 3,525 3,080
Exceptional
items 4
Europe - - (82) -
Group -
Including
Exceptiona
items 41,959 20,072 7,360 5,276
Associates`
share (5,271) (2,922) (854) (461)
36,688 17,150 6,506 4,815
South African Breweries plc
Notes to the Financial Statements (continued) 22
3. Net operating costs
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
US$m US$m Rm Rm
Raw materials 1,096 983 10,642 7,208
and
consumable
stores
Changes in (6) (9) (57) (68)
stock of
finished
goods and
work in
progress
Excise duties 686 684 6,664 5,021
Employee 439 426 4,263 3,128
costs
Depreciation
of tangible
fixed assets
owned assets 170 160 1,655 1,171
leased 6 7 54 52
assets
containers 34 34 330 249
Container 10 11 100 78
breakages and
shrinkage
Amortisation 51 20 499 147
of intangible
assets
Other (78) (57) (760) (414)
operating
income
Other 682 727 6,618 5,338
operating
charges
Brewery 9 - 88 -
closure costs
Impairment 10 - 102 -
costs
Reversal of (11) - (108) -
impairment
provision
Impairment of - 6 - 41
Monyaka
Profit on - (5) - (38)
disposal of
Sun
International
3,098 2,987 30,090 21,913
4. Exceptional items
The following exceptional items were incurred by the group during the years
ended 31 March:
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
US$m US$m Rm Rm
Recognised in
operating
profit:
SABI Europe
Brewery (9) - (88) -
closure costs
in Pitesti
(Romania)
Asset (10) - (102) -
impairment
provision in
Ursus
(Romania)
Reversal of 11 - 108 -
asset
impairment
provision in
Velke Popovice
(Czech)
(8) - (82) -
Minority 1 - 6 -
interests`
share of the
above items
Following SAB`s recent acquisition of Bere Timisoreana, an operating review
resulted in management announcing, in March 2002, the rationalisation of the
Pitesti brewery and a fair value adjustment/impairment of the Ursus brewery,
ahead of merging the two legal entities. Closure costs and asset impairment
total US$19 million (R190 million).
The PU group (Czech) has reversed an impairment provision of US$11 million
(R108 million) in respect of Velke Popovice, made at the date of
acquisition. The reversal has been occasioned by more resilient than
expected volumes, and therefore improved capacity utilisation, at the
brewery following national integration of the three subsidiaries in the
country.
South African Breweries plc
Notes to the Financial Statements (continued) 23
5. Taxation on profit on ordinary activities
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
US$m US$m Rm Rm
Current taxation 173 167 1,679 1,229
- Charge for the year 174 159 1,690 1,169
- (Over) / under provision in
respect of prior year (1) 8 (11) 60
Deferred taxation 4 5 36 33
- Charge for the year 3 5 26 33
- Charge for the prior year 1 - 13 -
- Rate change - - (3) -
Withholding taxes and secondary
taxation on companies 10 10 105 75
Share of associates` taxation
charge 21 13 201 93
208 195 2,021 1,430
Effective tax rate, before
goodwill amortisation and
exceptional items (%) 31.2 29.3
Tax rate reconciliation
Profit before taxation 606 646 5,879 4,737
Tax charge at standard
rate of 30% (1) 182 194 1,764 1,421
Exempt income (18) (20) (176) (148)
Other incentive allowances (8) (16) (79) (123)
Tax losses utilised (5) (9) (56) (66)
Goodwill amortisation 14 5 139 39
Disallowable expenses 20 29 195 213
Tax losses created 16 7 156 52
Withholding taxes and secondary
taxation on companies 10 10 105 75
Foreign tax rate differential (10) (17) (98) (128)
Charges relating to prior years - 8 2 60
Tax on gross dividends received 6 177 63 1,301
Double tax relief (6) (172) (63) (1,260)
Other reconciling items 7 (1) 69 (6)
Tax charge 208 195 2,021 1,430
(1) The corporate tax rate in the United Kingdom, SAB plc`s country of
primary listing is 30% (2001:30%).
6. Earnings per share
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
US cents US cents SA cents SA cents
Basic earnings per ordinary share 40.7 50.4 395.0 369.8
Adjusted basic earnings per
ordinary share 48.7 53.3 472.5 390.9
Diluted earnings per ordinary
share 40.3 50.3 390.9 368.7
Adjusted diluted earnings per
ordinary share 47.7 53.1 463.6 389.7
The calculation of basic earnings per ordinary share has been based on the
profit for the financial year as shown below, and on a weighted average
number of shares in issue of 718,504,170 (2001: 697,115,210).
