ALTRIA GROUP, INC. - FORM 10-K/A - EX-99.4 - SABMILLER FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2014, 2013 AND 2012 - August 4, 2014

Attached files

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10-K/A - FORM 10-K/A - ALTRIA GROUP, INC.a2013form10ka.htm
EX-32.4 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. 1350 - ALTRIA GROUP, INC.exhibit324201310ka.htm
EX-32.3 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. 1350 - ALTRIA GROUP, INC.exhibit323201310ka.htm
EX-31.3 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A) - ALTRIA GROUP, INC.exhibit313201310ka.htm
EX-23.1 - CONSENT OF INDEPENDENT ACCOUNTANTS - ALTRIA GROUP, INC.exhibit231consentofindepen.htm
EX-31.4 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A) - ALTRIA GROUP, INC.exhibit314201310ka.htm


Exhibit 99.4


















SABMiller plc
Consolidated financial statements
For the years ended 31 March 2014, 2013 and 2012



SABMiller plc
                    
Consolidated income statement
for the year ended 31 March





 
 
2014 
2013 1
2012 1
  
Notes
US$m
US$m
US$m
 
 
 
 
 
Revenue
2
 22,311 
 23,213 
 21,760 
Net operating expenses
3
 (18,069)
 (19,021)
 (16,757)
 
 
 
 
 
Operating profit
2
 4,242 
 4,192 
 5,003 
Operating profit before exceptional items
2
 4,439 
 4,392 
 3,977 
Exceptional items
4
 (197)
 (200)
 1,026 
 
 
 
 
 
Net finance costs
5
 (645)
 (726)
 (554)
Finance costs
5a
 (1,055)
 (1,186)
 (860)
Finance income
5b
 410 
 460 
 306 
 
 
 
 
 
Share of post-tax results of associates and joint ventures
2
 1,226 
 1,213 
 1,134 
 
 
 
 
 
Profit before taxation
 
 4,823 
 4,679 
 5,583 
Taxation
7
 (1,173)
 (1,192)
 (1,121)
Profit for the year
27a
 3,650 
 3,487 
 4,462 
 
 
 
 
 
Profit attributable to non-controlling interests
 
 269 
 237 
 256 
Profit attributable to owners of the parent
26a
 3,381 
 3,250 
 4,206 
 
 
 3,650 
 3,487 
 4,462 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share (US cents)
8
211.8 
204.3 
 265.7 
Diluted earnings per share (US cents)
8
209.1 
202.0 
 262.9 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
The notes on pages 7 to 81 are an integral part of these consolidated financial statements.
 
 
 
 
 
 
 
 
 
The results for the years ended 31 March 2014 and 31 March 2012 are unaudited.
 
 
 
 


2
SABMiller plc
                                  
Consolidated statement of comprehensive income
for the year ended 31 March

 
 
2014 

2013 1

2012 1

  
Notes
US$m

US$m

US$m

 
 
 

 

 

Profit for the year
 
3,650

3,487

4,462

Other comprehensive loss:
 
 
 
 
Items that will not be reclassified to profit or loss
 
 
 
 
Net remeasurements on defined benefit plans
31
22

(19
)
(7
)
 
 
 
 
 
Tax on items that will not be reclassified
7
(13
)
19

66

 
 
 
 
 
Share of associates' and joint ventures' other comprehensive income/(loss)
 
23

(26
)
(162
)
Total items that will not be reclassified to profit or loss
 
32

(26
)
(103
)
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss
 
 
 
 
Currency translation differences on foreign currency net investments:
 
(2,288
)
(700
)
136

- (Decrease)/increase in foreign currency translation reserve during the year
 
(2,290
)
(700
)
153

- Recycling of foreign currency translation reserve on disposals
 
2

 -  

(17
)
 
 
 
 
 
Available for sale investments:
26b
 
 
 
- Fair value losses arising during the year
 
 -  

(1
)
 -  

 
 
 
 
 
Net investment hedges:
26b
 
 
 
- Fair value gains/(losses) arising during the year
 
102

63

(1
)
 
 
 
 
 
Cash flow hedges:
26b
34

(5
)
6

- Fair value gains/(losses) arising during the year
 
33

(8
)
 -  

- Fair value (gains)/losses transferred to inventory
 
(1
)
8

2

- Fair value losses/(gains) transferred to profit or loss
 
2

(5
)
4

 
 
 
 
 
Tax on items that may be reclassified subsequently to profit or loss
7
1

6

30

 
 
 
 
 
Share of associates' and joint ventures' other comprehensive income/(loss):
 
122

(13
)
(76
)
- Share of associates' and joint ventures' other comprehensive income/(loss) during the year
 
131

(13
)
(76
)
- Share of associates' and joint ventures' recycling of available for sale reserve on disposal
 
(9
)
 -  

 -  

 
 
 
 
 
Total items that may be reclassified subsequently to profit or loss
 
(2,029
)
(650
)
95

 
 
 
 
 
Other comprehensive loss for the year, net of tax
 
(1,997
)
(676
)
(8
)
Total comprehensive income for the year
 
1,653

2,811

4,454

 
 
 
 
 
Attributable to:
 
 
 
 
Non-controlling interests
 
248

233

255

Owners of the parent
 
1,405

2,578

4,199

Total comprehensive income for the year
 
1,653

2,811

4,454

 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
The notes on pages 7 to 81 are an integral part of these consolidated financial statements.
 
 
 
 
 
The results for the years ended 31 March 2014 and 31 March 2012 are unaudited.
 
 
 
 


3
SABMiller plc
                                  
Consolidated balance sheet
at 31 March

 
 
2014 

2013 

 
Notes
US$m

US$m

Assets
 
 
 
Non-current assets
 
 
 
Goodwill
10
18,497

19,862

Intangible assets
11
8,532

9,635

Property, plant and equipment
12
9,065

9,059

Investments in joint ventures
13
5,581

5,547

Investments in associates
14
5,787

5,416

Available for sale investments
 
22

22

Derivative financial instruments
22
628

732

Trade and other receivables
16
139

144

Deferred tax assets
19
115

71

Loan participation deposit
17
-

100

 
 
48,366

50,588

 
 
 
 
Current assets
 
 
 
Inventories
15
1,168

1,175

Trade and other receivables
16
1,821

2,067

Current tax assets
 
174

159

Derivative financial instruments
22
141

111

Cash and cash equivalents
17
2,081

2,171

 
 
5,385

5,683

Assets of disposal group classified as held for sale
 
-

23

 
 
5,385

5,706

Total assets
 
53,751

56,294

 
 
 
 
Liabilities
 
 
 
Current liabilities
 
 
 
Derivative financial instruments
22
(78
)
(34
)
Borrowings
20
(4,519
)
(2,469
)
Trade and other payables
18
(3,847
)
(4,004
)
Current tax liabilities
 
(1,106
)
(1,460
)
Provisions
24
(450
)
(558
)
 
 
(10,000
)
(8,525
)
Liabilities of disposal group classified as held for sale
 
-

(1
)
 
 
(10,000
)
(8,526
)
 
 
 
 
Non-current liabilities
 
 
 
Derivative financial instruments
22
(37
)
(52
)
Borrowings
20
(12,528
)
(16,079
)
Trade and other payables
18
(25
)
(132
)
Deferred tax liabilities
19
(3,246
)
(3,507
)
Provisions
24
(433
)
(538
)
 
 
(16,269
)
(20,308
)
Total liabilities
 
(26,269
)
(28,834
)
Net assets
 
27,482

27,460

 
 
 
 
Equity
 
 
 
Share capital
25
167

167

Share premium
 
6,648

6,581

Merger relief reserve
 
4,321

4,586

Other reserves
26b
(702
)
1,328

Retained earnings
26a
15,885

13,710

Total shareholders' equity
 
26,319

26,372

Non-controlling interests
 
1,163

1,088

Total equity
 
27,482

27,460

 
 
 
 
The notes on pages 7 to 81 are an integral part of these consolidated financial statements.
 
 
 
 
The financial statements were authorised for issue by the board of directors on 4 August 2014.
 
 
 
 
 
The balances as at 31 March 2014 are unaudited.
 
 
 


4
SABMiller plc
                                   
Consolidated cash flow statement
for the year ended 31 March

 
 
2014 

2013 

2012 

 
Notes
US$m

US$m

US$m

Cash flows from operating activities
 
 

 

 

Cash generated from operations
27a
5,770

5,554

5,237

Interest received
 
365

468

516

Interest paid
 
(1,108
)
(1,238
)
(923
)
Tax paid
 
(1,596
)
(683
)
(893
)
Net cash generated from operating activities
27b
3,431

4,101

3,937

 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Purchase of property, plant and equipment
 
(1,401
)
(1,335
)
(1,473
)
Proceeds from sale of property, plant and equipment
 
70

30

116

Purchase of intangible assets
 
(84
)
(144
)
(166
)
Proceeds from sale of intangible assets
 
-

4

-

Purchase of available for sale investments
 
(1
)
-

(1
)
Proceeds from disposal of available for sale investments
 
-

5

2

Proceeds from disposal of associates
 
-

21

205

Proceeds from disposal of businesses (net of cash disposed)
 
88

57

(23
)
Acquisition of businesses (net of cash acquired)
 
(39
)
(6
)
(10,951
)
Investments in joint ventures
 
(188
)
(272
)
(288
)
Investments in associates
 
(199
)
(23
)
(52
)
Repayment of investments by associates
 
-

-

14

Dividends received from joint ventures
13
903

886

896

Dividends received from associates
14
224

113

120

Dividends received from other investments
 
1

1

1

Net cash used in investing activities
 
(626
)
(663
)
(11,600
)
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
Proceeds from the issue of shares
 
88

102

96

Proceeds from the issue of shares in subsidiaries to non-controlling interests
 
20

36

107

Purchase of own shares for share trusts
26a
(79
)
(53
)
(52
)
Purchase of shares from non-controlling interests
 
(5
)
-

(27
)
Proceeds from borrowings
 
2,585

2,318

19,000

Repayment of borrowings
 
(3,829
)
(2,878
)
(10,139
)
Proceeds from associate in relation to loan participation deposit
17
-

100

-

Capital element of finance lease payments
 
(9
)
(6
)
(5
)
Net cash receipts/(payments) on derivative financial instruments
 
228

(5
)
(52
)
Dividends paid to shareholders of the parent
9
(1,640
)
(1,517
)
(1,324
)
Dividends paid to non-controlling interests
 
(194
)
(131
)
(109
)
Net cash (used in)/generated from financing activities
 
(2,835
)
(2,034
)
7,495

 
 
 
 
 
Net cash (outflow)/inflow from operating, investing and financing activities
 
(30
)
1,404

(168
)
Effects of exchange rate changes
 
(61
)
(51
)
(39
)
Net (decrease)/increase in cash and cash equivalents
 
(91
)
1,353

(207
)
Cash and cash equivalents at 1 April
 
1,959

606

813

Cash and cash equivalents at 31 March
27c
1,868

1,959

606

 
 
 
 
 
The notes on pages 7 to 81 are an integral part of these consolidated financial statements.
 
 
 
 
 
The cash flows for the years ended 31 March 2014 and 31 March 2012 are unaudited.
 
 
 
 


5
SABMiller plc
                                 
Consolidated statement of changes in equity
for the year ended 31 March

 
 
Called up share capital

Share premium account

Merger relief reserve

Other reserves

Retained earnings

Total shareholders’ equity

Non-
controlling interests

Total equity

 
 
Notes
US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

 
 
 
 

 

 

 

 

 

 

 

At 1 April 2011
 
166

6,384

4,586

1,881

8,991

22,008

751

22,759

Total comprehensive income
 
-

-

-

97

4,102

4,199

255

4,454

Profit for the year1
  
-

-

-

-

4,206

4,206

256

4,462

Other comprehensive income/(loss)1
  
-

-

-

97

(104
)
(7
)
(1
)
(8
)
Dividends paid
9
-

-

-

-

(1,324
)
(1,324
)
(159
)
(1,483
)
Issue of SABMiller plc ordinary shares
25
-

96

-

-

-

96

-

96

Proceeds from the issue of shares in
 
 
 
 
 
 
 
 
 
    subsidiaries to non-controlling interests
 
-

-

-

-

-

-

107

107

Non-controlling interests disposed of via
 
 
 
 
 
 
 
 
 
    business disposal
 
-

-

-

-

-

-

(64
)
(64
)
Arising on business combinations
 
-

-

-

-

-

-

84

84

Dilution of non-controlling interests
 
 
 
 
 
 
 
 
 
    as a result of business combinations
26a
-

-

-

-

(5
)
(5
)
5

-

Payment for purchase of own shares
 
 
 
 
 
 
 
 
 
    for share trusts
26a
-

-

-

-

(52
)
(52
)
-

(52
)
Buyout of non-controlling interests
26a
-

-

-

-

(7
)
(7
)
(20
)
(27
)
Credit entry relating to share-based payments
26a
-

-

-

-

158

158

-

158

At 31 March 2012
 
166

6,480

4,586

1,978

11,863

25,073

959

26,032

Total comprehensive income
 
-

-

-

(650
)
3,228

2,578

233

2,811

Profit for the year1
  
-

-

-

-

3,250

3,250

237

3,487

Other comprehensive loss1
  
-

-

-

(650
)
(22
)
(672
)
(4
)
(676
)
Dividends paid
9
-

-

-

-

(1,517
)
(1,517
)
(128
)
(1,645
)
Issue of SABMiller plc ordinary shares
25
1

101

-

-

-

102

-

102

Proceeds from the issue of shares in
 
 
 
 
 
 
 
 
 
    subsidiaries to non-controlling interests
 
-

-

-

-

-

-

36

36

Non-controlling interests disposed of via
 
 
 
 
 
 
 
 
 
    business disposal
 
-

-

-

-

-

-

(13
)
(13
)
Arising on business combinations
 
-

-

-

-

-

-

1

1

Payment for purchase of own shares
 
 
 
 
 
 
 
 
 
    for share trusts
26a
-

-

-

-

(53
)
(53
)
-

(53
)
Credit entry relating to share-based payments
26a
-

-

-

-

189

189

-

189

At 31 March 2013
 
167

6,581

4,586

1,328

13,710

26,372

1,088

27,460

Total comprehensive income
 
-

-

-

(2,030
)
3,435

1,405

248

1,653

Profit for the year
 
-

-

-

-

3,381

3,381

269

3,650

Other comprehensive (loss)/income
 
-

-

-

(2,030
)
54

(1,976
)
(21
)
(1,997
)
Dividends paid
9
-

-

-

-

(1,640
)
(1,640
)
(193
)
(1,833
)
Issue of SABMiller plc ordinary shares
 
-

67

-

-

21

88

-

88

Proceeds from the issue of shares in
 
 
 
 
 
 
 
 
 
    subsidiaries to non-controlling interests
 
-

-

-

-

-

-

20

20

Payment for purchase of own shares
 
 
 
 
 
 
-

-

-

    for share trusts
26a
-

-

-

-

(79
)
(79
)
-

(79
)
Buyout of non-controlling interests
26a
-

-

-

-

(5
)
(5
)
-

(5
)
Utilisation of merger relief reserve
26a
-

-

(265
)
-

265

-

-

-

Credit entry relating to share-based payments
26a
-

-

-

-

178

178

-

178

At 31 March 2014
 
167

6,648

4,321

(702
)
15,885

26,319

1,163

27,482

 
 
 
 
 
 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The notes on pages 7 to 81 are an integral part of these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
The changes in equity for the years ended 31 March 2014 and 31 March 2012 are unaudited.
 
 
 
 
 
 
 
 
 
 
 
 
Merger relief reserve
 
 
 
 
 
 
 
 
 
At 1 April 2013 the merger relief reserve comprised US$3,395 million in respect of the excess of value attributed to the shares issued as consideration for Miller Brewing Company over the nominal value of those shares and US$1,191 million relating to the merger relief arising on the issue of SABMiller plc ordinary shares for the buyout of non-controlling interests in the group's Polish business. In the year ended 31 March 2014 the group transferred US$265 million of the reserve relating to the Polish business to retained earnings upon realisation of qualifying consideration.

6
 
                                  
SABMiller plc
Business description and notes to the consolidated financial statements

Business description
SABMiller plc (the company) is listed on the London and the Johannesburg stock exchanges. It is a holding company which has brewing and beverage interests across six continents. Together with its subsidiaries, associated undertakings and joint venture undertakings (the group), the principal activities are the manufacture, distribution and sale of beverages. The company’s registered office is at SABMiller House, Church Street West, Woking, Surrey, England, GU21 6HS.

1. Accounting policies
The principal accounting policies adopted in the preparation of the group’s financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

a)
Basis of preparation
These consolidated financial statements of SABMiller plc have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRSs).
The financial statements are prepared under the historical cost convention, except for the revaluation to fair value of certain financial assets and liabilities, and post-retirement assets and liabilities as described in the accounting policies below. The financial statements have been prepared on a going concern basis.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. Actual results could differ from those estimates.
These financial statements have been prepared pursuant to Rule 3-09 of SEC Regulation S-X for inclusion in the Form 10-K of Altria Group, Inc., as the company is a foreign equity investee of Altria Group, Inc. Pursuant to Rule 3-09, only the financial information for the year ended 31 March 2013 has been audited. The financial information for the years ended 31 March 2012, 31 March 2013 and 31 March 2014 included herein have been revised to reflect the adoption of new accounting standards, as detailed below, and thus will not correspond to the company's 2012, 2013, or 2014 Annual Reports, which were previously filed with the Registrar of Companies and are available on the company’s website (www.sabmiller.com) and are prepared under IFRS as adopted by the European Union.

b)
Recent accounting developments
(i)
New standards, amendments and interpretations of existing standards adopted by the group
The following standards, interpretations and amendments have been adopted by the group as of 1 April 2013.
•
Amendment to IAS 19, ‘Employee benefits’. The adoption of this revised standard retrospectively from 1 April 2013 has resulted in the interest charge on retirement benefit liabilities and the expected return on plan assets being replaced by a net interest charge on net defined benefit liabilities based on high quality corporate bond rates. This net charge is included within operating costs. Further details of these adjustments are provided in note 28.

•
Amendment to IAS 1, ‘Financial statement presentation’. The adoption of this amendment has resulted in changes to the presentation of certain items within other comprehensive income in the consolidated statement of comprehensive income.

•
IFRS 10, ‘Consolidated Financial Statements’, IFRS 11, ‘Joint Arrangements’ and IFRS 12, ‘Disclosure of Interests in Other Entities’ with effect from 1 April 2013, along with the revised versions of IAS 27, ‘Separate Financial Statements’ and IAS 28, ‘Associates’. The adoption of these standards has had no impact on the total comprehensive income or net assets of the group. Further details of the impact of adopting these standards are provided in notes 13 and 28. The requirements of IFRS 12 have increased certain disclosures in respect of the group’s joint arrangements and associates. These are included in notes 13 and 14.

