INTERNATIONAL FINANCIAL REPORTING AND ANALYSIS

MSc in International Accounting & Finance / University of Liverpool

Final Project: SABMiller Plc

Onur ZTRK (15999838)

Table of Contents 1. Company Information ................................................................................................................ 4 1.1. 1.2. 1.3. History of the Company ...................................................................................................... 4 Business Focus & Strategies ............................................................................................... 5 Global Operations ............................................................................................................... 5 Latin America ............................................................................................................. 5 North America ............................................................................................................ 5 Europe ........................................................................................................................ 6 Asia ............................................................................................................................ 6 South Africa ................................................................................................................ 6 Australia ..................................................................................................................... 6

1.3.1. 1.3.2. 1.3.3. 1.3.4. 1.3.5. 1.3.6. 1.4.

SWOT Analysis .................................................................................................................. 7 Weaknesses ................................................................................................................. 7 Strengths ..................................................................................................................... 7 Opportunities .............................................................................................................. 7 Threats ........................................................................................................................ 8

1.4.1. 1.4.2. 1.4.3. 1.4.4. 1.5. 1.6.

Business Capability Programme .......................................................................................... 8 Operations other than brewery ............................................................................................ 8 Hotels and Gaming ...................................................................................................... 8

1.6.1. 2.

Regulatory Environment ............................................................................................................. 9 2.1. 2.2. Financial Reporting Council ............................................................................................... 9 Regulations of London Stock Exchange .............................................................................. 9

3.

Analysis of Capital structure ..................................................................................................... 10 3.1. 3.2. 3.3. Equity Structure ................................................................................................................ 10 Debt Financing ................................................................................................................. 11 Off balance sheet financing ............................................................................................... 11

4.

Non-current Asset structure ...................................................................................................... 12 4.1. 4.2. 4.3. Goodwill........................................................................................................................... 12 Intangible Assets............................................................................................................... 12 Derivative financial instruments ........................................................................................ 12

5.

Corporate Governance .............................................................................................................. 13 5.1. 5.2. 5.3. UK Corporate Governance Code ....................................................................................... 13 Non-executive Directors ................................................................................................... 13 Remuneration ................................................................................................................... 14

5.4. 5.5. 6.

Audit Committees ............................................................................................................. 14 Executive committees ....................................................................................................... 14

Financial Analysis of SABMiller .............................................................................................. 15 6.1. 6.1.1. 6.1.2. 6.1.3. 6.1.4. 6.2. 6.2.1. Analysis of Financial Statements....................................................................................... 15 Statement of Income ..................................................................................................... 15 Statement of Financial Position ..................................................................................... 17 Statement of Cash Flow ................................................................................................ 19 Trend analysis of financial performance and position .................................................... 19 Ratio and Trend Analysis .................................................................................................. 22 Six Key Ratios .............................................................................................................. 22

7.

Competitor analysis .................................................................................................................. 25 7.1. 7.2. 7.2.1. 7.2.2. 7.3. The biggest beverage company: Anheuser Busch .............................................................. 25 Comparison of SABMiller vs. Anheuser Busch ................................................................. 25 Financial performance ................................................................................................... 25 Financial Ratios ............................................................................................................ 26 Anheuser Busch's ability to acquire SABMiller: ................................................................ 27

8.

Acquisition Foster's Group Limited .......................................................................................... 28 8.1. 8.1.1. 8.1.2. 8.1.3. 8.1.4. 8.1.5. 8.2. 8.2.1. 8.2.2. 8.3. 8.4. History of acquisitions ...................................................................................................... 28 Acquisiton of Miller Brewing Company (2002) ............................................................. 29 Merger with Bavaria S.A (2005) ................................................................................... 30 Acquisition of Fosters India (2006) ............................................................................... 30 Acquisition of Koninklijke Grolsch (2008) .................................................................... 30 Joint Venture with Molson Coors (MillerCoors) (2008) ................................................. 30 Foster's Group Limited ..................................................................................................... 31 Company Information ................................................................................................... 31 Financial statement analysis of Foster's ......................................................................... 31 Acquisition Process........................................................................................................... 32 Financing of the acquisition .............................................................................................. 32

1. Company Information SABMiller is one the largest brewers of the world, with operations in six continents. Company holds more than 200 beer brands and is also one of the worlds largest bottlers of Coca-Cola products. Company is listed in London Stock Exchange as one of FTSE 100, with a current capitalization level of 36.956 million. 1.1. History of the Company SAB was founded in Johannesburg (South Africa) in 1895 with 350.000 share capital when the city was under control of British administration. The Castle Lager, still of one the bestselling brands, was launched initially, and within 1 year company increased its capital to 500.000 following a remarkable dividend payment. (SABMiller, 2012a) Companys success continued in the 20th century through investments in breweries, acquisitions of competitors and even diversification to other businesses like food, real estate development, retail, but SAB was a South African company until it entered to European market by acquisition of the largest brewery of Hungary in 1994. (SABMiller, 2012a) In order to raise funds for worldwide expansion SAB moved its primary listing to London Stock Exchange in 1999 and operations continued globally through acquisitions in Europe, India and Central America. In 2002, after acquisition of Miller Brewing Company (2nd largest brewery of US), company changed its name to SABMiller and became the 2nd biggest brewer in the world. Following Miller acquisition, SABMiller achieved another big expansion through acquisition of South Americas 2nd biggest brewer, Bavaria SA in 2005. Finally, in late 2011, SABMiller completed its 3rd major acquisition within last 10 years with Fosters deal and entered Australian beer market from a leading position.

1.2. Business Focus & Strategies SABMillers focus in brewery business is on localization in the regions it operates. The main reason for this is the impact of local brands in the consumption habits of consumers. Therefore as stated in its mission statement, company has a motivation to own and nurture local and international brands that are the choice of the consumer. As a consequences of this, company is quite aggressive in acquisitions, strategic partnerships and joint ventures globally. Addition to local values, company has well known international brands like Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch. The four strategic priorities of the company as stated in its 2011 annual report are (1) creating a balanced and attractive global spread of businesses (2) Developing strong, relevant brand portfolios that win in the local market (3) Constantly raising the profitability of local businesses, sustainably (4) Leveraging our skills and global scale. 1.3. Global Operations SABMiller operates globally in emerging and developed countries all over the world with its more than 200 brands. 1.3.1. Latin America Contribution of Latin America operations in terms of EBITDA was 31% of overall group performance. Primary operations are undertaken in Colombia, Ecuador, Honduras, Panama and Peru, where the company held number 1 position in market share. Besides brewery, bottling business of Coca-Cola and Pepsi Co is also important for the group. 1.3.2. North America In 2008 SABMiller formed a joint venture with Molson Coors Brewing Company, called MillerCoors which currently holds 30% of the US beer market. Addition to

MillerCoors, SABMiller export its brands to Canada and Mexico through its wholly owned subsidiary Miller Brewing International. 1.3.3. Europe SABMiller runs its primary operations in 10 European countries (Czech Republic, Hungary, Italy, Poland, Romania, Russia, Slovakia, Spain, Netherlands and Ukraine) while has significant number of exports to other European markets like Germany and UK. 1.3.4. Asia Companys operations in China are held through CR Snow, a joint venture of SABMiller and China Resource Enterprise. CS Snow currently is the biggest brewer in China. India and Vietnam are other countries that include brewing operations and company has significant exports to South Korea and Cambodia. Despite this penetration in Asia market, the region only provides 2% of total group EBITDA. 1.3.5. South Africa Result of being a South Africa originated company, SABMiller is extensively active in the Africa region with its brewing operations running in nearly 20 countries where company holds number one position mostly. Addition to its brewing operations, hotel and gaming business is conducted in South Africa. 1.3.6. Australia Although there were joint ventures operating in the region, SABMiller is now the market leader through its new subsidiary Fosters.

