26 June 2009
Annual Financial Report
SABMiller plc has today submitted copies of the 2009 Annual Report and Accounts, Notice of the 2009 Annual General Meeting, Shareholder Proxy Form (UK) and proposed new Articles of Association to the Financial Services Authority. These will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at:
Financial Services Authority
25 The North Colonnade
The Annual Report and Notice of Annual General Meeting are also available on the Company's website www.sabmiller.com
At the Annual General Meeting on 31 July 2009 it is proposed that the Company adopts new Articles of Association with effect from 1 October 2009. A summary of the material differences between the current articles of association and the proposed new articles of association is set out in the Notice of the Annual General Meeting. The proposed new Articles of Association are available for inspection during normal business hours at the offices of the Company's solicitors, Lovells LLP, Atlantic House, 50 Holborn Viaduct, London EC1A 2FG.
A condensed set of SABMiller's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in SABMiller's preliminary results announcement released on 14 May 2009. That information, together with the information set out below, which is extracted from the 2009 Annual Report, constitute the material required by Disclosure and Transparency Rule 6.3.5 which is required to be communicated to the media in unedited full text through a Regulatory Information Service. This announcement is not a substitute for reading the full 2009 Annual Report. Page numbers and cross-references in the extracted information below refer to references in the 2009 Annual Report.
PRINCIPAL RISKS AND UNCERTAINTIES (page 10)
The principal risks facing the group, which have been considered by the board, are detailed below. The group's well developed risk management process is detailed in the Corporate Governance section and our financial risks are discussed in the Chief Financial Officer's review and in note 22 to the consolidated financial statements.
The global brewing industry is expected to continue to consolidate. Participation in industry consolidation provides opportunities to enter growth markets, and to create value from scale benefits including applying the group's best operating practices. There is a risk that failure to participate in attractive value-adding transactions may inhibit our ability to grow and exploit scale benefits. There is also a risk that expected benefits from participating in consolidation and integrating acquisitions may not be captured or may be inadequate, or that we may not fully leverage our scale across business operations.
■ Our existing portfolio of businesses which spans six continents gives the group access to growth markets and already provides scale benefits.
■ Potential transactions are subject to rigorous analysis to assess potential to create value.
■ Application of proven integration processes and procedures are applied to deliver expected returns.
■ Programmes to leverage scale, including in areas such as procurement, are continuously being enhanced.
Our expertise in marketing, together with our strong and growing brand portfolios, position us well to benefit from changing consumer preferences in both developed and developing markets. However, markets continue to evolve and competitor activity is increasing. Should the group fail to ensure the relevance and attractiveness of its brands, and continuously improve its marketing and related sales capability, there is the risk that opportunities for profitable growth may not be realised.
■ Ongoing focus on building our marketing and sales capabilities through continued roll-out and enhancement of the Marketing Way.
■ Continually ensuring that our brand equities are strong and fresh through compelling marketing programmes and relevant innovation.
■ Consistent evaluation of our brand portfolios in every market ensuring that they adequately cover current and future growth opportunities.
The group now operates on six continents and it is essential to develop and retain a global management capability. Our global growth potential could be jeopardised should we fail to develop and maintain a sufficient cadre of talented management or to capture shared learnings and leverage expertise through effective management practices.
■ Well developed global strategic people resourcing and talent management processes.
■ A strong culture of accountability, empowerment and personal development.
■ Standardisation of key processes and best practices across the group through the roll out of the SABMiller Ways.
In many countries, debates continue over the need for regulatory constraints and restrictions on alcohol products, taxes and duties. There is a risk that regulatory authorities when making impositions on beer do not recognise the positive contribution of our businesses, and effective ways of addressing health and social concerns. In affected countries, our ability to grow profitably and contribute to our local communities could be adversely affected.
■ Rigorous adherence to the principle of self regulation backed by appropriate policies and management review.
■ Engagement with government and thought leaders on alcohol-related issues.
■ Investment to expand positively the economic impact of our businesses in local communities in partnership with governments and NGOs.
The supply of, and demand for, certain brewing and packaging raw
materials have been out of balance during recent years which has
led to supply shortages and price volatility of key raw material inputs. Supply pressures have now eased and prices have fallen, but should the group fail to ensure an adequate supply of brewing and packaging raw materials at competitive prices, there is the risk that margins could fall.