•
Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset and liability offsetting introduced new disclosure requirements to facilitate comparison between entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. The additional disclosures are included in note 23.

•
IFRS 13, ‘Fair value measurement’. This new standard provides a single source of fair value measurement and disclosure requirements. It does not require restatement of historical information. The additional disclosures required by this standard are included in note 21.

•
Annual improvements to IFRS 2009-11. The application of the annual improvements has had no material impact on the consolidated results of operations or financial position of the group.

•
Amendment to IAS 36, ‘Impairment of assets’, on recoverable amount disclosures. This amendment clarified the disclosure requirements in relation to impairment testing of goodwill. There has been no material impact on the group.

(ii)
New standards, amendments and interpretations of existing standards that are not yet effective and have not been early adopted by the group
The following standards, interpretations and amendments to existing standards mandatory for the group’s accounting periods beginning on or after 1 April 2014 are not expected to have a material impact on the consolidated results of operations or financial position of the group.
•
Amendment to IAS 32, ‘Offsetting financial instruments asset and liability’, is effective from 1 January 2014.
•
Amendment to IAS 39, ‘Financial instruments: recognition and measurement’, on novation of derivatives and hedge accounting, is effective from 1 January 2014.
•
IFRIC 21, ‘Levies’, is effective from 1 January 2014.

7
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

(ii)
New standards, amendments and interpretations of existing standards that are not yet effective and have not been early adopted by the group (continued)
The group has yet to assess the full impact of the following standards and amendments to existing standards mandatory for the group’s accounting periods beginning on or after 1 April 2015 or later periods, which have not been early adopted.
•
Amendment to IAS 19, ‘Employee benefits’ on defined benefit plans, is effective from 1 July 2014.
•
Amendment to IAS 16, ‘Property, plant and equipment’, and IAS 38, ‘Intangible assets’, on depreciation and amortisation, is effective from 1 January 2016.
•
Amendments to IAS 16, 'Property, plant and equipment', and IAS 41, 'Agriculture', on bearer plants, is effective from 1 January 2016.
•
Amendment to IFRS 11, ‘Joint arrangements’, on accounting for acquisitions of interests in joint operations, is effective from 1 January 2016.
•
Annual improvements to IFRS 2012, are effective from 1 July 2014.
•
Annual improvements to IFRS 2013, are effective from 1 July 2014.
•
IFRS 9, ‘Financial Instruments’, is effective from 1 January 2018.
•
IFRS 15, ‘Revenue from contracts with customers’, is effective from 1 January 2017.

c)
Significant judgements and estimates
In determining and applying accounting policies, judgement is often required where the choice of specific policy, assumption or accounting estimate to be followed could materially affect the reported results or net position of the group, should it later be determined that a different choice be more appropriate.
Management considers the following to be areas of significant judgement and estimation for the group due to greater complexity and/or particularly subject to the exercise of judgement.

(i)
Impairment reviews
Goodwill arising on business combinations is allocated to the relevant cash generating unit (CGU). Impairment reviews in respect of the relevant CGUs are performed at least annually or more regularly if events indicate that this is necessary. Impairment reviews are based on future cash flows discounted using the weighted average cost of capital for the relevant country with terminal values calculated applying a long-term growth rate. The future cash flows which are based on business forecasts, the long-term growth rates and the discount rates used are dependent on management estimates and judgements. Future events could cause the assumptions used in these impairment reviews to change with a consequent adverse impact on the results and net position of the group. Details of the estimates used in the impairment reviews for the year are set out in note 10.

(ii)
Taxation
The group operates in many countries and is subject to taxes in numerous jurisdictions. Significant judgement is required in determining the provision for taxes as the tax treatment is often by its nature complex, and cannot be finally determined until a formal resolution has been reached with the relevant tax authority which may take several years to conclude. Amounts provided are accrued based on management’s interpretation of country specific tax laws and the likelihood of settlement. Actual liabilities could differ from the amount provided which could have a consequent adverse impact on the results and net position of the group.

(iii)
Pension and post-retirement benefits
Pension accounting requires certain assumptions to be made in order to value the group’s pension and post-retirement obligations in the balance sheet and to determine the amounts to be recognised in the income statement and in other comprehensive income in accordance with IAS 19. The calculations of these obligations and charges are based on assumptions determined by management which include discount rates, salary and pension inflation, healthcare cost inflation, and mortality rates. Details of the assumptions used are set out in note 31. The selection of different assumptions could affect the net position of the group and future results.

(iv)
Property, plant and equipment
The determination of the useful economic life and residual values of property, plant and equipment is subject to management estimation. The group regularly reviews all of its depreciation rates and residual values to take account of any changes in circumstances, and any changes that could affect prospective depreciation charges and asset carrying values.

(v)
Business combinations
On the acquisition of a company or business, a determination of the fair value of the assets acquired and liabilities assumed, and the useful life of intangible assets and property, plant and equipment acquired is performed, which requires the application of management judgement. Future events could cause the assumptions used by the group to change which could have a significant impact on the results and net position of the group.

(vi)
Exceptional items
Exceptional items are expense or income items recorded in a period which have been determined by management as being material by their size or incidence and are presented separately within the results of the group. The determination of which items are disclosed as exceptional items will affect the presentation of profit measures including EBITA and adjusted earnings per share, and requires a degree of judgement. Details relating to exceptional items reported during the year are set out in note 4.

d)
Segmental reporting
Operating segments reflect the management structure of the group and the way performance is evaluated and resources allocated based on group net producer revenue and EBITA by the group’s chief operating decision maker, defined as the executive directors. The group is focused geographically, and while not meeting the definition of reportable segments, the group reports separately as segments South Africa: Hotels and Gaming and Corporate as this provides useful additional information.

8
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

e)
Basis of consolidation
SABMiller plc (the company) is a public limited company incorporated in Great Britain and registered in England and Wales. The consolidated financial statements include the financial information of the subsidiary, associate and joint ventures owned by the company.

(i)
Subsidiaries
Subsidiaries are entities controlled by the company. Control is where the company has power to vary the returns from its investment in the entity and exposure to the variability of those returns. Where the company’s interest in subsidiaries is less than 100%, the share attributable to outside shareholders is reflected in non-controlling interests. Subsidiaries are included in the financial statements from the date control commences until the date control ceases.

On the subsequent disposal or termination of a business, the results of the business are included in the group’s results up to the effective date of disposal. The profit or loss on disposal or termination is calculated after charging the amount of any related goodwill to the extent that it has not previously been taken to the income statement.

Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Some of the company’s subsidiaries have a local statutory balance sheet date of 31 December. These are consolidated using management prepared information on a basis coterminous with the company's balance sheet date.

(ii)
Associates
Associates are entities in which the group has a long-term interest and over which the group has directly or indirectly significant influence, where significant influence is the ability to influence the financial and operating policies of the entity.

The associate, Distell Group Ltd, has a statutory balance sheet date of 30 June. In respect of each year ending 31 March, this company is included based on financial statements drawn up to the previous 31 December, but taking into account any changes in the subsequent period from 1 January to 31 March that would materially affect the results. All other associates are included on a coterminous basis.

(iii)
Joint arrangements
The group has assessed the nature of its joint arrangements and determined them to be joint ventures.

Joint ventures are contractual arrangements which the group has entered into with one or more parties to undertake an economic activity that is subject to joint control. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when decisions relating to the relevant activities require the unanimous consent of the parties sharing the control.

The group’s share of the recognised income and expenses of associates and joint ventures are accounted for using the equity method from the date significant influence or joint control commences to the date it ceases based on present ownership interests.
 
The group recognises its share of associates’ and joint ventures’ post-tax results as a one line entry before profit before taxation in the income statement and its share of associates’ and joint ventures’ equity movements as one line entries under each of items of other comprehensive income that will not be reclassified to profit or loss, and items of other comprehensive income that may be reclassified to profit or loss, in the statement of comprehensive income.

When the group’s interest in an associate or joint venture has been reduced to nil because the group’s share of losses exceeds its interest in the associate or joint venture, the group only provides for additional losses to the extent that it has incurred legal or constructive obligations to fund such losses, or make payments on behalf of the associate or joint venture. Where the investment in an associate or joint venture is disposed, the investment ceases to be equity accounted.

(iv)
Transactions with non-controlling interests
Transactions with non-controlling interests are treated as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity where there is no loss of control.

(v)
Reduction in interests
When the group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, certain amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that certain amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, or if the ownership interest in a joint venture is reduced but joint control is retained, only the proportionate share of the carrying amount of the investment and of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.



9
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

(f)
Foreign exchange
(i)
Foreign exchange translation
Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in US dollars which is the group’s presentational currency. The key exchange rates to the US dollar used in preparing the consolidated financial statements were as follows.
 
Year ended
31 March 2014
Year ended
31 March 2013
Year ended
31 March 2012
Average rate
 
 
 
Australian dollar (AUD)
1.07
        0.97
0.95
Colombian peso (COP)
1,920
       1,796
1,831
Czech koruna (CZK)
19.68
       19.65
17.65
Euro (€)
0.75
        0.78
0.72
Peruvian nuevo sol (PEN)
2.77
        2.61
2.73
Polish zloty (PLN)
3.15
        3.26
2.99
South African rand (ZAR)
10.13
        8.51
7.48
Turkish lira (TRY)
1.98
1.80
1.73
 
 
 
 
Closing rate
 
 
 
Australian dollar (AUD)
1.08
        0.96
0.97
Colombian peso (COP)
1,965
       1,832
1,792
Czech koruna (CZK)
19.90
       20.07
18.52
Euro (€)
0.73
        0.78
0.75
Peruvian nuevo sol (PEN)
2.81
        2.59
2.67
Polish zloty (PLN)
3.03
        3.26
3.13
South African rand (ZAR)
10.53
        9.24
7.67
Turkish lira (TRY)
2.14
1.81
1.78

The average exchange rates have been calculated based on the average of the exchange rates during the relevant year which have been weighted according to the phasing of revenue of the group’s businesses.

(ii)
Transactions and balances
The financial statements for each group company have been prepared on the basis that transactions in foreign currencies are recorded in their functional currency at the rate of exchange ruling at the date of the transaction. Monetary items denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date with the resultant translation differences being included in operating profit in the income statement other than those arising on financial assets and liabilities which are recorded within net finance costs and those which are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Translation differences on non-monetary assets such as equity investments classified as available for sale assets are included in other comprehensive income.

(iii)
Overseas subsidiaries, associates and joint ventures
One-off items in the income and cash flow statements of overseas subsidiaries, associates and joint ventures expressed in currencies other than the US dollar are translated to US dollars at the rates of exchange prevailing on the day of the transaction. All other items are translated at weighted average rates of exchange for the relevant reporting period. Assets and liabilities of these undertakings are translated at closing rates of exchange at each balance sheet date. All translation exchange differences arising on the retranslation of opening net assets together with differences between income statements translated at average and closing rates are recognised as a separate component of equity. For these purposes net assets include loans between group companies that form part of the net investment, for which settlement is neither planned nor likely to occur in the foreseeable future. When a foreign operation is disposed of, any related exchange differences in equity are reclassified to the income statement as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(iv)
Hyperinflationary economies
In hyperinflationary economies, when translating the results of operations into US dollars, adjustments are made to local currency denominated non-monetary assets, liabilities, income statement and equity accounts to reflect the changes in purchasing power. South Sudan was considered to be a hyperinflationary economy in the years ended 31 March 2013 and 2014. The effect of inflation accounting in South Sudan for the years ended 31 March 2013 and 31 March 2014 was not material.

g)
Business combinations
(i)
Subsidiaries
The acquisition method is used to account for business combinations. The identifiable net assets (including intangibles) are incorporated into the financial statements on the basis of their fair value from the effective date of control, and the results of subsidiary undertakings acquired during the financial year are included in the group’s results from that date.

On the acquisition of a company or business, fair values reflecting conditions at the date of acquisition are attributed to the identifiable assets (including intangibles), liabilities and contingent liabilities acquired. Fair values of these assets and liabilities are determined by reference to market values, where available, or by reference to the current price at which similar assets could be acquired or similar obligations entered into, or by discounting expected future cash flows to present value, using either market rates or the risk-free rates and risk-adjusted expected future cash flows.

10
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

g)
Business combinations (continued)
(i)
Subsidiaries (continued)
The consideration transferred is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of the acquisition, and also includes the group’s estimate of the fair value of any deferred consideration payable. Acquisition-related costs are expensed as incurred. Where the business combination is achieved in stages and results in a change in control, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Where the business combination agreement provides for an adjustment to the cost that is contingent on future events, the consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. On an acquisition by acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

(ii)
Associates and joint ventures
On acquisition the investment in associates and joint ventures is recorded initially at cost. Subsequently the carrying amount is increased or decreased to recognise the group’s share of the associates’ and joint ventures’ income and expenses after the date of acquisition.

Fair values reflecting conditions at the date of acquisition are attributed to the group’s share of identifiable assets (including intangibles), liabilities and contingent liabilities acquired. The consideration transferred is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of the acquisition, and also includes the group’s estimate of the fair value of any deferred consideration payable.

The date significant influence or joint control commences is not necessarily the same as the closing date or any other date named in the contract.

(iii)
Goodwill
Goodwill arising on consolidation represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets (including intangibles), liabilities and contingent liabilities of the acquired entity at the date of acquisition. Where the fair value of the group’s share of identifiable net assets acquired exceeds the fair value of the consideration, the difference is recognised immediately in the income statement.

Goodwill is stated at cost less impairment losses and is reviewed for impairment on an annual basis. Any impairment identified is recognised immediately in the income statement and is not reversed.

The carrying amount of goodwill in respect of associates and joint ventures is included in the carrying value of the investment in the associate or joint venture.

h)
Intangible assets
Intangible assets are stated at cost less accumulated amortisation on a straight-line basis (if applicable) and impairment losses. Cost is usually determined as the amount paid by the group, unless the asset has been acquired as part of a business combination. Intangible assets acquired as part of a business combination are recognised at their fair value at the date of acquisition. Amortisation is included within net operating expenses in the income statement. Internally generated intangibles are not recognised except for computer software and applied development costs referred to under computer software and research and development below.

Intangible assets with finite lives are amortised over their estimated useful economic lives, and only tested for impairment where there is a triggering event. The group regularly reviews all of its amortisation rates and residual values to take account of any changes in circumstances. The directors’ assessment of the useful life of intangible assets is based on the nature of the asset acquired, the durability of the products to which the asset attaches and the expected future impact of competition on the business.

(i)
Brands
Brands are recognised as an intangible asset where the brand has a long-term value. Acquired brands are only recognised where title is clear or the brand could be sold separately from the rest of the business and the earnings attributable to it are separately identifiable.

Acquired brands are amortised. In respect of brands currently held the amortisation period is 10 to 40 years, being the period for which the group has exclusive rights to those brands, up to a maximum of 40 years.

(ii)
Contract brewing and other licences recognised as part of a business combination
Contractual arrangements for contract brewing and competitor licensing arrangements are recognised as an intangible asset at a fair value representing the remaining contractual period with an assumption about the expectation that such a contract will be renewed, together with a valuation of this extension.

Acquired licences or contracts are amortised. In respect of licences or contracts currently held, the amortisation period is the period for which the group has exclusive rights to these assets or income streams.

(iii)
Customer lists and distributor relationships recognised as part of a business combination
The fair value of businesses acquired may include customer lists and distributor relationships. These are recognised as intangible assets and are calculated by discounting the future revenue stream attributable to these lists or relationships.

Acquired customer lists or distributor relationships are amortised. In respect of contracts currently held, the amortisation period is the period for which the group has the benefit of these assets.

(iv)
Computer software
Where computer software is not an integral part of a related item of property, plant and equipment, the software is capitalised as an intangible asset.

11
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

h)
Intangible assets (continued)
(iv)
Computer software (continued)
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring them to use. Direct costs associated with the production of identifiable and unique internally generated software products controlled by the group that will probably generate economic benefits exceeding costs beyond one year are capitalised. Direct costs include software development employment costs (including those of contractors used), capitalised interest and an appropriate portion of overheads. Capitalised computer software, licence and development costs are amortised over their useful economic lives of between three and eight years.

Internally generated costs associated with maintaining computer software programmes are expensed as incurred.

(v)
Research and development
Research and general development expenditure is written off in the period in which it is incurred.

Certain applied development costs are only capitalised as internally generated intangible assets where there is a clearly defined project, separately identifiable expenditure, an outcome assessed with reasonable certainty (in terms of feasibility and commerciality), expected revenues exceed expected costs and the group has the resources to complete the task. Such assets are amortised on a straight-line basis over their useful lives once the project is complete.

i)
Property, plant and equipment
Property, plant and equipment are stated at cost net of accumulated depreciation and any impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying value or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the specific asset will flow to the group and the cost can be measured reliably. Repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

(i)
Assets in the course of construction
Assets in the course of construction are carried at cost less any impairment loss. Cost includes professional fees and for qualifying assets certain borrowing costs as determined below. When these assets are ready for their intended use, they are transferred into the appropriate category. At this point, depreciation commences on the same basis as on other property, plant and equipment.

(ii)
Assets held under finance leases
Assets held under finance leases which result in the group bearing substantially all the risks and rewards incidental to ownership are capitalised as property, plant and equipment. Finance lease assets are initially recognised at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, then depreciated over the lower of the lease term or their useful lives. The capital element of future obligations under the leases is included as a liability in the balance sheet classified, as appropriate, as a current or non-current liability. The interest element of the lease obligations is charged to the income statement over the period of the lease term to reflect a constant rate of interest on the remaining balance of the obligation for each financial period.

(iii)
Returnable containers
Returnable containers in circulation are recorded within property, plant and equipment at cost net of accumulated depreciation less any impairment loss.

Depreciation of returnable bottles and containers is recorded to write the containers off over the course of their economic life. This is typically undertaken in a two stage process:
▪
The excess over deposit value is written down over a period of one to 10 years.
▪
Provisions are made against the deposit values for breakages and losses in trade together with a design obsolescence provision held to write off the deposit value over the expected container design period - which is a period of no more than 14 years from the inception of a container design. This period is shortened where appropriate by reference to market dynamics and the ability of the entity to use containers for different brands.

(iv)
Depreciation
No depreciation is provided on freehold land or assets in the course of construction. In respect of all other property, plant and equipment, depreciation is provided on a straight-line basis at rates calculated to write off the cost, less the estimated residual value, of each asset over its expected useful life as follows.