1.4. SWOT Analysis A recent study conducted by Datamonitor (2011) summarizes ths SWOT analysis as shown in the below table:
Table 1: SABMiller SWOT Analysis (source: Datamonitor, 2012)

1.4.1. Weaknesses In spite of its strong positions in China and India, SABMillers Asia operations is not performing well compared to other regions. Asian region contributes to group revenue by $2.026m revenues which less than half of any other region. Profitability of the operations stayed well below compared to overall group performance in 2011, with a 5% EBITDA margin (Rest of the group performed 19% EBITDA margin). 1.4.2. Strengths SABMiller is considered to be a well-diversified company globally. Despite its successful positions in developed regions, company generates most of its revenues from emerging countries which secures its future growth. 1.4.3. Opportunities Big retail chains are very important to brewers distribution lines, as they penetrate globally. Distribution agreements with such retail chains like Wal-Mart, Tesco ...etc. therefore contribute to the sales growth for SABMiller.

Acquisitions, on the other hand, are inevitable in brewery industry which is based on local brands mainly. SABMiller continued its acquisitions in Latin America with Cerveceria Argentina Isenbeck, and in Australia with Fosters. 1.4.4. Threats In a highly competitive market, where competitors are also world-wide diversified big brewers, SABMiller has to struggle with lower margins driven by the fluctuations in agricultural products, especially barley. Another threat for the industry is the world-wide increasing health care issues. Negative effects of beer increasingly recognized throughout the world, which will lead consumers to decrease their alcohol consumption or change their preference to less harmful beverages like wines. 1.5. Business Capability Programme In 2009, SABMiller initiated a global project called business capability programme (BCP). The programme aims simplified processes, cost reduction and local focus (Datamonitor, 2012). Programme includes outsourcing strategies for some processes, and centralisation of procurement and information systems. Chief executive, Graham Mackay, claims that company already gained a net operating benefit by $67m in FY2011, despite the total costs incurred for the programme was $296m in the same financial year. BCP is expected to be completed in 2013 1.6. Operations other than brewery 1.6.1. Hotels and Gaming As a completely different business SABMiller has interest in hotels and gaming industry in South Africa through its shares in Tsogo Sun Holdings Limited, which is a gaming and entertainment company incorporated in South Africa (Fin24, 2012) with operations

include Hotels, Theme Parks and Casinos. SABMiller owns 40% shares of the business and in 2011 contribution to group EBITDA was 2,7% with $137m.

2. Regulatory Environment 2.1. Financial Reporting Council The Financial Reporting Council (FRC) is the UKs independent regulator responsible for promoting high quality corporate governance and reporting to foster investment (FRC, 2012a) FRC conducts regulatory decisions through its operating bodies like Accounting Standards Board (ASB), Auditing Practices Board, Board for Actuarial standards, Professional Oversight Board, Financial Reporting Review Panel, Accountancy and Actuarial Discipline Board . There is also the Committee on Corporate Governance under FRC, leading the governance related issues through maintaining UK Corporate Governance Code and monitoring its implementation. 2.2. Regulations of London Stock Exchange In order to be listed in London Stock Exchange, companies need to be approved by UK Listing Authority (UKLA) which is a function of Financial Services Authority (FSA). FSA is an independent non-governmental body accountable to Treasury Ministers and, through them parliament (FSA, 2012). UKLAs main role is to maintain the list of all securities it has approved for trading on exchanges in the UK and to set the requirements for listing and the rules for procedures and documents related to listing such as IPO, prospectus. (Moneyterms, 2011) There are two main categories of listing in London Stock Exchange, (1) Premium and (2) Standards. A company listed as premium is considered to be more reliable from the standpoint of investors as regulations are stricter for them compared to standard listing companies. Some

of the extra requirements are half-yearly financial reports, UK Corporate Governance Code, compliance with related party transaction rules. Compulsory implementation of IFRS has been effective as of 1 January 2005 in UK for listed companies (Iatridis, 2010) and IFRS compliance is mandatory for both premium and standard listing companies in London Stock Exchange. (LSE, 2010) The financial year of the company starts on 1st of April and ends on 31st of March of the following calendar year. Therefore, latest annual report of 2011 financial year covers the time period between 1.4.2010 and 31.3.2011 and all the financial information in this business report is mainly based on this latest annual report if not stated otherwise.

3. Analysis of Capital structure 3.1. Equity Structure SABMillers equity related financing sources are equal to $22.008 million, which formed by share capital ($166 m), share premium ($6.3 m), merger relief reserve ($4.586m), other reserves ($1.881) and retained earnings ($8.991). The biggest shareholder is Altria Group which owns 27,39% of the shared capital. Altria Group is a US based holding company and wholly owns Philip Morris USA Inc., one of worlds biggest cigarettes manufacturers (NYSE, 2012). BevCo Ltd is the second big shareholder of the company with 14,98% capital share. Bevco Ltd, is a holding company of Colombian Santo Domingo Group, which obtained its shares with the Bavaria merger in 2005. Other shareholders composed mainly from nominies & trustees, pension funds, mutual funds, and corporate entities. Merger relief reserve account is, accordingly with Companies Act 2006 (CA2006), used following a share for share acquisition of all the shares in a company, to record the difference

between fair value of the bought shares and shares issued of the acquirers shares (Mallett, 2010). In SABMiller, It is first created in 2003 with an amount equal to excess of value attributed to the shares issued asconsideration for Miller Brewing Company over the nominal value of those shares ($3.395 million). Remaining amount added to the reserve following the issuance of SABMiller plc ordinary shares for the buyout of non-controlling interests in the groups Polish business. Other reserves mainly include foreign currency translation reserve driven by all translation exchange differences arising on the retranslation of opening net assetstogether with differences between income statements translated at average and closing rates 3.2. Debt Financing SABMillers debt financing is highly depending on the money raised through corporate bonds. Out of $8.460 million total current and non-current borrowing, $6.635 is based on several corporate bonds with maturities varied between 2011 and 2018. Trade payables consists an important part of debt financing by $3.582 million, mostly as current liabilities. Company has no bank financing other than a small amount of overdraft. 3.3. Off balance sheet financing Companys off balance sheet financing includes operating leases for tangible non-current items, but they relatively small in size. The outstanding operating lease commitments are $182 million for land and buildings and $224 million for plant, vehicles and systems which is 1% of total capital employed. Therefore it can be concluded that SABMiller does not depend highly on off balance sheet financing.

