Annual Report - SABMiller

SABMiller plc Annual Report 2010 Chief Financial Officer’s review 37Adjusted EPS and dividend per shareUS cents1601208040EPSDividend06 07 08 09 10On 1 July 2009 the group completed the cash acquisitionof an effective 40% interest in Ambo Mineral Water ShareCompany in Ethiopia. On 30 September 2009 the groupacquired for cash an effective 62% interest in a maheubusiness, a non-alcoholic traditional beverage operation,in Zambia. On 9 February 2010 the group completedthe cash acquisition of an 80% effective interest in theassets of the Rwenzori water business in Uganda. Thesebusiness combinations have all been made in partnershipwith Castel, with the effective interests stated after takingaccount of Castel’s interests, and align with the group’sfull beverage portfolio strategy in Africa.On 29 May 2009 the group acquired the outstanding28.1% minority interest in its Polish subsidiary, KompaniaPiwowarska SA, in exchange for the issue of 60 millionordinary shares of SABMiller plc.In China, our associate, CR Snow, has continued toconsolidate its position as the country’s largest brewerwith the purchase of a further three breweries in the year.On 30 June 2009, our South African hotels and gamingassociate, Tsogo Sun Group (Tsogo Sun), acquired100% of the Century Casinos businesses in Caledon andNewcastle and on 12 October 2009 it increased by 30%its effective interest in Tsogo Sun KwaZulu-Natal (Pty) Ltd,the licensee and operator of the Suncoast Casino inDurban. The latter transaction was funded through theissue of preference shares to Tsogo Sun’s shareholdersin proportion to their shareholdings.Cash flow and investment highlightsNet cash generated from operations before workingcapital movements (EBITDA) of US$3,974 million wasUS$190 million (5%) lower than the prior year. EBITDAexcludes cash contributions from joint ventures and wastherefore affected by the formation of the MillerCoorsjoint venture in the first half of the prior year. To considercash generation on a comparable basis, a normalisedEBITDA measure has been used which includes thedividends received from MillerCoors of US$707 million(2009: US$454 million). Normalised EBITDA grew by1% compared with the prior year, including the adverseimpact of the cash exceptional items of US$339 million(2009: US$49 million). Normalised EBITDA margin,including the group’s share of MillerCoors’ revenue,declined 40 bps in the year to 20.2%. There has beena cash inflow from working capital of US$563 millionprincipally as a result of business capability initiativeswhich have realised working capital cash inflows ofUS$333 million in inventories, receivables and payablesthrough improved processes. As a result cash generatedfrom operations increased by 24% over the prior year toUS$4,537 million.Free cash flowUS$m2,5002,0001,5001,0005000-50006 07 08 09 10Tax paid has decreased by 19% to US$620 million fromUS$766 million reflecting tax repayments in Russia, theoffset of significant overpayments in North America thatarose in the prior year from initial estimates of pre-taxincome on the inception of the joint venture, and timingdifferences in South Africa and Latin America.The corporate tax charge for the year was US$848 million.This differs from the taxes paid of US$620 million becauseof timing differences where the payment of the tax liabilityfalls outside the financial year, and the impact of deferredtaxes. Furthermore, uncertainty of interpretation andapplication of tax law in some jurisdictions has led todifferences between the amounts paid and those chargedto the income statement.In the year, total tax payments were just under US$7,000million. This includes tax borne by the group of US$1,000million plus taxes collected on behalf of governments inthe countries in which we operate of US$6,000 million.These amounts reflect the tax contribution that resultsfrom our activities in each of the regions.Net interest paid has reduced 11% to US$640 millionreflecting the reduction in net interest expense partlyoffset by the timing of payments and the settlementat maturity of a number of derivative financial liabilities.The group has continued to invest in its operations,selectively maintaining investment to support futuregrowth, including building new breweries in Russia,Angola, Mozambique, Southern Sudan and Tanzaniatogether with brewery capacity expansions completed inthe year in Poland, Romania, Ghana and Uganda. Capitalexpenditure for the year has reduced to US$1,436 million(2009: US$2,073 million). Capital expenditure includingthe purchase of intangible assets was US$1,528 million(2009: US$2,147 million). The completion of a number ofmajor capacity projects in the year is expected to resultin lower capital expenditure in the forthcoming year.Free cash flow improved by US$1,913 million toUS$2,010 million, benefiting from significantly improvedworking capital and lower capital expenditure. Free cashflow over the last five years is shown in the chart above.CurrencyThe rand strengthened against the US dollar during the yearand ended the financial year at ZAR7.30 to the US dollarcompared to ZAR9.61 at 31 March 2009, while the weightedaverage rand/dollar rate appreciated by 14% to ZAR7.78compared with ZAR8.87 in the prior year. The Colombian peso(COP) strengthened by 33% against the US dollar comparedwith the prior year and ended the financial year at COP1,929to the US dollar compared with COP2,561 at 31 March 2009.The weighted average COP/dollar rate appreciated by 1% toCOP2,031 from COP2,061 in the prior year.Overview Business reviewGovernance Financial statements Shareholder information