At 31 March 2002 there were 10,085,000 share purchase options outstanding
under the SAB Limited Executive Share Purchase Scheme, 3,646,278 share
purchase options outstanding under SAB plc Executive Share Purchase Scheme
and 687,384 shares which have been awarded conditionally under the SAB
Executive Performance Share Awards 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 766,644,698, after adjusting for 48,140,528
weighted potentially dilutive ordinary shares arising from the share options
and the guaranteed convertible bond; and the profit for the financial year
as shown below, adjusted for an interest saving of US$16 million, on the
4.25% guaranteed convertible bond. The average share price of SAB plc since
the beginning of the financial year, used in determining the number of
potentially dilutive ordinary shares, is US$6.67, compared with an average
strike price on the outstanding options of US$4.84.
South African Breweries plc
Notes to the Financial Statements (continued) 24
6. Earnings per share (continued)
The group has also presented an adjusted earnings per share figure to
exclude the impact of amortisation and other non-recurring items in order to
present a more meaningful comparison for the years shown in the consolidated
financial statements. Adjusted earnings per share has been based on adjusted
headline earnings for each financial year and on the same number of weighted
average ordinary shares in issue as the basic earnings per share
calculation. Headline earnings per share has been calculated in accordance
with the Institute of Investment Management and Research (`IIMR`)`s
Statement of Investment Practice No. 1 entitled `The Definition of Headline
Earnings`. The adjustments made to arrive at headline earnings and adjusted
earnings are as follows:
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
US$m US$m Rm Rm
Profit for the financial year 293 352 2,838 2,578
Amortisation of goodwill 46 20 450 144
Impairment of Monyaka - 6 - 41
Profit on sale of Sun
International - (5) - (38)
Brewery closure costs I
Pitesti (Romania) 8 - 3 -
Asset impairment provision
in Ursus (Romania) 10 - 97 -
Reversal of asset impairmen
provision in Velke Popovice
(Czech) (9) - (92) -
Impairment costs in Africa 1 - 12 -
Profit on sale of fixed assets
and investments (3) (4) (36) (22)
Headline earnings (basic) 346 369 3,352 2,703
Reorganisation costs (1) 4 3 43 23
Adjusted earnings 350 372 3,395 2,726
Note : All adjustments are stated after impacts of taxation and minority
interests.
(1) Comprises reorganisation costs of Distell Group Limited and SABI Central
America in the current year.
7. Intangible assets
Trademarks Goodwill Total
US$m US$m US$m
Net book amount
At 31 March 2001 2 865 867
(audited)
At 31 March 2002 1 1,803 1,804
(unaudited)
Trademarks Goodwill Total
Rm Rm Rm
Net book amount
At 31 March 2001 16 6,922 6,938
(audited)
At 31 March 2002 8 20,562 20,570
(unaudited)
The goodwill balance of US$1,803 million (R20,562 million) at the end of the
year includes US$1,026 million (R9,964 million) due to acquisition
activities. Operations acquired in Central America resulted in US$930
million (R9,031 million) new goodwill and other acquisitions within the
Africa and Asia and Europe segments added US$96 million (R933 million) to
that.
Goodwill arising from the acquisitions in SAB International is being
amortised over 20 years. The directors believe that the purchased goodwill
in respect of the further acquisition of equity in ABI has an indefinite
life. This is consistent with the treatment of goodwill that arose on the
acquisition of Suncrush, which was acquired on 8 June 1998. The directors
consider the goodwill to be supported by the existence of bottlers`
agreements with Coca-Cola (Southern Africa) (Proprietary) Limited (CCSA).
ABI has similar bottlers` agreements in respect of other regions within
South Africa. These bottlers` agreements, which are based on the Coca-Cola
system, establish performance obligations as to production, distribution and
marketing arrangements to maximise long-term growth in volume, cash flow and
shareholder value of the bottler company. The Coca-Cola system came into
being during 1899 and has had a consistent history of growth and success
since that date.
The Suncrush agreements with CCSA were established in 1955 and have been in
place since then. The current agreements are for a period of ten years,
with an extension of five years, expiring on 30 September 2007 and contain
provisions for renewal at no cost. ABI has had similar agreements since
1976 and they have always been renewed prior to expiry. In the view of the
directors, the bottlers` agreements reflect a long and ongoing relationship
between the respective managements of ABI and CCSA.
