SABMiller 2004 Annual Report

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    SABMiller plc

    AnnualReport 2004

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    More top 50beer brands than

    Occupying

    a top threeposition

    in more

    than 30countries

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    Brewing

    operations

    in over 40countries

    150beerbrands owned

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    SABMillerA story of growth From its South African origins,SABMiller has become one of the worlds largest brewing companies.

    With operations in over 40 countries, it has more beer brands in the

    worlds top 50 than any other brewer and it ranks among the top three

    brewers in more than 30 countries. Every minute of every day, consumers

    the world over drink an average of over 46,000 pints of SABMiller beer.

    SABMiller is passionate about brewing. From local beers steeped

    in tradition to brands that are recognised around the world, the companys

    ambition is always to offer an outstanding product. Its quality is backed

    by some of the most efficient brewing and distribution operations in the

    industry not to mention its long and successful record of market

    research, brand development and superb marketing in all corners of the

    world. Its success also lies in the way it conducts its business with

    respect for partners and employees and a desire to do the best for the

    local community.

    SABMillers history is one of exceptional growth and returns to

    shareholders. With its global footprint, strong portfolio of brands and

    spread of operations in both mature and developing markets, SABMiller

    is well placed to continue its growth.

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    SABMiller plc 1

    Highlights2004 2003

    US$m US$m# % change

    Turnover^ 12,645 8,984 41

    EBITA* 1,893 1,270 49Profit before tax 1,391 770 81Adjusted profit before tax* 1,705 1,107 54Adjusted earnings* 925 581 59Adjusted earnings per share*

    US cents 77.6 54.0 44UK pence (up 31%) 45.8 34.9SA cents (up 7%) 547.6 513.3

    Basic earnings per share (US cents) 54.1 27.5 97Dividends per share (US cents) 30.0 25.0 20Net cash inflow from operating activities 2,292 1,568 46# Includes Miller Brewing Company for nine months.^ 2003 turnover has been restated downward by US$128 million to reflect the adoption of FRS 5 Reporting

    the substance of transactions, application note G revenue recognition.* EBITA and adjusted profit before tax comprise profit before interest and tax (US$1,579 million) and profit

    before tax (US$1,391 million) respectively before goodwill amortisation (US$355 million), and beforeexceptional items (net credit US$41 million see note 5). The calculation of adjusted earnings is given

    in note 11.

    Total lager volumes increase 18.9% to 137.8 million hls,organic growth of 3.7%

    Miller turnaround on track and showing momentum

    Continuing excellent performances in Europe,EBITA* up 39%

    Further good performance from Africa & Asia,EBITA* up 31%

    Strong growth in Beer South Africa, EBITA up 54%

    Balance sheet strength reflects cash generationand successful refinancing

    15,000

    12,000

    9,000

    6,000

    3,000

    01 02 03^ 04

    TurnoverUS$ (million)

    2,000

    1,600

    1,200

    800

    400

    01 02 03 04

    EBITA (pre-exceptional)US$ (million)

    70

    80

    60

    50

    40

    01 02 03 04

    Adjusted EPS US cents

    Restated for deferred tax change in accounting policy.

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    2 SABMiller plc

    Anothermilestone yearFrom our South African origins, weve risen to the top league of theinternational brewing industry by the planned and careful process we outlinedfive years ago. The result is a spread of operations, well balanced betweenfast-growing developing markets and cash-generating developed markets.

    CHAIRMANS STATEMENT

    Dear ShareholderI am delighted to report that the financialyear to 31 March 2004 has been anoutstanding one for your company.Turnover increased by some 41% whileadjusted earnings per share were up by44%. Pleasingly, for the first time, ouradjusted earnings per share showed anincrease in all our major currencies. Inview of this performance, the board hasrecommended an increase in the finaldividend to bring the total for the yearto 30 US cents, a 20% increase. Thedividend, which is covered 2.6 times byadjusted earnings, is at a level that webelieve should grow over time in line withthe trend of any increase in earnings.

    Net cash flow generated in the year

    totalled US$2,292 million from operatingactivities. The balance sheet remainsstrong with gearing at 43.3% this afterUS$576 million of capital expenditure,of which 33% was in new capacity and67% in maintenance expenditure. Duringthe year we launched a successfulUS$2,000 million debt offering.