4. Non-current Asset structure 4.1. Goodwill As a result of SABMillers aggressive acquisition and merger strategy in the last decade currently the total goodwill balance is the biggest single item in the statement of financial position with and amount of $11.952 million. It consist 34% of all non-current assets. Among all recognized goodwill, it is the Latin America transactions which form more than half of the total goodwill ($7.327 million). This mainly depends on the goodwill arose due to the Bavaria merger in 2005 which resulted in $4.042 million of provisional goodwill. 4.2. Intangible Assets Brands ($4.075 million) form the largest part of the intangible assets ($4.361 million) in SABMillers financial position, as result of more than 200 brands which are mostly obtained through acquisitions so they could have been recognized. According to IFRS (IAS38, 2010), capitalization of internally generated assets including brands is not allowed. Therefore, some well-known global brands of the company are not included in this value of intangible assets like Miller Genuine Draft, Peroni Nastro Azurro or Pilsner Urquell, whereas Aguila ($1.529 million), Cristal ($634 million) and Grolsch ($ 492 million) brands have their value as it was recognized following the consolidation of accounts after the acquisitions. Remaining part of the intangible assets ($286 million) mainly includes computer software with a carrying value of $265 million. 4.3. Derivative financial instruments Epstein and Jermakowicz (2010) states that derivative financial instruments are used most typically as a tool to assist in the management of some category of risk, such as possible unfavourable movements in share prices, interest rate variations, currency fluctuations and commodity price volatility. SABMiller has three types of risks that can be secured via

derivative financial instrument; (1) the risk of increase in floating rate interests of the borrowings (2) the risk of foreign currencies devaluated against UD dollar and (3) the risk of prices increases in commodities used as raw material. In order to eliminate these kinds of risks to some extent company is entered several types of financial instruments like interest rate swaps, forward exchange contracts, commodity contracts, forward foreign currency contracts, cross currency swaps.

5. Corporate Governance 5.1. UK Corporate Governance Code As stated earlier, one of the roles of FRC is to maintain Corporate Governance principles through UK Corporate Governance Code (the Code) and premium listing companies need to comply with this code regarding the system for directing and controlling companies. The first version of the Code is produced in 1992 by Cadbury Committee and after several revisions latest version is published in June 2010. FRCs states that the new code applies to accounting periods beginning on or after 29 June 2010, as a result of the new Listing Regime introduced in April 2010, and applies to all companies with a Premium Listing of equity shares regardless of whether they are incorporated in the UK or elsewhere (FRC, 2010). 5.2. Non-executive Directors The board of SABMiller currently consists 14 non-executive directors, of which nine directors are independent while five of them cannot considered to be independent. According to the Code (A.4.1.) a senior independent non-executive director should be appointed in order to provide a sounding board for the chairman and to serve as an intermediary for the other directors when necessary (FRC, 2010) and this role is given to John Manser.

The the Code, there is the exibility for companies, that they can choose between complying with its principles or explaining why they do not (Arcot S, Bruno V & Grimaud AF, 2010). Parallel to this although the board consists 5 non-executives appointed by the major shareholders, therefore confronting the independency principle of non-executive directors, it is explained in the annual report. 5.3. Remuneration Compliance with The Code requires a formal and transparent procedure for developing policy on remuneration where no director is involved in deciding his or her own remuneration (FRC, 2010). In SABMiller, a remuneration committee exists to conduct the remuneration policies which consists five independent non-executive directors. Remuneration Committee also benefits from a consultancy company specialized on executive remuneration, called Kepler Associates (www.kepler-associates.com). 5.4. Audit Committees The chief of audit committee, John Manser, seems to be enough qualified for his role as he is a chartered accountant. This is important though The Code suggest the audit committee should include members who have financial background. Some important considerations of the committee are annual and interim financial reporting, organization of the audit partner and internal audit. One important role of the committee chairman is to be the direct contact with the company internal auditor. 5.5. Executive committees Executive committee of SABMiller, appointed by the Chief Executive, consist Chief Financial Officer, divisional managing directors and directors of group functions. Organizational structure of the committee is as follows:

Chief Executive
Chairman and Managing Director, SAB Ltd

Chief Financial Officer

Marketing Director, SABMiller plc

Managing Director, SABMiller Africa

Director: Supply Chain & Human Resources, SABMiller plc

Managing Director, SABMiller Europe

General Counsel and Group Company Secretary, SABMiller

Managing Director, SABMiller Asia

Corporate Affairs Director, SABMiller plc

President, SABMiller Latin America

6. Financial Analysis of SABMiller 6.1. Analysis of Financial Statements 6.1.1. Statement of Income SABMillers 2011 annual report shows a revenue amount of $19.408 million for the last financial year. A segmental analysis show that revenue is diversified to all regions in significant amounts, but impact of Africa (combined with South Africa) is easily figured out as it consist 33% of all revenues. Asian revenues of the group ($2.026 million) can be considered as being relatively low compared to the economic size of the region, which also stated as a weakness in the SWOT analysis.

Another conclusion can be derived from segmental analysis of SABMiller is that; companys revenues are highly depended on joint ventures and associates in North America and Asia, which are not wholly owned by the company.

Vertical analysis of the operating expenses show that the most significant cost items are cost of inventories recognised as expense (24%), employee costs (12%) and marketing costs (12%) respectively. SABMillers preferred inventory valuation method is FIFO, therefore cost of inventories might be underestimated to some extent while vice versa for the inventory level in the statement of financial position.
2011 US$m Revenues Cost of inventories recognised as an expense Excise duties Employee costs (see note 6a) Depreciation of property, plant and equipment Profit on disposal of available for sale investments Profit on partial disposal of investment in associate (Profit)/loss on disposal of property, plant and equipment Amortisation of intangible assets Other expenses Selling, marketing and distribution costs Repairs and maintenance expenditure on property, plant and equipment Impairment of intangible assets Impairment of property, plant and equipment Impairment of trade and other receivables Operating lease rentals land and buildings Operating lease rentals plant, vehicles and systems Research and development expenditure Other operating expenses Total net operating expenses by nature Other income Net operating expenses 19.408 4.640 4.263 2.240 904 (159) (5) 220 4.566 2.249 315 14 31 91 61 78 7 1.720 16.669 (388) 16.281 2011 % of Revenues 100% 24% 22% 12% 5% 0% -1% 0% 1% 24% 12% 2% 0% 0% 0% 0% 0% 0% 9% 86% -2% 84%

It is also stated in the annual report that $436 million of total operating costs are exceptional items mainly driven by the previously mentioned Business Capability Programme ($296 million) and Broad-Based Black Economic Empowerment, a governmental economic empowerment initiative ($149 million). Companys net financial costs ($525 million) are due to interest expenses of corporate bonds ($408 million) which is the main financing source of the company other than equity. Other financing costs include interest expenses of bank loans and overdrafts and gains & losses from financial instruments. Finally, share of post-tax results of associates and joint ventures has a contribution to the net profit before taxation with an amount $1.024 million, driven by MillerCoors joint venture mainly. Taxation rate on the net income is 28% in UK (HRCM, 2012), therefore effective tax charge can be calculated as $729 million after deducting the contribution of associates and joint ventures to the net profit but after several adjustment driven by the differences between IFRS and legal tax regulation taxation is increases to $1.069 million. The most questionable single adjustment is the effect of expenses not deductible for tax purposes ($131 million) signalling some $467 million of expenses of the company which are not considered as an expense from taxation point of view. Such expenses may be related with donations or similar expenses, which are sometimes used as a means of illegal activities like bribery. Therefore it can be further investigated by relevant stakeholders. 6.1.2. Statement of Financial Position A vertical analysis of SABMillers financial statements, by the end of 2011 financial, year implies a healthy and balanced financial position from several aspects.