The directors have given due consideration to financial forecasts in respect
of the ABI business, the history of dealings of ABI with CCSA and the
established international practice of The Coca-Cola Company in relation to
its bottlers` agreements. In light of the above factors, the directors
believe that the Suncrush agreements will continue to be renewed at the end
of their legal expiry dates and the commercial value of the Coca-Cola
product will be maintained. Accordingly, the directors are of the view that
the goodwill, as underpinned by the bottlers` agreements, currently has an
indefinite economic life. The directors have performed a review for
impairment at 31 March 2002 and are of the opinion that no provision is
required.
The amount of cumulative goodwill in respect of purchased subsidiary and
associated undertakings which has been set off against shareholders` funds
prior to 31 March 1998 was US$151 million (R1,718 million) at 31 March 2002
(2001: US$172 million (R1,375 million)).
South African Breweries plc
Notes to the Financial Statements (continued) 25
8. Provisions for liabilities and charges
Post-
Demerged retirement Deferred
entities benefits Other taxation Total
US$m US$m US$m US$m US$m
At 31 March 44 29 40 25 138
2000
(audited)
Prior year - - - 110 110
adjustment
for FRS19
Exchange (8) (3) (3) (23) (37)
adjustments
Charged to - 4 3 5 12
profit and
loss account
Utilised in (11) (3) (15) - (29)
the year
Transfer to - (5) - - (5)
creditors
At 31 March 25 22 25 117 189
2001
(unaudited)
Exchange (6) (6) (2) (31) (45)
adjustments
Arising on - - 9 11 20
the
acquisition
of
subsidiary
undertakings
Charged to - 8 1 5 14
profit and
loss account
Utilised in (5) (3) (5) - (13)
the year
Transfer - (1) 2 - 1
(to) / from
creditors
At 31 March 14 20 30 102 166
2002
(unaudited)
Post-
Demerged retirement Deferred
entities benefits Other taxation Total
Rm Rm Rm Rm Rm
At 31 March 2000 (audited) 285 192 262 164 903
Prior year adjustment for
FRS19 - - - 715 715
Exchange adjustments - 15 25 20 60
Charged to profit and
loss account - 24 25 33 82
Utilised in the year (82) (19) (112) - 213)
Transfer to creditors - (35) - - (35)
At 31 March 2001 (unaudited) 203 177 200 932 1,512
Exchange adjustments - 13 76 75 164
Arising on the acquisition
of subsidiary undertakings - (3) 83 111 191
Charged to profit and loss
account - 72 10 48 130
Utilised in the year (48) (26) (45) - (119)
Transfer (to) / from
creditors - (11) 20 - 9
At 31 March 2002
(unaudited) 155 222 344 1,166 1,887
Demerged entities
During the year ended 31 March 1998, the group recognised a provision of
US$117 million (R562 million) for the disposal of certain demerged entities
in relation to equity injections which were not regarded as recoverable, as
well as potential liabilities arising on warranties and the sale agreements.
During the year ended 31 March 2002, US$5 million (R48 million) was further
utilised in regard to the disposal of SAB Limited`s remaining retail
interests. The residual US$14 million (R155 million) relates mainly to the
disposal of OK Bazaars (1929) Limited to Shoprite Holdings Limited
(`Shoprite`). As disclosed in last year`s annual report, a number of claims
were made by Shoprite in relation to the valuation of the net assets of OK
Bazaars at the time of the sale and for alleged breaches by SAB Limited of
warranties contained in the sale agreements. These claims are being
contested by SAB Limited and have been submitted for dispute resolution to
independent accountants acting as experts and not as arbitrators. In March
2000 an opinion was received from the experts but subsequent to that year
end Shoprite have instituted action against the independent experts and SAB
indicating an intention to refute the expert opinion. While full provision
for all claims has already been made on the basis of prudence, the actual
outcome of the dispute cannot be estimated by the directors at this time.
The further information ordinarily required by financial reporting standard
12 - `Provisions, Contingent Liabilities and Contingent Assets` - has not
been disclosed on the grounds that it can be expected to seriously prejudice
the outcome of the dispute.
Post-retirement benefits
The provision for post-retirement benefits represents the provision for
medical benefits for retired employees and their dependants in South Africa
and pension provisions for retired employees in SABI Europe and SABI Africa
and Asia. The principal assumptions on which these provisions are based
will be disclosed in the group`s annual report.
