Notes on the Financial Statements
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he South African Breweries Limited is a holding Tcompany invested in and taking management responsibility for a portfolio of businesses, principally engaged in meeting mass market consumer needs mainly in the Southern African region. Beer is the major profit contributor, but an important balance is provided by signifisant interests in other beverages, retailing, hotels and the manufacture of selected consumer goods, together with strategic investments in businesses which complement the mainstream interests. T A Then Charles Glass sold his Castle Lager from V V a wagon to thirsty diggers during the late 19th Century Witwatersrand golds trike, he paved the way for the birth of SAB. Early Randlords persuaded Glass to part with his brewery and with venture capital raised through a London quotation, The South African Breweries Limited was registered in 1895. With the added impetus of a ISE listing in 1897, the new brewing company showed steady growth, buying hotels and other licensed outlets to expand the distribution network. The second stage of SAWs development started in the 1960's with a move into wines and spirits and the moulding of its hotel investments into a regenerated industry. By the 1970's, however, legal constraints made it imperative for SAB to broaden its investment base away from liquor. Due to SAWs affinity with a broad spectrum of consumers, the third stage of SAWs evolution involved the acquisition of significant mass market manufacturing and retailing investments and the inclusion of soft drinks and fruit juices in the Group's range of beverages. The contents arc listed on the inside back cover. verkrygbaar in Afrikaans by die oordragsekretarisse. Financial highlights (j;fJ 1992 1991 increase Group summary (Rand million) Turnover 17699 16122 ]0 Added cash value generated 4454 4 146 7 Profit after taxation 1046 973 7 Attributable earnings 779 711 10 Total assets 11 837 10310 ]5 Market capitalisation 16538 13 094 26 Ordinary share performance (cents) Earnings per share - attributable earnings basis 290 265 ]0 - fully inflation adjusted 269 247 9 - cash equivalent basis 473 422 12 Cash flow per share 350 383 (9) Dividends per share 130 118 10 Net equity per share 1 371 1 168 17 Financial statistics Percent return on revalued equity 21,2 22,7 Financial gearing ratio 0,53 0,48 Seven year COin pound growth per annum (,Yo) 1986/92 1985/91 Shareholders' combined rate of return 41 33 Rate of inflation (Consumer Price Index) IS 15 o EARNINGS PER SHARE IIl1 ADDED CASH VALUE GENEltATlD • DIVIDENDS PER SHARE • DISBURSED AI-.10NG EMPLOVEES cents Ihn 4500 -~ ~ 3 750 " ~ 3000 - 2250 - l- t_ 1500 - 1;- 750 - - o - 86 87 88 89 90 91 92 86 87 88 89 90 91 92 ] Performance highlights SAB Objective: BUSINESS To improve both the shareholders' Seek to achieve a compound PHILOSOPHY income flow and the value of their growth rate in dividends and share investment in a sustainable and price, which over time betters that socially acceptable way. achieved by comparable industrial equity investments. INVESTMENT Objective: POLICY To invest in a focused and balanced To develop four main pillars of portfolio of businesses engaged in activity - beverages, retail, hotels meeting mass market consumer and the manufacture of selected needs. consumer goods. RETURN ON Objective: INVESTMENT To achieve and sustain a return on The average annual rate of return revalued equity capital, on revalued equity should over which exceeds the current cost of time exceed 20%. acquiring that capital, by the maximum margin consistent with defined and acceptable risk parameters. FINANCING Constraint: POLICY To manage the business rigidly The ratio of interest bearing debt to within predetermined financial total shareholders' funds will not ratios, be permitted to exceed 0,6: 1. which are deemed to provide adequate financial buffers, Objective: to meet all obligations under the Seek to cover taxed net financing most adverse foreseeable costs not less than six times by circumstances. taxed operating profits. DIVIDEND Practice: POLICY To retain sufficient earnings Dividend distribution: generated in terms of the stated approximately 4S{J1J of earnings. return objective, to sustain planned net asset growth, within the stated gearing constraint, while seeking to maintain regular and improving dividend payments. 