FOSTER'S GROUP LTD 201 1 F¡nancial Results For the year ended 30 June 2011 lncorporating the requirements of Appendix 4E For personal use only ABN 49 007 620 886 APPENDIX 4E Preliminary Final Report For the twelve months ended 30 June 2011 ABN 49 007 620 886 Results for announcement to the market Extracts of the Foster’s Group Limited results for the year ended 30 June 2011. $m Continuing Operations operating revenue down 5.4% to 2,418.4 Net loss for the period attributable to members (89.0) Dividends Franked Amount per amount per security Security at 30% tax Final dividend 13.25¢ Nil Interim dividend 12.00¢ 12.00¢ Total dividend 25.25¢ 12.00¢ The Company’s dividend reinvestment plan has been suspended. Annual Meeting The annual meeting will be held as follows: Place City Recital Hall 2 – 12 Angel Place Sydney, New South Wales, Australia Time and Date 10.30am, Tuesday 25 October 2011 Approximate date the annual report will be available Monday 19 September 2011 Compliance Statement This report has been prepared under accounting policies which comply with the Corporations Act 2001, the Accounting standards and other mandatory professional reporting requirements in Australia, and the Corporations Regulations 2001. This report and the financial statements prepared under the Corporations Act 2001, use the same accounting policies. This report gives a true and fair view of the matters disclosed. The report is based on accounts which have been audited. The audit report, which was unqualified, will be made available with the Company’s financial report. Further information: For personal use only Chris Knorr Tel: +61 3 8626 2685 Mob: 61 417 033 623 Foster’s Group Limited Preliminary Final Report 30 June 2011 Foster's Group Limited Financial Result for the twelve month period ended 30 June 2011 Contents 1 Media Release 9 Profit Commentary 17 Financial Statements For personal use only 23 August 2011 TURNAROUND ON TRACK IN A TOUGH MARKET ENVIRONMENT • Demerger of Treasury Wine Estates completed in May 2011 • Experienced new management team with a dedicated focus on beer and cider • Turnaround has addressed fundamental business challenges • CUB market share stabilised correcting a long-term trend of decline • Cost reduction program commenced with $55 million of annual benefit by fiscal 2013 • Final dividend of 13.25 cents per share unfranked • Capital management of at least $500 million OVERVIEW Foster’s has completed the first phase of initiatives to turn around performance, addressing fundamental business challenges and establishing a strong foundation for future growth. Benefits of these initiatives have included improved execution, cost efficiency and a stabilisation of market share during the year. Foster’s Group today reported earnings before interest and tax and before material items of $816.7 million, an 8% decrease on the prior year. The decrease reflects a 6% decline in Australian beer category volume and higher Corporate costs relative to the prior year which included one time benefits. CUB’s EBIT declined 6.2%, in line with the decline in the Australian beer category. However, improved cost efficiency mitigated the impact on CUB earnings and allowed CUB to increase advertising and promotion by more than 4%. Operating cash flow from continuing operations before interest and tax was $872.7 million and cash conversion was 100.4%. Earnings per share from continuing operations before material items fell 8.9% to 25.6 cents. Foster’s declared a final dividend for fiscal 2011 of 13.25 cents per share. The total dividend for fiscal 2011 was 25.25 cents, representing an 83% payout ratio on net profit after discontinued operations but before material items. In addition, the board of Foster’s today announced an intention to undertake capital management For personal use only of at least $500 million in fiscal 2012. Commenting on the results, Foster’s Group CEO John Pollaers said: “This has been a transformational year for Foster’s and I’m pleased to say that the turnaround is on track,” Foster’s Group CEO John Pollaers said today. 1 Foster’s Group Limited Preliminary Final Report 30 June 2011 “The successful demerger of Treasury Wine Estates was completed in May, with the overwhelming support of our shareholders. “Foster’s is now an exciting “new” company with a bright future as a great Australian success story with a focus on beer and cider. That focus is an important point: Foster’s is now able to dedicate all of its considerable financial resources and industry expertise to the beer and cider business. “The initiatives put in place as part of a phased turnaround plan at the beginning of fiscal 2011 have addressed the fundamental business challenges we faced. “The turnaround is by no means complete – we’re well aware of the challenges we still