Companys assets reflect the acquisition & merger strategy of the company with significant amount of non-current assets (89%) driven by goodwill booked as a result of consolidation with acquired entities. Addition to goodwill, intangible assets also includes significant amount of value for the acquired brands. Such intangible asset intensity in a manufacturing company might have been considered as being strange, but the fact that brewery industry faced enormous amount of business combination in last decades can explain this position of SABMiller. However, proportion of goodwill and intangible assets to total asset (42%) distorts the straightforward analysis of other assets.
2011 US$m Assets Non-curre nt asse ts Goodwill Intangible assets Property, plant and equipment Investments in joint ventures Investments in associates Available for sale investments Agricultural Assets Investment securities Derivative financial instruments Employee benefits Inventories Trade and other receivables Deferred tax assets 2011 % of Total Assets Liabilitie s Curre nt liabilitie s Derivative financial instruments Bank Overdrafts Borrowings Trade and other payables Current tax liabilities Provisions 2011 US$m 2011 % of Total Assets

11.952 4.361 9.330 5.813 2.719 35 330 140 184 34.864

31% 11% 24% 15% 7% 0% 0% 0% 1% 0% 0% 0% 0% 89%

Curre nt asse ts Inventories Trade and other receivables Income tax receivable Current tax assets Investment securities Derivative financial instruments Available for sale investments Loan participation deposit Cash and cash equivalents Assets of disposal group classified as held for sale

1.256 1.687 152 16 1.067 4.178 66 4.244 39.108

3% 4% 0% 0% 0% 0% 0% 0% 3% 11% 0% 11% 100%

50 1.345 3.484 658 410 5.947 Liabilities of disposal group classified as held for sale 66 6.013 Non-curre nt liabilitie s 0,00 Derivative financial instruments 85 Borrowings 7.115 Trade and other payables 98 Deferred tax liabilities 2.578 Employee benefits Provisions 460 10.336 Total liabilitie s 16.349 Equity Share capital Share premium Merger relief reserve Other reserves Retained earnings Total share holders e quity Non-controlling interests Total e quity Total e quity & liabilitie s

0% 0% 3% 9% 2% 1% 15% 0% 15%

0% 18% 0% 7% 0% 1% 26% 42%

Total asse ts

166 6.384 4.586 1.881 8.991 22.008 751 22.759 39.108

0% 16% 12% 5% 23% 56% 2% 58% 100%

For example inventory level of the company is 3% of total assets, whereas it would be 6% excluding goodwill and intangible assets. However, inventory level is still not so significant despite the overestimation effect of FIFO method, probably because beer is a fast consumed product.

Financing of the assets depends more on equity (58%) rather than liabilities (42%), and furthermore debts include no bank financing but corporate bonds (22%). This financing structure is one of the general characteristics of UK companies. Interestingly trade payables has an important role in financing (9%) which is nearly 2 ties trade receivables, which in fact is a signal of good working capital management. Finally, nearly of the total financing is sourced by retained earning which is a result of successful historical performance. 6.1.3. Statement of Cash Flow Accordingly with its profitable income performance and well-balanced financial position, statement of cash flows for SABMiller represents an ideal cash management. Net cash generated from operations ($3.043 million) in the last financial year is allocated into three in general view; (1) Investment in property, plant and equipment ($1.189 million) (2) Net repayment of corporate bonds ($1.159 million) and (3) dividends paid to shareholders ($1.113 million). Cash flow statement represents a closing cash balance of $813 million whereas statement of financial position has $1.067 Cash and cash equivalent balance, mainly driven by the bank overdrafts of $258 million. 6.1.4. Trend analysis of financial performance and position SABMillers revenues have increased with a nearly 20% year-on-year increase rate from 2005 to 2008, but this increase is mainly due to acquisitions & mergers rather than an organic growth. In 2009 financial statements show a dramatic decrease compared to previous year, but this is misleading as the reason behind the decline of the revenues is the establishment of the MillerCoors joint venture. The revenues of North America region is transferred to the new entity and revenues of joint venture is not consolidate in the revenues

of SABMiller, but later in the income statement under post-tax net profit from associates and joint ventures. Profit before taxation includes the North America sales indirectly, which was also declined but mostly due the first year inefficiency of the new entity. It can be tracked from the below table that, profit before taxation catches up with the increase trend in 3 years.

5.000 4.500 4.000 3.500 12.901 3.000 2.500 15.307 18.620 21.410 18.703

25.000

20.000 19.408 18.020 15.000

10.000

5.000 2.000 1.500 2005 2006 2007 2008 2009 2010 2011 Revenue -

Operating profit

Profit before taxation

Profit for the year

2005
US$m

2006
US$m

2007
US$m

2008
US$m

2009
US$m

2010
US$m

2011

Revenue Operating profit Profit before taxation Profit for the year

US$m 2005 2006 2007 2008 2009 2010 2011 12.901 15.307 18.620 21.410 18.703 18.020 19.408 2.547 2.575 3.027 3.448 3.148 2.619 3.127 2.552 2.453 2.804 3.264 2.958 2.929 3.626 1.729 1.674 1.883 2.288 2.157 2.081 2.557

If it is the net profit after taxation that matters, trend of it implies a steady growth trend in last 7 years despite some fluctuations in meantime.

40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 2005 2006 2007 2008 2009 12.869 24.286 25.683 31.947 28.159

34.864

33.604

2010

2011

Goodwill and Intangible Assets Property, plant and equipment Total Non-current Assets

Investments in joint associates & JVs Other non-current assets

2005
US$m

2006
US$m

2007
US$m

2008
US$m

2009
US$m

2010
US$m

2011

Goodwill and Intangible Assets Investments in joint associates & JVs Property, plant and equipment Other non-current assets Total Non-curre nt Assets

US$m 2005 2006 2007 2008 2009 2010 2011 7.303 16.410 17.151 20.169 12.463 16.313 15.933 1.116 1.133 1.351 1.826 7.282 8.532 8.035 4.056 6.337 6.750 9.113 7.404 9.330 8.915 394 406 431 839 1.010 689 721 12.869 24.286 25.683 31.947 28.159 34.864 33.604

A trend analysis of non-current analysis shows a steady increase in non-current assets of the company, but a closer look will reveal that tangible assets like property, plant and equipment does not increase in the same rate. In this report the growth strategy of the company is mentioned several times, but the above graph may show better that the investment in the past 7 years is to the intangible assets like brand values, intellectual property, market position, etc. rather than physical assets. In 2009 we see the impact of the MillerCoors joint venture, that some of the goodwill and property, plant equipment is transferred to the joint venture.

20.000 18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 2005 Borrowings 2006 2007 6.892 13.530 13.735

17.838 15.506

16.906

16.349

2008 Provisions

2009

2010

2011 Total Liabilities

Trade and other payables

Other liabilities

2005 Borrowings Trade and other payables Provisions Other liabilities Total Liabilities 2005 3.340 1.994 989 569 6.892
US$m

2006 2006 7.602 2.686 1.311 1.931 13.530

US$m

2007 2007 7.231 3.015 1.439 2.050 13.735

US$m

2008 2008 9.658 3.645 1.515 3.020 17.838

US$m

2009 2009 9.618 2.582 672 2.634 15.506

US$m

2010 2010 9.414 3.373 808 3.311 16.906

US$m

2011
US$m 2011 8.460 3.582 870 3.437 16.349

Trend of liabilities show significant increase in borrowings from 2005 to 2008, but then it declines slightly until 2011. This is a good indicator for a growing company, although slowed down after 2008, that growth is not financed mainly through external debt. 6.2. Ratio and Trend Analysis 6.2.1. Six Key Ratios First part of the ratios analysis includes analysis six key ratios through a trend analysis of 7 years. Following analysis is based the below table of SABMillers key ratios for last 7 years.