Freehold buildings
20 - 50 years
Leasehold buildings
Shorter of the lease term or 50 years
Plant, vehicles and systems
2 - 30 years
Returnable containers (non-returnable containers are recorded as inventory)
1 - 14 years
Assets held under finance leases
Lower of the lease term or life of the asset

The group regularly reviews all of its depreciation rates and residual values to take account of any changes in circumstances. When setting useful economic lives, the principal factors the group takes into account are the expected rate of technological developments, expected market requirements for the equipment and the intensity at which the assets are expected to be used.

The profit or loss on the disposal of an asset is the difference between the disposal proceeds and the net book amount.

12
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

i)
Property, plant and equipment (continued)
(v)
Capitalisation of borrowing costs
Financing costs incurred, before tax, on major capital projects during the period of development or construction that necessarily take a substantial period of time to be developed for their intended use, are capitalised up to the time of completion of the project.

j)
Advance payments made to customers (principally hotels, restaurants, bars and clubs)
Advance payments made to customers are conditional on the achievement of contracted sales targets or marketing commitments. The group records such payments as prepayments initially at fair value and amortises them in the income statement over the relevant period to which the customer commitment is made (typically three to five years). These prepayments are recorded net of any impairment losses.

Where there is a volume target the amortisation of the advance is included in sales discounts as a reduction to revenue and where there are specific marketing activities/commitments the amortisation is included as an operating expense. The amounts capitalised are reassessed annually for achievement of targets and are impaired where there is objective evidence that the targets will not be achieved.

Assets held at customer premises are included within property, plant and equipment and are depreciated in line with group policies on similar assets.

k)
Inventories
Inventories are stated at the lower of cost incurred in bringing each product to its present location and condition, and net realisable value, as follows.

▪
Raw materials, consumables and goods for resale: Purchase cost net of discounts and rebates on a first-in first-out basis (FIFO).
▪
Finished goods and work in progress: Raw material cost plus direct costs and a proportion of manufacturing overhead expenses on a FIFO basis.

Net realisable value is based on estimated selling price less further costs expected to be incurred to completion and disposal. Costs of inventories include the transfer from equity of any gains or losses on matured qualifying cash flow hedges of purchases of raw materials.

l)
Financial assets and financial liabilities
Financial assets and financial liabilities are initially recorded at fair value (plus any directly attributable transaction costs, except in the case of those classified at fair value through profit or loss). For those financial instruments that are not subsequently held at fair value, the group assesses whether there is any objective evidence of impairment at each balance sheet date.

Financial assets are recognised when the group has rights or other access to economic benefits. Such assets consist of cash, equity instruments, a contractual right to receive cash or another financial asset, or a contractual right to exchange financial instruments with another entity on potentially favourable terms. Financial assets are derecognised when the right to receive cash flows from the asset have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.

Financial liabilities are recognised when there is an obligation to transfer benefits and that obligation is a contractual liability to deliver cash or another financial asset or to exchange financial instruments with another entity on potentially unfavourable terms. Financial liabilities are derecognised when they are extinguished, that is discharged, cancelled or expired.

If a legally enforceable right exists to set off recognised amounts of financial assets and liabilities, which are in determinable monetary amounts, and there is the intention to settle net, the relevant financial assets and liabilities are offset.

Interest costs are charged to the income statement in the year in which they accrue. Premiums or discounts arising from the difference between the net proceeds of financial instruments purchased or issued and the amounts receivable or repayable at maturity are included in the effective interest calculation and taken to net finance costs over the life of the instrument.

There are four categories of financial assets and financial liabilities. These are described as follows:

(i)
Financial assets and financial liabilities at fair value through profit or loss
Financial assets and financial liabilities at fair value through profit or loss include derivative assets and derivative liabilities not designated as effective hedging instruments.

All gains or losses arising from changes in the fair value of financial assets or financial liabilities within this category are recognised in the income statement.

a.
Derivative financial assets and financial liabilities
Derivative financial assets and financial liabilities are financial instruments whose value changes in response to an underlying variable, require little or no initial investment and are settled in the future.

These include derivatives embedded in host contracts. Such embedded derivatives need not be accounted for separately if the host contract is already fair valued; if it is not considered as a derivative if it was freestanding; or if it can be demonstrated that it is closely related to the host contract. There are certain currency exemptions which the group has applied to these rules which limit the need to account for certain potential embedded foreign exchange derivatives. These are: if a contract is denominated in the functional currency of either party; where that currency is commonly used in international trade of the good traded; or if it is commonly used for local transactions in an economic environment.

Derivative financial assets and liabilities are analysed between current and non-current assets and liabilities on the face of the balance sheet, depending on when they are expected to mature.


13
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

l)
Financial assets and financial liabilities (continued)
a.
Derivative financial assets and financial liabilities (continued)
For derivatives that have not been designated to a hedging relationship, all fair value movements are recognised immediately in the income statement. (See note x for the group’s accounting policy on hedge accounting.)

(ii)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They arise when the group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities of greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are initially recognised at fair value including originating fees and transaction costs, and subsequently measured at amortised cost using the effective interest method less provision for impairment. Loans and receivables include trade receivables, amounts owed by associates, amounts owed by joint ventures - trade, accrued income and cash and cash equivalents.

a.
Trade receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the terms of the receivables. The amount of the provision is the difference between the asset’s carrying value and the present value of the estimated future cash flows discounted at the original effective interest rate. This provision is recognised in the income statement.

b.
Cash and cash equivalents
In the consolidated balance sheet, cash and cash equivalents includes cash in hand, bank deposits repayable on demand and other short-term highly liquid investments with original maturities of three months or less. In the consolidated cash flow statement, cash and cash equivalents also includes bank overdrafts which are shown within borrowings in current liabilities on the balance sheet.

(iii)
Available for sale investments
Available for sale investments are non-derivative financial assets that are either designated in this category or not classified as financial assets at fair value through profit or loss, or loans and receivables. Investments in this category are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. They are initially recognised at fair value plus transaction costs and are subsequently remeasured at fair value and tested for impairment. Gains and losses arising from changes in fair value including any related foreign exchange movements are recognised in other comprehensive income. On disposal or impairment of available for sale investments, any gains or losses in other comprehensive income are reclassified to the income statement.

Purchases and sales of investments are recognised on the date on which the group commits to purchase or sell the asset. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.

(iv)
Financial liabilities held at amortised cost
Financial liabilities held at amortised cost include trade payables, accruals, amounts owed to associates, amounts owed to joint ventures - trade, other payables and borrowings.

a.
Trade payables
Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Trade payables are analysed between current and non-current liabilities on the face of the balance sheet, depending on when the obligation to settle will be realised.

b.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs, and are subsequently stated at amortised cost and include accrued interest and prepaid interest. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months from the balance sheet date. Borrowings classified as hedged items are subject to hedge accounting requirements (see note x). Bank overdrafts are shown within borrowings in current liabilities and are included within cash and cash equivalents on the face of the cash flow statement as they form an integral part of the group’s cash management.

m)
Impairment
This policy covers all assets except inventories (see note k), financial assets (see note l), non-current assets classified as held for sale (see note n), and deferred tax assets (see note u).

Impairment reviews are performed by comparing the carrying value of the non-current asset with its recoverable amount, being the higher of the fair value less costs of disposal and value in use. The fair value less costs of disposal is considered to be the amount that could be obtained on disposal of the asset. Value in use is determined by discounting the future post-tax cash flows generated from continuing use of the cash generating unit (CGU) using a post-tax discount rate, as this closely approximates applying pre-tax discount rates to pre-tax cash flows. Where a potential impairment is identified using post-tax cash flows and post-tax discount rates, the impairment review is reperformed on a pre-tax basis in order to determine the impairment loss to be recorded.

Where the asset does not generate cash flows that are independent from the cash flows of other assets, the group estimates the recoverable amount of the CGU to which the asset belongs. For the purpose of conducting impairment reviews, CGUs are considered to be groups of assets that have separately identifiable cash flows. They also include those assets and liabilities directly involved in producing the income and a suitable proportion of those used to produce more than one income stream.


14
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

m)
Impairment (continued)
An impairment loss is held firstly against any specifically impaired assets. Where an impairment is recognised against a CGU, the impairment is first taken against goodwill balances and if there is a remaining loss it is set against the remaining intangible and tangible assets on a pro-rata basis.

Should circumstances or events change and give rise to a reversal of a previous impairment loss, the reversal is recognised in the income statement in the period in which it occurs and the carrying value of the asset is increased. The increase in the carrying value of the asset is restricted to the amount that it would have been had the original impairment not occurred. Impairment losses in respect of goodwill are irreversible.

Goodwill is tested annually for impairment. Assets subject to amortisation or depreciation are reviewed for impairment if circumstances or events change to indicate that the carrying value may not be fully recoverable.

n)
Non-current assets (or disposal groups) held for sale
Non-current assets and all assets and liabilities classified as held for sale are measured at the lower of carrying value and fair value less costs of disposal.

Such assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continued use. This condition is regarded as met only when a sale is highly probable, the asset or disposal group is available for immediate sale in its present condition and when management is committed to the sale which is expected to qualify for recognition as a completed sale within one year from date of classification.

o)
Provisions
Provisions are recognised when there is a present obligation, whether legal or constructive, as a result of a past event for which it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Such provisions are calculated on a discounted basis where the effect is material to the original undiscounted provision. The carrying amount of the provision increases in each period to reflect the passage of time and the unwinding of the discount and the movement is recognised in the income statement within net finance costs.

Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. Provisions are recognised for onerous contracts where the unavoidable cost exceeds the expected benefit.

p)
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

q)
Investments in own shares (treasury and shares held by employee benefit trusts)
Shares held by employee share ownership plans, employee benefit trusts and in treasury are treated as a deduction from equity until the shares are cancelled, reissued, or disposed.

Purchases of such shares are classified in the cash flow statement as a purchase of own shares for share trusts or purchase of own shares for treasury within net cash from financing activities.

Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental costs and related tax effects, is included in equity attributable to the company’s equity shareholders.
 
r)
Revenue recognition
(i)
Sale of goods and services
Revenue represents the fair value of consideration received or receivable for goods and services provided to third parties and is recognised when the risks and rewards of ownership are substantially transferred.

The group presents revenue gross of excise duties because unlike value added tax, excise is not directly related to the value of sales. It is not generally recognised as a separate item on invoices, increases in excise are not always directly passed on to customers, and the group cannot reclaim the excise where customers do not pay for product received. The group therefore considers excise as a cost to the group and reflects it as a production cost. Consequently, any excise that is recovered in the sale price is included in revenue.

Revenue excludes value added tax. It is stated net of price discounts, promotional discounts, settlement discounts and after an appropriate amount has been provided to cover the sales value of credit notes yet to be issued that relate to the current and prior periods.

The same recognition criteria also apply to the sale of by-products and waste (such as spent grain, malt dust and yeast) with the exception that these are included within other income.

(ii)
Interest income
Interest income is recognised on an accruals basis using the effective interest method.

When a receivable is impaired the group reduces the carrying amount to its recoverable amount by discounting the estimated future cash flows at the original effective interest rate, and continuing to unwind the discount as interest income.

(iii)
Royalty income
Royalty income is recognised on an accruals basis in accordance with the relevant agreements and is included in other income.


15
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

r)
Revenue recognition (continued)
(iv)
Dividend income
Dividend income is recognised when the right to receive payment is established.

s)
Operating leases
Rentals paid and incentives received on operating leases are charged or credited to the income statement on a straight-line basis over the lease term.

t)
Exceptional items
Where certain expense or income items recorded in a period are material by their size or incidence, the group reflects such items as exceptional items within a separate line on the income statement except for those exceptional items that relate to associates, joint ventures, net finance costs and tax. (Associates’ and joint ventures’ net finance costs and tax exceptional items are only referred to in the notes to the consolidated financial statements.)

Exceptional items are also summarised in the segmental analyses, excluding those that relate to net finance costs and tax.

The group presents alternative earnings per share calculations on a headline and adjusted basis. The adjusted earnings per share figure excludes the impact of amortisation of intangible assets (excluding computer software), certain non-recurring items and post-tax exceptional items in order to present an additional measure of performance for the years shown in the consolidated financial statements. Headline earnings per share is calculated in accordance with the South African Circular 2/2013 entitled 'Headline Earnings' which forms part of the listing requirements for the JSE Ltd (JSE).
 
u)
Taxation
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or directly in equity, respectively.

Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. The group’s liability for current taxation is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided in full using the liability method, in respect of all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the consolidated financial statements, except where the temporary difference arises from goodwill (in the case of deferred tax liabilities) or from the initial recognition (other than a business combination) of other assets and liabilities in a transaction that affects neither accounting nor taxable profit.

Deferred tax liabilities are recognised where the carrying value of an asset is greater than its tax base, or where the carrying value of a liability is less than its tax base. Deferred tax is recognised in full on temporary differences arising from investment in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. This includes taxation in respect of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future periods has been entered into by the subsidiary. Deferred income tax is also recognised in respect of the unremitted retained earnings of overseas associates and joint ventures as the group is not able to determine when such earnings will be remitted and when such additional tax such as withholding taxes might be payable.

A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it is probable that future taxable profit will be available against which the temporary differences (including carried forward tax losses) can be utilised.

Deferred tax is measured at the tax rates expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at balance sheet date. Deferred tax is measured on a non-discounted basis.

v)
Dividend distributions
Dividend distributions to equity holders of the parent are recognised as a liability in the group’s financial statements in the period in which the dividends are approved by the company’s shareholders. Interim dividends are recognised when paid. Dividends declared after the balance sheet date are not recognised, as there is no present obligation at the balance sheet date.

w)
Employee benefits
(i)
Wages and salaries
Wages and salaries for current employees are recognised in the income statement as the employees’ services are rendered.

(ii)
Vacation and long-term service awards costs
The group recognises a liability and an expense for accrued vacation pay when such benefits are earned and not when these benefits are paid.

The group also recognises a liability and an expense for long-term service awards where cash is paid to the employee at certain milestone dates in a career with the group. Such accruals are appropriately discounted to reflect the future payment dates at discount rates determined by reference to local high quality corporate bonds.

(iii)
Profit-sharing and bonus plans
The group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the company’s shareholders after certain adjustments.

The group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. At a mid-year point an accrual is maintained for the appropriate proportion of the expected bonuses which would become payable at the year end.


16
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

w)
Employee benefits (continued)
(iv)
Share-based compensation
The group operates a variety of equity-settled share-based compensation plans.

The equity-settled plans comprise share option and stock appreciation rights plans (with and without market performance conditions attached), performance share award plans (with market conditions attached) and awards related to the employee element of the Broad-Based Black Economic Empowerment (BBBEE) scheme in South Africa. An expense is recognised to spread the fair value of each award granted after 7 November 2002 over the vesting period on a straight-line basis, after allowing for an estimate of the share awards that will eventually vest. A corresponding adjustment is made to equity over the remaining vesting period. The estimate of the level of vesting is reviewed at least annually, with any impact on the cumulative charge being recognised immediately. In addition the group has granted an equity-settled share-based payment to retailers in relation to the retailer element of the BBBEE scheme. A one-off charge has been recognised based on the fair value at the grant date with a corresponding adjustment to equity. The charge will not be adjusted in the future.

The charges are based on the fair value of the awards as at the date of grant, as calculated by various binomial model calculations and Monte Carlo simulations.

The charges are not reversed if the options and awards are not exercised because the market value of the shares is lower than the option price at the date of grant.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

For cash-settled plans a liability is recognised at fair value in the balance sheet over the vesting period with a corresponding charge to the income statement. The liability is remeasured at each reporting date, on an actuarial basis using the analytic method, to reflect the revised fair value and to adjust for changes in assumptions such as leavers. Changes in the fair value of the liability are recognised in the income statement. Actual settlement of the liability will be at its intrinsic value with the difference recognised in the income statement.

(v)
Pension obligations
The group has both defined benefit and defined contribution plans.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in full as they arise outside of the income statement and are charged or credited to equity in other comprehensive income in the period in which they arise.

Past service costs are recognised immediately in the income statement.

The contributions to defined contribution plans are recognised as an expense as the costs become payable. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(vi)
Other post-employment obligations
Some group companies provide post-retirement healthcare benefits to qualifying employees. The expected costs of these benefits are assessed in accordance with the advice of qualified actuaries and contributions are made to the relevant funds over the expected service lives of the employees entitled to those funds. Actuarial gains and losses arising from experience adjustments, and changes in actuarial assumptions are recognised in full as they arise outside the income statement and are charged or credited to equity in other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries.

(vii)
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits when it is demonstrably committed to terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value in a similar manner to all long-term employee benefits.

x)
Derivative financial instruments - hedge accounting
Financial assets and financial liabilities at fair value through profit or loss include all derivative financial instruments. The derivative instruments used by the group, which are used solely for hedging purposes (i.e. to offset foreign exchange, commodity price and interest rate risks), comprise interest rate swaps, cross currency swaps, forward foreign exchange contracts, commodity contracts and other specific instruments as necessary under the approval of the board. Such derivative instruments are used to alter the risk profile of an existing underlying exposure of the group in line with the group’s risk management policies. The group also has derivatives embedded in other contracts, primarily cross border foreign currency supply contracts for raw materials.


17
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

1. Accounting policies (continued)

x)
Derivative financial instruments - hedge accounting (continued)
Derivatives are initially recorded at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the hedging relationship.

In order to qualify for hedge accounting, the group is required to document at inception the relationship between the hedged item and the hedging instrument as well as its risk management objectives and strategy for undertaking hedging transactions. The group is also required to document and demonstrate that the relationship between the hedged item and the hedging instrument will be highly effective. This effectiveness test is reperformed at each period end to ensure that the hedge has remained and will continue to remain highly effective.

The group designates certain derivatives as either: hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); hedges of highly probable forecast transactions or commitments (cash flow hedge); or hedges of net investments in foreign operations (net investment hedge).

(i)
Fair value hedges
Fair value hedges comprise derivative financial instruments designated in a hedging relationship to manage the group’s interest rate risk and foreign exchange risk to which the fair value of certain assets and liabilities are exposed. Changes in the fair value of the derivative offset the relevant changes in the fair value of the underlying hedged item attributable to the hedged risk in the income statement in the period incurred.

Gains or losses on fair value hedges that are regarded as highly effective are recorded in the income statement together with the gain or loss on the hedged item attributable to the hedged risk.

(ii)
Cash flow hedges
Cash flow hedges comprise derivative financial instruments designated in a hedging relationship to manage currency and interest rate risk to which the cash flows of certain assets and liabilities are exposed. The effective portion of changes in the fair value of the derivative that is designated and qualifies for hedge accounting is recognised in other comprehensive income. The ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are reclassified to the income statement in the period in which the hedged item affects profit or loss. However, where a forecasted transaction results in a non-financial asset or liability, the accumulated fair value movements previously deferred in equity are included in the initial cost of the asset or liability.

(iii)
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations comprise either foreign currency borrowings or derivatives (typically forward exchange contracts and cross currency swaps) designated in a hedging relationship.

