SAB Saratoga Investment Corp

SABMiller plc, one of the world's leading brewers, reports its preliminary (unaudited) results for the twelve months to 31 March 2014.

Highlights

• Portfolio development and commercial execution drive group NPR
• Reported group NPR decline of 1% with organic, constant currency group NPR growth of 3%
• Lager volumes up 1% on both reported and organic bases with growth in Latin America, Africa and Asia Pacific partially offset by declines in Europe and North America
• Reported EBITA growth of 1% and EBITA margin1 improvement of 50 basis points (bps) to 24.2%, with organic, constant currency EBITA growth of 7% and EBITA margin1 expansion of 90 bps
• The depreciation of key currencies against the US dollar had a significant negative impact on the translation of financial results, impacting reported EBITA by approximately US$400 million
• Adjusted earnings up 2%, with adjusted EPS also up 2% to 242.0 US cents per share
• Full year dividends per share up 4% to 105.0 US cents

1 Expressed as a percentage of group NPR.

	2014 US$m	20132 US$m	% change
Group revenuea	34,084	34,487	(1)
Revenueb	22,311	23,213	(4)
Group net producer revenuec	26,719	26,932	(1)
EBITAd	6,453	6,379	1
Adjusted profit before taxe	5,712	5,597	2
Profit before taxf	4,823	4,679	3
Profit attributable to owners of the parent	3,381	3,250	4
Adjusted earningsg	3,865	3,772	2
Adjusted earnings per share
- US cents	242.0	237.2	2
- UK pence	152.1	150.2	1
- SA cents	2,451.7	2,018.9	21
Basic earnings per share (US cents)	211.8	204.3	4
Dividends per share (US cents)	105.0	101.0	4
Free cash flow	2,563	3,230	(21)

2 As restated. Further details of the restatement are provided in the financial review and note 13.

a      Group revenue includes the attributable share of associates' and joint ventures' revenue of US$11,773 million (2013: US$11,274 million). b      Revenue excludes the attributable share of associates' and joint ventures' revenue. c      Group net producer revenue (NPR) comprises group revenue less excise and similar taxes, including the group's share of associates' and joint ventures' excise and similar taxes. d      Note 2 provides a reconciliation of operating profit to EBITA which is defined as operating profit before exceptional items and amortisation of intangible assets (excluding computer software) but includes the group's share of associates' and joint ventures' operating profit, on a similar basis. EBITA is used throughout this preliminary announcement. e      Adjusted profit before tax comprises EBITA less adjusted net finance costs of US$645 million (2013: US$738 million, restated) and share of associates' and joint ventures' net finance costs of US$96 million (2013: US$44 million). f       Profit before tax includes exceptional charges of US$202 million (2013: US$203 million). Exceptional items are explained in note 3. g      A reconciliation of adjusted earnings to the statutory measure of profit attributable to owners of the parent is provided in note 6.

Alan Clark, Chief Executive of SABMiller, said:

"We have produced a resilient performance in the face of a number of headwinds, with organic, constant currency EBITA growth of 7% and strong margin improvement. Group net producer revenue growth of 3% was led by our developing market businesses in Africa and Latin America, together with our associate in China, where we continued to build capacity, make selective price increases and grow our premium brand portfolios. We continue to deliver operational cost efficiencies including the completion of the business capability programme and have identified further areas where efficiencies can be targeted."

"As we look ahead, we will continue to innovate and rejuvenate our products, build on our position in growth markets, and increase the efficiency of our operations. With this approach I believe we are well placed to continue to deliver strong returns to shareholders."

Group net producer revenue	Reported 2013 US$m	Net acquisitions and disposals US$m	Currency translation US$m	Organic growth US$m	Reported 2014 US$m	Organic, constant currency growth %	Reported growth %
Latin America	5,802	(45)	(305)	293	5,745	5	(1)
Europe	4,300	269	4	1	4,574	-	6
North America	4,656	-	-	9	4,665	-	-
Africa	3,290	9	(55)	180	3,424	5	4
Asia Pacific	4,005	9	(213)	143	3,944	4	(2)
South Africa:	4,879	24	(826)	290	4,367	6	(10)
- Beverages	4,475	17	(757)	262	3,997	6	(11)
- Hotels and Gaming	404	7	(69)	28	370	7	(8)
Total	26,932	266	(1,395)	916	26,719	3	(1)

Group volumes	Reported 2013 hl'000	Net acquisitions and disposals hl'000	Organic growth hl'000	Reported 2014 hl'000	Organic growth %	Reported growth %
Lager	241,940	787	2,110	244,837	1	1
Soft drinks	56,881	5,800	2,681	65,362	5	15
Other alcoholic beverages	7,452	223	41	7,716	1	4
Total	306,273	6,810	4,832	317,915	2	4

