24th Jun 2014 14:45
24 June 2014
SABMiller plc
Annual Financial Report
SABMiller plc has today submitted a copy of the 2014 Annual Report and Accounts, Notice of the 2014 Annual General Meeting and Shareholder Proxy Form (UK) to the National Storage Mechanism and they will shortly be available for inspection at www.hemscott.com/nsm.do.
The Annual Report and Notice of Annual General Meeting are also available on the Company's website www.sabmiller.com
SABMiller plc's Annual General Meeting will be held on Thursday, 24 July 2014 at the InterContinental London Park Lane, One Hamilton Place, Park Lane, London W1J 7QY.
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 22 May 2014. That information, together with the information set out below, which is extracted from the 2014 Annual Report, constitutes the material required by Disclosure and Transparency Rule 6.3.5 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 2014 Annual Report. Page numbers and cross-references in the extracted information below refer to page numbers and sections in the 2014 Annual Report.
PRINCIPAL RISKS AND UNCERTAINTIES (page 18 & 19)
Principal risks
Focused on managing our risks
The principal risks facing the group and considered by the board are detailed below. The group's well-developed risk management process is described in the corporate governance section while financial risks are discussed in the Chief Financial Officer's review on page 39 and in note 21 to the consolidated financial statements.
Principal risk | Context | Specific risks we face | Possible impact | Mitigation | Associated strategic elements |
Industry consolidation | The global brewing and beverages industry is expected to continue to consolidate. There will continue to be opportunities to enter attractive growth markets, to realise synergy benefits from integration and to leverage our global scale. | • Failing to participate in the right opportunities. • Paying too much to acquire a business. • Not implementing integration plans successfully. • Failing to identify and develop the capabilities necessary to facilitate market and category entry. | Lower growth rate, profitability and financial returns. | • Continued competitor and target analysis to consider strategic and financial implications of potential transactions. • Potential transactions are subject to continual and rigorous analysis. Only opportunities with potential to create value are pursued. • Proven integration processes, procedures and practices are applied to ensure delivery of expected returns. • Activities to deliver synergies and leverage scale are in place, monitored closely and continuously enhanced. • Developing non-traditional capabilities to enter and grow profitably in new markets. | • Retaining a broad portfolio of operations. • Creating superior revenue growth and profitability for our investors. |
Change in consumer preferences
| Consumer tastes and behaviours are constantly evolving, and at an increasingly rapid rate. Competition in the beverage industry is expanding and becoming more fragmented, complex and sophisticated. | • Failing to develop and ensure the strength and relevance of our brands with consumers, shoppers and customers. • Failing to continue to improve our commercial capabilities to deliver brand propositions which respond appropriately to changing consumer preferences. | Market positions come under pressure, market opportunities are missed, lower top line growth rates and profitability. | • Ongoing evaluation of our brand portfolios in every market to ensure that they target current and future opportunities for profitable growth. • Developing a beer category structure that enables us to grow both the value of the beer category, and our share of it. • Ensuring we have deep understanding of changing consumer and industry dynamics in key markets, enabling us to respond appropriately to opportunities and issues which may impact our business performance. • Building our brand equities through innovation and compelling marketing programmes; creating a pipeline of opportunities to support our premium offering. • Focus on monitoring and benchmarking commercial performance and developing the critical commercial capabilities that are required in order to win in local markets. | • Offering beers and soft drinks that appeal to local tastes. • Creating superior revenue growth and profitability for our investors. • Producing economies of scale and skill. |
Management capability | We believe that our people are our enduring advantage and therefore it is essential that we develop and maintain global management capability. | • Failing to identify, develop and retain an appropriate pipeline of talented managers for the present and future needs of the group. | Failure to deliver the group's strategic and financial ambitions.
Lower long-term profitable growth. | • Building the group's leadership talent pipeline through our Global Talent Management model, strategic people resourcing and long-term talent pipeline. • Sustaining a strong culture of accountability, empowerment and personal development.
| • Offering beers and soft drinks that appeal to local tastes. • Creating superior revenue growth and profitability for our investors. • Producing economies of scale and skill. |
Regulatory changes | With an increasingly high profile debate over alcohol consumption in many markets, the alcohol industry is coming under more pressure from national and international regulators, NGOs and local governments. | • Regulation places increasing restrictions on the availability and marketing of beer. • Tax and excise changes cause pressure on pricing. • Anti-alcohol advocates erode industry reputation.
| Lower growth, profitability and reduced contribution to local communities in some countries.