Gains or losses on hedging instruments that are regarded as highly effective are recognised in other comprehensive income. These largely offset foreign currency gains or losses arising on the translation of net investments that are recorded in equity, in the foreign currency translation reserve. The ineffective portion of gains or losses on hedging instruments is recognised immediately in the income statement. Amounts accumulated in equity are only reclassified to the income statement upon disposal of the net investment.

Where a derivative ceases to meet the criteria of being a hedging instrument or the underlying exposure which it is hedging is sold, matures or is extinguished, hedge accounting is discontinued and amounts previously recorded in equity are reclassified to the income statement. A similar treatment is applied where the hedge is of a future transaction and that transaction is no longer likely to occur. When the hedge is discontinued due to ineffectiveness, hedge accounting is discontinued prospectively.

Certain derivative instruments, while providing effective economic hedges under the group’s policies, are not designated as hedges. Changes in the fair value of any derivative instruments that do not qualify or have not been designated as hedges are recognised immediately in the income statement. The group does not hold or issue derivative financial instruments for speculative purposes.

y)
Deposits by customers
Returnable containers in circulation are recorded within property, plant and equipment and a corresponding liability is recorded in respect of the obligation to repay the customers’ deposits. Deposits paid by customers for branded returnable containers are reflected in the balance sheet within current liabilities. Any estimated liability that may arise in respect of deposits for unbranded containers is shown in provisions.

z)
Earnings per share
Basic earnings per share represents the profit on ordinary activities after taxation attributable to the equity shareholders of the parent entity, divided by the weighted average number of ordinary shares in issue during the year, less the weighted average number of ordinary shares held in the group’s employee benefit trusts and in treasury during the year.

Diluted earnings per share represents the profit on ordinary activities after taxation attributable to the equity shareholders of the parent, divided by the weighted average number of ordinary shares in issue during the year, less the weighted average number of ordinary shares held in the group’s employee benefit trusts and in treasury during the year, plus the weighted average number of dilutive shares resulting from share options and other potential ordinary shares outstanding during the year.


18
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

2. Segmental analysis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating segments reflect the management structure of the group and the way performance is evaluated and resources allocated based on group NPR and EBITA by the group’s chief operating decision maker, defined as the executive directors. The group is focused geographically and, while not meeting the definition of reportable segments, the group reports separately as segments South Africa: Hotels and Gaming and Corporate as this provides useful additional information.
 
 
 
 
 
 
 
 
 
 
 
 
The segmental information presented below includes the reconciliation of GAAP measures presented on the face of the income statement to non-GAAP measures which are used by management to analyse the group's performance. The non-GAAP measures used were revised in the year. Consequently the comparative period disclosures have been revised accordingly.
 
 
 
 
 
 
 
 
 
 
 
 
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
 
Group NPR

EBITA

 
Group NPR

 
EBITA

 
Group NPR

EBITA

 
 
 
2014 

2014 

 
2013 

 
2013 1

  
2012 

2012 1

  
  
  
US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
 
5,745

2,192

 
5,802

 
2,112

 
5,315

1,865

Europe
 
 
4,574

703

 
4,300

 
784

 
4,235

836

North America
 
 
4,665

804

 
4,656

 
747

 
4,544

745

Africa
 
 
3,424

939

 
3,290

 
838

 
3,087

743

Asia Pacific
 
 
3,944

845

 
4,005

 
854

 
2,600

319

South Africa:
 
 
4,367

1,138

 
4,879

 
1,253

 
5,168

1,295

- Beverages
 
 
3,997

1,015

 
4,475

 
1,119

 
4,747

1,160

- Hotels and Gaming
 
370

123

 
404

 
134

 
421

135

Corporate
 
 
-

(161
)
 
-

 
(202
)
 
-

(190
)
 
 
 
26,719

6,460

 
26,932

 
6,386

 
24,949

5,613

Amortisation of intangible assets (excluding computer software) -
  group and share of associates' and joint ventures'
(436
)
 
 
 
(483
)
 
 
(264
)
Exceptional items in operating profit - group and share of
  associates' and joint ventures'
(202
)
 
 
 
(205
)
 
 
1,015

Net finance costs - group and share of associates' and
  joint ventures' (excluding exceptional items)
(741
)
 
 
 
(770
)
 
 
(563
)
Share of associates' and joint ventures' taxation
(162
)
 
 
 
(164
)
 
 
(170
)
Share of associates' and joint ventures' non-controlling interests
(96
)
 
 
 
(85
)
 
 
(48
)
Profit before taxation
 
 
4,823

 
 
 
4,679

 
 
5,583

 
 
 
 
 
 
 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
 
 
 
Group revenue and group NPR (including the group's share of associates and joint ventures)
With the exception of South Africa: Hotels and Gaming, all reportable segments derive their revenues from the sale of beverages. Revenues are derived from a large number of customers which are internationally dispersed, with no customers being individually material.
 
 
 
Revenue

Share of associates' and joint ventures' revenue

 
Group revenue

 
Excise duties and other similar taxes

 
Share of associates' and joint ventures' excise duties and other similar taxes

Group NPR

 
 
 
2014 

2014 

 
2014 

 
2014 

 
2014 

2014 

 
 
 
US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
 
7,812

-

 
7,812

 
(2,067
)
 
-

5,745

Europe
 
 
4,319

1,726

 
6,045

 
(1,009
)
 
(462
)
4,574

North America
 
 
143

5,199

 
5,342

 
(4
)
 
(673
)
4,665

Africa
 
 
2,405

1,653

 
4,058

 
(437
)
 
(197
)
3,424

Asia Pacific
 
 
3,285

2,166

 
5,451

 
(1,235
)
 
(272
)
3,944

South Africa:
 
 
4,347

1,029

 
5,376

 
(855
)
 
(154
)
4,367

- Beverages
 
 
4,347

604

 
4,951

 
(855
)
 
(99
)
3,997

- Hotels and Gaming
 
 
-

425

 
425

 
-

 
(55
)
370

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22,311

11,773

 
34,084

 
(5,607
)
 
(1,758
)
26,719

 
 
 
 
 
 
 
 
 
 
 
 

19
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

2. Segmental analysis (continued)
 
 
 
 
 
 
 
 
 
 
 
 
Revenue

Share of associates' and joint ventures' revenue

 
Group revenue

 
Excise duties and other similar taxes

 
Share of associates' and joint ventures' excise duties and other similar taxes

Group NPR

 
 
 
2013 

2013 

 
2013 

 
2013 

 
2013 

2013 

 
 
 
US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
 
7,821

-

 
7,821

 
(2,019
)
 
-

5,802

Europe
 
 
4,292

1,475

 
5,767

 
(995
)
 
(472
)
4,300

North America
 
 
141

5,214

 
5,355

 
(4
)
 
(695
)
4,656

Africa
 
 
2,267

1,586

 
3,853

 
(420
)
 
(143
)
3,290

Asia Pacific
 
 
3,797

1,888

 
5,685

 
(1,440
)
 
(240
)
4,005

South Africa:
 
 
4,895

1,111

 
6,006

 
(950
)
 
(177
)
4,879

- Beverages
 
 
4,895

645

 
5,540

 
(950
)
 
(115
)
4,475

- Hotels and Gaming
 
-

466

 
466

 
-

 
(62
)
404

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23,213

11,274

 
34,487

 
(5,828
)
 
(1,727
)
26,932

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012 

2012 

 
2012 

 
2012 

 
2012 

2012 

 
 
 
US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
 
7,148

10

 
7,158

 
(1,843
)
 
-

5,315

Europe
 
 
5,347

135

 
5,482

 
(1,204
)
 
(43
)
4,235

North America
 
 
134

5,116

 
5,250

 
(3
)
 
(703
)
4,544

Africa
 
 
2,299

1,387

 
3,686

 
(421
)
 
(178
)
3,087

Asia Pacific
 
 
1,682

1,828

 
3,510

 
(690
)
 
(220
)
2,600

South Africa:
 
 
5,150

1,152

 
6,302

 
(963
)
 
(171
)
5,168

- Beverages
 
 
5,150

665

 
5,815

 
(963
)
 
(105
)
4,747

- Hotels and Gaming
 
-

487

 
487

 
-

 
(66
)
421

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,760

9,628

 
31,388

 
(5,124
)
 
(1,315
)
24,949

 
 
 
 
 
 
 
 
 
 
 
 
Operating profit and EBITA (segment result)
The following table provides a reconciliation of operating profit to operating profit before exceptional items, and to EBITA. EBITA comprises operating profit before exceptional items, and amortisation of intangible assets (excluding computer software) and includes the group's share of associates' and joint ventures' operating profit on a similar basis.
 
 
Operating profit

Exceptional items

Operating profit before exceptional items

 
Share of associates' and joint ventures' operating profit before exceptional items

 
Amortisation of intangible assets (excluding computer software)

 
Share of associates' and joint ventures' amortisation of intangible assets (excluding computer software)

EBITA

 
 
2014 

2014 

2014 

 
2014 

 
2014 

 
2014 

2014 

 
 
US$m

US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
2,116

(47
)
2,069

 
-

 
123

 
-

2,192

Europe
 
565

11

576

 
79

 
20

 
28

703

North America
 
9

-

9

 
753

 
-

 
42

804

Africa
 
560

(25
)
535

 
398

 
6

 
-

939

Asia Pacific
 
365

103

468

 
165

 
212

 
-

845

South Africa:
 
910

33

943

 
190

 
-

 
5

1,138

- Beverages
 
910

33

943

 
72

 
-

 
-

1,015

- Hotels and Gaming
-

-

-

 
118

 
-

 
5

123

Corporate
 
(283
)
122

(161
)
 
-

 
-

 
-

(161
)
 
 
4,242

197

4,439

 
1,585

 
361

 
75

6,460

 
 
 
 
 
 
 
 
 
 
 
 

20
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

2. Segmental analysis (continued)
 
 
 
 
 
 
 
 
 
 
 
Operating profit

Exceptional items

Operating profit before exceptional items

 
Share of associates' and joint ventures' operating profit before exceptional items

 
Amortisation of intangible assets (excluding computer software)

 
Share of associates' and joint ventures' amortisation of intangible assets (excluding computer software)

EBITA

 
 
2013 1

2013 

2013 1

  
2013 1

  
2013 

 
2013 

2013 1

  
  
US$m

US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
1,920

63

1,983

 
-

 
129

 
-

2,112

Europe
 
588

64

652

 
76

 
21

 
35

784

North America
 
7

-

7

 
697

 
-

 
43

747

Africa
 
518

(79
)
439

 
392

 
7

 
-

838

Asia Pacific
 
357

104

461

 
156

 
237

 
-

854

South Africa:
 
1,030

22

1,052

 
190

 
-

 
11

1,253

- Beverages
 
1,030

22

1,052

 
67

 
-

 
-

1,119

- Hotels and Gaming
-

-

-

 
123

 
-

 
11

134

Corporate
 
(228
)
26

(202
)
 
-

 
-

 
-

(202
)
 
 
4,192

200

4,392

 
1,511

 
394

 
89

6,386

 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012 1

2012 

2012 1

  
2012 1

  
2012 

 
2012 

2012 1

  
  
US$m

US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
1,617

119

1,736

 
-

 
129

 
-

1,865

Europe
 
1,939

(1,135
)
804

 
11

 
21

 
-

836

North America
 
-

-

-

 
700

 
-

 
45

745

Africa
 
584

(162
)
422

 
318

 
3

 
-

743

Asia Pacific
 
52

70

122

 
132

 
65

 
-

319

South Africa:
 
1,042

41

1,083

 
211

 
-

 
1

1,295

- Beverages
 
1,042

41

1,083

 
77

 
-

 
-

1,160

- Hotels and Gaming
-

-

-

 
134

 
-

 
1

135

Corporate
 
(231
)
41

(190
)
 
-

 
-

 
-

(190
)
 
 
5,003

(1,026
)
3,977

 
1,372

 
218

 
46

5,613

 
 
 
 
 
 
 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The group's share of associates' and joint ventures' operating profit is reconciled to the share of post-tax results of associates and joint ventures in the income statement as follows.
 
 
 
 
 
 
 
 
2014 

 
2013 1

2012 1

  
  
  
  
  
  
  
  
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 

 
 

 

Share of associates' and joint ventures' operating profit (before exceptional items)
 
 
 
1,585

 
1,511

1,372

Share of associates' and joint ventures' exceptional items in operating profit
 
 
 
(5
)
 
(5
)
11

Share of associates' and joint ventures' net finance costs
 
 
 
(96
)
 
(44
)
(31
)
Share of associates' and joint ventures' taxation
 
 
 
(162
)
 
(164
)
(170
)
Share of associates' and joint ventures' non-controlling interests
 
 
 
(96
)
 
(85
)
(48
)
Share of post-tax results of associates and joint ventures
 
 
 
1,226

 
1,213

1,134

 
 
 
 
 
 
 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

21
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

2. Segmental analysis (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
 
 
 
 
 
 
 
 
 
 
 
EBITA is reconciled to EBITDA as follows.
 
EBITA

Depreciation

Share of associates' and joint ventures' depreciation

EBITDA

 
EBITA

 
Depreciation

 
Share of associates' and joint ventures' depreciation

EBITDA

 
2014 

2014 

2014 

2014 

 
2013 1

  
2013 

 
2013 

2013 1

  
US$m

US$m

US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
2,192

328

-

2,520

 
2,112

 
337

 
-

2,449

Europe
703

222

92

1,017

 
784

 
205

 
70

1,059

North America
804

-

141

945

 
747

 
-

 
137

884

Africa
939

116

107

1,162

 
838

 
98

 
103

1,039

Asia Pacific
845

72

132

1,049

 
854

 
79

 
108

1,041

South Africa:
1,138

151

32

1,321

 
1,253

 
172

 
36

1,461

- Beverages
1,015

151

8

1,174

 
1,119

 
172

 
8

1,299

- Hotels and Gaming
123

-

24

147

 
134

 
-

 
28

162

Corporate
(161
)
31

-

(130
)
 
(202
)
 
28

 
-

(174
)
 
6,460

920

504

7,884

 
6,386

 
919

 
454

7,759

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 

 

 
EBITA

 
Depreciation

 
Share of associates' and joint ventures' depreciation

EBITDA

 
 
 
 
 
 
2012 1

  
2012 

 
2012 

2012 1

  
  

  

  

  

  
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
 
 
 
 
1,865

 
318

 
-

2,183

Europe
 
 
 
 
 
836

 
272

 
5

1,113

North America
 
 
 
 
 
745

 
-

 
142

887

Africa
 
 
 
 
 
743

 
125

 
76

944

Asia Pacific
 
 
 
 
 
319

 
53

 
88

460

South Africa:
 
 
 
 
 
1,295

 
168

 
42

1,505

- Beverages
 
 
 
 
 
1,160

 
168

 
10

1,338

- Hotels and Gaming
 
 
 
 
135

 
-

 
32

167

Corporate
 
 
 
 
 
(190
)
 
23

 
-

(167
)
 
 
 
 
 
 
5,613

 
959

 
353

6,925

 
 
 
 
 
 
 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 

 

 

 

 
 

 
 

 
 

 

Adjusted EBITDA comprised the following.
 
 
 
 
 
 
 

 
2014 

 
2013 1

2012 1

  
  

  

  

  

  
  

  
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Subsidiaries' EBITDA
 
 
 
5,720

 
5,705

5,154

- Operating profit before exceptional items
 
 
 
4,439

 
4,392

3,977

- Depreciation (including amortisation of computer software)
 
 
 
920

 
919

959

- Amortisation (excluding computer software)
 
 
 
361

 
394

218

 
 
 
 
 
 
 
 
 
 
 
 
Group's share of MillerCoors' EBITDA
 
 
 
936

 
877

887

- Operating profit before exceptional items
 
 
 
753

 
697

700

- Depreciation (including amortisation of computer software)
 
 
 
141

 
137

142

- Amortisation (excluding computer software)
 
 
 
42

 
43

45

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,656

 
6,582

6,041

1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
 

22
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

2. Segmental analysis (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other segmental information
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditure excluding investment activity¹

Investment activity²

 
Total

 
Capital expenditure excluding investment activity¹

 
Investment activity²

Total

 
 
 
2014 

2014 

 
2014 

 
2013 

 
2013 

2013 

 
 
 
US$m

US$m

 
US$m

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
 
413

(88
)
 
325

 
528

 
-

528

Europe
 
 
252

-

 
252

 
216

 
-

216

North America
 
 
1

188

 
189

 
-

 
272

272

Africa
 
 
416

42

 
458

 
391

 
29

420

Asia Pacific
 
 
96

201

 
297

 
88

 
(78
)
10

South Africa: Beverages
 
247

-

 
247

 
228

 
-

228

Corporate
 
 
60

1

 
61

 
28

 
(5
)
23

 
 
 
1,485

344

 
1,829

 
1,479

 
218

1,697

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
 

 
Capital expenditure excluding investment activity¹

 
Investment activity²

Total

 
 
 
 
 
 
 
 
2012 

 
2012 

2012 

 
 
 
 

 

 
 

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
Latin America
 
 
 
 
 
 
 
522

 
(34
)
488

Europe
 
 
 
 
 
 
 
324

 
17

341

North America
 
 
 
 
 
 
 
-

 
288

288

Africa
 
 
 
 
 
 
 
398

 
(82
)
316

Asia Pacific
 
 
 
 
 
 
 
69

 
10,931

11,000

South Africa: Beverages
 
 
 
 
 
 
284

 
-

284

Corporate
 
 
 
 
 
 
 
42

 
1

43

 
 
 
 
 
 
 
 
1,639

 
11,121

12,760

 
 
 
 
 
 
 
 
 
 
 
 
¹ Capital expenditure includes additions of intangible assets (excluding goodwill) and property, plant and equipment.
² Investment activity includes acquisitions and disposals of businesses, net investments in associates and joint ventures, purchases of shares in non-controlling interests and purchases and disposals of available for sale investments.
 
 
 
 
 
 
 
 
 
 
 
 
Geographical information
 
 
 
 
 
 
 
 
 
The UK is the parent company's country of domicile. Those countries which account for more than 10% of the group's total revenue and/or non-current assets are considered individually material and are reported separately below.
 