EBITA	Restated 2013 US$m	Net acquisitions and disposals US$m	Currency translation US$m	Organic growth US$m	Reported 2014 US$m	Organic, constant currency growth %	Reported growth %
Latin America	2,112	(11)	(112)	203	2,192	10	4
Europe	784	33	7	(121)	703	(15)	(10)
North America	740	-	-	57	797	8	8
Africa	838	-	(10)	111	939	13	12
Asia Pacific	854	(9)	(72)	72	845	8	(1)
South Africa:	1,253	4	(211)	92	1,138	7	(9)
- Beverages	1,119	2	(188)	82	1,015	7	(9)
- Hotels and Gaming	134	2	(23)	10	123	8	(8)
Corporate	(202)	-	2	39	(161)
Total	6,379	17	(396)	453	6,453	7	1
EBITA Margin1 (%)	23.7				24.2

1 Expressed as a percentage of group NPR.

Business review

The group delivered earnings growth in the year, despite headwinds in several markets. The depreciation of key currencies against the US dollar had a significant negative impact on the translation of financial results in South Africa, Latin America and Australia, resulting in a decline of 1% in reported group NPR and a 1% increase in reported EBITA.

Group NPR growth of 3% on an organic, constant currency basis was driven by our developing market operations in Latin America, Africa, Asia Pacific and South Africa, through a combination of volume growth, selective pricing and improved brand mix. Lager volumes grew by 1% on both reported and organic bases reflecting robust growth in Latin America, Africa and China, partially offset by declines in Europe and North America. Reported soft drinks volumes increased by 15%, benefiting from the full consolidation of Coca-Cola Icecek in our associate Anadolu Efes, with soft drinks volume growth of 5% on an organic basis driven by Latin America, Europe and Africa.

On an organic, constant currency basis EBITA grew by 7% as a result of higher group NPR, cost efficiencies across most divisions and a reduction in performance-related share incentive charges, resulting in a 90 bps increase in our organic, constant currency EBITA margin. Input cost increases were mitigated by procurement savings, leaving raw material input costs in line with the prior year on a constant currency, per hl basis. Production efficiencies also aided cost of goods sold, while a focus on cost management benefited fixed costs. Marketing investment increased in some developing markets to support category development and the expansion of our brand portfolios. On a reported basis EBITA margin increased by 50 bps, reflecting the adverse impact of both currency and the inclusion of the acquisition of the Kingway brewery business in our Chinese associate's results in the second half of the year, together with the full consolidation of Coca-Cola Icecek in Anadolu Efes' results.

Adjusted earnings grew by 2% over the prior year, significantly impacted by the depreciation of key currencies against the US dollar, principally the South African rand, Australian dollar, Colombian peso and Peruvian nuevo sol. Net finance costs were lower than in the prior year following a reduction in net debt including the repayment of some higher interest bonds which matured in the year.

Due to the phasing of scheduled receipts from and payments to the Australian Tax Office and our increased investment in our Chinese associate to partly fund the Kingway acquisition, free cash flow for the year was lower by US$667 million at US$2,563 million. However, excluding these one-off items free cash flow increased by 13% compared with the prior year. Adjusted EBITDA was adversely impacted by the depreciation of key currencies against the US dollar in the year but still grew by 1%. Strong working capital cash inflows in Europe and Latin America led to a working capital cash inflow of US$93 million. Capital expenditure at US$1,485 million was in line with the prior year, with continued investment in brewing capacity and capability, particularly in Africa and Latin America.

The group's gearing ratio as at 31 March 2014 was 52.0%. Net debt reduced by US$1,297 million, ending the year at US$14,303 million. A final dividend of 80.0 US cents per share is proposed, to be paid to shareholders on 15 August 2014. This brings the total dividend for the year to 105.0 US cents per share, an increase of 4.0 US cents over the prior year.