Loss of consumer goodwill and public sentiment. | • Rigorous adherence to the principle of self-regulation backed by appropriate policies and management review. • Building licence to trade capabilities across the group to facilitate sound risk analysis and mitigation plan development. • Constructive engagement with government and all external stakeholders on alcohol-related issues. Working collaboratively with them to address the harmful use of alcohol. • Investment to improve the economic and social impact of our businesses in local communities and working in partnership with local governments and NGOs. | • Retaining a broad portfolio of operations. • Offering beers and soft drinks that appeal to local tastes. • Creating real and lasting economic and social benefits in communities. |
Acquisition of Foster's | A key aspect of the Foster's acquisition was the delivery of a turnaround plan with specific and communicated financial value creation. | • Failing to deliver integration objectives and commercial and operational excellence targets communicated as part of the turnaround plan. • Failing to achieve the synergy and cost saving commitments of the transaction. | Lower growth rates and profitability.
Damage to the group's reputation for strong commercial capability and for making value creating acquisitions. | • Embedding of the SABMiller Ways (its processes, systems and tools) throughout the Foster's business. • Commercial efforts in market to effectively deliver volume, value and market share gains. • Continued monitoring of progress against the integration plan, including frequent and regular tracking of key performance indicators. | • Retaining a broad portfolio of operations. • Offering beers and soft drinks that appeal to local tastes. • Creating superior revenue growth and profitability for our investors. • Producing economies of scale and skill. |
Delivering business transformation
| We continue to execute major efficiency programmes that will simplify processes, reduce costs and allow local management teams to focus more closely on their markets. | • Failing to derive the expected benefits from the projects currently under way. • Failing to contain programme costs or ensure execution is in line with planned timelines. | Increased programme costs, delays in benefit realisation, business disruption, reputational damage, reduced competitive advantage in the medium term. | • Senior leadership closely involved in monitoring progress and in making key decisions. • Mechanisms in place to track both costs and benefits. • Rigorous programme management and governance processes with dedicated resources and clear accountability. | • Creating superior revenue growth and profitability for our investors. • Producing economies of scale and skill. |
Information and cyber security | There is increasing sophistication of cyber-attack capabilities. Business's increasing demand for consumers' and customers' personal data means legislators rightly continue to impose tighter data management control. | • Disruption of information technology (IT) systems and a loss of valuable and sensitive information and assets. • Significant business disruption. • Failing to comply with tightening legislation poses a threat of significant financial penalties or restrictions. | Loss of competitive advantage and reputational damage through the publicised loss of key operating systems and confidential data.
Adverse effect of profitability, cash flows or financial position. | • Continued articulation and implementation of information security policies. • Increased investment to improve information security awareness, intelligence and implementation of sound security processes. • Building and enhancing processes to deal with IT security incidents. | • Producing economies of scale and skill. • Creating superior revenue growth and profitability for our investors |
RELATED PARTY TRANSACTIONS
Note 32 to the consolidated financial statements on page 158 details the following related party transactions.
32. Related party transactions
a. Parties with significant influence over the group: Altria Group, Inc (Altria) and the Santo Domingo Group (SDG)
Altria is considered to be a related party of the group by virtue of its 26.8% equity shareholding in SABMiller plc. There were no transactions with Altria during the year.
SDG is considered to be a related party of the group by virtue of its 14.0% equity shareholding in SABMiller plc. During the year Bavaria SA and its subsidiaries made donations of US$14 million (2013: US$nil) to the Fundación Mario Santo Domingo, pursuant to the contractual arrangements entered into at the time of the Bavaria transaction in 2005, under which it was agreed that the proceeds of the sale of surplus non-operating property assets owned by Bavaria SA and its subsidiaries would be donated to various charities, including the Fundación Mario Santo Domingo. At 31 March 2014 US$nil (2013: US$nil) was owing to the SDG.
b. Associates and joint ventures
Details relating to transactions with associates and joint ventures are analysed below.
2014 US$m | 2013 US$m | |
Purchases from associates1 Purchases from joint ventures2 Sales to associates3 Sales to joint ventures4 Dividends receivable from associates5 Dividends received from joint ventures6 Royalties received from associates7 Royalties received from joint ventures8 Management fees, guarantee fees and other recoveries received from associates9 Management fees paid to joint ventures10 Sale of associate to joint venture11 | (168) (93) 9 23 224 903 25 2 11 (2) - | (227) (97) 46 25 113 886 27 2 17 (2) 21 |
1 The group purchased canned Coca-Cola products for resale from Coca-Cola Canners of Southern Africa (Pty) Limited (Coca-Cola Canners); inventory from Distell Group Ltd (Distell) and Associated Fruit Processors (Pty) Ltd (AFP); and accommodation from Tsogo Sun Holdings Ltd (Tsogo Sun), all in South Africa.