 
 
 
 
 
 
 
2014 

 
2013 

2012 

Revenue
 
 
 

 

 
 

 
US$m

 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 
 
UK
 
 
 
 
 
 
 
394

 
378

359

Australia
 
 
 
 
 
 
 
2,680

 
3,064

1,025

Colombia
 
 
 
 
 
 
 
3,681

 
3,742

3,481

South Africa
 
 
 
 
 
 
 
4,347

 
4,896

5,150

USA
 
 
 
 
 
 
 
129

 
129

124

Rest of world
 
 
 
 
 
 
 
11,080

 
11,004

11,621

 
 
 
 
 
 
 
 
22,311

 
23,213

21,760

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

23
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

2. Segmental analysis (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014 

2013 

Non-current assets
 
 
 
 
 
 
 
US$m

US$m

 
 
 
 
 
 
 
 
 
 
 

 

UK
 
 
 
 
 
 
 
 
 
333 

388 

Australia
 
 
 
 
 
 
 
 
 
12,500 

14,351 

Colombia
 
 
 
 
 
 
 
 
 
7,781 

8,465 

South Africa
 
 
 
 
 
 
 
 
 
2,237 

2,368 

USA
 
 
 
 
 
 
 
 
 
5,839 

5,804 

Rest of world
 
 
 
 
 
 
 
 
 
18,933 

18,409 

 
 
 
 
 
 
 
 
 
 
47,623 

49,785 

 
 
 
 
 
 
 
 
 
 
 
 
Non-current assets by location exclude amounts relating to derivative financial instruments and deferred tax assets.

3. Net operating expenses
 
 
 
 
 
2014 

2013 1

2012 1

  
  
US$m

US$m

US$m

 
 
 

 

 

 
Cost of inventories recognised as an expense
4,711

5,043

5,049

 
- Changes in inventories of finished goods and work in progress
(15
)
93

18

 
- Raw materials and consumables used
4,726

4,950

5,031

 
Excise duties and other similar taxes
5,607

5,828

5,124

 
Employee costs (see note 6a)
2,491

2,704

2,512

 
Depreciation of property, plant and equipment
854

867

909

 
- Containers
233

226

237

 
- Other
621

641

672

 
Net profit on disposal of businesses
(72
)
(79
)
(1,242
)
 
Profit on disposal of investment in associate
-

-

(103
)
 
Loss/(gain) on dilution of investment in associate
18

(4
)
-

 
Gain on remeasurement of existing interest in joint venture on acquisition
-

-

(66
)
 
(Profit)/loss on disposal of property, plant and equipment
(17
)
13

(15
)
 
Amortisation of intangible assets
427

450

273

 
- Intangible assets (excluding computer software)
361

394

218

 
- Computer software
66

56

55

 
Other expenses
4,431

4,561

4,829

 
- Selling, marketing and distribution costs
2,468

2,582

2,562

 
- Repairs and maintenance expenditure on property, plant and equipment
324

333

325

 
- Impairment of goodwill
-

11

-

 
- Impairment of intangible assets
8

-

-

 
- Impairment of property, plant and equipment
52

39

-

 
- Impairment of trade and other receivables
30

23

25

 
- Operating lease rentals - land and buildings
81

64

60

 
- Operating lease rentals - plant, vehicles and systems
86

95

84

 
- Research and development expenditure
4

4

7

 
- Acquisition-related costs
-

-

109

 
- Other operating expenses
1,378

1,410

1,657

 
Total net operating expenses by nature
18,450

19,383

17,270

 
 
 
 
 
 
Other income
(381
)
(362
)
(513
)
 
- Revenue received from royalties
(51
)
(55
)
(43
)
 
- Dividends received from investments
(1
)
(1
)
(1
)
 
- Other operating income
(329
)
(306
)
(469
)
 
 
 
 
 
 
Net operating expenses
18,069

19,021

16,757

 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
Foreign exchange differences recognised in the profit for the year, except for those arising on financial instruments measured at fair value under IAS 39, were a loss of US$32 million (2013: US$14 million, 2012: US$27 million).
 
 
 
 
 

24
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

3. Net operating expenses (continued)
 
 
 
 
 
 
 
 
 
The following fees were paid to a number of different accounting firms as auditors of various parts of the group.
 
 
 
 
2014 

2013 

2012 

 
 
US$m

US$m

US$m

 
Group auditors
 

 

 

 
Fees payable to the company's auditor and its associates for the audit of parent company
 

 

 

 
   and consolidated financial statements
3

2

3

 
Fees payable to company's auditor and its associates for other services:
 
 
 
 
   The audit of the company's subsidiaries
7

9

8

 
Total audit fees payable to the company's auditor
10

11

11

 
Audit-related assurance services
-

1

2

 
Taxation compliance services
1

1

1

 
Taxation advisory services
2

1

6

 
Services relating to corporate finance transactions
-

-

3

 
Other non-audit services
 
 
 
 
   Services relating to information technology1
-

1

4

 
   Other
1

1

2

 
Total fees payable to the company's auditor
14

16

29

 
 
 
 
 
 
Other audit firms
 
 
 
 
Fees payable to other auditor firms for:
 
 
 
 
   The audit of the company's subsidiaries
1

1

1

 
   Taxation advisory services
6

3

2

 
   Services relating to corporate finance transactions
-

-

1

 
   Internal audit services
4

1

1

 
   Other non-audit services
 
 
 
 
      Services relating to information technology1
2

12

8

 
      Other1
35

12

7

 
Total fees payable to other audit firms
48

29

20

 
 
1 Consulting services principally relating to the capability programmes.
 
 
 
 


25
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

4. Exceptional items
 
 
 
 
2014 

2013 

2012 

 
US$m

US$m

US$m

 
 
 
 
Exceptional items included in operating profit:
 
 
 
Net profit on disposal of businesses
72

79

1,248

Capability programme costs
(133
)
(141
)
(235
)
Integration and restructuring costs
(103
)
(91
)
(60
)
Broad-Based Black Economic Empowerment related charges
(33
)
(17
)
(29
)
Impairments
-

(30
)
-

Profit on disposal of investment in associate
-

-

103

Gain on remeasurement of existing interest in joint venture on acquisition
-

-

66

Litigation
-

-

42

Transaction-related costs
-

-

(109
)
Net exceptional (losses)/gains included within operating profit
(197
)
(200
)
1,026

 
 
 
 
Exceptional items included in net finance costs:
 
 
 
Litigation-related finance income
-

-

4

Transaction-related net finance costs
-

-

(26
)
Net exceptional losses included within net finance costs
-

-

(22
)
 
 
 
 
Share of associates' and joint ventures' exceptional items:
 
 
 
Capability programme costs
(5
)
-

-

Impairments
-

(5
)
(35
)
Profits on transactions in associates
-

-

46

Share of associates' and joint ventures' exceptional (losses)/gains
(5
)
(5
)
11

Non-controlling interests' share of associates' and joint ventures' exceptional losses
-

2

-

Group's share of associates' and joint ventures' exceptional (losses)/gains
(5
)
(3
)
11

 
 
 
 
Net taxation credits relating to subsidiaries' and the group's share of associates' and joint
  ventures' exceptional items
27

20

24


Exceptional items included in operating profit
Net profit on disposal of businesses
During 2014 a net profit of US$47 million, after associated costs, was realised on the disposal of the milk and juice business in Panama, Latin America and an additional profit of US$25 million (2013: US$79 million) was realised in Africa in relation to the disposal in 2012 of the group's Angolan operations in exchange for a 27.5% interest in BIH Angola, following the successful resolution of certain matters leading to the release of provisions.

In 2012 a profit of US$1,195 million arose in Europe on the disposal of the group's Russian and Ukrainian businesses in exchange for a 24% interest in the enlarged Anadolu Efes group; a profit of US$67 million arose in Africa on the disposal of the group's Angolan operations in exchange for a 27.5% interest in BIH Angola; partially offset by a loss of US$14 million incurred in Europe primarily in relation to the recycling of the foreign currency translation reserve on the disposal of the distribution business in Italy.

Capability programme costs
The business capability programme streamlined finance, human resources and procurement activities through the deployment of global systems and introduced common sales, distribution and supply chain management systems. Costs of US$79 million were incurred in the year (2013: US$141 million, 2012: US$235 million). Costs of US$54 million (2013: US$nil) were incurred in the year in relation to the new cost saving and efficiency programme which will build upon and extend what has been delivered under the business capability programme.

Integration and restructuring costs
During 2014 US$103 million (2013: US$74 million, 2012: US$26 million) of integration and restructuring costs were incurred in Asia Pacific following the Foster’s and Pacific Beverages acquisitions, including impairments relating to the closure of a brewery and the discontinuation of a brand.

In 2013 US$17 million of restructuring costs were incurred in South Africa: Beverages.

In 2012 US$34 million of restructuring costs were incurred in Latin America, principally in Ecuador, Peru and the regional office.

Broad-Based Black Economic Empowerment scheme charges
During 2014 US$13 million (2013: US$17 million, 2012: US$29 million) of charges have been incurred in relation to the Broad-Based Black Economic Empowerment (BBBEE) scheme in South Africa. This represents the final year of IFRS 2 share-based payment charges in respect of the employee element of the scheme. Additionally a US$20 million loss was incurred on the dilution of the group’s investment in its associate, Distell Group Ltd, as a result of the exercise of share options issued as part of its BBBEE scheme.

Impairments
In 2013 a US$30 million impairment charge was incurred in respect of the Vietnam business in Asia Pacific. The impairment charge comprised US$11 million against goodwill and US$19 million against property, plant and equipment.

26
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

4. Exceptional items (continued)

Profit on disposal of investment in associate
In 2012 a profit of US$103 million was realised on the disposal of the group's investment in its associate, Kenya Breweries Ltd, in Africa.

Gain on remeasurement of existing interest in joint venture on acquisition
In 2012 the group acquired the remaining 50% interest which it did not already own in Pacific Beverages from Coca-Cola Amatil Limited. This resulted in a US$66 million gain arising on the remeasurement to fair value of the group's existing interest.

Litigation    
In 2012 in Europe a US$42 million anti-trust fine paid by Grolsch prior to its acquisition by SABMiller plc was annulled by the EU General Court and the payment refunded.

Transaction-related costs
In 2012 costs of US$109 million were incurred in relation to the Foster's transaction.

Exceptional items included in net finance costs
Litigation-related interest income
In 2012 US$4 million of interest was received in relation to the refund of the anti-trust fine in Europe.

Transaction-related net finance costs    
In 2012 net costs of US$26 million were incurred primarily related to the Foster's transaction and included fees relating to financing facilities and premiums on derivative instruments which were partially offset by mark to market gains on derivative financial instruments taken out in anticipation of the transaction and where hedge accounting could not be applied.

Share of associates’ and joint ventures’ exceptional items
Capability programme costs
During 2014 restructuring costs associated with the group’s new cost saving programme were incurred in MillerCoors. The group’s share amounted to US$5 million.

Impairments
In 2013 an impairment of a soft drinks plant in BIH Angola amounted to US$5 million. After taking account of non-controlling interests, the group’s share was US$3 million.

In 2012 the group’s share of MillerCoors' impairment of the Sparks brand amounted to US$35 million.    

Profits on transactions in associates
In 2012 Tsogo Sun released deferred consideration relating to a prior acquisition of which the group's share was US$13 million; US$10 million profit arose on Tsogo Sun's fair value accounting on the change in control on the acquisition of the outstanding stake in the Formula 1 chain; and a US$23 million profit arose in Africa being the group's share of Castel's profit on disposal of its subsidiary in Nigeria.

Net taxation credits relating to subsidiaries’ and the group’s share of associates’ and joint ventures’ exceptional items
Net taxation credits of US$27 million (2013: US$20 million, 2012: US$24 million) arose in relation to exceptional items during the year and include US$2 million (2013: US$nil, 2012: US$13 million) in relation to MillerCoors although the tax credit is recognised in Miller Brewing Company (see note 7).


27
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

5. Net finance costs
 
 
 
 
2014 

2013 1

2012 1

  
US$m

US$m

US$m

a. Finance costs
 

 

 

Interest payable on bank loans and overdrafts
110

183

170

Interest payable on derivatives
222

255

156

Interest payable on corporate bonds
647

677

463

Interest element of finance lease payments
3

1

1

Net fair value losses on financial instruments
34

-

-

Net exchange losses2
-

23

10

Net exceptional interest payable and similar charges3
-

-

22

Other finance charges
39

47

38

Total finance costs
1,055

1,186

860

 
 
 
 
b. Finance income
 
 
 
Interest receivable
24

39

55

Interest receivable on derivatives
338

355

226

Net fair value gains on financial instruments4
-

62

25

Net exchange gains
36

-

-

Other finance income
12

4

-

Total finance income
410

460

306

 
 
 
 
Net finance costs
645

726

554

 
 
 
 
1 As restated (see note 28).
 
 
 
2 Net gains of US$nil (2013: US$2 million, 2012: US$3 million) were excluded from the determination of adjusted earnings per share.
3 Net losses of US$nil (2013: US$nil, 2012: US$22 million) were excluded from the determination of adjusted earnings per share.
4 Net gains of US$nil (2013: net gains of US$10 million, 2012: net losses of US$1 million) were excluded from the determination of adjusted earnings per share.
 
 
 
 
Adjusted net finance costs were US$645 million (2013: US$738 million, 2012: US$534 million, restated).
 
 
 
 
 
 
 
Refer to note 21 - Financial risk factors for interest rate risk information.
 
 
 

6. Employee and key management compensation costs
 
 
 
 
 
 
 
a. Employee costs
 
 
 
 
2014 

2013 1

2012 1

  
US$m

US$m

US$m

 
 

 
 

Wages and salaries
2,063

2,163

2,046

Share-based payments
154

201

161

Social security costs
160

215

193

Pension costs
117

130

114

Post-retirement benefits other than pensions
7

11

13

 
2,501

2,720

2,527

 
 

 

 

1 As restated (see note 28).
 

 

 

 
 

 

 

Of the employee costs shown above, US$10 million (2013: US$ 16 million, 2012: US$15 million) has been capitalised within intangible assets and property, plant and equipment.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

28
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

6. Employee and key management compensation costs (continued)
 

 
 
 
 

 
 
b. Employee numbers
 
 
 
The average monthly number of employees are shown on a full-time equivalent basis, excluding employees of associated and joint venture undertakings and including executive directors.
 
2014 

2013 

2012 

 
Number

Number

Number

Latin America
29,296

29,882

26,933

Europe
10,174

10,489

14,095

North America
97

82

76

Africa
13,236

12,652

13,596

Asia Pacific
5,113

5,128

3,804

South Africa
11,167

11,438

11,939

Corporate
864

815

701

 
69,947

70,486

71,144

 
 

 
 
c. Key management compensation
 
 
 
The directors of the group and members of the executive committee (excom) are defined as key management. At 31 March 2014 there were 25 (2013: 26, 2012: 27) key management.
 
2014 

2013 

2012 

 
US$m

US$m

US$m

Salaries and short-term employee benefits
30

34

32

Post-employment benefits
2

2

2

Share-based payments
63

61

36

 
95

97

70

 
 
 
 
d. Directors
 
 
 
 
2014 

2013 

2012 

 
US$m

US$m

US$m

Aggregate emoluments £6,287,359 (2013: £6,689,562, 2012: £6,087,153)
10

11

10

Aggregate gains made on the exercise of share options or release of share awards1
15

12

15

Notional contributions to unfunded retirement benefits scheme £626,955 (2013: £767,000, 2012: £562,679)
1

1

1

 
26

24

26

 
 
 
 
1 Excludes gains made on share options exercised and share awards released posthumously.
 
 
 
 
At 31 March 2014 one director (2013: two, 2012: one) had retirement benefits accruing under money purchase pension schemes. Company contributions to money purchase pension schemes during the year amounted to £50,000 (2013: £11,364, 2012: £nil).

7. Taxation
 
 
 
 
2014 

2013 1

2012 1

  
US$m

US$m

US$m

 
 

 

 

Current taxation
1,096

1,118

957

- Charge for the year
1,086

1,131

986

- Adjustments in respect of prior years
10

(13
)
(29
)
Withholding taxes and other remittance taxes
188

170

137

Total current taxation
1,284

1,288

1,094

 
 
 
 
Deferred taxation
(111
)
(96
)
27

- (Credit)/charge for the year
(75
)
(37
)
55

- Adjustments in respect of prior years
(36
)
5

(3
)
- Rate change
-

(64
)
(25
)
 
 
 
 
Taxation expense
1,173

1,192

1,121

 
 
 
 
Tax charge/(credit) relating to components of other comprehensive income is as follows:
 
 
 
Deferred tax charge/(credit) on net remeasurements of defined benefit plans
13

(19
)
(66
)
Deferred tax credit on financial instruments
(1
)
(6
)
(30
)
 
12

(25
)
(96
)
 
 
 
 

29
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

7. Taxation (continued)
 
 
 
 
 
 
 
 
2014 

2013 1

2012 1

  
US$m

US$m

US$m

Total current tax
1,284

1,288

1,094

Total deferred tax
(99
)
(121
)
(69
)
Total taxation
1,185

1,167

1,025

 
 
 
 
Effective tax rate (%)
26.0

27.0

27.5

 
 
 
 
UK taxation included in the above
 
 
 
Current taxation
-

-

-

Withholding taxes and other remittance taxes
102

133

39

Total current taxation
102

133

39

Deferred taxation
-

24

(24
)
UK taxation expense
102

157

15

 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
The effective tax rate is calculated by expressing tax before tax on exceptional items and on amortisation of intangible assets (excluding computer software), including the group’s share of associates’ and joint ventures’ tax on the same basis, as a percentage of adjusted profit before tax. The calculation is on a basis consistent with that used in prior years and is also consistent with other group operating metrics. Tax on amortisation of intangible assets (excluding computer software) was US$123 million (2013: US$135 million, 2012: US$72 million).
 
 
 
 
MillerCoors is not a taxable entity. The tax balances and obligations therefore remain with Miller Brewing Company as a 100% subsidiary of the group. This subsidiary’s tax charge includes tax (including deferred tax) on the group’s share of the taxable profits of MillerCoors and includes tax in other comprehensive income on the group’s share of MillerCoors’ taxable items included within other comprehensive income.
 
