skip to primary navigation
skip to main content
SABMiller plc Annual Report 2007

Directors’ report

The directors have pleasure in submitting their report to shareholders, together with the audited annual financial statements for the year ended 31 March 2008.

Principal activities and business review

SABMiller plc is a holding company which has brewing and beverage interests across six continents. The principal subsidiaries and associates of the company are listed in Note 33 of this annual report. The principal activities of the group are the manufacture, distribution and sale of beverages.

The company is required by the Companies Act 1985 to produce a fair review of the business of the group including a description of the principal risks and uncertainties it faces, its development and performance during the year and the position of the group at the end of the year. The business review, including a review of the development and performance of the group during the financial year, its position at the end of the year, likely future developments in the business of the group, key performance indicators and a description of the principal risks and uncertainties facing the group, is set out within the Chairman’s statement and the Chief Executive’s review of this annual report. Other key performance indicators and matters relating to environmental and employee matters required by the business review are set out in the sustainable development review of this annual report.

Significant acquisitions, disposals, financing transactions, investments and material developments during the year.

In April 2007 the company announced that it had completed the sale of its Pepsi Bottling operations in Costa Rica to Cervecería Costa Rica S.A., a subsidiary of Florida Ice and Farm Company S.A., together with its 42.5% investment in a hotel complex in Costa Rica for a total of US$116 million.

Also in April, China Resources Snow Breweries Limited (“CR Snow”), an associate of the company and subsidiary of China Resources Enterprise, Limited, completed the acquisition of the 38% equity interest that it did not already own in the 14 Blue Sword breweries based in the Sichuan province in South West China at a cost of US$320 million.

In May 2007 CR Snow announced it had agreed to sell its non core Southern region water business, C’est Bon, to China Resources Enterprise, Limited for a cash consideration of US$35 million.

In the same month, following receipt of the required merger clearance, the company’s Colombian subsidiary, Bavaria S.A., completed the disposal of its fruit juice business to the Colombian beverage company Postobón S.A. for US$55.3 million.

In July 2007 the company announced that its wholly owned subsidiary SABSA Holdings (Pty) Ltd had raised R1,600 million (approximately US$230 million) in 5-year notes. The notes, issued under a R4,000 million Domestic Medium Term Note Programme, are guaranteed by the company and are listed on BESA, the South African Bond Exchange. The net proceeds of the bond issue have been used to repay part of existing loan facilities that were utilised by The South African Breweries Ltd.

Also in July, the company announced that it would make simultaneous tender offers for all the voting shares which it did not already own in its Panamanian subsidiaries Cervecería Nacional, S.A. and Refrescos Nacionales S.A. for a consideration of approximately US$21.8 million. At year end the company’s effective economic interest in Cervecería Nacional, S.A. and Refrescos Nacionales S.A. increased to approximately 96.3% and 95.2% respectively.

In August 2007 the company’s Polish subsidiary, Kompania Piwowarska S.A. announced the acquisition of 99.96% of Browar Belgia from Palm Breweries N.V. The acquisition was subject to clearance from the Polish Office of Competition and Consumer Protection, which was received in January 2008 following which the acquisition completed. The value of gross assets acquired was approximately US$91 million.

Also in August, CR Snow announced it had agreed to acquire four breweries in separate transactions. Two breweries are in Liaoning province, one brewery is in Anhui and one is in Hunan province. The total investment cost for the four acquisitions was US$79 million, including a cash consideration of US$57 million.

In October 2007, the company and Molson Coors Brewing Company announced that they had signed a letter of intent to combine the US and Puerto Rican businesses of their subsidiaries, Miller and Coors. The companies signed a definitive agreement to form MillerCoors LLC in December 2007. Closing of the transaction is subject to obtaining clearances from the US competition authorities and certain other regulatory clearances and third-party consents, as required, and is expected to complete in the middle of 2008.

In October 2007, following the launch of a delisting tender offer on the Colombian Stock Exchange, the company’s effective interest in Bavaria increased to 98.78% and Bavaria’s shares were delisted.

In November 2007, the company announced that it had reached agreement on the terms of a recommended offer for Royal Grolsch N.V. (‘Grolsch’). The offer was made in January 2008, and was declared unconditional in February 2008. By year end, the company had acquired approximately 99.65% of the shares of Grolsch for a total consideration of approximately US$1,190 million.

In December 2007 the company announced that its joint venture with Coca-Cola Amatil Limited, Pacific Beverages Pty Limited had acquired the premium Australian brewer Bluetongue Brewery Pty Limited. The value of the gross assets acquired was approximately U$12 million.

