SABMiller plc Annual Report 2013 Local knowledge, global strength Performance highlights Strong revenue and earnings growth SABMiller plc is one of the world’s leading brewers with more than 200 beer brands and some 70,000 employees in over 75 countries. Group revenuea Revenueb Lager volumes +10% +7% +6% 2013: US$34,487m 2013: US$23,213m 2013: 242m hectolitres 2012: US$31,388m 2012: US$21,760m 2012: 229m hectolitres EBITA c EBITA margin progression Profit before tax +14% +70 bps –16% 2013: US$6,421m 2013: 18.6% 2013: US$4,712m 2012: US$5,634m 2012: 17.9% 2012: US$5,603m Adjusted EPSd Dividends per sharee Water usage +11% +11% –8% 2013: 238.7 US cents 2013: 101.0 US cents 2013: [3.7] hl/hl 2012: 214.8 US cents 2012: 91.0 US cents 2012: 4.0 hl/hl Net debtf Free cash flowg Total Shareholder Returnh –12% +6% +216% 2013: US$15,701m 2013: US$3,230m Peer median: 76% 2012: US$17,862m 2012: US$3,048m a Group revenue includes the attributable share of associates’ Further information and joint ventures’ revenue of US$11,274 million (2012: US$9,628 million). Go online for more details b Revenue excludes the attributable share of associates’ and This report covers the financial year ended joint ventures’ revenue. 31 March 2013. It is also available on our c Note 2 to the consolidated financial statements provides website as a downloadable PDF a reconciliation of operating profit to EBITA which is defined as www.sabmiller.com/annualreport operating profit before exceptional items and amortisation of intangible assets (excluding computer software) and includes the group’s share of associates’ and joint ventures’ operating For more detailed information about profit, on a similar basis. As noted in the Chief Financial Officer’s review, EBITA is used throughout this report. SABMiller please refer to our website d A reconciliation of adjusted earnings to the statutory measure www.sabmiller.com/investors of profit attributable to owners of the parent is provided in note 8 to the consolidated financial statements. e 2013 final dividend is subject to shareholder approval at the annual general meeting. f Net debt comprises gross debt (including borrowings, borrowings-related derivative financial instruments, overdrafts and finance leases) net of cash and cash equivalents (excluding overdrafts). An analysis of net debt is provided in note 27c to the consolidated financial statements. g Note 27b to the consolidated financial statements provides a reconciliation of net cash from operating activities to free cash flow. h Total Shareholder Return (TSR) is shown as the percentage growth in our TSR over the five years to 31 March 2013. SABMiller plc Annual Report 2013 Contents What’s inside Overview 4 Overview 2 Our business in brief 4 Group at a glance Business review 5 Global beer market trends 6 Acting Chairman’s statement 10 Chief Executive’s review 14 How we create long-term Business review Business sustainable value 15 Key performance indicators 16 Principal risks 18 Operations review 18 Latin America 21 Europe 24 North America 27 Africa 30 Asia Pacifi c 33 South Africa: Beverages South Africa: Hotels and Gaming 36 Chief Financial Offi cer’s review 44 Sustainable development 48 People Governance 50 Board of directors Governance 52 Executive committee 19 26 53 Directors’ report 57 Corporate governance 66 Directors’ remuneration report Financial statements 86 Statement of directors’ responsibilities in respect of the consolidated fi nancial statements statements Financial 87 Independent auditors’ report to the members of SABMiller plc on the consolidated fi nancial statements 88 Consolidated income statement 89 Consolidated statement of comprehensive income 90 Consolidated balance sheet 91 Consolidated cash fl ow statement 92 Consolidated statement of changes in equity 93 Notes to the consolidated fi nancial 32 statements 165 Statement of directors’ responsibilities in respect of the company fi nancial statements 166 Independent auditors’ report to the members of SABMiller plc on the 35 information Shareholder company fi nancial statements 167 Balance sheet of SABMiller plc 168 Notes to the company fi nancial statements 178 Five-year fi nancial review 180 Defi nitions Shareholder information 182 Ordinary shareholding analyses 183 Shareholders’ diary 184 Administration IBC Cautionary statement SABMiller plc Annual Report 2013 – 1 Our business in brief Local knowledge driving global strength A strategy that consistently delivers Built on our brands and a passion for beer SABMiller has become a global leader by doing business locally, Informed by deep local market insights, we invest in building producing high quality products as effi ciently and sustainably as and nurturing local beer brands which earn the long-term possible across a mix of developed and developing