Tax rate reconciliation
 
 
 
 
2014 

2013 1

2012 1

  
US$m

US$m

US$m

Profit before taxation
4,823

4,679

5,583

Less: Share of post-tax results of associates and joint ventures
(1,226
)
(1,213
)
(1,134
)
 
3,597

3,466

4,449

 
 
 
 
Tax charge at standard UK rate of 23% (2013: 24%, 2012: 26%)
827

832

1,157

Exempt income
(189
)
(242
)
(413
)
Other incentive allowances
(28
)
(20
)
(63
)
Expenses not deductible for tax purposes
24

157

47

Deferred tax asset not recognised
89

51

30

Initial recognition of deferred taxation
(87
)
(28
)
(10
)
Tax impact of MillerCoors joint venture
178

171

174

Withholding taxes and other remittance taxes
188

170

137

Other taxes
26

35

28

Adjustments in respect of foreign tax rates
160

124

90

Adjustments in respect of prior periods
(26
)
(8
)
(32
)
Deferred taxation rate change
-

(64
)
(25
)
Deferred taxation on unremitted earnings
11

14

1

Total taxation expense
1,173

1,192

1,121

 
 

 

 

1 As restated (see note 28).
 

 

 


8. Earnings per share
 
 
 
 
2014 

2013 1

2012 1

  
US cents

US cents

US cents

 
 

 
 

Basic earnings per share
 211.8 

 204.3 

 265.7 

Diluted earnings per share
 209.1 

 202.0 

 262.9 

Headline earnings per share
 211.6 

 203.0 

 179.0 

Adjusted basic earnings per share
 242.0 

 237.2 

 213.9 

Adjusted diluted earnings per share
 239.0 

 234.5 

 211.6 

 
 
 
 
1 As restated (see note 28).
 
 
 

30
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

8. Earnings per share (continued)
 
 
 
 
 
 
 
The weighted average number of shares was:
 
 
 
 
2014 

2013 

2012 

 
Millions of shares

Millions of shares

Millions of shares

 
 

 

 

Ordinary shares
1,671 

1,667 

1,661 

Treasury shares
(67)

(72)

(72)

EBT ordinary shares
(7)

(5)

(6)

Basic shares
1,597 

1,590 

1,583 

Dilutive ordinary shares
20 

19 

17 

Diluted shares
1,617 

1,609 

1,600 

 
 
 
 
The calculation of diluted earnings per share excludes 6,044,130 (2013: 6,332,436, 2012: 8,362,920) share options that were non-dilutive for the year because the exercise price of the option exceeded the fair value of the shares during the year, and 19,755,628 (2013: 21,226,441, 2012: 14,799,716) share awards that were non-dilutive for the year because the performance conditions attached to the share awards have not been met. These share incentives could potentially dilute earnings per share in the future.
 
 
 
 
Subsequent to 31 March 2014 and before the date of signing these financial statements, 9,408,998 share incentives were granted, and 4,972,947 share incentives were exercised or released.
 
 
 
 
Adjusted and headline earnings
 
 
 
The group presents an adjusted earnings per share figure which excludes the impact of amortisation of intangible assets (excluding computer software), certain non-recurring items and post-tax exceptional items in order to present an additional measure of performance for the years shown in the consolidated financial statements. Adjusted earnings per share has been based on adjusted earnings for each financial year and on the same number of weighted average shares in issue as the basic earnings per share calculation. Headline earnings per share has been calculated in accordance with the South African Circular 2/2013 entitled ‘Headline Earnings’ which forms part of the listing requirements for the JSE Ltd (JSE). The adjustments made to arrive at headline earnings and adjusted earnings are as follows.
 
2014 

2013 1

2012 1

  
US$m

US$m

US$m

 
 

 
 

Profit for the year attributable to owners of the parent
3,381

3,250

4,206

Headline adjustments
 
 
 
Impairment of goodwill
-

11

-

Impairment of intangible assets
8

-

-

Impairment of property, plant and equipment
52

39

-

Loss/(profit) on disposal of property, plant and equipment
-

13

(15
)
Net profit on disposal of businesses
(72
)
(79
)
(1,242
)
Profit on disposal of investment in associates
-

-

(103
)
Loss/(gain) on dilution of investments in associates
20

(4
)
-

Gain on remeasurement of existing interest in joint venture on acquisition
-

-

(66
)
Tax effects of these items
(11
)
(14
)
12

Non-controlling interests' share of the above items
1

(3
)
40

Share of associates' and joint ventures' headline adjustments, net of tax and non-controlling interests
-

15

-

Headline earnings
3,379

3,228

2,832

Capability programme costs
133

141

235

Broad-Based Black Economic Empowerment scheme charges
13

17

29

Integration and restructuring costs (excluding impairment)
43

71

60

Net gain on fair value movements on capital items2
-

(12
)
(2
)
Amortisation of intangible assets (excluding computer software)
361

394

218

Transaction-related costs
-

-

109

Litigation
-

-

(42
)
Litigation-related finance income
-

-

(4
)
Transaction-related net finance costs
-

-

26

Tax effects of the above items
(133
)
(137
)
(101
)
Non-controlling interests' share of the above items
(4
)
(8
)
(7
)
Share of associates' and joint ventures' other adjustments, net of tax and non-controlling interests
73

78

32

Adjusted earnings
3,865

3,772

3,385

 
 

 

 

1 As restated (see note 28).
 

 

 

2 This does not include all fair value movements but includes those in relation to capital items for which hedge accounting cannot be applied.

31
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

9. Dividends
 
 
 
 
2014 
2013 
2012 
 
US$m
US$m
US$m
 
 
 
 
Equity
 
 
 
2013 Final dividend paid: 77.0 US cents (2012: 69.5 US cents, 2011: 61.5 US cents) per ordinary share
 1,236 
 1,125 
 973 
2014 Interim dividend paid: 25.0 US cents (2013: 24.0 US cents, 2012: 21.5 US cents) per ordinary share
 404 
 392 
 351 
 
 1,640 
 1,517 
 1,324 
 
 
 
 
In addition, the directors proposed and the shareholders have approved a final dividend of 80 US cents per share in respect of the financial year ended 31 March 2014 which will absorb an estimated US$1,280 million of shareholders’ funds. The dividend will be paid on 15 August 2014 to shareholders registered on the London and Johannesburg registers as at 8 August 2014. The total dividend per share for the year is 105 US cents (2013: 101 US cents, 2012: 91 US cents).
 
 
 
 
Treasury shares do not attract dividends and the employee benefit trusts have both waived their right to receive dividends (further information can be found in note 26).

10. Goodwill
 
 
 
 
 
 
US$m

Cost
 
 
 
At 1 April 2012
 
 
20,496

Exchange adjustments
 
 
(301
)
Acquisitions - through business combinations
 
 
3

Transfers to disposal group classified as held for sale
 
 
(13
)
At 31 March 2013
 
 
20,185

Exchange adjustments
 
 
(1,349
)
Acquisitions - through business combinations (provisional) (see note 29)
 
 
7

At 31 March 2014
 
 
18,843

 
 
 
 
Accumulated impairment
 
 
 
At 1 April 2012
 
 
325

Exchange adjustments
 
 
(13
)
Impairment
 
 
11

At 31 March 2013
 
 
323

Exchange adjustments
 
 
23

At 31 March 2014
 
 
346

 
 
 
 
Net book amount
 
 
 
At 1 April 2012
 
 
20,171

At 31 March 2013
 
 
19,862

At 31 March 2014
 
 
18,497

 
 
 
 
2014 
 
 
 
Provisional goodwill arose on the acquisition of the trade and assets of a wine and spirits business in Africa. The residual value of the net assets acquired has been recognised as goodwill of US$7 million in the financial statements. The fair value exercise in respect of this business combination has yet to be completed.
 
 
 
 
2013 
 
 
 
Goodwill arose on the acquisition through business combination in the year of Darbrew Limited in Tanzania. The fair value exercise in respect of this business combination is now complete.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

32
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

10. Goodwill (continued)
 
 
 
 
 
 
 
Goodwill is monitored principally on an individual country basis and the net book value is allocated by cash generating unit (CGU) as follows.
 
 
2014 

2013 

 
 
US$m

US$m

CGUs:
 
 
 
Latin America:
 
 
 
- Central America
 
795

803

- Colombia
 
4,392

4,706

- Peru
 
1,658

1,796

- Other Latin America
 
211

224

Europe:
 
 
 
- Czech Republic
 
909

901

- Netherlands
 
106

100

- Italy
 
445

414

- Poland
 
1,258

1,168

- Other Europe
 
80

75

North America
 
256

256

Africa
 
247

250

Asia Pacific:
 
 
 
- Australia
 
7,397

8,319

- India
 
291

335

- Other Asia Pacific
 
1

1

South Africa
 
451

514

 
 
18,497

19,862


Assumptions
The recoverable amount for a CGU is determined based on value in use calculations. Value in use is determined by discounting the future post-tax cash flows generated from continuing use of the CGU using a post-tax discount rate, as this closely approximates to applying pre-tax discount rates to pre-tax cash flows. Where a potential impairment is identified using post-tax cash flows and post-tax discount rates, the impairment review is re-performed on a pre-tax basis and the fair value less cost to sell calculated, in order to determine the impairment loss to be recorded. The key assumptions for the value in use calculations are as follows.
Expected volume compound annual growth rate (CAGR) - Cash flows are based on financial forecasts approved by management for each CGU covering five-year periods and are dependent on management's expected volume CAGRs which have been determined based on past experience and planned initiatives, and with reference to external sources in respect of macro-economic assumptions. Expected growth rates over the five-year forecast period are generally higher than the long-term average growth rates for the economies in which the CGUs operate as a steady state is not necessarily expected to be reached in this period.
Discount rate - The discount rate (weighted average cost of capital) is calculated using a methodology which reflects the returns from United States Treasury notes with a maturity of 20 years, an equity risk premium adjusted for specific industry and country risks, and inflation differentials. The group applies local post-tax discount rates to local post-tax cash flows.
Long-term growth rate - Cash flows after the first five-year period are extrapolated using a long-term growth rate, in order to calculate the terminal recoverable amount. The long-term growth rate is estimated using historical trends and expected future trends in inflation rates, based on external data.
The following table presents the key assumptions used in the value in use calculations in each of the group's operating segments and relate only to subsidiaries of the group.
 
Expected volume CAGRs
2015 - 2019
Post-tax
discount rates
Long-term growth rates
 
%
%
%
Latin America
1.8-4.0
7.6-14.0
2.0-5.8
Europe
1.1-4.3
6.8-10.5
2.0-2.5
North America
5.6 
6.8 
2.0
Africa
7.8-9.4
13.6-14.4
6.5-8.0
Asia Pacific
2.1-6.3
7.4-12.5
2.8-6.5
South Africa
3.2 
11.2 
5.0
 
 
 
 
The most material balance is in Australia. For the goodwill in Australia to be at risk of impairment, the following would need to occur: future compound net producer revenue growth to reduce to a level where EBITA growth over the short term is limited to the long-term growth rate of 2.8%; or long-term growth in nominal terms to fall below 1.8%; or the discount rate to rise to 8.2% or higher.

33
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

10. Goodwill (continued)
 
 
 
 
 
 
 
Impairment reviews results
 
 
 
As a result of the annual impairment reviews, no impairment losses have been recognised in the year.
 
 
 
 
 
 
 
In 2013 a US$30 million impairment loss was recognised in respect of SABMiller Vietnam Company Limited in Asia Pacific, which was principally due to a deterioration in trading. The impairment loss was allocated to goodwill (US$11 million) and property, plant and equipment (US$19 million).
 
 
 
 
Sensitivities to assumptions
 
 
 
The group’s impairment reviews are sensitive to changes in the key assumptions described above. Based on the group’s sensitivity analysis, a reasonably possible change in a single assumption will not cause an impairment loss in any of the group’s CGUs.
11. Intangible assets
 
 
 
 
 
Brands

Computer software

Other

Total

 
US$m

US$m

US$m

US$m

Cost
 
 
 
 
At 1 April 2012
9,974

646

655

11,275

Exchange adjustments
(11
)
(36
)
2

(45
)
Additions - separately acquired
-

149

-

149

Acquisitions - through business combinations
2

-

-

2

Transfers to disposal group classified as held for sale
(9
)
-

-

(9
)
Disposals
(4
)
(7
)
-

(11
)
At 31 March 2013
9,952

752

657

11,361

Exchange adjustments
(789
)
(14
)
(65
)
(868
)
Additions - separately acquired
-

84

-

84

Acquisitions - through business combinations (see note 29)
22

-

-

22

Transfers
3

-

(3
)
-

Disposals
-

(11
)
(32
)
(43
)
At 31 March 2014
9,188

811

557

10,556

 
 
 
 
 
Accumulated amortisation and impairment
 
 
 
 
At 1 April 2012
988

287

42

1,317

Exchange adjustments
(9
)
(18
)
(1
)
(28
)
Amortisation
335

56

59

450

Transfers to disposal group classified as held for sale
(7
)
-

-

(7
)
Disposals
-

(6
)
-

(6
)
At 31 March 2013
1,307

319

100

1,726

Exchange adjustments
(83
)
(5
)
(7
)
(95
)
Amortisation
312

66

49

427

Disposals
-

(10
)
(32
)
(42
)
Impairment
8

-

-

8

At 31 March 2014
1,544

370

110

2,024

 
 
 
 
 
Net book amount
 
 
 
 
At 1 April 2012
8,986

359

613

9,958

At 31 March 2013
8,645

433

557

9,635

At 31 March 2014
7,644

441

447

8,532

 
 
 
 
 
During 2014 impairment charges in respect of intangible assets totalling US$8 million (2013: US$nil) were recognised, all in Asia Pacific.
 
 
 
 
 
At 31 March significant individual brands included within the carrying value of intangible assets are as follows.
 
 

2014
US$m

2013
US$m

Amortisation period remaining (years)

Brand carrying value
 

 

 

 

Carlton (Australia)
 
1,853 

2,139 

38 

Águila (Colombia)
 
1,335 

1,478 

31 

Victoria Bitter (Australia)
 
935 

1,080 

38 

Cristal (Peru)
 
578 

646 

31 

Grolsch (Netherlands)
 
439 

421 

34 


34
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

12. Property, plant and equipment
 
 
 
 
 
 
Assets in course of construction

Land and buildings

Plant,
 vehicles and systems

Returnable containers

Total

 
US$m

US$m

US$m

US$m

US$m

Cost
 
 
 
 
 
At 1 April 2012
584

3,765

8,250

2,067

14,666

Exchange adjustments
(18
)
(163
)
(505
)
(147
)
(833
)
Additions
720

25

324

296

1,365

Acquisitions - through business combinations
-

1

1

-

2

Breakages and shrinkage
-

-

-

(71
)
(71
)
Transfers
(733
)
115

532

86

-

Transfers from other assets
-

-

3

-

3

Transfers to disposal group classified as held for sale
-

(2
)
(10
)
-

(12
)
Disposals
(11
)
(18
)
(313
)
(138
)
(480
)
At 31 March 2013
542

3,723

8,282

2,093

14,640

Exchange adjustments
(33
)
(157
)
(474
)
(113
)
(777
)
Additions
716

23

346

364

1,449

Acquisitions - through business combinations (see note 29)
-

8

4

-

12

Breakages and shrinkage
-

-

-

(216
)
(216
)
Transfers
(618
)
93

423

102

-

Transfers (to)/from other assets
-

-

(8
)
1

(7
)
Disposals
(1
)
(25
)
(179
)
(180
)
(385
)
At 31 March 2014
606

3,665

8,394

2,051

14,716

 
 
 
 
 
 
Accumulated depreciation and impairment
 
 
 
 
 
At 1 April 2012
-

672

3,776

1,056

5,504

Exchange adjustments
-

(43
)
(273
)
(82
)
(398
)
Provided during the year
-

78

563

226

867

Breakages and shrinkage
-

-

-

(24
)
(24
)
Impairment
-

4

35

-

39

Transfers to disposal group classified as held for sale
-

(1
)
(6
)
-

(7
)
Disposals
-

(8
)
(293
)
(99
)
(400
)
At 31 March 2013
-

702

3,802

1,077

5,581

Exchange adjustments
-

(43
)
(273
)
(53
)
(369
)
Provided during the year
-

77

544

233

854

Breakages and shrinkage
-

-

-

(136
)
(136
)
Impairment
-

2

50

-

52

Transfers
-

1

(50
)
49

-

Transfers to other assets
-

-

(1
)
-

(1
)
Disposals
-

(16
)
(156
)
(158
)
(330
)
At 31 March 2014
-

723

3,916

1,012

5,651

 
 
 
 
 
 
Net book amount
 
 
 
 
 
At 1 April 2012
584

3,093

4,474

1,011

9,162

At 31 March 2013
542

3,021

4,480

1,016

9,059

At 31 March 2014
606

2,942

4,478

1,039

9,065

 
 
 
 
 
 
 
 
 
 
 
 
As a result of annual impairment reviews, no impairment losses have been recognised in the year (2013: US$19 million) (see note 10).
 
 
 
 
 
 
Included in land and buildings is freehold land with a cost of US$695 million (2013: US$725 million) which is not depreciated.
 
 
 
 
 
 
Included in plant, vehicles and systems are the following amounts relating to assets held under finance leases.
 
 
 
 
 
 
 
 

 
 
2014 

2013 

 
 

 
 
US$m

US$m

Net book amount
 

 
 
61 

40 

 
 
 
 
 
 

35
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

12. Property, plant and equipment (continued)
 
 
 
 
 
 
 
 
 
 
 
Included in the amounts above are the following amounts in respect of borrowing costs capitalised.
 
 
 
 
 
 
 
 

 
 
2014 

2013 

 
 

 
 
US$m

US$m

At 1 April
 

 
 
45

53

Exchange adjustments
 
 
 
(4
)
(4
)
Amortised during the year
 
 
 
(4
)
(4
)
At 31 March
 
 
 
37

45

 
 
 
 
 
 
No borrowings costs were capitalised during the year (2013: none).
 
 
 
 
 
 
 
 
 
 
 
Borrowings are secured by various of the group's property, plant and equipment with an aggregate net book value of US$87 million (2013: US$21 million).

13. Investments in joint ventures
 
 
 
 
 
A list of the group's significant investments in joint ventures, including the name, country of incorporation and effective ownership interest is given in note 34 to the consolidated financial statements.
 
 

US$m

At 1 April 2012
 
5,520

Investments in joint ventures
 
272

Share of results retained1
  
686

Share of other comprehensive loss1
  
(45
)
Dividends received
 
(886
)
As at 31 March 2013
 
5,547

Investments in joint ventures
 
188

Share of results retained
 
737

Share of other comprehensive income
 
12

Dividends received
 
(903
)
At 31 March 2014
 
5,581

 
 
 
1 As restated (see note 28).
 
 
 
 
 
Summarised financial information for the group's interest in joint ventures, on a 100% basis after adjustments to comply with the group's accounting policies, is shown below.
Summarised balance sheet
MillerCoors
 
 
2014

2013 1

  
US$m

US$m

Cash and cash equivalents
15

16

Other current assets
980

1,011

Total current assets
995

1,027

Non-current assets
4,972

4,961

Total assets
5,967

5,988

Financial liabilities (excluding trade payables)
(46
)
(29
)
Other current liabilities
(888
)
(842
)
Total current liabilities
(934
)
(871
)
Financial liabilities
(38
)
(65
)
Other non-current liabilities
(1,278
)
(1,382
)
Total liabilities
(2,250
)
(2,318
)
Non-controlling interests
(41
)
(53
)
Net assets attributable to owners
3,676

3,617

 
 
 
1 The MillerCoors summarised balance sheet includes adjustments made on the adoption of IFRS 10, 'Consolidated financial statements'. Adopting this standard has resulted in two investments of MillerCoors that were previously classified as joint ventures being recognised as subsidiaries. The investments were previously equity accounted and are now fully consolidated. The change in accounting policy has had no impact on net assets attributable to owners or total comprehensive income, but has resulted in an increase to total assets of US$44 million, and reduction in total liabilities of US$9 million, and an offsetting increase in non-controlling interests of US$53 million at 31 March 2013.
 