South African Breweries plc
Notes to the Financial Statements (continued) 26
8. Provisions for liabilities and charges (continued)
Other provisions
At 31 March 2002 the group retained US$30 million (R344 million) of other
provisions. The principal individual components of this amount are as
follows:
The group has recognised various provisions, totalling US$7 million (R82
million) at 31 March 2002, in relation to taxation exposures it believes may
arise. The provisions principally relate to corporate taxation in respect of
a number of group companies and are not individually significant. Any
settlement in respect of these amounts will occur as and when the
assessments are finalised with the respective tax authorities.
US$7 million (R83 million) of provisions in respect of outstanding
litigation within various operations have been retained, none of which are
expected to have adverse material consequences to the group.
Payroll related provisions of US$10 million (R118 million), include
provisions amounting to US$4 million (R50 million) within SABI Central
America and US$3 million (R35 million) within SABI Europe to comply with
labour legislation relating to employee service terminations and rewards.
Deferred taxation
In December 2000 the Accounting Standards Board published FRS19 (Deferred
tax), which requires a form of `full` provision for accounting for deferred
tax (called `incremental liability` approach) that replaces the `partial`
provision method as previously used by SAB plc. The results reflect the
adoption of the `full` provision approach. The cumulative cost of
recognising the unprovided liability relating to previous years has been
recognised as a prior year adjustment and comparative figures for 2000 have
been restated. Refer to the basis of preparation for further details of the
change in accounting policy.
2002 2001 2002 2001
US$m US$m Rm Rm
Provision for
deferred tax
comprises:
Fixed asset 133 127 1,512 1,016
allowances
Prepayments (11) (3) (121) (23)
Excise duty in (4) 4 (50) 29
stock
Unrealised (9) - (96) -
foreign
exchange
profits
Provisions (2) (12) (23) (94)
Other timing (5) 1 (56) 4
differences
102 117 1,166 932
At beginning 117 25 932 164
of year as
previously
reported
Prior year - 110 - 715
adjustment for
FRS19
Arising on the 11 - 111 -
acquisition of
subsidiary
undertakings
Exchange (31) (23) 75 20
adjustments
Charged to 5 5 48 33
profit and
loss account
At end of year 102 117 1,166 932
Included
within debtors
is a deferred
tax asset
comprising:
Provisions 3 - 34 -
Tax losses 2 - 22 -
carried
forward
5 - 56 -
At beginning - - - -
of year
Arising on the 4 - 42 -
acquisition of
subsidiary
undertakings
Credited to 1 - 14 -
profit and
loss account
At end of year 5 - 56 -
This deferred tax asset is brought about by tax losses in the Czech
operations and timing differences on provisions in Central America. Given
both recent and forecast trading, the directors are of the opinion that the
level of profits in the foreseeable future is more likely than not to be
sufficient to record these assets.
South African Breweries plc
Notes to the Financial Statements (continued) 27
9. Reconciliation of operating profit to net cash inflow from operating
activities
2002 2001 2002 2001
Unaudited Restated Unaudited Restated
US$m US$m Rm Rm
Operating 619 637 6,007 4,671
profit
Depreciation
tangible 176 167 1,709 1,223
fixed assets
containers 34 34 330 249
Container 10 11 100 78
breakages and
shrinkage
Amortisation 51 20 499 147
of intangible
assets
Dividends (2) (3) (23) (25)
received from
other
investments
Profit on sale (3) (6) (28) (47)
of fixed
assets
Brewery 8 - 79 -
closure costs
in Pitesti