markets. support and affection of our customers and consumers. To be the most admired company The physical characteristics of beer, Our vision in the global beer industry. Local a perishable product that is bulky knowledge to transport, dictate that brewing is a predominantly local enterprise around the world. International To own and nurture local and brands comprise only a small Our mission international brands that are the proportion of global beer volumes, fi rst choice of the consumer. and the growth of craft beers in many developed markets indicates that interest in local brands is on the • Our people are our enduring rise. At SABMiller we understand and Our values advantage. celebrate the inherently local qualities • Accountability is clear and of the beer industry, nurturing and personal. developing brands that address the • We work and win in teams. specifi c tastes of consumers which • We understand and respect are often unique to their location, our customers and consumers. refl ecting their heritage, nationality • Our reputation is indivisible. or cultural identity. • Creating a balanced and attractive Our local approach to brand Our strategic global spread of businesses. Global management does not preclude priorities • Developing strong, relevant brand strength a global approach to generating portfolios that win in the local the effi ciencies necessary to invest market. for growth and local competitive • Constantly raising the profi tability advantage. We routinely test, update of local businesses, sustainably. and reapply global standards and • Leveraging our skills and global best practice across a range of scale. disciplines, from technical standards and distribution, to marketing, sales, fi nance and people management. For more information on our strategic priorities and For more information on the performance of our brands, how we measure against them, see page 15. see pages 18 to 35. 2 – SABMiller plc Annual Report 2013 Overview Business review Business Delivering strong revenue and earnings Creating long-term sustainable value growth in 2013 We generate value by establishing leading positions in strategically attractive markets that offer long-term growth Investment in additional production capacity, commercial opportunities, building and sustaining successful local brands capability and distribution reach supported strong growth in as part of comprehensive portfolios. We maximise the effi ciency our developing markets, while a focus on operating effi ciencies of our businesses and utilise our extensive local supply chains helped us achieve growth in profi t margins. Total beverage to ensure that the communities in which we operate participate volumes grew by 7% to 306 million hectolitres, with lager volumes in our growth and development. Governance up 6% and soft drinks volumes up 15%. • Reported group revenue growth We build long-term value by ensuring Operational of 10% with organic, constant Understanding that our brands maintain a continuous highlights currency group revenue up 7%. consumer connection and relevance to their • Group revenue per hectolitre (hl) target consumers, supported by up 3% on an organic, constant tastes innovation within the beer category currency basis. to develop new products, brands, • Lager volumes rose 3% on an packs and price points to meet the statements Financial organic basis with growth in all evolving expectations of consumers, divisions except North America. wholesalers and our retail partners. • Organic, constant currency EBITA growth of 9%, with reported EBITA growth of 14%, refl ecting the inclusion of Foster’s and other business combinations, partially offset by adverse currency movements. • EBITA margin improvement of 70 basis points (bps) to 18.6%, with organic, constant currency EBITA margin improvement of 40 bps. • Progress with the Foster’s From strategic alliances that span integration and synergies remains Building continents, to individual relationships ahead of schedule, with lager with corner-shop retailers, our ability volume growth in the continuing the right to build and sustain long-term information Shareholder brand portfolio in the fourth quarter partnerships partnerships is a core strength of the versus the prior year. business. At the local level we are • Adjusted earnings up 12%, engaged in a shared endeavour with with adjusted EPS up 11% governments, distributors, retailers, to 238.7 US cents per share. suppliers and the community at large • Declines in profi t before tax and to support the social and economic profi t attributable to owners of the development of the countries in parent refl ect exceptional non-cash which we operate. gains reported last year. For more information on our fi nancial performance, For more information on how we create