PRIMARY RATIOS : 2011 Primary investment level ratios : Operating Return on Equity Financial Leverage Multiplier Primary operative level ratios : Return on Capital Employed Asset Turnover Net Profit Margin Primary liquidity level ratios : Current Ratio 15,7% 1,72 2010 15,0% 1,82 2009 19,5% 1,96 2008 19,5% 1,98 2007 20,8% 1,92 2006 19,1% 2,00 2005 24,4% 1,79

9,1% 0,50 18,36%

8,2% 0,48 17,15%

9,9% 0,59 16,82%

9,9% 0,59 16,63%

10,9% 0,65 16,76%

9,6% 0,56 16,92%

13,6% 0,82 16,53%

0,70

0,65

0,65

0,66

0,58

0,58

0,87

6.2.1.1.

Operating Return on Equity

SABMillers operating return on equity ratios stayed around 20% from 2005 till 2009 with a slight declining trend, which shows a relatively stable value creation over the equity employed has been achieved throughout the years. Normally after business combinations increased efficiency might be expected but in this case the results does not show an improved profits compared to the equity holders investment. 6.2.1.2. Financial Leverage Multiplier

Financial leverage multiplier is an indicator of the external financing position of the companies. In SABMillers case, this multiplier was nearly 2,00 between 2006 and 2009 which means external financing was close the equity financing. However, after 2009 there is a declining trend which is parallel to the slowdown of the business combinations of SABMiller after 2008. Therefore it can be concluded that in the times of big acquisitions & mergers SABMiller was more relying to the external debt, than in present time. 6.2.1.3. Return on Capital Employed

In the last 7 years the return on Capital employed was 10,2% in average for SABMiller, which steadily decreased from 13,6% in 2005 to 9,1% in 2011. This trend implies, parallel to operating return on equity ratio trend, that the profitability efficiency is

decreasing as the capital employed for the company increased. The success of the management might be questioned that as if the company can benefit from economies of scale or not, a result of extensive growth. Previously mentioned business capability programme of SABMiller mainly focus on how to increase the efficiency of the company, probably as a result of this fact. 6.2.1.4. Asset Turnover

Another operative level ratio, assets turnover, show parallel trend to return on capital employed. The story behind the ratio trend is that both the amount of capital employed and revenues are increasing but increase of revenues relatively slow. The question should be, similar to the previous ratio analysis, Did company achieve a relatively better performance by aggressive acquisition policy? Of course it may take time to adopt the new entities to the company, and achieving the expected efficiency may take time. After all companys profitability cannot be considered as low and acquisitions obviously have increased the strength of SABMillers position despite short-term inefficiency of capital employed. 6.2.1.5. Net Profit Margin

Contrary to the asset turnover and to return on capital employed ratios, net profit margin followed a stable period from 2005 to 2009 with an average of 16,73%, and dramatically increased to 18,36% in 2011. This result shows that less operating cost is required for the same amount of turnover than before; maybe the signal of the production efficiency is getting increased as a result of growth. This conflict with the previous ratios imply that growth might bring efficiency in production and marketing costs of the products, but the same efficiency is not reflected to the sales growth. The reason for this also might be a global decline in beer sales or the weakening of SABMiller in competition.

6.2.1.6.

Current Ratio

SABMiller operates with a current ratio level of 0,67 in average of last 7 years, without a significant upward or downward trend. Normally a current ratio below1,00 is a signal of a short term liquidity problem, but in SABMillers case the company has successful operation in the industry for long year therefore company is able to manage its cash flow with this position. The impact of trade payables is significant in this ratio which might be a result of SABMillers strong position against its suppliers in payment terms.

7. Competitor analysis 7.1. The biggest beverage company: Anheuser Busch Anheuser-Busch InBev(ABI) is the leading global brewer based in Belgium, whereas operations are diversified globally. Consolidated group revenue was $36,3 billion in 2010, nearly 2 times of the second best performer SABMillers annual performance. Among more than 200 beer brands, the most globally known ones are Budweiser, Stella Artois and Becks. Companys strongest region has been North America, where it has 48,3% market share in US and 41,2% in Canada (AB_InBev_AR10_OurTopTenMarkets). ABI is also very strong in two important Latin America countries, Brazil and Argentina with around 70-75% market share in both of them. Companys concentration on the rest of the world is relatively low. 7.2. Comparison of SABMiller vs. Anheuser Busch 7.2.1. Financial performance ABIs revenues for 2010 financial year were $36.297 million (87% more than SABMiller revenues) which makes the company leader of beer industry. Besides its big market size, ABIs operating profit margin (30%) is far better than SABMiller (16%).

However, SABMiller closes the margin gap to some extent in net income (before taxation) margin (19%) where ABI performs with 21%. This is due to the high level of external borrowings of ABI which creates high financial costs. ABIs non-current asset structure is quite similar to SABMiller, consisting significant amounts of goodwill and intangible assets. In fact, the proportion of goodwill and intangibles to total non-current assets (75%) is higher than SABMiller (46%), which can be a result of an even more aggressive acquisition strategy followed by ABI. External financing of ABI is 39% of total capital employed, nearly 2 times of SABMiller (22%) which also impacts the net profit margin as mentioned before. 7.2.2. Financial Ratios A comparison of operating return on equity shows that ABI (49,1%) is far better than SABMiller. There are three reasons to this; (1) ABI has better operating profit margin and (2) ABIs financing rely less to equity relatively. Financial leverage multiplier reveals the second reason that ABI has a 5,02 multiplier compared to SABMillers 1,72. The high financial leverage of ABI most probably based on the equity structure, so that there is one controlling group of shareholders who owns 51,63% at total and they do not want to lose the voting rights.

PRIMARY RATIOS : SABMille r Primary investment level ratios : Operating Return on Equity Financial Leverage Multiplier Primary operative level ratios : Return on Capital Employed Asset Turnover Net Profit Margin Primary liquidity level ratios : Current Ratio 15,7% 1,72 ABI 49,1% 5,02

9,1% 0,50 18,36%

9,8% 0,32 30,76%

0,70

0,80

Return on capital employed ratios are similar between both companies which puts SABMiller into a better position as its employed capital depends more on equity, however ABI has more borrowings which produce financing costs. 7.3. Anheuser Busch's ability to acquire SABMiller: A Brazilian news website reported in October 2011 that some talks are in place about the acquisition of SABMiller by ABI (Facchini, 2011) which take attention quickly. Although both companies denied such an issue with official announcements, the possibility of such a giant transaction was questioned within industry analysts. Both companies have a significant track report of acquisition and mergers, and the brewery industry has been used to such transaction in recent decades. This, in fact, is the first reason that makes the biggest possible deal of brewery world possible. Shareholder structure of SABMiller is also increases the potential takeover by a stronger company, as there is no single party who has the controlling votes; in fact the biggest party has only 27% of the voting rights. Furthermore, shareholders of SABMiller can be considered

as being profit oriented investors who see the company as a financial investment, therefore they would not miss an opportunity which makes sense financially. Another motivation of ABI might be the lack of its operations in Africa region where SABMiller is extensively powerful. ABI might want to enter to the emerging region as a market leader. However some analysts argue (Fletcher, 2011) that potential costs of exiting joint ventures and the price of a takeover will prevent SABMiller to be acquired by ABI. It is anticipated that, if ABI acquire SABMiller, than it will probably need to divest the stakes of SABMiller in MillerCoors, a joint venture with Molson Coors Brewing. SABMillers joint venture in China is also a similar issue.

8. Acquisition Foster's Group Limited 8.1. History of acquisitions SABMiller has followed an aggressive acquisition and strategic alliances strategy especially after acquisition of Miller Brewing Company in 2002. Between 1985 and 2011, SABMiller has made 44 acquisitions while taking stakes in 53 companies. (Alacrastore, 2011) Major deals of SABMiller are Miller Brewing Company (2002), Bavaria S.A (2005), Fosters India (2006), Koninklijke Grolsch (2008) and MillerCoors (2008).