(Romania)
Asset 10 - 102 -
impairment
provision in
Ursus
(Romania)
Reversal of (11) - (108) -
asset
impairment
provision in
Velke Popovice
(Czech)
Non-cash - 5 - 35
impairment of
Monyaka
Profit on - (5) - (38)
disposal of
Sun
International
Deferred 1 (12) 5 (83)
income
Other non-cash 11 6 106 51
movements
Net cash
inflow from
operating
activities
before working 904 854 8,778 6,261
capital
movements
(EBITDA)
Increase in (7) (15) (72) (107)
stock
Increase in (37) (42) (359) (312)
debtors
Increase in 115 62 1,116 456
creditors
Net cash 975 859 9,463 6,298
inflow from
operating
activities
South African Breweries plc
Notes to the Financial Statements (continued) 28
10. Analysis of net debt
Cash at Funding Funding
bank and due within due after
in hand Overdraft Total one year one year
US$m US$m US$m US$m US$m
At 31 March 2000
(audited) 197 (49) 148 (252) (260)
Cash flow (11) (48) (59) 144 (595)
Disposals - - - - -
Exchange (21) 11 (10) 26 32
adjustments
Change in
maturity of
net debt - - - (38) 38
Loan - - - 21 8
reclassification
At 31 March 2001
(audited) 165 (86) 79 (99) (777)
Cash flow 105 11 116 133 (454)
Acquisitions
(excluding
cash and - - - (59) (213)
overdrafts)
Exchange (25) 13 (12) 14 29
adjustments
Change in
maturity of
net debt - - - (153) 153
Amortisation of
loan
costs ? ? - - (3)
At 31 March 2002
(unaudited) 245 (62) 183 (164) (1,265)
Finance Finance
leases leases
due within due after Liquid Net
one year one year Total resources debt
US$m US$m US$m US$m US$m
At 31 March 2000
(audited) (7) (34) (553) 119 (286)
Cash flow 4 (40) (487) (64) (610)
Disposals - 2 2 - 2
Exchange 3 10 71 (2) 59
adjustments
Change in
maturity of
net debt - - - - -
Loan (21) (8) - - -
reclassification
At 31 March 2001
(audited) (21) (70) (967) 53 (835)
Cash flow 17 7 (297) (19) (200)
Acquisitions
(excluding
cash and - - (272) 11 (261)
overdrafts)
Exchange 5 18 66 - 54
adjustments
Change in
maturity of
net debt (15) 15 - - -
Amortisation of
loan
costs - - (3) - (3)
At 31 March 2002
(unaudited) (14) (30) (1,473) 45 (1,245)
Cash at Funding Funding
bank and due within due after
in hand Overdraft Total one year one year
Rm Rm Rm Rm Rm
At 31 March 2000
(audited) 1,283 (320) 963 (1,648) (1,700)
Cash flow (79) (354) (433) 1,054 (4,365)
Disposals - 2 2 - -
Exchange 120 (13) 107 (76) (491)
adjustments
Change in
maturity of
net debt - - - (279) 279
Loan - - - 151 58
reclassification
At 31 March 2001
(audited) 1,324 (685) 639 (798) (6,219)
Cash flow 1,019 106 1,125 1,290 (4,410)
Acquisitions
(excluding
cash and - - - (574) (2,063)
overdrafts)
Exchange 450 (130) 320 (306) (3,183)
adjustments
Change in
maturity of
net debt - - - (1,484) 1,484
Amortisation of
loan
costs - - - - (25)
At 31 March 2002
(unaudited) 2,793 (709) 2,084 (1,872) (14,416)
Finance Finance
leases leases
due within due after Liquid Net
one year one year Total resources debt
Rm Rm Rm Rm Rm
At 31 March 2000
(audited) (42) (223) (3,613) 780 (1,870)
Cash flow 32 (294) (3,573) (471) (4,477)
Disposals - 13 13 - 15
Exchange (4) - (571) 113 (351)
adjustments
Change in
maturity of
net debt (3) 3 - - -
Loan (151) (58) - - -
reclassification
At 31 March 2001
(audited) (168) (559) (7,744) 422 (6,683)
Cash flow 172 68 (2,880) (188) (1,943)
Acquisitions
(excluding
cash and (4) - (2,641) 115 (2,526)
overdrafts)
Exchange (6) (3) (3,498) 165 (3,013)
adjustments
Change in
maturity of
net debt (149) 149 - - -
Amortisation of
loan
costs - - (25) - (25)
At 31 March 2002
(unaudited) (155) (345) (16,788) 514 (14,190)
Note: Liquid resources comprise short-term deposits with banks, which mature
within 12 months of the date of inception, and amounts invested in
short-dated liquid instruments.
