SABMiller plc JSEALPHA CODE: SAB ISIN CODE: SOSAB ISIN CODE: GB0004835483
23 June 2015
Annual Financial Report
SABMiller plc has today submitted a copy of the 2015 Annual Report and Accounts, Notice of the 2015 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, 23 July 2015 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 13 May 2015. That information, together with the information set out below, which is extracted from the 2015 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 2015 Annual Report. Page numbers and cross-references in the extracted information below refer to page numbers and sections in the 2015 Annual Report.
PRINCIPAL RISKS AND UNCERTAINTIES (page 16 & 17)
Principal risks Focused on managing our risks The principal risks facing the group and considered by the board and the executive committee 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 finance review on page 45 and in note 21 to the consolidated financial statements.
Principal risk Context Specific risks we Possible impact Mitigation Associated strategic face priorities Consistent Consumer tastes • Failing to Topline growth • Continuous evaluation of • Drive superior sustainable and behaviours develop and progression does our brand portfolios in every topline growth. revenue growth are constantly ensure the not meet internal market to ensure that they • Actively shape our evolving, and at strength and and external target current and future global mix to drive a an increasingly relevance of our expectations. opportunities for profitable superior growth rapid rate. brands with growth. profile. consumers, Market positions • Developing a beer category • Build a globally Competition in shoppers and come under structure that enables us to integrated the beverage customers. pressure, market grow both the value of the organisation to industry is • Failing to opportunities are beer category, and our share optimise resources, expanding and continue to missed and lower of it. win in market and becoming more improve our profitability. • Ensuring we have deep reduce costs. fragmented, commercial understanding of changing complex and capabilities to consumer and industry sophisticated. deliver brand dynamics in key markets, propositions that enabling us to respond respond appropriately to appropriately to opportunities and issues changing which may impact our consumer business performance. preferences. • Building our brand equities through innovation and compelling marketing programmes; creating a pipeline of opportunities to support our premium offering. • Focusing on monitoring and benchmarking commercial performance and developing the critical commercial capabilities that are required in order to win in local markets. Industry The global • Failing to Lower growth rate, • Continued competitor and • Actively shape our consolidation brewing and participate in the profitability and target analysis to consider global mix to drive a beverages right financial returns. strategic and financial superior growth industry is opportunities. implications of potential profile. expected to • Paying too Failure to maintain transactions. • Drive superior continue to much to acquire a our competitive • Potential transactions are topline growth. consolidate. business. position relative to subject to continual and There will • Not our peers. rigorous analysis. Only continue to be implementing opportunities with potential opportunities to integration plans to create value are pursued. enter attractive successfully. • Proven integration growth markets, • Failing to processes, procedures and to realise synergy identify and practices are applied to benefits from develop the ensure delivery of expected integration and to capabilities returns. leverage our necessary to • Activities to deliver global scale. facilitate market synergies and leverage scale and category are in place, monitored entry. closely and continuously enhanced. • Development of non- traditional capabilities to enter and grow profitably in new markets. Regulatory With an • Unreasonable Lower growth, • Rigorous adherence to the • Drive superior changes increasingly high regulation places profitability and principle of self-regulation topline growth. profile debate increasing reduced backed by appropriate • Actively shape our over alcohol restrictions on the contribution to local policies and management global mix to drive a consumption in availability and communities in review. superior growth many markets, marketing of some countries. • Building and maintaining profile. the alcohol beer. licence to trade capabilities • Build a globally industry is coming • Tax and excise Loss of consumer across the group to facilitate integrated under more changes cause goodwill and public sound risk analysis and organisation to pressure from pressure on sentiment. mitigation plan optimise resources, national and pricing. development. win in market and international • Anti-alcohol • Constructive engagement reduce costs. regulators, NGOs advocates erode with government and all and local industry external stakeholders on governments. reputation. 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. • Driving our Prosper shared imperatives to make a sustainable and measurable difference to the communities and ecosystems in which we operate. Management We believe that • Failing to Failure to deliver • Building the group’s • Build a globally capability our people are identify, develop the group’s strategic leadership talent pipeline integrated our enduring and retain an and financial through our Global Talent organisation to advantage and appropriate ambitions. Management model, optimise resources, therefore it is pipeline of strategic people resourcing win in market and essential that we talented Lower long-term and long-term talent reduce costs. develop and managers for the profitable growth. pipeline. • Drive superior maintain global present and • Sustaining a strong culture topline growth. management future needs of of accountability, capability. the group. empowerment and personal development.