 
 

36
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

13. Investments in joint ventures (continued)
 
 
 
 
 
Summarised statement of comprehensive income
MillerCoors
 
 
2014

2013 1

  
US$m

US$m

Revenue
8,963

8,989

Depreciation and amortisation
(316
)
(309
)
Interest expense
(2
)
(2
)
Profit before taxation
1,277

1,189

Taxation expense
(5
)
(5
)
Profit for the year
1,272

1,184

Other comprehensive income/(loss)
20

(77
)
Total comprehensive income
1,292

1,107

 
 

 
1 As restated (see note 28).
 

 
 
 

 
Reconciliation of summarised financial information
 
 
A reconciliation of the summarised financial information to the carrying amount of the group's interests in its joint ventures is as follows.
 
MillerCoors
 
 
2014

2013 1

  
US$m

US$m

Opening net assets attributable to owners
3,617

3,591

Total comprehensive income
1,292

1,107

Dividends paid
(1,557
)
(1,528
)
Funding to joint venture
324

468

Other movements in reserves
-

(21
)
Closing net assets attributable to owners
3,676

3,617

Interest in joint venture (%)
58

58

Interest in joint venture (US$m)
2,132

2,098

Goodwill
3,449

3,449

Carrying value of investments in joint venture
5,581

5,547

 
 
 
1 As restated (see note 28).
 

 

14. Investments in associates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A list of the group’s significant investments in associates, including the name, country of incorporation and effective ownership interest is given in note 34 to the consolidated financial statements.
 
 

 

 
 

 

 
 

 

 
 

US$m

At 1 April 2012
 
 
 
 
 
 
 
 
 
 
5,072 

Exchange adjustments
 
 
 
 
 
 
 
 
 
 
(161)

Investments in associates
 
 
 
 
 
 
 
 
 
 
106 

Disposal of investments in associates
 
 
 
 
 
 
 
 
 
 
(21)

Share of results retained
 
 
 
 
 
 
 
 
 
 
527 

Share of gains recognised in other comprehensive loss
 
 
 
 
 
 
6 

Dividends receivable
 
 
 
 
 
 
 
 
 
 
(113)

At 31 March 2013
 
 
 
 
 
 
 
 
 
 
5,416 

Exchange adjustments
 
 
 
 
 
 
 
 
 
 
(264)

Investments in associates
 
 
 
 
 
 
 
 
 
 
231 

Share of results retained
 
 
 
 
 
 
 
 
 
 
489 

Share of gains recognised in other comprehensive income
 
 
 
 
 
 
133 

Share of movements in other reserves
 
 
 
 
 
 
 
 
 
6 

Dividends receivable
 
 
 
 
 
 
 
 
 
 
(224)

At 31 March 2014
 
 
 
 
 
 
 
 
 
 
5,787 

 
 
 
 
 
 
 
 
 
 
 
 
 
2014 
 
 
 
 
 
 
 
 
 
 
 
There have been no acquisitions or disposals of associates in the year. The increase in investments in associates primarily relates to increased investment in our Chinese associate to partly fund the Kingway acquisition.
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 
 
 
 
 
 
 
 
 
 
 
 
On 7 November 2012 Foster's sold its 49.9% interest in Foster's USA LLC to MillerCoors LLC at no gain or loss to the group. Foster's USA LLC is now wholly owned by MillerCoors LLC.
 
 
 
 
 
 
 
 
 
 
 
 
 

37
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

14. Investments in associates (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The analysis of associate undertakings between listed and unlisted investments is shown below.
 
 
 
 
 
 
 
 
 
 
 
2014 

2013 

 
 
 
 
 
 
 
 
 
 
 
US$m

US$m

Listed
 
 
 
 
 
 
 
 
 
 2,306 

 2,580 

Unlisted
 
 
 
 
 
 
 
 
 
 3,481 

 2,836 

 
 
 
 
 
 
 
 
 
 
 
 5,787 

 5,416 

 
 
 
 
 
 
 
 
 
 
 
 
 
As at 31 March the market value of listed investments included above is:
 
 
 
 
 
 
 
- Anadolu Efes
 
 
 
 
 
 
 
 
 
 1,580 

 2,318 

- Distell Group Ltd
 
 
 
 
 
 
 
 
 
 716 

 704 

- Delta Corporation Ltd
 
 
 
 
 
 
 
 
 
 354 

 351 

- Tsogo Sun Holdings Ltd
 
 
 
 
 
 
 
 
 
 1,046 

 1,166 

 
 
 
 
 
 
 
 
 
 
 
 
 
Further details on the market value of listed investments in associates is given in note 21 to the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
Summarised financial information
Summarised financial information for associates, which, in the opinion of the directors, are material to the group on a 100% basis after adjustments to comply with the group's accounting policies, is as follows.
 
 
Castel1
 
  
Anadolu Efes
 
 
CR Snow
 
 
Tsogo Sun
 
 
 
2014 

2013 

 
2014 

2013 

 
2014 

2013 

 
2014 

2013 

Summarised balance sheet
US$m

US$m

 
US$m

US$m

 
US$m

US$m

 
US$m

US$m

Total current assets
4,478

3,909

 
2,083

1,986

 
2,103

1,925

 
220

169

Non-current assets
3,489

3,197

 
8,735

7,620

 
4,817

3,821

 
1,668

1,685

Total assets
7,967

7,106

 
10,818

9,606

 
6,920

5,746

 
1,888

1,854

Total current liabilities
(1,402
)
(1,493
)
 
(1,505
)
(1,247
)
 
(2,517
)
(2,435
)
 
(122
)
(306
)
Total non-current liabilities
(570
)
(523
)
 
(2,902
)
(2,301
)
 
(1,118
)
(733
)
 
(788
)
(534
)
Total liabilities
(1,972
)
(2,016
)
 
(4,407
)
(3,548
)
 
(3,635
)
(3,168
)
 
(910
)
(840
)
Non-controlling interests
(783
)
(685
)
 
(1,840
)
(619
)
 
(18
)
(39
)
 
(34
)
(58
)
Net assets attributable to owners
5,212

4,405

 
4,571

5,439

 
3,267

2,539

 
944

956

 
 
 
 
 
 
 
 
 
 
 
 
 
Summarised statement of comprehensive income
 
 
 
 
Revenue
6,162

5,944

 
6,682

5,854

 
4,420

3,736

 
1,073

1,175

Profit/(loss) for the year
959

934

 
(139
)
187

 
254

215

 
178

174

Other comprehensive income
(31
)
(15
)
 
258

14

 
74

10

 
18

6

Total comprehensive income
928

919

 
119

201

 
328

225

 
196

180

 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of summarised financial information
 
 
 
 
 
 
 
 
 
A reconciliation of the summarised financial information to the carrying amount of the group's interests in its associates is as follows.
 
 
Castel1
 
  
Anadolu Efes
 
 
CR Snow
 
 
Tsogo Sun
 
 
 
2014 

2013 

 
2014 

2013 

 
2014 

2013 

 
2014 

2013 

 
 
US$m

US$m

 
US$m

US$m

 
US$m

US$m

 
US$m

US$m

Opening net assets attributable to owners
4,405

3,764

 
5,439

5,454

 
2,539

2,314

 
956

1,041

Total comprehensive income
928

919

 
119

201

 
328

225

 
196

180

Dividends paid
(461
)
(128
)
 
(140
)
(123
)
 
-

-

 
(87
)
(83
)
Exchange adjustments
340

(150
)
 
(842
)
(78
)
 
-

-

 
(121
)
(182
)
Funding to associates
-

-

 
-

-

 
400

-

 
-

-

Other movements in reserves
-

-

 
(5
)
(15
)
 
-

-

 
-

-

Closing net assets attributable to owners
5,212

4,405

 
4,571

5,439

 
3,267

2,539

 
944

956

Interest in associates (%)
20-40 

20-40 

 
24

24

 
49

49

 
40

40

Interest in associates (US$m)
1,223

1,019

 
1,097

1,305

 
1,601

1,244

 
375

380

Goodwill
352

300

 
469

556

 
-

-

 
-

-

Carrying value of investments in associates
1,575

1,319

 
1,566

1,861

 
1,601

1,244

 
375

380

 
 
 
 
 
 
 
 
 
 
 
 
 
1 BIH Brasseries Internationales Holding Ltd, Société des Brasseries et Glacières Internationales SA, Algerienne de Bavaroise Spa, BIH Brasseries Internationales Holding (Angola) Ltd, Marocaine d'Investissements et de Services SA, Skikda Bottling Company SARL, Société de Boissons de I'Ouest Algerien SARL, and Société des Nouvelles Brasseries together make up Castel's African beverage operations. Details of individual ownership percentages are included in note 34.

38
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

14. Investments in associates (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually immaterial associates
 
 
 
 
 
 
 
 
 
 
 
Summarised financial information for individually immaterial associates, in aggregate, is as follows.
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
2014 

2013 

Summarised statement of comprehensive income
 
 

 

 
US$m

US$m

Aggregate carrying amount of individually immaterial associates
 
 

 

 
670 

612 

Aggregate amounts of the group's share of:
 
 

 

 
 

 

Profit for the year
 
 

 

 
127 

112 

Other comprehensive income
 
 

 

 
33 

2 

Total comprehensive income
 
 

 

 
160 

114 


15. Inventories
 
 
 
 
 
2014 
 
2013 
 
 
US$m
 
US$m
Raw materials and consumables
 669 
 
 691 
Work in progress
 121 
 
 123 
Finished goods and goods for resale
 378 
 
 361 
 
 
 1,168 
 
 1,175 
 
 
 
 
 
The following amount of inventories are expected to be utilised after 12 months.
2014 
 
2013 
 
 
US$m
 
US$m
Raw materials and consumables
 46 
 
 48 
 
 
 
 
 
There were no borrowings secured on the inventories of the group (2013: US$nil).
 
 
 
 
 
 
 
 
An impairment charge of US$25 million was recognised in respect of inventories during the year (2013: US$15 million).

16. Trade and other receivables
 
 
 
 
 
 
 
 
 
 

 

 

 
 
2014 

2013 

 
 
 

 

 

 
 
US$m

US$m

Trade receivables
 
 
 
 
 
1,504

1,740

Less: provision for impairment
 
 
 
 
 
(144
)
(140
)
Trade receivables - net
 
 
 
 
 
1,360

1,600

Other receivables
 
 
 
 
 
357

392

Less: provision for impairment
 
 
 
 
 
(12
)
(12
)
Other receivables - net
 
 
 
 
 
345

380

Amounts owed by associates
 
 
 
 
 
42

68

Amounts owed by joint ventures - trade
 
 
 
 
 
5

5

Prepayments and accrued income
 
 
 
 
 
208

158

Total trade and other receivables
 
 
 
 
 
1,960

2,211

 
 
 
 
 
 
 
 
 
Analysed as:
 
 
 
 
 
 
 
Current
 
 
 
 
 
 
 
Trade receivables - net
 
 
 
 
 
1,345

1,584

Other receivables - net
 
 
 
 
 
250

274

Amounts owed by associates
 
 
 
 
 
32

59

Amounts owed by joint ventures - trade
 
 
 
 
 
5

5

Prepayments and accrued income
 
 
 
 
 
189

145

 
 
 
 
 
 
1,821

2,067

 
 
 
 
 
 
 
 
 
Non-current
 
 
 
 
 
 
 
Trade receivables - net
 
 
 
 
 
15

16

Other receivables - net
 
 
 
 
 
95

106

Amounts owed by associates
 
 
 
 
 
10

9

Prepayments and accrued income
 
 
 
 
 
19

13

 
 
 
 
 
 
139

144

 
 
 
 
 
 
 
 
 
The net carrying values of trade and other receivables are considered a close approximation of their fair values.

39
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

16. Trade and other receivables (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At 31 March 2014 trade and other receivables of US$450 million (2013: US$466 million) were past due but not impaired. These relate to customers of whom there is no recent history of default. The ageing of these trade and other receivables is shown below.
 
 
 

 

 

 

 
 

Past due

 
 
Fully

Within

 

 

 
 

Over

 
 
performing

30 days

30-60 days

60-90 days

 
90-180 days

180 days

 
 
US$m

US$m

US$m

US$m

 
US$m

US$m

At 31 March 2014
 

 

 

 

 
 

 

Trade receivables
1,022

149

54

23

 
31

57

Other receivables
231

52

11

6

 
16

26

Amounts owed by associates
17

4

6

-

 
-

15

Amounts owed by joint ventures - trade
5

-

-

-

 
-

-

 
 
 
 
 
 
 
 
 
At 31 March 2013
 
 
 
 
 
 
 
Trade receivables
1,255

181

62

15

 
18

42

Other receivables
290

44

18

5

 
4

15

Amounts owed by associates
6

2

-

3

 
4

53

Amounts owed by joint ventures - trade
5

-

-

-

 
-

-

 
 
 
 
 
 
 
 
 
The group holds collateral as security for past due trade receivables to the value of US$10 million (2013: US$17 million). Collateral held primarily includes bank guarantees and charges over assets.
 
 
 
 
 
 
 
 

 

At 31 March 2014 trade receivables of US$168 million (2013: US$167 million) were determined to be specifically impaired and provided for. The amount of the provision at 31 March 2014 was US$144 million (2013: US$140 million) and reflects trade receivables from customers which are considered to be experiencing difficult economic situations. It was assessed that a portion of these receivables is expected to be recovered. The group holds collateral as security against specifically impaired trade receivables with a fair value of US$1 million (2013: US$1 million).
 
 
 
 
 
 
 
 
 
At 31 March 2014 other receivables of US$15 million (2013: US$16 million) were determined to be specifically impaired and provided for.
The amount of the provision at 31 March 2014 was US$12 million (2013: US$12 million) and reflects loans to customers which are considered to be experiencing difficult economic situations. It was assessed that a portion of these receivables is expected to be recovered. The group held collateral as security against specifically impaired other receivables at 31 March 2014 of US$nil (2013: US$1 million).
 
 
 
 
 
 
 
 
 
The carrying amounts of trade and other receivables are denominated in the following currencies.
 
 
 
 
 
 
 
2014 

2013 

 
 
 
 
 
 
 
US$m

US$m

Australian dollar
 
 
 
 
 
176

260

British Pound
 
 
 
 
 
73

81

Colombian peso
 
 
 
 
 
135

167

Czech koruna
 
 
 
 
 
78

91

Euro
 
 
 
 
 
225

246

Indian rupee
 
 
 
 
 
141

136

Polish zloty
 
 
 
 
 
185

211

SA rand
 
 
 
 
 
295

340

US dollar
 
 
 
 
 
204

238

Other currencies
 
 
 
 
 
448

441

 
 
 
 
 
 
1,960

2,211

 
 
 
 
 
 
 
 
 
Movements on the provisions for impairment of trade receivables and other receivables are as follows.
 
 
 
 
Trade receivables
 
 
Other receivables
 
 
 
 
 
2014 

2013 

 
2014 

2013 

 
 
 
 
US$m

US$m

 
US$m

US$m

At 1 April
 
(140
)
(140
)
 
(12
)
(12
)
Provision for receivables impairment
 
(24
)
(23
)
 
(6
)
-

Receivables written off during the year as uncollectible
 
18

12

 
5

-

Disposals
 
-

4

 
-

-

Exchange adjustments
 
2

7

 
1

-

At 31 March
 
(144
)
(140
)
 
(12
)
(12
)
 
 
 
 
 
 
 
 
 
The creation of provisions for impaired receivables is included in net operating expenses in the income statement (see note 3).

40
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

17. Cash and cash equivalents
 
 
 
 
2014 

 
2013 

 
US$m

 
US$m

Short-term deposits
1,589

 
1,684

Cash at bank and in hand
492

 
487

 
2,081

 
2,171

 
 
 
 
Cash and short-term deposits of US$117 million (2013: US$146 million) are held in African countries (including South Africa) and are subject to local exchange control regulations. These local exchange control regulations provide for restrictions on exporting capital from those countries, other than through normal dividends. As normal dividends are generally able to be paid, these restrictions are not expected to have a material impact on the group's ability to meet its ongoing obligations.
 
 
 
 
The group operates notional cash pools. The structures facilitate interest and balance compensation of cash and bank overdrafts. These notional pooling arrangements meet the set-off rules under IFRS and, as a result, the cash and overdraft balances have been reported net on the balance sheet. Refer to note 23 for further details on amounts offset in the balance sheet.
 
 
 
 
Effective 1 January 2012 the group combined the operational management of its Angolan businesses in Africa with the Angolan businesses of its associate, Castel. All of the Angolan businesses, in which the group retains an associate interest, are being managed from that date by Castel. As a result, a participation in a bank loan of US$100 million previously owed by an Angolan subsidiary of the group was no longer entitled to be offset within borrowings.
 
 
 
 
During the year ended 31 March 2013 Castel paid US$100 million to the group to cover the group's exposure in respect of the loan participation deposit. This resulted in a payable to associate being recorded in the consolidated balance sheet, as the loan participation deposit and the payable to associate are held with different counterparties and therefore were unable to be offset.

During the year ended 31 March 2014 there was a non-cash settlement of the loan participation deposit and the payable to associate.
18. Trade and other payables
 
 
 
 
2014 

 
2013 

 
US$m

 
US$m

Trade payables
1,333

 
1,236

Accruals
731

 
873

Deferred income
9

 
9

Containers in the hands of customers
453

 
504

Amounts owed to associates
39

 
150

Amounts owed to joint ventures - trade
16

 
14

Deferred consideration for acquisitions
9

 
10

Excise duty payable
358

 
363

VAT and other taxes payable
216

 
239

Other payables
708

 
738

Total trade and other payables
3,872

 
4,136

 
 
 
 
Analysed as:
 
 
 
Current
 
 
 
Trade payables
1,333

 
1,236

Accruals
731

 
873

Deferred income
6

 
5

Containers in the hands of customers
453

 
504

Amounts owed to associates - trade
39

 
50

Amounts owed to joint ventures - trade
16

 
14

Deferred consideration for acquisitions
5

 
4

Excise duty payable
358

 
363

VAT and other taxes payable
216

 
239

Other payables
690

 
716

 
3,847

 
4,004

 
 
 
 
Non-current
 
 
 
Deferred income
3

 
4

Amounts owed to associates
-

 
100

Deferred consideration for acquisitions
4

 
6

Other payables
18

 
22

 
25

 
132


41
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

19. Deferred taxation
 
 
 
 
 
 
 
 
 
 
 
The movement on the net deferred tax liability is shown below.
 