South African Breweries plc
Notes to the Financial Statements (continued) 29
10 Analysis of net debt (continued)
The group`s net debt is denominated in the following currencies:
Denomination
Other
US dollars Rand currencies Total
US$m U$m US$m US$m
Gross (562) (330) (161) (1,053)
borrowings
(including
overdrafts)
Cash at bank 88 31 99 218
and liquid
resources
Net debt at 31 (474) (299) (62) (835)
March 2001
(audited)
Gross (1,094) (156) (285) (1,535)
borrowings
(including
overdrafts)
Cash at bank 124 79 87 290
and liquid
resources
Net debt at 31 (970) (77) (198) (1,245)
March
2002(unaudited)
Denomination
Other
US dollars Rand currencies Total
Rm Rm Rm Rm
Gross (4,496) (2,637) (1,296) (8,429)
borrowings
(including
overdrafts)
Cash at bank 707 247 792 1,746
and liquid
resources
Net debt at 31 (3,789) (2,390) (504) (6,683)
March 2001
(audited)
Gross (12,465) (1,781) (3,251) (17,497)
borrowings
(including
overdrafts)
Cash at bank 1,405 908 994 3,307
and liquid
resources
Net debt at 31 (11,060) (873) (2,257) (14,190)
March
2002(unaudited)
11. Acquisitions and disposals
All of the assets and liabilities relating to acquisitions have been
accounted for on an acquisition basis.
For the year ended 31 March 2002:
The following table represents the assets and liabilities acquired for the
year ended 31 March 2002, excluding the assets and liabilities relating to
the acquisition of the Central America business which are separately
disclosed below:
Book Fair value Fair
value adjustments value
US$m US$m US$m
Tangible fixed 87 7 94
assets
Other investments (4) - (4)
Stock 15 - 15
Debtors 16 (1) 15
Cash and cash 11 - 11
equivalents
Creditors due (59) - (59)
within one year
Creditors due (4) - (4)
after one year
Provisions for (4) (1) (5)
liabilities and
charges
58 5 63
Minority interest (13) - (13)
Net assets 45 5 50
Goodwill 96
Consideration 146
Book Fair value Fair
value adjustments value
Rm Rm Rm
Tangible fixed 849 65 914
assets
Other investments (41) - (41)
Stock 153 (4) 149
Debtors 153 (9) 144
Cash and cash 105 - 105
equivalents
Creditors due (576) 2 (574)
within one year
Creditors due (28) (2) (30)
after one year
Provisions for (37) (11) (48)
liabilities and
charges
578 41 619
Minority interest (130) - (130)
Net assets 448 41 489
Goodwill 933
Consideration 1,422
In accordance with the group`s policy, the goodwill of US$96 million (R933
million) arising on consolidation has been stated in the group`s balance
sheet as an intangible asset.
Total consideration is comprised as follows:
US$m Rm
Cash consideration 145 1,412
Deferred consideration 1 10
creditor raised
Consideration per the 146 1,422
above fair value table
South African Breweries plc
Notes to the Financial Statements (continued) 30
11. Acquisitions and disposals (continued)
Adjustments to align accounting policies and fair value adjustments comprise
the following:
US$m Rm
Adjustments to align
accounting policies
Tangible fixed assets 7 65
(1)
Stock (2) - (4)
Debtors(3) (1) (9)
Creditors due within one - 2
year (4)
Creditors due after one - (2)
year (5)
Provisions for (1) (11)
liabilities and charges
(6)
5 41
The principal fair value adjustments may be explained as:
(1) land and buildings were revalued on acquisition. Plant and machinery
were revalued on acquisition to the lower of
depreciated replacement cost or value in use. Leased vehicles were
capitalised in accordance with group policy;
(2) stock was revalued at acquisition to original cost;
(3) bad debt provision was increased and taxation balance reallocated to
creditors;
(4) undisclosed liabilities were raised and taxation balance reallocated
from debtors;
(5) liability relating to leased vehicles raised in accordance with group
policy; and
(6) undisclosed provision for potential taxation liabilities raised.
The principal acquisitions made by SAB include the following:
A 20% equity stake in the Castel group (CBB) in exchange for a 38% stake in
SABI Africa by way of a share exchange which became effective on 1 April
2001. A shareholders` agreement governs the strategic alliance arrangements
between the parties.
On 28 June 2001, SAB India Limited acquired a 76% controlling interest in
Mysore Breweries Limited (MBL) in India. At the time of acquisition MBL had
a 60% interest in Pals Distillers Limited. This was then increased to a 95%
interest.
A further 54.6% interest in Nile Breweries of Uganda bringing SAB`s stake to
94.6%. Consequently Nile Breweries is now consolidated as opposed to equity
accounted.
In December 2000 the Polish state failed to exercise its put option over its
shareholding in Kompania Piwowarska. In July 2001, the state then sold these
shares to EAC and SAB, increasing our share by 4%.