Year 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 Total

Acquisitions 1 2 3 4 1 3 3 0 1 3 2 4 1 5 3 5 1 1 1 0 1 0 0 0 0 0 0 44

Stakes 0 0 2 2 0 4 4 6 3 0 7 4 1 1 2 2 2 4 3 1 3 0 1 0 0 0 1 53

Divestitures 3 1 5 0 3 6 3 2 3 1 2 2 7 10 1 0 0 2 3 0 0 1 1 0 0 0 0 56

Table 2: SABMiller plc M&A Summary (soure: Alacrastore)

8.1.1. Acquisiton of Miller Brewing Company (2002) As a result of the deal between South African Breweries plc (SAB) and Philip Morris Companies Inc.(Philipp Morris), Miller Brewing company has become a wholly owned subsidiary of SAB and the new structure named SABMiller in July 2002. SAB paid $3,6

billion in stock and took Millers debt of $2 billion, and became the worlds 2nd largest brewer after the deal. (CNNMoney, 2002) 8.1.2. Merger with Bavaria S.A (2005) In 2005, SABMiller entered into one of the biggest transactions in its history with Santo Domingo Group through the merger of Bavaria S.A., the second largest brewer in South America. Bavaria had leading market shares in several South America countries like Colombia (99%), Peru (99%), Ecuador (93%) and Panama (79%). 8.1.3. Acquisition of Fosters India (2006) SABMillers entrance into India market, as the 2nd largest brewery of the country, was realized with the acquisition of Fosters India in September, 2006 for $120 million. This was an important deal in the way of penetration to the Asian market for the company. 8.1.4. Acquisition of Koninklijke Grolsch (2008) One of the biggest deals for SABMiller was the takeover of Netherlands Grolsch in February, 2008. Grolsch, having a 15% market share in Netherlands, also was reaching beer markets in UK, the United States, Canada, France, Australia and New Zealand. Takeover has been completed with a purchase of 99,46% shares for $812 million. 8.1.5. Joint Venture with Molson Coors (MillerCoors) (2008) SABMillers next big attack has been the joint venture deal with Molson Coors Brewing Company to combine their operations in US and Puerto Rico. New entity named MillerCoors, which now holds 30% market share in US.

8.2. Foster's Group Limited 8.2.1. Company Information Fosters is an Australia based group of companies, which focused on brewing activities. The majority of its revenues are generated by its Australian and Pacific beer business Carlton United Brewers, and rest is generated by International Beer business with its 4 key brands distributed in 45 countries. (Fosters, 2012) Fosters Group is the market leader in Australia beer market with total revenues of $2.418 million in the 2011 financial year (Fosters, 2011). The company has a portfolio of well established brands including VB, Carlton Draught, Corona, Crown Lager, Pure Blonde, Carlton Mid and Carlton Dry. Foster's is also the largest cider producer in Australia. Foster's is listed on the Australian Securities Exchange.(SABMiller, 2011) 8.2.2. Financial statement analysis of Foster's Although Fosters reported a net loss for the year with an amount of $89 million, before $1.136 million loss from discontinued wine operations, company has $1.047 million net profits. Total revenues for the 2011 financial year is $2.418 million and operating profit margin is 30,7%. The elimination of wine business has significant effects on the financial statements of 2011 financial year, therefore operative level of ratios are distorted and might be misleading. Company has a current ratio of 1,13 which is a good indicator of ability to finance short term obligations.

8.3. Acquisition Process SABMiller made first offer to acquire all of Fosters shares for A$4,90 per fully paid share in cash (nearly $10 billion) in June 2011,. SABMiller explained its interest in Austrias leading brewer with its strategy to create an attractive global spread of businesses, with a focus on developing strong and successful brand portfolios (SABMiller, 2011a) The SABMiller proposal was sent to the Chairman of Fosters in 20 June 2011, but the next they Fosters board announced that they rejected the offer. SABMiller, against this action of the Fosters board, took its offer to the shareholders of Fosters directly on 17th of August. This further action by SABMiller considered being a hostile bid (BBC, 2011) as it is processed via mailing of a Bidders Statement to Fosters shareholders through Australian Securities and Investments Commission. The offer was rejected by shareholders as they considered the Fosters is undervalued by SABMiller (Werdigier, 2011) and negotiations took several months until parties agreed on the last offer of SABMiller in September, 2011. The offer was increased to A$5,10 per share which represents an acquisition enterprise value of A$11.2 billion. The bid valued Fosters at 12,5 times estimated EBITDA, whereas average of comparable transactions in the brewing industry is 11,5 times. (Fletcher, 2011) 8.4. Financing of the acquisition According to the proposal of SABMiller, consideration would be paid in cash and would be financed from SABMiller's existing resources and new debt facilities. (SABMiller, 2011a) In August 2011, SABMiller hired 10 banks to raise $12,5 billion of loans for financing of the possible acquisition (Morris, 2011). In December 2012, following the agreement, SABMiller used the loan facility to pay the consideration to Fosters shareholders.

SABMiller issued $7 billion multi-tranche corporate bond immediately in 10 January 2012 (Jones, 2012) and raised the significant amount of the funds for Fosters acquisition, which is announced to be used in the partial repayment of the loan facility.

References: Alacrastore, 2011. SABMiller plc Mergers and Acquisitions [online] available at http://www.alacrastore.com/mergers-acquisitions/SABMiller_plc-2102919 accessed at 22.01.2012 Arcot S, Bruno V & Grimaud AF, 2010. 'Corporate governance in the UK: Is the comply or explain approach working?', International Review Of Law & Economics, 30, pp. 193-201 BBC,2011. News Business: SABMiller to go hostile with $10bn Foster's bid [online] available at <http://www.bbc.co.uk/news/business-14554391> accessed at 22.01.2012 CNNMoney, 2002. SAB buys Miller Brewing [online] available at <http://money.cnn.com/2002/05/30/news/deals/miller_sab/index.htm> accessed at 22.01.2012 IAS38, 2010. International Accounting Standard 38 : Intangible Assets, IFRS Foundation. [online] available at <http://eifrs.iasb.org/eifrs/bnstandards/en/ias38.pdf> accessed 22.01.2012 Epstein B.J. and Jermakowicz E.K. ,2010. Interpretation and Application of IFRS, John Wiley&Sons: New Jersey. Fin24, 2012. Tsogo Sun Holdings Limited: Company Profile. [online] available at: <http://www.fin24.com/Company/Tsogo-Sun/Profile> accessed at 22.01.2012 FRC, 2012a. Financial Reporting Council, FRC Home: About the FRC. [online] available at: <http://www.frc.org.uk/about/> accessed at 22.01.2012 FRC, 2010. FINANCIAL REPORTING COUNCIL, JUNE 2010 THE UK CORPORATE GOVERNANCE CODE. [online] available at: <http://www.frc.org.uk/documents/pagemanager/Corporate_Governance/UK%20Corp%20Go v%20Code%20June%202010.pdf> accessed at 22.01.2012 FSA, 2012. FSA: Who we are?. [online] available at <http://www.fsa.gov.uk/about/who> accessed at 22.01.2012 FDB, 2011. Food and Drinks Busines SABMiller Makes Hostile Bid For Fosters [online] available at <http://foodanddrinkbusiness.com/?p=6329> accessed at 22.01.2012 Fletcher C, 2011. Bloomberg News: SABMiller to Buy Fosters After Raising Bid [online] available at <http://www.bloomberg.com/news/2011-09-21/sabmiller-agrees-toacquire-foster-s-after-boosting-bid-to-10-2-billion.html> accessed at 22.01.2012 Fletcher C, 2011. SABMiller Shares Surge on Takeover Report, Bloomberg. [online] available at : <http://www.bloomberg.com/news/2011-10-06/sabmiller-shares-surge-onreport-of-ab-inbev-takeover-talks.html> accessed 22.01.2012 Facchini C, 2011. InBev deve utilizar a AmBev, no Brasil, para comprar SABMiller IG Economia. [online] available at : <http://economia.ig.com.br/mercados/inbev-deve-