2 Accounting philosophy Achievement: The compound growth rate over The Group is dedicated to achieving the last seven years is 41 o per meaningful and responsible reporting through annum, compared with 320/0 per annum achieved by the ten largest the comprehensive disclosure and explana• com parable industrial equity tion of its financial results. This is done investments on theJSE. to assist objective corporate performance rneasuremen t, to enable returns on Achievement: Growth was achieved in the investment to be assessed against the risks earnings of the diversified interests of the Group, despite continuing inherent in their achievement and to facilitate economic recession. Total profits appraisal of the full potential of the Group. have been generated equally between Beer and other interests. The core determinant of meaningful Achievement: presentation and disclosure of information is The return for the year ended 31 March 1992 is 210/0 and the its validity in supporting management's average annual return over the last decision making processes. While tile seven years is also 21 %. accounting philosophy encourages the pioneering of new techniques, it fully endorses the fundamental concepts underlying both the financial and Achievement: The gearing ratio at 31 March 1992 management accounting disciplines, as is 0,53:1 and the average over the enunciated by The International Federation of last seven years is 0,45: 1. Accountants, The International Accounting Achievement: Standards Committee and The South African Taxed net financing costs were covered 5,8 times in the year ended Institute of Chartered Accountants. 3 J March'] 992 and, on average, 6,4 times over the last seven years. The Group is committed to active Achievement: participation in the setting and regular review Dividends increased by 'JO'Jtb in the year ended 31 March 1992 and of accounting standards and to the have increased by a compound rate development of new and improved of 200/0 per annum over the last seven years, while the average accounting practices. This is done to ensure distribution rate over that period that the information reported to the was 44,80/0. management and stakeholders of the Group continues to be relevant and reliable. 3 CORPORATE CODE OF CONDUCT To act in a fashion that will eam the Group the reputation of being: • open and frank in all dealings and disclosures; • non-sectional and non-political; • socially and environmentally responsible; • beyond reproach in the quality of its products and services; • [ealous of its standing as regards integrity and credibility; • consistent in honouring its legal and moral obligations; • aware of the need to foster loyalty and long enduring rela• tionships. With regard to its human resources, to reinforce the principles of enlightened and humane employment practices and, in parti• cular, to: • eliminate discrimination; • recognise the employees' inalienable right to organise them• selves and to negotiate their conditions of employment; • promote training and development of skills. OPERATING MANAGEMENT APPROACH To endeavour to take the lead in its various fields of activities by: • seeking to be farsighted, innovative, entrepreneurial and competitive; • striving for a consistently high level of productivity with performance matching risk and return; • maintaining a soundly based group of prudently financed businesses; • decentralising to the maximum and, in the process, devel• oping the separate, independent and individual identities of Group companies and their managements. Portfolio of businesses INTERESTS AND HOLDINGS ACTIVITIES BEVERAGES SAD Beer Division Brewing and marketing of clear beer 70°;1) of United Breweries (Pty) Ltd Barley malting 700/0 of Ohlsson's Brewery Transkei (Pty) Ltd Hop fanning 550/0 of Southern Associated Maltsters (Pty) ltd Amalgamated Beverage Industries Ltd 68% Carbonated soft drinks 24°,f) of Amalgamated Beverage Canners (Pty) Ltd South African Fruit Juices l()()!Yo Sparkling and still fruit juices, lOO<}b of Appletiser Pure Fruit Juices (Pty) Ltd fruit concentrate and spring water 100% of Cape Display (Pty) Ltd 100Wo of Western Province Preserving Company (Pty) Ltd 49% of Ceres Fruit Juices (Pty) Ltd Traditional Beer Investments 100% Traditional sorghum beer 50% of Bophuthatswana Breweries (Pty) Ltd Distillers Corporation (SA) Ltd Wines and spirits Stell en bosch Fanners' Winery Group Ltd Wines and spirits RETAIL OK Bazaars (1929) Ltd 69% Mass merchandising Amalgamated Retail Ltd 69% Specialist furniture stores 760/0 of Boymans Ltd Specialist footwear and apparel Controlling interest effectively acquired in April 1992 chain stores Selected consumer services Edgars Stores Ltd Speciality clothing, accessories and horne textiles chain stores Apparelmanufacture HOTELS Southern Sun Hotel Holdings Ltd 100% Hotels, inns and resorts ZooAl of Sun International Inc 500/0 of Southern Sun Timesharing (Pry) Ltd MANUFACTURING Associated Furniture Companies Ltd 66% Furniture and upholstery 50% of Kallenbach-Hendler (Pty) Ltd Hedding 50% of Resinkem (Pry) Ltd Spring units 21 % of Romarex Ltd Textiles The Lion Match Company Ltd 71% Matches and disposable lighters 50(}D of Amalgamated Appliances (Pty) Ltd Packaging and