2 The group purchased lager from MillerCoors LLC (MillerCoors).
3 The group made sales of lager to Tsogo Sun, Delta Corporation Ltd (Delta), Anadolu Efes Biracilik ve Malt Sanayii AS (Anadolu Efes), and Distell.
4 The group made sales to MillerCoors.
5 The group had dividends receivable from Société des Brasseries et Glacières Internationales SA, Brasseries Internationales Holding Ltd, and Morrocaine d'Investissements et de Services SA (Castel) of US$97 million (2013: US$21 million), Coca-Cola Canners US$5 million (2013: US$11 million), Distell US$20 million (2013: US$21 million), Tsogo Sun US$34 million (2013: US$33 million), Delta US$17 million (2013: US$12 million), International Trade and Supply Limited $18 million (2013: US$14 million), Grolsch (UK) Ltd US$1 million (2013: US$1 million) and Anadolu Efes US$32 million (2013: US$nil).
6 The group received dividends from MillerCoors.
7 The group received royalties from Delta and Anadolu Efes.
8 The group received royalties from MillerCoors.
9 The group received management fees from Delta, guarantee fees from Delta and BIH Brasseries Internationales Holding (Angola) Ltd (BIH Angola), and other recoveries from AFP.
10 The group paid management fees to MillerCoors.
11 In 2013 the group sold its interest in Foster's USA LLC to MillerCoors for cash consideration.
At 31 March | 2014 US$m | 2013 US$m |
Amounts owed by associates - trade1 Amounts owed by joint ventures2 Amounts owed to associates3 Amounts owed to joint ventures4 | 42 5 (39) (16) | 68 5 (150) (14) |
1 Amounts owed by AFP, Delta and Anadolu Efes and BIH Angola.
2 Amounts owed by MillerCoors.
3 Amounts owed to Coca-Cola Canners, Castel and Tsogo Sun. At 31 March 2013 this balance included US$100 million received in compensation for the loan participation deposit relating to the Angolan businesses managed by Castel.
4 Amounts owed to MillerCoors.
Guarantees provided in respect of associates' bank facilities are detailed in note 21.
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 2014 there were 25 (2013: 26) members of key management. Key management compensation is provided in note 6c.
DIRECTORS' RESPONSIBILITY STATEMENT IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTS (page 88)
The directors are responsible for preparing the annual report, the directors' remuneration report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. The directors have prepared the consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law.
Under company law the directors must not approve the consolidated financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company and of the profit or loss of the group for that period.
In preparing those financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the group and parent company financial statements respectively;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the transactions of the company and group and disclose with reasonable accuracy at any time the financial position of the company and group and enable them to ensure that the company and consolidated financial statements and the directors' remuneration report comply with the Companies Act 2006 and, as regards the consolidated financial statements, 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.
A copy of the consolidated and company financial statements is placed on the company's website. The directors are responsible for the maintenance and integrity of the statutory and audited information on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's performance, business model and strategy.
Each of the directors, whose names and functions are listed on pages 46 and 47 of this annual report, confirm that, to the best of their knowledge:
• the consolidated financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, the Companies Act 2006 and Article 4 of the IAS Regulation, give a true and fair view of the assets, liabilities, financial position and profit of the group; and
• the management report contained in this 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.
The directors in office at the date of this report have each confirmed that:
• so far as the director is aware, there is no relevant audit information of which the group's auditors are unaware; and
• he or she has taken all the steps he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the group's auditors are aware of that information.
John Davidson
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 or its subsidiaries or associates in any jurisdiction or an inducement to enter into investment activity.
This announcement is intended to provide information to shareholders. It should not be relied upon by any other party or for any other purpose. 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 announcement. Factors which may cause differences between actual results and those expected or implied by the forward-looking statements include, but are not limited to: material adverse changes in the economic and business conditions in the markets which SABMiller operates; increased competition and consolidation within the global brewing and beverages industry; changes in consumer preferences; changes to the regulatory environment; failure to deliver the integration and cost-saving objectives in relation to the Foster's acquisition; failure to derive the expected benefits from the global efficiency programmes; and fluctuations in foreign currency exchange rates and interest rates. 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.
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