utilizar-a-ambev-no-brasil-para-comprar-sabmiller/n1597260436430.html> accessed 22.01.2012 Fosters, 2012. Fosters Overview [online] available at <http://www.fostersgroup.com/about/overview.aspx.> accessed at 22.01.2012 Fosters, 2011. Foster Group Ltd Annual Report 2011. [online] available at <http://www.fostersgroup.com/common/files/Annual_Report_2011.pdf> accessed at 22.01.2012 HRCM, 2012. Corporation Tax rates HM Revenue&Customs. [online] available <http://www.hmrc.gov.uk/rates/corp.htm> accessed 22.01.2012 Jones D, 2012. SABMiller plans largest US bond sale since 2010, Moneyweb. [online] available at : <http://www.moneyweb.co.za/mw/view/mw/en/page292520?oid=559357&sn=2009+Detail> accessed 22.01.2012 LSE, 2010. "A guide to listing on the London Stock Exchange". [online] available at <http://www.londonstockexchange.com/home/guide-to-listing.pdf> accessed 12.01.2012 LSE, 2012. Prices and markets, Stocks, SABMILLER [online] available at <http://www.londonstockexchange.com/exchange/prices-andmarkets/stocks/summary/companysummary.html?fourWayKey=GB0004835483GBGBXSET0> accessed at 22.01.2012 Mallett N., 2010. Merger reserve what to do with it?, Lewissilkin. . [online] available at http://www.lewissilkin.com/our_knowledge/knowledge_articles/Pages/Mergerreservewhattod owithit.aspx accessed at 22.01.2012 Mercer C, 2011. Comment - Anheuser-Busch InBev, SABMiller: Sounds Mad, But...?, Just Drinks, 10 October 2011. [online] available at : <http://www.justdrinks.com/comment/sounds-mad-but_id105209.aspx> accessed 22.01.2012 Moneyterms, 2011. UKLA (UK Listing Authority) [online] available at: <http://moneyterms.co.uk/ukla/> accessed at 22.01.2012 Morris S, 2011. SABMiller Hires 10 Banks for Fosters Loan Bloomberg. . [online] available at : <http://www.bloomberg.com/news/2011-08-25/sabmiller-hires-banks-for-12-5billion-loan-to-back-hostile-foster-s-bid.html> accessed 22.01.2012 NYSE,2012. NYSE Euronext Altria Group, Inc. [online] available at <http://www.nyse.com/about/listed/mo.html> accessed at 22.01.2012 SABMiller, 2011a. News: SABMiller plc proposal to acquire Fosters Group Limited. [online] available at <http://www.sabmiller.com/index.asp?pageid=149&newsid=1624> accessed at 22.01.2012

SABMiller, 2012a. About Us: Heritage [online] available at: <http://www.sabmiller.com/index.asp?pageid=27> accessed at 22.01.2012 WERDIGIER J, 2011. SABMiller to Buy Fosters for $10.15 Billion NYTimes Dealbook. [online] available at <http://dealbook.nytimes.com/2011/09/21/sabmiller-to-buy-fosters-for10-15-billion/> accessed at 22.01.2012

APPEDIX: Financial Statements of SABMiller, ABI and Fosters

SABMiller plc Annual Reports (2005-2011)

Consolidate d stateme nt of compre he ns ive income : Revenue Net operating expenses Operating profit Operating profit before exceptional items Exceptional items 2011 US$m 19.408 (16.281) 3.127 3.563 (436) 2010 US$m 18.020 (15.401) 2.619 3.091 (472) (563) (879) 316 873 2.929 (848) 2.081 2.081 171 1.910 2.081 122,6 122,1 2009 US$m 18.703 (15.555) 3.148 3.146 2 (706) (1.301) 595 516 2.958 (801) 2.157 2.157 276 1.881 2.157 125,2 124,6 2008 US$m 21.410 (17.962) 3.448 3.560 (112) (456) (721) 265 272 3.264 (976) 2.288 2.288 265 2.023 2.288 134,9 134,2 2007 US$m 18.620 (15.593) 3.027 3.120 (93) (428) (668) 240 205 2.804 (921) 1.883 1.883 234 1.649 1.883 110,2 109,5 2006 US$m 15.307 (12.732) 2.575 2.590 (15) (299) (377) 78 177 2.453 (779) 1.674 1.674 234 1.440 1.674 105,0 104,3 2005 US$m 12.901 (10.354) 2.547 2.132 415 (143) (239) 96 148 2.552 (823) 1.729 1.729 208 1.521 1.729 125,5 121,2

Anheuser-Busch InBev
2010 US$m 36.297 (25.400) 10.897 11.165 (268) (3.736) (3.336) (925) 525 521 7.682 (1.920) 5.762 5.762 4.026 1.736 5.762 2,5 2,5 2009 US$m 36.758 (25.189) 11.569 10.248 1.321 (4.419) (4.137) (629) 347 513 7.663 (1.786) 5.877 5.877 4.613 1.264 5.877 2,9 2,9

Foster's
2011 US$m 2.418 (1.675) 744 744 2010 US$m 2.556 (1.689) 867 867

Net finance costs (525) Interest payable and similar charges (883) Non-recurring Finance cost Interest receivable and similar income 358 Share of post-tax results of associates and join 1.024 Profit be fore taxation Taxation Profit for the year 3.626 (1.069) 2.557

16 (126) 143 15 775 272 1.047 (1.136) (89) (0) (88) (89)

(119) (125) 6 14 762 (209) 553 (1.017) (464) (0) (464) (464)

Net loss from discontinued operations (net of i Net loss for the year 2.557 Profit attributable to non-controlling interests Profit attributable to equity shareholders 149 2.408 2.557 152,8 151,8

Basic earnings per share (US cents) Diluted earnings per share (US cents)

SABMiller plc Annual Reports (2005-2011)

Consolidate d balance s he et : 2011 US$m Asse ts Non-curre nt as sets Goodwill Intangible assets Property, plant and equipment Investments in joint ventures Investments in associates Available for sale investments Agricultural Assets Investment securities Derivative financial instruments Employee benefits Inventories Trade and other receivables Deferred tax assets 2010 US$m 2009 US$m 2008 US$m 2007 US$m 2006 US$m 2005 US$m

Anheuser-Busch InBev
2010 US$m 2009 US$m

Foster's
2011 US$m 2010 US$m

11.952 4.361 9.330 5.813 2.719 35 330 140 184 34.864

11.579 4.354 8.915 5.822 2.213 31 409 117 164 33.604

8.734 3.729 7.404 5.495 1.787 29 695 125 161 28.159

15.133 5.036 9.113 1.826 53 208 237 341 31.947

13.250 3.901 6.750 1.351 52 34 181 164 25.683

12.814 3.596 6.337 1.133 43 3 86 274 24.286

7.181 122 4.056 1.116 187 54 153 12.869

52.498 23.359 15.893 7.295 243 13 1.700 744 101.745

52.125 23.165 16.461 6.744 277 10 1.941 949 101.672

807 684 63 104 10 13 559 2.239

1.758 1.688 76 194 141 338 20 330 4.544

1.256 1.687 152 16 1.067 4.178 Assets of disposal group classified as held for 66 4.244 39.108 Total assets Liabilitie s Current liabilitie s Derivative financial instruments Bank Overdrafts Borrowings Trade and other payables Current tax liabilities Provisions