In February 2008 the company announced that Pacific Beverages Pty Limited would invest in the construction of a new brewery in the Central Coast region of New South Wales. The brewery will have a capacity of 500,000 hectolitres and is expected to be completed in 2010.

Post Balance Sheet events

In May 2008 the company announced that it had agreed to acquire a 99.84% interest in the Ukrainian brewer CJSC Sarmat, acquiring gross assets of approximately US$130 million. The transaction is subject to approval by the Ukrainian competition authorities and other customary pre-closing conditions.

Also in May the group put in place a new committed borrowing facility of US$1,000 million with a final maturity date of 30 June 2009 and a new three-year committed borrowing facility totalling US$600 million.


An interim dividend of 16 US cents per share was paid to shareholders on 21 December 2007, in respect of the year ended 31 March 2008. Details of the final dividend proposed by the board for the year ended 31 March 2008 are set out below:

Amount of final dividend proposed by the board: 42 US cents per share
Total proposed dividend for the year ended 31 March 2008: 58 US cents per share

If approved, the final dividend will be payable to shareholders on either section of the register at 11 July 2008 in the following way:

Dividend payable on: 7 August 2008
Currency of payment: South African rands – to shareholders on the RSA section of the register,

US dollars – to shareholders shown as having an address in the USA and recorded on the UK section of the register (unless mandated otherwise),

Pounds sterling – to all other shareholders on the UK section of the register.
Ex-dividend dates: 7 July 2008 for shares traded on the JSE Limited, South Africa.

9 July 2008 for shares traded on the London Stock Exchange (LSE),
Dates on which the rate of exchange for conversion from US dollars will be calculated and will be published on the RNS of the LSE and the SENS of the JSE Limited.

Note 9 to the consolidated financial statements discloses dividends waived.


The names and biographical details of the current directors are set out within the Board of directors. With the exception of Mr Devitre (who was appointed to the board on 16 May 2007) and Ms Ramos and Mr Pieterse (who were appointed to the board on 15 May 2008) all directors served throughout the period. In addition Ms De Lisi, Altria Group Inc.’s (“Altria”) nominee prior to the appointment of Mr Devitre, served as a director of the company until her retirement on 30 April 2007. Details of the interests in shares and/or options of the directors who held office at the end of the period and any persons connected to such directors are set out in the remuneration report.

Corporate governance

The directors are committed to maintaining high standards of corporate governance, which they see as fundamental to discharging their stewardship responsibilities. The board strives to provide the right leadership, strategic oversight and control environment to produce and sustain the delivery of value to all of the company’s shareholders. The board applies integrity, principles of good governance and accountability throughout its activities and each director brings independence of character and judgment to the role. All of the members of the board are individually and collectively aware of their responsibilities to the company’s stakeholders. Statements of our application of the Combined Code on Corporate Governance are set out in the corporate governance report and the directors’ remuneration report.

Share capital

During the year, the issued ordinary share capital of the company increased from 1,502,187,446 shares of 10 US cents each to 1,505,779,276 shares of 10 US cents each. 3,591,830 new ordinary shares were issued to satisfy the exercise of options granted under the SABMiller plc Mirror Executive Share Purchase Scheme, the SABMiller plc Approved Executive Share Option Scheme, the SABMiller plc Executive Share Option (No. 2) Scheme and the SABMiller plc International Employee Share Scheme.

In addition, the company has 77,368,338 non-voting convertible participating shares of 10 US cents each and 50,000 deferred shares of £1 each in issue. No non-voting convertible participating shares, convertible participating shares or deferred shares were issued during the year.

In light of changes in the tax regime in the United Kingdom, the board has determined that the company should acquire the 77,368,338 non-voting convertible shares held by Safari Limited, a company incorporated in Jersey which is owned by a charitable trust not connected with the company, and hold those shares as treasury shares. In order for the shares to be held as treasury shares, it is necessary that they convert into ordinary shares before being acquired by the company. The board is therefore seeking shareholder approval of an amendment to the articles of association and a contingent purchase contract in relation to this transaction at the company’s forthcoming annual general meeting.

Purchase of own shares

At the last annual general meeting, shareholder authority was obtained for the company to purchase its own shares up to a maximum of 10% of the number of ordinary shares in issue on 16 May 2007. This authority is due to expire at the earlier of the next annual general meeting or 31 October 2008, and remains exercisable provided that certain conditions (relating to the purchase) are met.