■ Contractual agreements with suppliers covering multiple time horizons, combined with an active hedging programme.
■ Programmes to support development of local sourcing for certain key commodities, such as barley in Africa, India and Latin America.
The global economy is facing a widespread recession with GDP projected to fall in 2009. Consumer demand has softened in many countries in which we operate, and in some of these countries currency weakness has exacerbated the reduction. The availability of funding in the capital markets is less predictable and more expensive. We are responding to the changed conditions, but given the uncertainties in the global economic outlook, there is a risk that our plans and responses may not be adequate.
■ Preparation of contingency plans based on various scenarios.
■ Actions to restructure operations in certain countries to reflect the current and expected deterioration in local economic conditions.
■ Maintaining and extending our local industry leadership positions through appropriate investments in our brands, a focus on local execution and development of commercial capability.
■ Increased focus on cash flow management.
RELATED PARTY TRANSACTIONS
The following Related Party Transaction is disclosed on page 48 of the Directors' Report.
On 13 May 2009, the company agreed to acquire the outstanding 28.1% minority interest in the company's Polish subsidiary, Kompania Piwowarska S.A., from Kulczyk Holding S.A. in exchange for 60 million new ordinary shares in the company. The acquisition was completed on 29 May 2009, and Kulczyk Holding S.A. now holds 3.82% of the company's enlarged issued ordinary share capital (excluding treasury shares). Based upon SABMiller's closing share price on Wednesday, 13 May 2009, of £12.20 per share and an exchange rate of £1=US$1.52, the value of the consideration for the transaction was US$1,110 million. Kulczyk Holding S.A. was a related party of SABMiller because it is a member of a group of companies connected to Dr Jan Kulczyk, who at the time the transaction was entered into was a non-executive director and member of the supervisory board of Kompania Piwowarska S.A.
Note 32 to the consolidated financial statements on page 138 details the following related party transactions.
32. Related party transactions
a. Parties with significant influence over the group: Altria Group, Inc (Altria) and Santo
Domingo Group (SDG)
During the three months ended 30 June 2008, the Miller Brewing Company received various services from Altria, which holds 28.5% of the group, including insurance claims processing, leasehold accommodation and other administrative services, with an aggregate cost of US$nil (year ended 31 March 2008: US$0.1 million), of which US$nil (2008: US$nil) was outstanding at 31 March 2009.
The Santo Domingo Group (SDG) is considered to be a related party of the group by virtue of its 15% equity shareholding in SABMiller plc and of its power to appoint members of the board of directors. In the current year provisions for impairment of US$nil (2008: US$1.3 million) were recorded against receivables owing from companies controlled by the SDG. During the year, the group made a donation of US$69 million to the Fundacion Mario Santo Domingo based in Colombia (2008: US$8 million). At 31 March 2009, US$nil (2008: US$nil) was owing to the SDG.
Bavaria SA is jointly and severally liable with Valorem SA (part of the SDG) for the pension obligations of Avianca SA (a former part of the SDG which was sold by the SDG in 2004). The maximum obligation is for US$150 million which corresponds to the initial actuarial value of the obligation. On 30 December 2008, Valorem discharged the obligations via a trust structured with an insurance company that will take responsibility for the pensions of Avianca land personnel. As a consequence, the promissory note and related Bavaria guarantee are in the process of being cancelled and Bavaria will have to cancel certain pledges over shares in Valorem companies.
b. Associates and joint ventures
The MillerCoors joint venture is deemed to be a related party from 1 July 2008. Transactions with the MillerCoors joint venture include the sale of hops and lager to and the purchase of lager from MillerCoors. MillerCoors have also entered into a distribution agreement with a group company and carried out contract brewing on behalf of group companies. Further details relating to transactions with MillerCoors are included within the analysis of transactions with joint ventures below.
Purchases from associates1
Purchases from joint ventures2
Sales to associates3
Sales to joint ventures4
Dividends received from associates5
Dividends received from joint ventures6
Receipt from sale of distribution rights9
1 The group purchased canned Coca-Cola products for resale from Coca-Cola Canners of Southern Africa (Pty) Ltd (Coca-Cola Canners) and purchased inventory from Distell Group Ltd and Associated Food Processors (Pty) Ltd in South Africa and Metalforma, SA, Industria Nacional de Plasticos, SA and Envases del Istmo, SA in Panama.