face. But a lot of hard work has been done to get us in shape for the future and I am very pleased with the progress to date. “One of the key wins for us in the past year has been stabilising our market share, correcting a long term trend of decline. The stabilisation of market share reflects strong growth in the on premise channel combined with a more modest decline in the larger off premise channel.” “As a result, CUB’s Australian beer volume decline was in line with the rest of the market, and strong growth in cider sales saw our overall volume just over 5% lower. “The impact of that volume decline was minimised by the tough decisions we made on costs last year. We made a very deliberate decision not simply to cut costs, but also to increase investment in our brands, with advertising and promotion increasing by more than 4%. Among the highlights was Carlton Draught’s 10th consecutive year of growth and increased sales of more than 20% for Carlton Dry. Premium international and craft led the beer category with Fat Yak and Corona ahead in their segments. The cider category continues to grow strongly with CUB retaining the leading cider portfolio led by Strongbow and Bulmers, and innovation with new flavours and brands such as Bulmers Pear and Dirty Granny. Mr Pollaers said that in addition to the efficiencies we’ve already built into the organisation, the cost reduction program we commenced in May will drive additional benefits in 2012 and future years. “The first phase of the program will deliver $55 million of annual benefits by the end of fiscal 2013, with $45 million of benefits in fiscal 2012. “Today we’ve also announced the commencement of a supply footprint review. “The review involves an assessment of the most appropriate long term asset footprint to support the CUB business. We expect to conclude the review within the next six months and it will include a review of all Australian production and logistics sites, and key supplier arrangements.” Meanwhile, success in the Ashwick tax case led to a continuing operations material gain after tax of $551.6 million. Mr Pollaers said that a strong credit profile and proceeds from the Ashwick tax case have led the For personal use only Board to pursue capital management options for the return of at least $500 million to shareholders. “Options being investigated include a capital reduction and share buy back. A capital reduction involves seeking a tax ruling from the ATO, a process that commenced in July, as well as the approval of shareholders”, Mr Pollaers said. 2 Foster’s Group Limited Preliminary Final Report 30 June 2011 FINANCIAL HIGHLIGHTS Continuing Operations Foster’s Group Limited’s (Foster’s) continuing operations result excludes the impact of discontinued wine operations and material items. Foster’s today announced a continuing operations net profit (before material items) of $494.9 million, a decline of 8.7% on the prior year. Continuing operations earnings per share (before material items) was 25.6 cents per share, a decline of 8.9%. Foster’s continuing operations volume declined 5.2% and net sales revenue declined 5.0%. EBIT declined 8.0% to $816.7 million with the key driver being lower Australian beer category volume. Carlton United Brewers (CUB) completed the first phase of initiatives to turn around business performance. The Urgent Agenda has substantially addressed the fundamental business challenges identified at the beginning of the year – execution, capability and portfolio positioning. CUB’s market share stabilised, with total market share including draught and packaged beer the same as the prior period1, ending a long-term period of decline. Strong gains have been made in the critical on premise channel where the benefits of CUB’s improved execution have been most pronounced. The decline in CUB’s off premise market share moderated during the year. Improved off premise market share in the first half was reversed in the second half with CUB remaining disciplined on pricing in the face of increased competitor promotional activity in the June quarter. CUB’s off premise market share in the second half was also impacted by actions taken to protect its brands against below cost selling by some retailers. The key driver of financial performance during the year was a 6% decline in Australian beer category volume¹. Economic uncertainty, lower household disposable income and exceptional weather conditions reduced consumer demand for beer during the year. CUB’s Australian beer volume declined 5.6%, with CUB’s total volume down 5.3%. CUB net sales revenue declined 4.6%. Growth in net sales revenue per case in the second half of 1% was higher than growth for the full year of 0.6%. Net sales revenue per case on domestic beer increased 2.1%, with growth in the second half of 2.3%.