The notice of annual general meeting proposes that shareholders approve a resolution updating and renewing the authority allowing the company to purchase its own shares.

Shares in the company were purchased during the year by the trustee of the company’s employee benefit trust, details of which are provided in the directors’ remuneration report. The company did not repurchase any of its shares during the year for the purpose of cancellation, holding in treasury or for any other purpose.

As noted above the board has determined that, subject to shareholder approval, the company should acquire the 77,368,338 non-voting convertible shares, following their conversion into ordinary shares, and hold those shares as treasury shares.

Annual general meeting

The company’s annual general meeting for 2008 will be held at the InterContinental London Park Lane, One Hamilton Place, London, W1V 7QY, UK at 11:00 am on Thursday 31 July 2008. Notice of this meeting may be obtained from the company’s website.


During the year the group invested US$30 million in corporate social investment programmes, of which US$10,855,000 represented charitable donations. Of this amount US$99,410 were charitable donations made by the company and Miller Brands (UK) Limited for the benefit of various causes, both in the UK and overseas, comprising donations in respect of community development, health and education, the environment and other causes.

It remains the group’s policy that political donations are only made by exception, and where permitted by local laws, and must be consistent with building multi-party democracy.

Miller Brewing Company made contributions to individual candidates for political office and to party committees in the USA, where permitted by applicable campaign finance laws. Political donations in the USA are an accepted part of the local socio-political environment. These contributions amounted to US$603,940 in aggregate.

The board has reaffirmed the group’s policy not to make donations to political organisations in the European Union.

Employment policies

The aim of the group is to be the employer of choice in each country in which it operates. In order to achieve this, each operating company designs employment policies which attract, retain and motivate the highest quality of staff.

The group is committed to an active equal opportunities policy from recruitment and selection, through training and development, appraisal and promotion to retirement. Within the constraints of local law, it is our policy to ensure that everyone is treated equally, regardless of gender, colour, national origin, race, disability, marital status, sexual orientation, religion or trade union affiliation.

Research and development

The group continues to invest in research and development leading to new products, packages and processes, as well as new manufacturing technologies to improve overall operational effectiveness. The group’s upstream scientific research continues to yield solid progress in brewing, raw materials, flavour stability, packaging materials and environmental performances. During the year under review, the aggregate amount spent by the group on research and development was US$9 million (2007: US$6 million).

Payment of suppliers

The group’s policy is to pay invoices in accordance with the terms of payment agreed in advance. At the year end, the amount owed by the group to trade creditors was equivalent to 56.7 days (2007: 60.9 days) of purchases from suppliers.

Overseas branches

The company does not have any branches registered overseas.

Going concern and audit

Statement of directors’ responsibilities details the directors’ responsibilities for preparing the consolidated financial statements. As set out in that statement the directors are satisfied that SABMiller plc is a going concern.

So far as each director is aware, there is no relevant audit information of which the group’s auditors are unaware, and each director has taken all the steps necessary that he or she ought to have taken as a director in order to make himself or herself aware of the relevant audit information and to establish that the group’s auditors are aware of that information.

PricewaterhouseCoopers LLP have expressed their willingness to continue in office as auditors and resolutions proposing their re-appointment and authorising the board to set their remuneration will be submitted to the forthcoming annual general meeting.

Directors’ indemnities

The company has granted rolling indemnities to the directors, uncapped in amount, in relation to certain losses and liabilities which they may incur in the course of acting as directors of the company or of one or more of its subsidiaries. The Company Secretary and Deputy Company Secretary have also been granted indemnities, on similar terms, covering their roles as Company Secretary and Deputy Company Secretary respectively of the company and as directors or as company secretary of one or more of the company’s subsidiaries. The board believes that it is in the best interests of the group to attract and retain the services of the most able and experienced directors and officers by offering competitive terms of engagement, including the granting of such indemnities.

The indemnities are categorised as qualifying third-party indemnities for the purposes of the Companies Act and will continue in force for the benefit of directors and officers for as long as they remain in their positions.

Substantial shareholdings

Details of notifications received by the company in accordance with the Disclosure and Transparency Rules as at 14 May 2008 and of persons with significant direct or indirect holdings known to the company at year end are set out in the ordinary shareholding analyses of this annual report.

Financial instruments

Information on the financial risk management objectives and policies of the group and details of the group’s exposure to price risk, credit risk, liquidity risk and cash flow risk are contained in Note 22 to the consolidated financial statements.

