5. Exceptional items

Bottling AppletiseBrewery scenePilsener beer

The following items were treated as exceptional by the group during the years ended 31 March:

Recognised in operating profit:    
North America    
Restructuring and integration costs (13) (23)
Brewery closure costs in Tumwater 4 (35)
Asset impairment (5)
  (14) (58)
Central America    
Reorganisation costs (6) (12)
Water plant closure costs in the Canary Islands (6)
  (26) (70)
Taxation 7 23
Minority interests’ share of the above items 5 4

The amalgamation of Miller Brewing Company with the rest of the group’s business has given rise to restructuring and integration costs during the year under review amounting to US$13 million (2003: US$23 million). These costs relate mainly to severance costs in 2004 and in 2003, and in 2003 also included consultancy fees, office closure costs and expenses related to the reorganisation of the Miller and Pilsner Urquell international businesses, including severance costs and international brand realignment costs.

Following the acquisition of Miller Brewing Company, an operating review resulted in management announcing, on 10 January 2003, the closure of the Tumwater brewery effective from 1 July 2003. Total brewery closure costs in 2003 amounted to US$35 million and included the impairment of tangible fixed assets to net recoverable value (US$20 million) and rationalisation costs, including redundancy and associated closure costs (US$15 million). In 2004, US$4 million of the closure costs provided in the prior year were deemed surplus and were credited to the profit and loss account in the year.

Following the decision in the year to cease the production and distribution of Flavoured Malt Beverages (FMBs), with the exception of the SKYY brands, at Miller an impairment charge of US$5 million has been taken against assets used in FMB production.

Following the group’s acquisition of brewing and soft drink bottling interests in Central America towards the end of 2001, costs have been incurred to restructure the Central American operations of US$6 million (2003: US$12 million). These expenses consist primarily of retrenchment costs in 2004 of US$6 million (2003: US$6 million), and also in 2003 consultancy fees of US$3 million and other associated costs of US$3 million.

The closure of the water bottling plant in the Canary Islands, Europe, has taken place during the year. Total plant closure costs in the year amounted to US$6 million and included the impairment of tangible fixed assets to net recoverable value (US$4 million) and rationalisation costs including redundancy and associated closure costs (US$2 million).

Recognised after operating profit:    
Africa and Asia    
Share of associate’s profit on disposal of CSD business and brands in Morocco 6
Share of associate’s profit on disposal of a brand in Angola 1
Other Beverage Interests (Appletiser)    
Profit on disposal of trademarks 13
Central Administration    
Surplus on pension fund of disposed operation 47
Hotels and Gaming    
Gain on partial disposal of subsidiary (note 29) 12
Goodwill previously eliminated against reserves (8)
Profit on partial disposal of subsidiary 4
  67 4
Taxation (1)

During the year Castel disposed of its interests in the Cobomi business and brands in Morocco. SABMiller’s share of the profit on disposal was US$6 million. Castel recognised a profit on disposal of the Youki brand in Angola. SABMiller’s share of the profit was US$1 million.

In the period, Appletiser SA recorded a pre-tax profit on the disposal of its Valpré and Just Juice trademarks of US$13 million, which were sold to a subsidiary of The Coca-Cola Company (TCCC). Appletiser continues to produce the Valpré and Just Juice brands under a manufacturing agreement with TCCC.

The group is still in dispute resolution with Shoprite Holdings Ltd regarding the disposal of the OK Bazaars some years ago. As a result of a surplus arising from the liquidation of the OK Bazaars pension fund, which was returned to the Shoprite group, Shoprite has paid The South African Breweries Ltd, OK Bazaars’ former parent company, an after-tax equivalent amount of US$47 million, pursuant to the sale agreement.

On 31 March 2003 as part of an empowerment deal announced on 12 December 2002, the group disposed of its holdings in the Southern Sun Hotels and Gaming group, in return for cash, a 49% interest in the ordinary share capital of Tsogo Sun Holdings (Pty) Ltd (new Tsogo Sun), together with US$42 million of preference shares in new Tsogo Sun. Effectively, the transaction reduced the group’s holdings in the Hotels division from 100% to 49%, and in the Gaming division from 50% to 49%. The group’s investment in new Tsogo Sun is being equity accounted.

The partial disposal of the Hotel and Gaming interests resulted in a gain of US$12 million, which consisted of profit on the transaction, after taking into account costs of disposal. In addition, goodwill of US$8 million (which had been written off against reserves) was taken into account.

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