SABI Europe acquired a controlling interest of 83.7% in Bere Timisoreana SA
of Romania from a vendor consortium on 7 August 2001. This was increased in
March 2002 to 95.6%.
An agreement was signed, on 1 November 2001, with The Coca-Cola Export
Corporation to purchase a 45% shareholding in Coca-Cola Bottling Luanda
(CCBL). This investment along with existing management agreement gave SABI
Africa an effective controlling stake in CCBL.
SAB acquired, through its subsidiary SAB India Limited, a 53% controlling
interest in Rochees Breweries Limited, a company listed on a number of stock
exchanges in India, including the Bombay Stock Exchange on 7 November 2001.
After listing CDM on the Mozambiquan Stock Exchange on 27 December 2001, SAB
acquired an additional 13.5% interest, thus increasing its investment to
78.5%.
On 12 February 2002 SABI Africa announced that its Zambian subsidiary,
Zambian Breweries plc, listed on the Lusaka Stock Exchange, had acquired the
entire issued share capital of the Coca-Cola bottler, Zambia Bottlers
Limited, from a vendor consortium including The Coca-Cola Export
Corporation.
South African Breweries plc
Notes to the Financial Statements (continued) 31
11. Acquisitions and disposals (continued)
Central America
On 28 November 2001, SAB plc together with Central American Beverage
Corporation, formed Bevco in which SAB plc has a 58.4% interest. Bevco owns
interests in Honduras and El Salvador. The fair values of the assets and
liabilities acquired, which are considered to be provisional as a number of
matters are still under consideration, were as follows:
Book Fair value Provisional
value adjustments fair value
US$m US$m US$m
Tangible fixed 241 (14) 227
assets
Other investments - - -
Stock 58 (11) 47
Debtors 127 (9) 118
Cash and cash 24 1 25
equivalents
Creditors due (136) (12) (148)
within one year
Creditors due (209) - (209)
after one year
Provisions for (7) (8) (15)
liabilities and
charges
98 (53) 45
Minority interest (4) - (4)
Net assets 94 (53) 41
Goodwill 930
Consideration 971
Book Fair value Provisional
value adjustments fair value
Rm Rm Rm
Tangible fixed 2,335 (134) 2,201
assets
Other investments 4 1 5
Stock 561 (103) 458
Debtors 1,237 (88) 1,149
Cash and cash 234 7 241
equivalents
Creditors due (1,322) (117) (1,439)
within one year
Creditors due (2,029) (4) (2,033)
after one year
Provisions for (70) (74) (144)
liabilities and
charges
950 (512) 438
Minority interest (42) - (42)
Net assets 908 (512) 396
Goodwill 9,031
Consideration 9,427
In accordance with the group`s accounting policy, the goodwill of US$930
million (R9,031 million) arising on consolidation has been stated in the
group`s balance sheet as an intangible asset.
Total consideration is comprised as follows:
US$m Rm
Cash consideration 547 5,313
Trading balances with 24 230
Dole Inc. set off
Issue of shares in Bevco 400 3,884
to partner
Consideration per the 971 9,427
above fair value table
Adjustments to align accounting policies and fair value adjustments comprise
the following:
Adjustments to align
accounting policies
Tangible fixed assets (1) (13)
(1)
Stock (2) (3) (26)
Debtors (3) 1 9
Creditors due after one - (4)
year (4)
Provisions for (8) (78)
liabilities and charges
(5)
Other adjustments
Tangible fixed assets (13) (121)
(1)
Other investments - 1
Stock (2) (8) (77)
Debtors (3) (10) (97)
Cash and cash 1 7
equivalents (7)
Creditors due within one (12) (117)
year (8)
Provisions for - 4
liabilities and charges
(5)
(53) (512)
The principal fair value adjustments may be explained as:
(1) surplus, obsolete and missing assets were written down to their net
realisable value or value in use. Existing revaluations in
respect of tangible fixed assets were reversed. Assets held under
finance leases were capitalised in accordance with group
policy. Depreciation lives were brought into harmony with group
policies;
(2) stock was revalued on acquisition to net realisable value and previously
capitalised maintenance costs were written off to
comply with UK GAAP;
(3) deferred tax assets recognised. Recognition of appropriate provisions
for bad and doubtful debts. Write off of prepayments
which should have been expensed. Capitalised renovation costs (deferred
costs) written off to comply with UK GAAP;
(4) recognition of obligations in respect of finance lease and
reclassification of current portion of long term loans;
(5) recognition of provisions for deferred tax in accordance with FRS19 and
constructive labour severance obligations;
(6) reclassification of land not used in business from tangible fixed assets
and write off of investments in process of liquidation;
(7) foreign currencies held were restated to November 2001 exchange rates
and obligations in respect of dividend payable was
grossed up; and
(8) recognition of undisclosed liabilities and accruals and reclassification
of long term liabilities.