Current asse ts Inventories Trade and other receivables Income tax receivable Current tax assets Investment securities Derivative financial instruments Available for sale investments Loan participation deposit Cash and cash equivalents

1.295 1.665 135 20 1 779 3.895 3.895 37.499

1.242 1.576 168 54 11 409 3.460 3.460 31.619

1.362 1.865 190 45 673 4.135 4.135 36.082

928 1.471 103 6 481 2.989 64 3.053 28.736

878 1.225 54 4 196 472 2.829 2.829 27.115

627 952 56 1.143 2.778 2.778 15.647

2.409 4.638 366 641 32 4.511 12.597 12.597 114.342

2.354 4.099 590 55 66 3.689 10.853 10.853 112.525

158 543 58 759 759 2.997

1.013 990 10 237 2.250 35 2.286 6.830

(50) (1.345) (3.484) (658) (410) (5.947) Liabilities of disposal group classified as held f (66) (6.013) Non-curre nt liabilities Derivative financial instruments Borrowings Trade and other payables Deferred tax liabilities Employee benefits Provisions Total liabilitie s Net assets

(174) (1.605) (3.228) (616) (355) (5.978) (5.978)

(35) (2.148) (2.396) (463) (299) (5.341) (5.341)

(34) (2.062) (3.307) (540) (314) (6.257) (6.257)

(5) (1.711) (2.746) (429) (266) (5.157) (19) (5.176)

(3) (1.950) (2.414) (316) (182) (4.865) (4.865)

(815) (1.941) (381) (62) (3.199) (3.199)

(14) (2.919) (12.071) (478) (238) (15.720) (15.720)

(28) (2.015) (11.377) (526) (308) (14.254) (14.254)

(1) (102) (441) (128) (672) (672)

(0) (322) (797) (34) (135) (1.288) (1.288)

(85) (7.115) (98) (2.578) (460) (10.336) (16.349) 22.759 -0,22

(147) (7.809) (145) (2.374) (453) (10.928) (16.906) 20.593

(107) (7.470) (186) (2.029) (373) (10.165) (15.506) 16.113

(497) (7.596) (338) (1.949) (1.201) (11.581) (17.838) 18.244

(204) (5.520) (269) (1.393) (1.173) (8.559) (13.735) 15.001

(175) (5.652) (272) (1.437) (1.129) (8.665) (13.530) 13.585

(2.525) (53) (188) (927) (3.693) (6.892) 8.755

(41.961) (2.295) (11.909) (2.746) (912) (59.823) (75.543) 38.799 -0,39

(47.049) (1.979) (12.495) (2.611) (966) (65.100) (79.354) 33.171

(1.574) (57) (283) (13) (1.926) (2.598) 400

(1) (2.242) (10) (555) (19) (2.826) (4.114) 2.716

Equity Share capital Share premium Merger relief reserve Other reserves Retained earnings Total share holde rs equity Non-controlling interests Total equity

166 6.384 4.586 1.881 8.991 22.008 751 22.759

165 6.312 4.586 1.322 7.525 19.910 683 20.593

159 6.198 3.395 (873) 6.496 15.375 738 16.113

158 6.176 3.395 2.215 5.601 17.545 699 18.244

158 6.137 3.395 466 4.250 14.406 595 15.001

158 6.099 3.395 102 3.289 13.043 542 13.585

135 2.010 3.395 207 2.330 8.077 678 8.755

1.733 17.535 2.335 13.656 35.259 3.540 38.799

1.732 17.515 623 10.448 30.318 2.853 33.171

2.346

3.525

(949) (1.010) 387 12 400

(428) (399) 2.698 17 2.715

SABMiller plc Annual Reports (2005-2011)

Consolidate d cash flow stateme nt : 2011 US$m Cash flows from ope rating activities Cash generated from operations 4.568 Interest received 293 Interest paid (933) Tax paid (885) Net cash generate d from ope rating activit 3.043 Cash flows from investing activities Purchase of property, plant and equipment (1.189) Proceeds from sale of property, plant and equi 73 Purchase of intangible assets (126) Purchase of available for sale investments (3) Acquisition of businesses (net of cash acquired (60) Investments in joint ventures (186) Investments in associates (5) Repayment of investments by associates 68 Dividends received from joint ventures 822 Dividends received from associates 88 Dividends received from other investments 1 Net cash used in investing activities (517) Cash flows from financing activitie s Proceeds from the issue of shares 73 Proceeds from the issue of shares in subsidiari 34 Purchase of shares from non-controlling intere (12) Proceeds from borrowings 1.608 Repayment of borrowings (2.767) Capital element of finance lease payments (5) Net cash payments on net investment hedges (43) Dividends paid to shareholders of the parent (1.113) Dividends paid to non-controlling interests (102) Net cash used in financing activities (2.327) Net cash inflow from operating, investing and Effects of exchange rate changes Net increase in cash and cash e quivalents Cash and cash equivalents at begining Cash and cash e quivalents at closing 199 25 224 589 813 2010 US$m 2009 US$m 2008 US$m 2007 US$m 2006 US$m 2005 US$m

Anheuser-Busch InBev
2010 US$m 2009 US$m

Foster's
2011 US$m 2010 US$m

4.537 317 (957) (620) 3.277

3.671 275 (997) (766) 2.183

4.276 228 (730) (969) 2.805

4.018 231 (719) (801) 2.729

3.291 80 (401) (869) 2.101

2.792 94 (228) (625) 2.031

13.972 219 (2.987) (1.682) 9.522

13.469 132 (2.908) (1.569) 9.124

730 17 (103) (102) 750

918 3 (114) (267) 935

(1.436) 37 (92) (6) (78) (353) (76) 3 707 106 2 (1.172)

(2.073) 75 (74) (14) (252) (397) (4) 3 454 151 1 (2.009)

(1.978) 110 (59) (1.284) (179) 91 1 (3.220)

(1.191) 110 (270) (3) (131) (186) 102 1 (1.479)

(999) 48 (33) (7) (717) (1) 71 2 (1.509)

(756) 30 (12) (19) (23) (13) 47 10 (329)

(2.344) 221 (37) 383 (2.179)

(1.713) 327 (608) 5.240

(74) (44) (210)

(38) 4 (48) (90)

114 (5) 5.110 (5.714) (4) (137) (924) (160) (1.728) 377 90 467 122 589

23 (5) 4.960 (4.096) (1) (12) (877) (217) (262) (88) 22 (66) 188 122

39 (33) (49) 6.492 (5.038) (7) (16) (769) (197) 422 7 (113) (106) 294 188

38 (30) (200) 5.126 (5.663) (7) 42 (681) (161) (1.336) (86) (18) (104) 398 294

30 (8) (2.048) 3.002 (900) (28) (520) (167) (835) (243) 11 (232) 630 398

38 (21) (793) 540 (632) (25) (412) (172) (1.476) 226 (56) 170 460 630

215 27.313 (31.603) (4) (1.924) (6.741) 602 234 836 3.661 4.497

76 27.834 (39.627) (4) (1.313) (13.067) 1.297 193 1.490 2.171 3.661

1.186 (1.422) (470) (706) (166) (12) (178) 237 58

625 (833) (526) (735) 110 (5) 104 133 237