Other Companies Act disclosures

Following the implementation of the Takeovers Directive into UK law, the directors’ report is required to disclose certain additional information, irrespective of whether the company is involved in a takeover situation.

The structure of the company’s share capital, including the rights and obligations attaching to each class of share and the percentage of the share capital that each class of share comprises, is set out in Note 25 to the consolidated financial statements. There are no securities of the company that grant the holder special control rights.

At year end the company’s employee benefit trust held 4,644,176 ordinary shares in the company. By agreement with the company, the trustees do not exercise the voting rights attached to these shares.

The directors are responsible for the management of the business of the company and may exercise all the powers of the company subject to the company’s memorandum and articles of association and relevant statutes. Powers of the directors relating to the issuing and buying back of shares are set out in the articles of association. Such powers are subject to renewal by the shareholders of the company each year at the annual general meeting.

The company’s articles of association give the board of directors power to appoint directors. The articles of association may be amended by special resolution of the shareholders. The appointment of directors by the board is subject to re-appointment by the shareholders at the next annual general meeting of the company. Additionally, as disclosed in the corporate governance report, Altria and BevCo have power under their respective relationship agreements with the company to nominate directors for appointment to the board and certain committees. These relationship agreements also regulate processes applicable in relation to the acquisition or disposal of shares by Altria and BevCo.

The company’s articles of association allow directors, in their absolute discretion, to refuse to register the transfer of a share in certificated form which is not fully paid or the transfer of a share in certificated form on which the company has a lien. If that share has been admitted to Official List, the board may not refuse to register the transfer if this would prevent dealings in the company’s shares from taking place on an open and proper basis. They may also refuse to register a transfer of a share in certificated form unless the instrument of transfer is lodged, duly stamped (if stampable), at the address at which the register of the company is held or at such other place as the directors may appoint, and (except in the case of a transfer by a financial institution where a certificate has not been issued in respect of the share) is accompanied by the certificate for the share to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer, is in respect of only one class of share and is in favour of not more than four transferees jointly.

Transfers of shares in uncertificated form must be made in accordance with and subject to the Uncertificated Securities Regulations (the “Regulations”), the facilities and requirements of the relevant CREST system and such arrangements as the board may determine in relation to the transfer of certicated shares (subject to the Regulations).

Transfers of shares listed on the JSE Limited (‘JSE’) in uncertificated form must be made in accordance with, and subject to, the Securities Services Act 2004, the Rules and Directives of the JSE and STRATE Ltd. Certificated shares may be transferred prior to dematerialisation, but share certificates must be dematerialised prior to trading in the STRATE environment.

In addition, subject to the Regulations, and each Act and statutory instrument concerning and affecting companies for the time being in force, and in exceptional circumstances approved by the FSA, the board may refuse to register a transfer of a share (including a fully paid share) if the refusal does not disturb the market in the company’s shares.

Pursuant to the company’s code for securities transactions, directors require, and employees may in certain circumstances require, approval to deal in the company’s shares.

No shareholder shall, unless the directors otherwise determine, be entitled in respect of any share held by him/her to vote either personally or by proxy at a shareholders’ meeting or to exercise any other right conferred by membership in relation to shareholders’ meetings if any call or other sum presently payable by him/her to the company in respect of that share remains unpaid. In addition, no shareholder shall be entitled to vote if he/she has been served with a notice after failing to provide the company with information concerning interests in those shares required to be provided under the Companies Acts. Restrictions on the rights of the holders of convertible shares, non-voting convertible shares and deferred shares are set out in Note 25.

Votes may be exercised in person, by proxy, or in relation to corporate members by a corporate representative. The deadline for delivering proxy forms is 48 hours before the time for holding the meeting.

The company is also required to disclose any significant agreements that take effect, alter or terminate upon a change of control following a takeover bid. The company has a number of facility agreements with banks which contain provisions giving rights to the banks upon a change of control of the company. A change of control of the company would also give The Coca-Cola Company certain rights under its bottling agreements with various subsidiaries of the company. Similarly, in certain circumstances a change of control may give the company’s joint venture partner, China Resources Enterprise, Limited the ability to exercise certain rights under a shareholder agreement in relation to the company’s associate CR Snow.

The company does not have any agreements with any director or officer that would provide compensation for loss of office or employment resulting from a takeover.

John Davidson
General Counsel and Group Company Secretary

For and on behalf of the board of SABMiller plc
2 June 2008

> Back to top