South African Breweries plc
Notes to the Financial Statements (continued) 32
11. Acquisitions and disposals (continued)
Reconciliation of cash consideration to cash paid per the cash flow
statement
US$m Rm
Cash consideration for 547 5,313
Central America
Cash consideration for 145 1,412
rest of the group
Settlement of deferred 12 116
consideration in respect
of Polish put option
704 6,841
Purchase of subsidiary 672 6,524
undertakings per cash
flow statement
Purchase of shares from 32 317
minorities per cash flow
statement
704 6,841
12. Post-balance sheet events
Africa
On 14 May 2002 the group announced a restructure of its East African
interests.
North America
On 30 May 2002 the group announced the acquisition of 100% of Miller Brewing
Company in the USA for an implied enterprise value of US$4,993 million, to
be satisfied in new shares and existing debt.
Full details can be found in the two announcements.
33
SUPPLEMENTARY
INFORMATION (US$)
Half yearly reporting
Profit and Loss Accounts
Cash Flow Statements
South African Breweries plc
Second six months Profit and Loss Accounts
For the period ended 31 March 34
2002 2001
Unaudited Unaudited
US$m US$m
Turnover (including 2,188 2,078
share of associates`
turnover)
Less: share of (330) (273)
associates` turnover
Group turnover 1,858 1,805
Net operating costs (1,545) (1,465)
Group operating profit 313 340
Share of operating 43 26
profit of associates
Profit on ordinary 356 366
activities before
interest and taxation
Net interest payable (52) (30)
Group (45) (23)
Associates (7) (7)
Profit on ordinary 304 336
activities before
taxation
Taxation on profit on (117) (104)
ordinary activities
Profit on ordinary 187 232
activities after
taxation
Equity minority (55) (52)
interests
Profit for the financial 132 180
period
South African Breweries plc
Second six months Cash Flow Statements
For the period ended 31 March 35
2002 2001
Unaudited Unaudited
US$m US$m
Net cash inflow from 509 399
operating activities
Dividends received from 7 12
associates
Returns on investments
and servicing of finance
Interest received 16 17
Interest paid (66) (46)
Interest element of - (2)
finance lease rental
payments
Dividends received from - 1
other investments
Dividends paid to (25) (27)
minority interests
Net cash outflow from (75) (57)
returns on investments
and servicing of finance
Taxation paid (82) (73)
Capital expenditure and
financial investments
Purchase of tangible (133) (155)
fixed assets
Sale of tangible fixed 9 10
assets
Purchase of investments 4 (9)
Sale of investments (1) 18
Net cash outflow for (121) (136)
capital expenditure and
financial investments
Acquisitions and
disposals
Purchase of subsidiary (590) (4)
undertakings
Sale of subsidiary - 1
undertakings
Net cash acquired with 13 -
subsidiary undertakings
Purchase of shares from (17) (404)
minorities
Purchase of shares in (49) 12
associates
Net funding to (2) (34)
associates
Sale of associate - (3)
Net cash outflow for (645) (432)
acquisitions and
disposals
Dividends paid to (45) (45)
ordinary shareholders
Management of liquid
resources
Sale of short-term 259 137
liquid instruments
Cash withdrawn from 4 -
short-term deposits
Net cash inflow from 263 137
management of liquid
resources
Financing
Issue of shares 398 2
Issue of shares to - 1
minorities
New loans raised 78 333
Repayment of loans (229) (30)
Net cash inflow from 247 306
financing
Increase in cash in the 58 111
period
South African Breweries plc
ADMINISTRATION 36
South African Breweries 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.sabplc.com
Investor Relations
amillersalzman@sabplc.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 Investor Services Limited
11 Diagonal Street, Johannesburg
PO Box 1053
Johannesburg 2000
South Africa
Telefax +27-11-370-5487
Telephone +27-11-370-5100
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.bankofny.com/adr
Toll free 1-888-269-2377 (USA & Canada)
Date: 30/05/2002 10:34:00 AM Produced by the SENS Department
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