Delivering We continue to • Failing to derive Increased • Senior leadership closely • Build a globally business execute major the expected programme costs, involved in monitoring integrated transformation efficiency benefits from the lower benefits than progress and in making key organisation to programmes that projects currently planned, delays in decisions. optimise resources, will simplify under way. benefit realisation • Mechanisms in place to win in market and processes, reduce • Failing to and business track both costs and reduce costs. costs and allow contain disruption. benefits. • Actively shape our local programme costs • Rigorous programme global mix to drive a management or ensure Reputational management and superior growth teams to focus execution is in damage and governance processes profile. more closely on line with planned reduced (including independent their markets. timelines. competitive programme assurance) with advantage in the dedicated resources and medium term. clear accountability. Information and There is • Disruption of Loss of competitive • Continued development, • Build a globally cyber security increasing information advantage and articulation and integrated sophistication of technology (IT) reputational implementation of organisation to cyber-attack systems and a loss damage through the information security policies. optimise resources, capabilities. of valuable and publicised loss of • Increased investment to win in market and Business’s sensitive key operating improve information security reduce costs. increasing information and systems and awareness, intelligence and demand for assets. confidential data. implementation of sound consumers’ and • Significant security processes. customers’ business Adverse effect of • Building and enhancing personal data disruption. profitability, cash processes to deal with IT means legislators • Failing to flows or financial security incidents. rightly continue comply with position. to impose tighter tightening data management legislation poses a control. threat of significant financial penalties or restrictions. Acquisition A key aspect of • Failing to deliver Lower growth rates, • Embedding of the • Actively shape our of CUB the CUB integration profitability and SABMiller Ways (its global mix to drive a acquisition was objectives and asset values. processes, systems and superior growth the delivery of a commercial and tools) throughout the CUB profile. turnaround plan operational Damage to the business. • Build a globally with specific and excellence targets group’s reputation • Commercial efforts in integrated communicated communicated as for strong market to effectively deliver organisation to financial value part of the commercial volume, value and market optimise resources, creation. turnaround plan. capability and for share gains. win in market and • Failing to making value • Continued monitoring of reduce costs. achieve the creating progress to complete the synergy and cost acquisitions. integration objectives, saving including frequent and commitments of regular tracking of key the transaction. performance indicators.
RELATED PARTY TRANSACTIONS
Note 31 to the consolidated financial statements on page 171 details the following related party transactions.
31. 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. 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. There were no transactions with SDG during the year ended 31 March 2015. During the year ended 31 March 2014 Bavaria SA and its subsidiaries made donations of US$14 million to the Fundación Mario Santo Domingo, pursuant to the contractual arrangements entered into at the time of the Bavaria transaction in 2005, under which it was agreed that the proceeds of the sale of surplus non-operating property assets owned by Bavaria SA and its subsidiaries would be donated to various charities, including the Fundación Mario Santo Domingo. There were no balances owing to the SDG at 31 March 2015 and 31 March 2014. b. Associates and joint ventures
Details relating to transactions with associates and joint ventures are analysed below.
2015 2014 US$m US$m Purchases from associates1 (173) (168) Purchases from joint ventures2 (88) (93) Sales to associates3 9 9 Sales to joint ventures4 21 23 Dividends receivable from associates5 423 224 Dividends received from joint ventures6 976 903 Royalties received from associates7 18 25 Royalties received from joint ventures8 1 2 Management fees, guarantee fees and other recoveries received from associates9 14 11 Marketing fees paid to associates10 (1) - Management fees paid to joint ventures11 (2) (2)
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), Associated Fruit Processors (Pty) Ltd (AFP); and Delta Corporation (Delta); and accommodation from Tsogo Sun. 2 The group purchased lager from MillerCoors LLC (MillerCoors). 3 The group made sales of lager to Tsogo Sun, Delta, Anadolu Efes Biracılık ve Malt Sanayii AŞ (Anadolu Efes), International Trade and Supply Ltd (ITSL) and Distell. 4 The group made sales to MillerCoors. 5 The group had dividends receivable from China Resources Snow Breweries Ltd (CR Snow) of US$228 million (2014: US$nil), Castel of US$108 million (2014: US$97 million), Coca-Cola Canners of US$5 million (2014: US$5 million), Distell of US$18 million (2014: US$20 million), Tsogo Sun of US$24 million (2014: US$34 million), Delta of US$18 million (2014: US$17 million), International Trade and Supply Limited of US$21 million (2014: US$18 million), Grolsch (UK) Ltd of US$1 million (2014: US$1 million) and Anadolu Efes US$nil (2014: US$32 million). 6 The group received dividends from MillerCoors. 7 The group received royalties from Delta and Anadolu Efes. 8 The group received royalties from MillerCoors. 9 The group received management fees from Delta, consulting fees from Anadolu Efes and other recoveries from AFP. 10 The group paid marketing fees to ITSL. 11 The group paid management fees to MillerCoors.
At 31 March 2015 2014 US$m US$m Amounts owed by associates – trade1 28 42 Amounts owed by joint ventures2 4 5 Amounts owed to associates3 (38) (39) Amounts owed to joint ventures4 (18) (16)
1 Amounts owed by AFP, Delta, Coca-Cola Canners, Castel, ITSL, and Anadolu Efes. 2 Amounts owed by MillerCoors. 3 Amounts owed to AFP and 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. Key management compensation is provided in note 6c.
DIRECTORS’ RESPONSIBILITY STATEMENT IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTS (page 100)
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; and • 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 52 and 53 of this annual report, confirm that, to the best of his or her 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.
Stephen Shapiro Group Company Secretary
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
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 in which SABMiller operates; increased competition and consolidation in 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.