Annual Report - SABMiller

SABMiller plc Annual Report 2010 Directors’ report 47Directors’ reportThe directors have pleasure in submitting their report to shareholders,together with the audited annual financial statements for the year ended31 March 2010.Principal activities and business reviewSABMiller plc is a holding company which has brewing and beverageinterests across six continents. The principal subsidiaries, associatesand joint ventures of the company are listed in note 33 to the consolidatedfinancial statements. The principal activities of the group are themanufacture, distribution and sale of beverages.The company is required by the Companies Act 2006 to produce afair review of the business of the group including a description of theprincipal risks and uncertainties it faces, its development and performanceduring the year and the position of the group at the end of the year.The business review, including a review of the development andperformance of the group during the financial year, its position at theend of the year, likely future developments in the business of the group,key performance indicators and a description of the principal risks anduncertainties facing the group, is set out on pages 6 to 39 of this annualreport. Other key performance indicators and information relating toenvironmental matters, employee matters and social and communityissues required by the business review are set out in the sustainabledevelopment review on pages 40 to 43 of this annual report.Significant acquisitions, disposals, financing transactions,investments and material developments during the yearIn April 2009 the company’s Romanian subsidiary Ursus Breweries SAassumed control over 71% of the issued share capital of Bere AzugaSA in Romania. Subsequently, further share purchases were madeand at the year end Bere Azuga was wholly owned by Ursus.In May 2009 the company acquired the outstanding 28.1% minorityinterest in its Polish subsidiary, Kompania Piwowarska SA, from KulczykHolding SA in exchange for the issue of 60 million new ordinary shares.In July 2009 the company announced that it proposed to enter intoa Broad-Based Black Economic Empowerment transaction in SouthAfrica. The transaction will result in 8.45% of its South African subsidiary,The South African Breweries Limited (SAB), being held by a broad baseof black participants, which include SAB’s employees, black-ownedlicensed liquor retailers and liquor licence applicants, as well as registeredblack-owned customers of ABI (the soft drinks division of SAB), andthe broader South African community through an SAB foundation. Atthe end of the 10-year transaction period, participants will exchangetheir shareholdings in SAB for shares in SABMiller plc. At a generalmeeting of the company held in January 2010 the transaction wasapproved by shareholders, with over 99.99% of the votes cast beingin favour of the adoption of a scheme of arrangement to give effectto the transaction. The scheme of arrangement was subsequentlysanctioned by the High Court of Justice in England and Wales inFebruary 2010. The economic cost of the transaction as at 27 November2009 was calculated at approximately US$279 million, equatingto approximately 0.6% of SABMiller plc’s market capitalisation on27 November 2009, and the initial allocation of shares in SAB isexpected to be completed in June 2010.In July 2009 the company completed a €1,000 million bond issueunder its US$5,000 million Euro Medium Term Note Programme.The 5.5 year notes were issued with a coupon of 4.50%. The netproceeds of the issue were used to repay certain indebtedness andfor general corporate purposes.In July 2009 the company announced plans to open a new breweryand sparkling soft drinks plant in Angola. The new soft drinks plant wascommissioned in January 2010 and the new brewery in April 2010.In July 2009 the company’s Mauritian subsidiary Ambo InternationalHoldings Limited completed an investment resulting in the companyholding an effective 40% interest in Ambo Mineral Water Share Companyin Ethiopia.In September 2009 the company’s Zambian subsidiary, Heinrich’sSyndicate Limited, acquired a maheu business, a non-alcoholictraditional beverage.In September 2009 the company’s Namibian subsidiary, SABMiller(Namibia) (Proprietary) Limited (SABMiller Namibia), was granted alicence to brew and bottle beer in Namibia. Following the year end,it was announced that SABMiller Namibia, which will be 60% ownedby SABMiller and 40% owned by local Namibian partners in a Broad-Based Black Economic Empowerment initiative, will build a breweryat a cost of US$34 million. Construction of the new brewery on 7.3hectares of land outside Okahandja is expected to start in the secondhalf of 2010 and will also include a returnable bottle packaging lineand warehousing facilities.In December 2009 SABMiller’s Ugandan subsidiary, Nile BreweriesLtd, announced that following the success of its initiative to convertlocally grown barley into brewing malt it would build a malting plantat a cost of US$16 million. Construction began in January 2010 onNile Breweries’ existing site in Jinja and is expected to be completedin the first quarter of 2011.In February 2010 the company announced that it had agreed to mergeTsogo Sun, its South African hotels and gaming associate, with GoldReef Resorts Limited (Gold Reef), a Johannesburg Stock Exchange(JSE) listed business, through an all-share merger. The transaction willbe effected through the acquisition by Gold Reef of the entire issuedshare capital of Tsogo Sun Holdings (Proprietary) Limited (Tsogo Sun)in exchange for the issue of new shares in Gold Reef. SABMiller’s whollyowned subsidiary SABSA Holdings (Pty) Limited (SABSA), will exchangeits 49% interest in Tsogo Sun for a 39.7% interest in the enlarged GoldReef/Tsogo Sun business, which will continue to be listed on the JSEwith an expected market capitalisation of approximately ZAR21 billion(US$2,700 million) as at 29 January 2010. The merger was approvedby Gold Reef shareholders in April 2010, and completion remains subjectto requisite regulatory approvals.In February 2010 the company’s subsidiary Rwenzori Bottling CompanyLimited acquired the assets of the Rwenzori water business in Uganda.In March 2010 the company completed an issue of Peruvian nuevosol (PEN) 150 million (approximately US$53 million) 6.75% notes due2015, under the PEN1,500 million Guaranteed Medium Term NoteProgramme which had been established by the company and itswholly owned subsidiary Racetrack Perú S.R.L. in January 2009. Thenet proceeds of the issue were used for the repayment of loans incurredto fund the acquisition of shares in Unión de Cervecerías PeruanasBackus y Johnston S.A.A. and for general corporate purposes.Overview Business review Governance Financial statements Shareholder information