2 The group purchased lager from MillerCoors.
3 The group made sales of lager to Tsogo Sun Holdings (Pty) Ltd (Tsogo Sun), Madedeni Beer Wholesaler (Pty) Ltd, Empresa Cervejas De N'Gola SARL and Société des Brasseries et Glacières Internationales/Brasseries Internationales Holding Ltd (Castel).
4 The group made sales to MillerCoors and Pacific Beverages (Pty) Ltd.
5 The group received dividends from Société des Brasseries et Glacières Internationales and Brasseries Internationales Holding Ltd (Castel) of US$39 million (2008: US$27 million), Kenya Breweries Ltd (Kenya) US$15 million (2008: US$15 million), Coca-Cola Canners US$4 million (2008: US$4 million), Distell Group Ltd US$17 million (2008: US$17 million), Tsogo Sun US$73 million (2008: US$28 million) and Grolsch (UK) Ltd of US$3 million (2008: US$nil).
6 The group received dividends from MillerCoors.
7 The group received royalties from MillerCoors.
8 The group paid management fees to MillerCoors.
9 The group sold distribution rights to MillerCoors.
Amounts owed by associates1
Amounts owed by joint ventures2
Amounts owed to associates3
Amounts owed to joint ventures4
1 Amounts owed by Grolsch (UK) Ltd and Empresa Cervejas De N'Gola SARL.
2 Amounts owed by MillerCoors.
3 Amounts owed to Coca-Cola Canners (Pty) Ltd.
4 Amounts owed to MillerCoors.
c. Transactions with key management
The group has a related party relationship with the directors of the group and members of the excom as key management. At 31 March 2009, there are 23 members of key management. Key management compensation is provided in note 6c.
DIRECTORS' RESPONSIBILITY STATEMENT IN RESPECT OF THE GROUP CONSOLIDATED FINANCIAL STATEMENTS (page 66)
The directors are responsible for preparing the group consolidated financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare consolidated financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The group financial statements are required by law to give a true and fair view of the state of affairs of the group and of the profit or loss of the group for that year.
In preparing those financial statements, the directors are required to:
■ select suitable accounting policies and then apply them consistently;
■ make judgements and estimates that are reasonable and prudent;
■ state that the financial statements comply with IFRSs as adopted by the European Union; and
■ prepare the group financial statements on the going concern basis, unless it is inappropriate to presume that the group will continue in business, in which case there should be supporting assumptions or qualifications as necessary.
The directors confirm that they have complied with the above requirements in preparing the financial statements.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the group and to enable them to ensure that the group consolidated financial statements comply with the Companies Act 1985 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Each of the directors, whose names and functions are listed in the Governance section of the Annual Report (with the exception of Dr Moyo, who was appointed to the board after the approval of these group consolidated financial statements), confirms that, to the best of their knowledge:
■ the group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the group; and
■ the directors' report contained in the Governance section of the Annual Report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that it faces.
In addition, the Companies Act 1985 requires directors to provide the group's auditors with every opportunity to take whatever steps and undertake whatever inspections the auditors consider to be appropriate for the purpose of enabling them to give their audit report. Each of the directors (with the exception of Dr Moyo who was appointed to the board after the approval of these financial statements), having made appropriate enquiries, confirms that:
■ so far as the director is aware, there is no relevant audit information of which the group's auditors are unaware; and
■ each director has taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the group's auditors are aware of that information.
The directors have reviewed the group's budget and cash flow forecasts. On the basis of this review, and in the light of the current financial position and existing borrowing facilities, the directors are satisfied that SABMiller plc is a going concern and have continued to adopt the going concern basis in preparing the financial statements.
A copy of the financial statements of the group is placed on the company's website. The directors are responsible for the maintenance and integrity of statutory and audited information on the company's website. Information published on the internet is accessible in many countries with different legal requirements. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
General Counsel and Group Company Secretary
This announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire ordinary shares in the capital of SABMiller plc (the "Company") or any other securities of the Company in any jurisdiction or an inducement to enter into investment activity.
This announcement includes 'forward-looking statements' with respect to certain of SABMiller plc's plans, current goals and expectations relating to its future financial condition, performance and results. These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Company's products and services) are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this document. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The past business and financial performance of SABMiller plc is not to be relied on as an indication of its future performance.