    It is particularly gratifying that all ourbusinesses did well. In the US, resultsfrom Miller Brewing Company acquiredin 2002 have answered many peoplesscepticism about our ability to restorethe business to financial health. Theturnaround programmes now in placeare already having an effect onperformance, though I should point out

    that were still in the early stages andmuch remains to be done. Our CentralAmerican operation delivered higherearnings, thanks to the actions wevetaken to improve its brand portfolio andenhance its efficiency. There were strongresults from South Africa in both beerand soft drinks, helped by the rise ofthe rand against the dollar. The restof Africa produced an impressiveperformance and we again saw goodgrowth in Europe with Russia doingparticularly well.

    Meanwhile, weve continued tostrengthen our position in new, emergingmarkets by acquiring further operationsin China and by forming a joint venturein India with Shaw Wallace breweries.

    Also during the year, weve developedour European portfolio with theacquisition of Birra Peroni in Italy andgained entry to Morocco and Algeriathrough our joint venture with Castel.

    Five years of progressIts now five years since SAB was listedon the London Stock Exchange. In1999, we had 39 breweries, operatedin 18 countries and sold 48 millionhectolitres of beer and 70 millionhectolitres of beverage overall. Contrastthat with todays figures: 81 breweries;operations in 43 countries on fourcontinents; annual beer sales of138 million hectolitres and total

    beverage sales of 174 million hectolitres.Also over this period, the companysmarket capitalisation has grown from3.4 billion to 6.6 billion, and we haverisen from number 81 in the FTSE 100to number 34 as at market close on20 May, the day of our preliminaryresults announcement. Since our listing,our total shareholder return has beena gratifying 74% compared with negative17% for the FTSE 100 as a whole.

    In 1999, we set out a three-partstrategy for growth improving ourvolumes, margins and cash flow in SouthAfrica; expanding our positions in otherdeveloping markets; and seeking major,value-adding investments in bothdeveloping and established markets.

    Our London listing, as we said at thetime, would enhance the ability ofSAB to take advantage of increasingconsolidation in the international brewingindustry and to compete with otherinternational brewers for developmentopportunities throughout the world.

    Milestones over the five yearsinclude our success in Poland; thepurchase of Pilsner Urquell in theCzech Republic in 1999; our moveinto India in 2000; being the firstinternational brewer to enter CentralAmerica in 2001; forming a pan-Africanalliance with Castel to invest in newAfrican markets in 2001; and, in 2002,acquiring Miller Brewing Company,

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    SABMiller plc 3

    the second largest brewer in the US.More recently, we achieved incrementalexpansion in China and Poland, weacquired Peroni in Italy and formeda new Indian joint venture. In addition,weve grown to become one of theworlds largest Coca-Cola bottlers.

    From our South African origins,weve risen to the top league of theinternational brewing industry by theplanned and careful process we outlinedfive years ago. The result is a spread ofoperations, well balanced between fast-growing developing markets and cash-generating developed markets. In hischief executives review, Graham Mackay

    explains how we now plan to carry thisstrategy into the future.

    Corporate social responsibilityMany of our markets are challengingplaces to work and require greatsensitivity in dealing with partners, localcommunities and employees. Corporatesocial responsibility, or CSR, is thereforeingrained in everything we do. Ourcommitment starts at the top with aboard-level committee responsiblefor our CSR performance. Some1% of pre-tax profits go to help thecommunities in which we operate,through programmes coveringeducation, welfare and entrepreneurship.

    As a brewer, we believe we have aspecial duty to promote the responsibleuse of alcohol. Consumed sensibly,alcoholic beverages can make a positivecontribution to peoples quality of life.We do, however, recognise thatirresponsible consumption can havenegative consequences. To this end,we continue to invest in alcoholeducation and research programmesand recently introduced a strict codeof practice to cover all our marketingand advertising.

    Board and corporate governanceWe are fortunate to have a board of

    the highest quality and integrity with agood balance of skills and experience.Nevertheless, at a time of growing publicscrutiny and developments such as theHiggs Review, we want to be sure wemeet the most exacting s

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