Annual Report - SABMiller India

Chief Financial Officer’s review continuedAdjusted EPS and Dividend per share(US cents)150 EPS120906030Source: SABMiller plc 2008Dividend05 06 07 08Exceptional itemsItems that are material either by size orincidence are classified as exceptionalitems. Further details on the treatmentof these items can be found in note 4to the financial statements.Net exceptional charges of US$112 millionbefore tax were reported during the year(2007: US$93 million). Of these, US$78million relate to final restructuring costsincurred in Latin America (2007: US$69million), partially offset by a net profit ofUS$17 million on the disposal of soft drinksbusinesses in Costa Rica and Colombia.Miller has also recorded costs of US$51million in relation to retention accrualspending the completion of the proposedMillerCoors joint venture and certainintegration costs. In 2007, Europe reporteda net exceptional cost of US$24 million.This comprised a profit on the disposalof land in Naples of US$14 million lessintegration costs of US$7 million principallyincurred in Slovakia, and an adjustment togoodwill at Birra Peroni. As required underIFRS, to the extent that a business is ableto utilise, after an acquisition, previouslyunrecognised deferred tax assets, anadjustment to goodwill is required with acompensating adjustment to tax. During2007 we recorded such an adjustmentfor US$31 million in respect of Birra Peroniand this had been included withinexceptional items.Finance costs and taxNet finance costs increased to US$456million, a 7% increase on the prior year’sUS$428 million. Finance costs in thecurrent year include a net benefit fromthe mark-to-market adjustments of variousderivatives amounting to US$35 million(2007: nil) which are of a capital nature andfor which the group has been unable toobtain hedge accounting. This benefit hasbeen excluded from the determination ofadjusted earnings per share. Adjusted netfinance costs, which exclude this benefit,were US$491 million, up 15%, reflectingan increase in net debt following thesignificant capital expenditure programmecurrently being undertaken by the groupand the recent Grolsch acquisition. Interestcover, based on pre-exceptional profitbefore interest and tax and excluding theimpact of the mark to market movementsnoted above, has increased to 7.9 timesfrom 7.8 times in the prior year.The effective tax rate of 32.5% (2007:34.5%) before amortisation of intangibleassets (other than software) and exceptionalitems and the adjustment to interest notedabove, is below that of the prior year,principally reflecting a more favourablegeographic mix of profits across the group,local statutory rate reductions and ongoinginitiatives to manage our effective tax rate.CurrencyThe South African rand has declined againstthe US dollar during the year and endedthe financial year at R8.15 to the US dollar,while the weighted average rand/dollarrate weakened by 1% to R7.13 comparedwith R7.06 in the prior year. The Colombianpeso (COP) strengthened by almost 17%against the US dollar compared to the prioryear end, and ended the year at COP1,822to the US dollar, while the weighted averageCOP/dollar rate improved by 15% toCOP1,997 from COP2,340.Profit and earningsAdjusted profit before tax of US$3,639million increased by 15% over the prior year,reflecting performance improvements acrossthe businesses and translation of resultsinto US dollars. On a statutory basis, profitbefore tax of US$3,264 million was up16%, including the impact of exceptionalitems and the mark to market movementsin finance costs as noted above.The group presents adjusted basic earningsper share to exclude the impact ofamortisation of intangible assets (excludingsoftware) and other non-recurring items,which include post-tax exceptional items,in order to present a more meaningfulcomparison for the years shown in theconsolidated financial statements. Adjustedearnings increased by 20% to US$2,147million and the weighted average numberof basic shares in issue for the yearwas 1,500 million, up from last year’s1,496 million.Adjusted earnings per share increased by19%, the fifth year in the last six years withdouble digit growth. The group’s adjustedearnings per share also showed doubledigitincreases when measured in SouthAfrican rand and sterling. A reconciliationof basic earnings per share to adjustedearnings per share is shown in note 8 tothe financial statements and, on a statutorybasis, basic earnings per share wereup 22%.20 Chief Financial Officer’s reviewSABMiller plc Annual Report 2008