• In Latin America, EBITA grew by 4% (10% on an organic, constant currency basis), adversely impacted by the depreciation of the Colombian peso and Peruvian nuevo sol against the US dollar. Group NPR on an organic, constant currency basis grew by 5% driven by selective price increases and favourable brand mix, supported by our continued focus on market-facing activities and effective trade execution, despite trading challenges in several markets. Reported EBITA margin improved by 180 bps through a combination of group NPR growth, cost efficiencies and asset disposals.  
• In Europe, EBITA was down by 10% with group NPR growth of 6%, both on a reported basis, which includes the benefit of the full consolidation of Coca-Cola Icecek in Anadolu Efes' results. On an organic, constant currency basis group NPR was in line with the prior year reflecting volume-led declines in Poland and the Anadolu Efes beer business, offset by soft drinks volume growth in Anadolu Efes and lager volume improvements in Romania, Slovakia, the Netherlands and the UK, while organic, constant currency EBITA declined by 15%. Reported EBITA margin decreased by 280 bps driven by volume declines in Poland and margin contraction in Anadolu Efes.  
• In North America, EBITA increased by 8% as a result of increased profitability in MillerCoors. Group NPR was level with the prior year, with a decline in lager volumes offset by higher group NPR per hl. Group NPR per hl benefited from firm pricing and favourable brand mix resulting from the introduction of new higher margin products such as the Redd's franchise, growth in the Tenth and Blake division and a decline in the economy segment. The growth in sales of higher margin products, along with continued fixed cost reduction and lower marketing spend helped drive a 120 bps improvement in EBITA margin.  
• In Africa, EBITA grew by 12% (13% on an organic, constant currency basis) as a result of volume growth, pricing, and market share gains across most of our subsidiaries. The group NPR growth of 4% (5% on an organic, constant currency basis) was driven by good lager volume growth across our portfolios, as mainstream brands performed well and Castle Lite continued to expand in the premium segment. Focus on production efficiencies and increased local sourcing of raw materials helped contain variable cost increases and deliver reported EBITA margin growth of 190 bps despite increased fixed costs related to investment in capacity.   
• In Asia Pacific, EBITA declined by 1% and group NPR declined by 2% on a reported basis following the depreciation of the Australian dollar against the US dollar. On an organic, constant currency basis EBITA grew by 8% driven by Australia and China. In Australia, continuing1 domestic NPR on a constant currency basis was level with the prior year, as pricing and a focus on premium growth platforms offset lager volume declines resulting from continued category and competitor pressure. The integration programme continued to progress ahead of schedule in terms of both synergy delivery and capability build. In China, organic, constant currency group NPR growth of 17% was underpinned by higher volumes and the continued focus on premiumisation, led by Snow Draft and Snow Brave the World. Reported EBITA in China benefited from higher group NPR, but margins were diluted by investment in market-facing activities and the inclusion of Kingway results in the second half of the financial year, following completion of the acquisition in September 2013. As a result reported EBITA margin for the region increased by 10 bps.  
• South Africa: Beverages was adversely impacted by the significant depreciation of the South African rand against the US dollar, resulting in reported EBITA and group NPR decreases of 9% and 11% respectively. On an organic, constant currency basis EBITA grew by 7% driven by the increase in group NPR of 6% on the same basis. Lager volumes were level with the prior year, affected by the timing of Easter and the slowing economy. Castle Lite and Castle Milk Stout performed strongly in the premium segment which, along with firm pricing, helped to deliver a 6% increase in group NPR per hl. Despite intense competition and challenging economic conditions, soft drinks volumes were level with the prior year driven by the two litre PET pack in the sparkling portfolio, while water brands and the Play brand performed well in still drinks. EBITA margins were under pressure owing to the deteriorating exchange rate and the higher input costs but the impact was contained and offset through continued focus on increased productivity, resulting in reported EBITA margin growth of 40 bps.

1Continuing information basis adjusts for the impact of discontinued licensed brands in all comparative information.

• The business capability programme concluded at the end of the year, having built our global procurement and European manufacturing organisations, together with our standardised global template. This template will now be rolled out across our businesses. We have achieved cumulative net operating benefits of US$496 million per annum, with incremental operating benefits in the year of US$175 million, which were in excess of the forecast issued in 2012 of net cumulative benefits of US$450 million by March 2014. Exceptional business capability programme costs in the year were US$79 million (2013: US$141 million).  
• We have now launched a new programme in order to drive additional operational efficiencies and it is expected to deliver savings of approximately US$500 million per annum by the financial year ending 31 March 2018. It will provide a global business services organisation delivering standardised finance, HR, procurement and data analytics services to the group's operations, enabled by the global template, from central locations and restructuring of the in-country back office teams. It will also expand the scope of our supply chain activities including expanding the reach of our procurement organisation to in excess of 80% spend under management, together with changes to its current delivery model. This programme will involve restructuring costs of some US$350 million, of which US$59 million has been incurred in the year. These costs exclude the further deployment of the global template and the running costs of the new global business services organisation which will be embedded into business as usual costs.

Outlook Trading conditions are expected to remain broadly unchanged from the year just ended, with growth continuing to be driven by our developing markets, however the business will continue to be impacted by currency movements. Development of our brand and pack portfolios will continue, as we seek opportunities to reach new consumers and enhance the beer category. Revenue growth will also be driven by selective price increases and management of our price points across all brands and packs.  Raw material unit input costs are expected to rise in low single digits in constant currency terms. Investment in production capacity, capability and strong commercial execution of existing and new consumer offerings will continue to drive growth. We will implement our new programme to deliver efficiencies to invest in this growth and improve our margins.

Enquiries:
	SABMiller plc	Tel: +44 20 7659 0100
Catherine May	Director of Corporate Affairs	Tel: +44 20 7927 4709
Gary Leibowitz	Senior Vice President, Internal and Investor Engagement	Tel: +44 20 7659 0119
Christina Mills	Director of Communications and Reputation	Tel: +44 20 7659 0105
Richard Farnsworth	Business Media Relations Manager	Tel: +44 20 7659 0188
A live audio webcast of a presentation to the investor community by Chief Executive, Alan Clark, and Chief Financial Officer, Jamie Wilson will begin at 9.30am (BST) on 22 May 2013. To register for the webcast, download the slide presentation, view management video interviews and download photography and b-roll, visit our online Results Centre at www.sabmiller.com/resultscentre. To monitor Twitter bulletins throughout the day follow www.twitter.com/sabmiller or #sabmillerresults. Copies of the press release and detailed Preliminary Announcement are available from the Company Secretary at the Registered Office or from our website www.sabmiller.com.

SABMiller preliminary results to 31 March 2014 http://hugin.info/159125/R/1787883/614051.pdf

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