 
 
 
 
 
 
 
 
 

 
2014 

2013 1

  
  
  
  
  
  

  
US$m

US$m

At 1 April
 
 
 
 
 
3,436

3,602

Exchange adjustments
(219
)
(45
)
Acquisitions - through business combinations (see note 29)
-

1

Transfers to disposal group classified as held for sale
-

(1
)
Rate change
-

(64
)
Transfers from current tax
13

-

Credited to the income statement
(111
)
(32
)
Deferred tax on items (credited)/charged to other comprehensive loss:
 
 
- Financial instruments
(1
)
(6
)
- Remeasurements of defined benefit plans
13

(19
)
At 31 March
3,131

3,436

 
 
 
 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The movements in deferred tax assets and liabilities (after offsetting of balances as permitted by IAS 12) during the year are shown below.
 
 
Fixed asset allowances

Pensions and post-retirement benefit provisions

Intangibles

Financial instruments

Investment in MillerCoors joint venture

Other timing differences

Total

 
 
US$m

US$m

US$m

US$m

US$m

US$m

US$m

Deferred tax liabilities
 
 
 
 
 
 
 
At 1 April 2012
707

(14
)
2,818

(46
)
687

(433
)
3,719

Exchange adjustments
(51
)
-

2

-

-

2

(47
)
Acquisitions - through business
  combinations
-

-

1

-

-

-

1

Rate change
(64
)
-

-

-

-

-

(64
)
Transfers from deferred tax assets
(11
)
-

-

-

-

(14
)
(25
)
Transfers to disposal group classified
  as held for sale
-

-

(1
)
-

-

-

(1
)
Charged/(credited) to the income
  statement1
104

22

(125
)
(2
)
35

(85
)
(51
)
Deferred tax on items charged/(credited) to other comprehensive loss:
 
 
 
 
 
 
 
- Financial instruments
-

-

-

1

(7
)
-

(6
)
- Remeasurements of defined benefit plans1
-

(6
)
-

-

(13
)
-

(19
)
At 31 March 2013
685

2

2,695

(47
)
702

(530
)
3,507

Exchange adjustments
(41
)
-

(231
)
(1
)
-

54

(219
)
Transfers from current tax
-

-

-

-

-

16

16

Transfers (from)/to deferred tax assets
(4
)
-

2

-

-

(1
)
(3
)
Charged/(credited) to the income
  statement
84

2

(86
)
-

(62
)
(5
)
(67
)
Deferred tax on items (credited)/charged
  to other comprehensive loss:
 
 
 
 
 
 
 
- Financial instruments
-

-

-

-

(1
)
-

(1
)
- Remeasurements of defined benefit plans
-

8

-

-

5

-

13

At 31 March 2014
724

12

2,380

(48
)
644

(466
)
3,246

 
 
 
 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

42
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

19. Deferred taxation (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Fixed asset allowances

Provisions and accruals

Other timing differences

Total

 
 
 
 
 

US$m

US$m

US$m

US$m

Deferred tax assets
 
 
 
 
 
 
 
At 1 April 2012
 
 
 
-

57

60

117

Exchange adjustments
 
-

(1
)
(1
)
(2
)
Transfers (to)/from deferred tax liabilities
(11
)
(20
)
6

(25
)
Charged to the income statement
 
 
 
(4
)
(2
)
(13
)
(19
)
At 31 March 2013
 
 
 
(15
)
34

52

71

Exchange adjustments
 
1

(1
)
-

-

Transfers from current tax
 
 
 
-

-

3

3

Transfers (to)/from deferred tax liabilities
 
(4
)
2

(1
)
(3
)
Credited to the income statement
 
2

-

42

44

At 31 March 2014
 
 
 
(16
)
35

96

115

 
 
 
 
 
 
 
 
 
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
 
 
 
 
 
 
 
 
 
The deferred tax asset arises because of timing differences in Europe, Africa, Asia Pacific, and Latin America. Given both recent and forecast trading, the directors are of the opinion that the level of profits in the foreseeable future is more likely than not to be sufficient to recover these assets.
 
 
 
 
 
 
 
 
 
Deferred tax liabilities of US$3,174 million (2013: US$3,449 million) are expected to fall due after more than one year and deferred tax assets of
US$112 million (2013: US$52 million) are expected to be recovered after more than one year.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014 

2013 

 
 
 
 
 
 
 
US$m

US$m

Unrecognised deferred tax assets
 
 
 
 
 
 

 

Deferred tax assets have not been recognised in respect of the following items:
 
 
Tax losses
 
 
 
 
 
355 

345 

Tax credits
 
 
 
 
 
1,532 

1,318 

Depreciation in excess of capital allowances
 
 
 
 
19 

16 

Share-based payments
 
 
 
 
28 

29 

Other deductible temporary differences
 
 
 
 
120 

60 

 
 
 
 
 
 
 
2,054 

1,768 

 
 
 
 
 
 
 
 
 
Deferred tax assets in respect of tax losses are not recognised unless there is convincing evidence that there will be sufficient profits in future years to recover the assets. A significant part of the tax losses arise in the UK and the value has been calculated at the substantively enacted rate of 20%. The tax losses do not expire.
 
 
 
 
 
 
 
 
 
Deferred tax assets in respect of tax credits arising which are carried forward for offset against future profits are not recognised unless it is probable that future profits will arise. US$1,180 million (2013: US$968 million) of such tax credits expire within 10 years.
 
 
 
 
 
 
 
 
 
Deferred tax is recognised on the unremitted earnings of overseas subsidiaries where there is an intention to distribute those reserves. A deferred tax liability of US$14 million (2013: US$16 million) has been recognised in the year. A deferred tax liability of US$97 million (2013: US$80 million) has been recognised in respect of unremitted profits of associates where a dividend policy is not in place. Unremitted earnings of subsidiaries, associates and joint ventures operating in lower tax jurisdictions do not result in a deferred tax liability where the reporting entity is able to control the timing of the reversal of temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Similarly no tax is provided where there are plans to remit overseas earnings of subsidiaries but it is not expected that such distributions will give rise to a tax liability.
 
 
 
 
 
 
 
 
 
As a result of UK legislation which largely exempts overseas dividends from tax, the temporary differences arising on unremitted profits are unlikely to lead to additional corporate taxes. However, remittance to the UK of those earnings may still result in a tax liability, principally as a result of withholding taxes levied by the overseas tax jurisdictions in which those subsidiaries operate.


43
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

20. Borrowings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2014 

2013 

Current
 
 
 
 
 
 
 
 

US$m

US$m

Secured
 
 
 
 
 
 
 
 

 

 

Overdrafts
 
 
 
 
 
 
 
 
32 

9 

Obligations under finance leases
 
 
 
 
 
 
 
8 

8 

Other secured loans
 
 
 
 
 
 
 
 
2 

5 

 
 
 
 
 
 
 
 
 
42 

22 

Unsecured
 
 
 
 
 
 
 
 
 

 

Overdrafts
 
 
 
 
 
 
 
 
181 

203 

Unsecured bonds
 
 
 
 
 
 
 
 
3,402 

1,881 

Other unsecured loans
 
 
 
 
 
 
 
 
894 

363 

 
 
 
 
 
 
 
 
 
4,477 

2,447 

Total current borrowings
 
 
 
 
 
 
 
 
4,519 

2,469 

 
 
 
 
 
 
 
 
 
 
 
The fair value of current borrowings is US$4,636 million (2013: US$2,485 million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2014 

2013 

Non-current
 
 
 
 
 
 
 
 

US$m

US$m

Secured
 
 
Obligations under finance leases
43 

27 

Other secured loans
2 

4 

 
 
 
 
 
 
 
 
 
45 

31 

Unsecured
 
 
Unsecured bonds
12,036 

14,451 

Unsecured loans
447 

1,597 

 
 
 
 
 
 
 
 
 
12,483 

16,048 

Total non-current borrowings
12,528 

16,079 

 
 
 
 
 
 
 
 
 
 
 
Total current and non-current borrowings
17,047 

18,548 

 
 
 
 
 
 
 
 
 
 
 
Analysed as:
 
 
 
 
 
 
 
 
 
 
Overdrafts
 
 
 
 
 
 
 
 
213 

212 

Bank loans
 
 
 
 
 
 
 
 
1,345 

1,969 

Bonds
 
 
 
 
 
 
 
 
15,438 

16,332 

Obligations under finance leases
 
 
 
 
 
 
 
51 

35 

 
 
 
 
 
 
 
 
 
17,047 

18,548 

 
 
 
 
 
 
 
 
 
 
 
Maturity of non-current financial liabilities
The maturity profile of the carrying amount of the group's non-current financial liabilities at 31 March was as follows.
 
Bank loans

Bonds

Finance leases

Net derivative financial assets¹

2014
Total

Bank loans

Bonds

Finance leases

Net derivative financial assets¹

2013
Total

 
US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

Amounts falling due:
 
 
 
 
 
 
 
 
 
 
Between one and two years
220

738

7

(123
)
842

792

3,381

7

(54
)
4,126

Between two and three years
107

3,268

8

(258
)
3,125

168

798

8

(61
)
913

Between three and four years
75

96

8

(1
)
178

638

3,316

3

(241
)
3,716

Between four and five years
45

1,871

4

(33
)
1,887

3

108

4

(6
)
109

In five years or more
2

6,063

16

(181
)
5,900

-

6,848

5

(322
)
6,531

 
449

12,036

43

(596
)
11,932

1,601

14,451

27

(684
)
15,395

 
 
 
 
 
 
 
 
 
 
 
1 Net financing-related derivative financial instruments only (note 22). In 2013 as restated for the change in definition of net debt.
 
 
 
 
 
 
 
 
 
 
 
The fair value of non-current borrowings is US$13,231 million (2013: US$16,679 million). Further details on the fair value of borrowings is given in note 21 to the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 

44
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

20. Borrowings (continued)
 
 
 
 
 
 
 
 
 
 
 
2014
 
 
 
 
 
 
 
 
 
 
On 13 August 2013 SABMiller Holdings Inc issued US$750 million, 2.2% Notes due August 2018 and US$350 million, Floating Rate Notes due August 2018, each guaranteed by SABMiller plc.
 
 
 
 
 
 
 
 
 
 
 
The US$750 million Notes and US$350 million Notes are redeemable in whole but not in part at the option of the issuer upon the occurrence of certain changes in taxation at their principal amount with the accrued and unpaid interest to the date of redemption. The US$750 million Notes are redeemable in whole or in part at any time at the option of the issuer at a redemption price equal to the make-whole amount.
 
 
 
 
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
 
 
 
 
On 28 March 2013 SABSA Holdings Ltd issued ZAR1,000 million, 7.125% Notes due March 2018. The notes were issued under the ZAR6,000 million Domestic Medium Term Note Programme established on 13 December 2012 and guaranteed by SABMiller plc.

On 6 December 2012 SABMiller Holdings Inc issued €1,000 million, 1.875% Notes due January 2020. The notes were issued under the US$3,000 million Euro Medium Term Note Programme established on 12 October 2012 and guaranteed by SABMiller plc.

The ZAR1,000 million Notes and the €1,000 million Notes are redeemable in whole but not in part at the option of the issuer upon the occurrence of certain changes in taxation at their principal amount with accrued and unpaid interest to the date of redemption. The €1,000 Notes are redeemable in whole or in part at any time at the option of the issuer at a redemption price equal to the make-whole amount.
 
 
 
 
 
 
 
 
 
 
 
Maturity of obligations under finance leases
Obligations under finance leases are as follows.
 
 
 
 
 
 
 
 
 

2014 

2013 

 
 
 
 
 
 
 
 
 

US$m

US$m

The minimum lease payments under finance leases fall due as follows.
 
 
Within one year
 
 
 
 
 
 
 
 
11

9

Between one and five years
 
 
 
 
 
 
 
 
36

24

In five years or more
 
 
 
 
 
 
 
 
17

10

 
 
 
 
 
 
 
 
 
64

43

Future finance charges
 
 
 
 
 
 
 
 
(13
)
(8
)
Present value of finance lease liabilities
51

35


21. Financial risk factors

Financial risk management
Overview    
In the normal course of business, the group is exposed to the following financial risks:
- market risk
- credit risk
- liquidity risk

This note explains the group's exposure to each of the above risks, aided by quantitative disclosures included throughout these consolidated financial statements, and it summarises the policies and processes that are in place to measure and manage the risks arising, including those related to the management of capital.

The directors are ultimately responsible for the establishment and oversight of the group's risk management framework. An essential part of this framework is the role undertaken by the audit committee of the board, supported by the internal audit function, and by the Chief Financial Officer, who in this regard is supported by the treasury committee and the group treasury function. Among other responsibilities, the audit committee reviews the internal control environment and risk management systems within the group and it reports its activities to the board. The board also receives a quarterly report on treasury activities, including confirmation of compliance with treasury risk management policies.

The group treasury function is responsible for the management of cash, borrowings and the financial risks arising in relation to interest rates, foreign exchange rates and the price risk of some commodities. The responsibility for the management of remaining commodities exposures lies with the procurement functions within the group, including SABMiller Procurement GmbH (SABMiller Procurement), the group's centralised procurement function. Risk management of key brewing and packaging materials has now been substantially transferred to SABMiller Procurement. Some of the risk management strategies include the use of derivatives in order to manage the currency, interest rate and commodities exposures arising from the group's operations. It is the policy of the group that no trading in financial instruments be undertaken.

The group’s treasury policies are established to identify and analyse the financial risks faced by the group, to set appropriate risk limits and controls and to monitor exposures and adherence to limits.





45
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

21. Financial risk factors (continued)

a. Market risk
(i) Foreign exchange risk
The group is subject to exposure on the translation of the foreign currency denominated net assets of subsidiaries, associates and joint ventures into the group's US dollar reporting currency. The group seeks to mitigate this exposure, where cost effective, by borrowing in the same currencies as the functional currencies of its main operating units or by achieving the same effect through the use of derivatives. An approximate nominal value equivalent to US$4,774 million (2013: US$5,039 million) of borrowings have been swapped into currencies that match the currency of the underlying operations of the group, including Australian dollar, Colombian peso, Czech koruna, Peruvian nuevo sol, Polish zloty, and South African rand.

The group does not hedge currency exposures from the translation of profits earned in foreign currency subsidiaries, associates and joint ventures.

The group is also exposed to transactional currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of group entities. These exposures are managed primarily by the group treasury function and in some cases locally by group entities which, subject to regulatory constraints or currency market limitations, hedge a proportion of their foreign currency exposure estimated to arise over a period of up to 18 months. Committed transactional exposures that are certain are hedged fully without limitation in time. The group principally uses forward exchange contracts to hedge currency risk.

The tables below set out the group's currency exposures from financial assets and liabilities held by group companies in currencies other than their functional currencies and resulting in exchange movements in the income statement and balance sheet. The sensitivity analysis has been prepared on a basis consistent with 2013, based on reasonably possible changes in exchange rates, and assumes all other variables are held constant.

 
Australian dollars

Euro

Latin American currencies

Other European currencies

SA
rand

US dollars

Other

Total

 
US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

Financial assets
 
 
 
 
 
 
 
 
Trade and other receivables
4

17

-

101

142

21

36

321

Derivative financial instruments¹
333

1,313

-

1,146

285

1,245

8

4,330

Cash and cash equivalents
-

176

57

78

5

35

10

361

Intra-group assets
-

1,617

-

613

93

416

1

2,740

 
337

3,123

57

1,938

525

1,717

55

7,752

Financial liabilities
 
 
 
 
 
 
 
 
Trade and other payables
(1
)
(154
)
-

(256
)
(45
)
(210
)
(21
)
(687
)
Derivative financial instruments¹
(1,276
)
(1,600
)
(584
)
(3,977
)
(905
)
(23
)
(6
)
(8,371
)
Borrowings
-

(2,779
)
(54
)
-

-

(1,487
)
-

(4,320
)
Intra-group liabilities
(47
)
(181
)
(160
)
(97
)
(72
)
(207
)
(1
)
(765
)
 
(1,324
)
(4,714
)
(798
)
(4,330
)
(1,022
)
(1,927
)
(28
)
(14,143
)
At 31 March 2014
(987
)
(1,591
)
(741
)
(2,392
)
(497
)
(210
)
27

(6,391
)
 
 
 
 
 
 
 
 
 
Potential impact on profit for the year - gain/(loss)
 
 
 
 
 
20% increase in functional currency
5

25

(9
)
43

(19
)
73

(5
)
113

20% decrease in functional currency
(5
)
(30
)
11

(52
)
23

(88
)
5

(136
)
 
 
 
 
 
 
 
 
 
Potential impact on other comprehensive income - gain/(loss)
 
 
 
 
 
20% increase in functional currency
160

240

133

355

101

(38
)
-

951

20% decrease in functional currency
(192
)
(289
)
(159
)
(427
)
(122
)
46

-

(1,143
)
 
 
 
 
 
 
 
 
 
¹ These represent the notional amounts of derivative financial instruments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

46
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

21. Financial risk factors (continued)
 
 
 
 
 
 
 
 
 
 
 
Australian dollars

Euro

Latin American currencies

Other European currencies

SA
rand

US dollars

Other

Total

 
US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

Financial assets
 
 
 
 
 
 
 
 
Trade and other receivables
3

36

165

134

135

21

21

515

Derivative financial instruments¹
-

1,034

-

352

61

2,023

-

3,470

Cash and cash equivalents
-

8

9

16

2

25

2

62

Intra-group assets
115

1,062

-

802

8

190

2

2,179

 
118

2,140

174

1,304

206

2,259

25

6,226

Financial liabilities
 
 
 
 
 
 
 
 
Trade and other payables
(19
)
(143
)
(215
)
(415
)
(47
)
(260
)
(5
)
(1,104
)
Derivative financial instruments¹
(1,331
)
(431
)
(428
)
(1,023
)
(565
)
(58
)
-

(3,836
)
Borrowings
(521
)
(2,557
)
(58
)
(9
)
-

(1,533
)
(113
)
(4,791
)
Intra-group liabilities
(400
)
(103
)
-

(114
)
(41
)
(45
)
(1
)
(704
)
 
(2,271
)
(3,234
)
(701
)
(1,561
)
(653
)
(1,896
)
(119
)
(10,435
)
At 31 March 2013
(2,153
)
(1,094
)
(527
)
(257
)
(447
)
363

(94
)
(4,209
)
 
 
 
 
 
 
 
 
 
Potential impact on profit for the year - gain/(loss)
 
 
 
 
 
20% increase in functional currency
50

-

7

(70
)
(9
)
11

16

5

20% decrease in functional currency
(60
)
-

(8
)
84

11

(14
)
(19
)
(6
)
 
 
 
 
 
 
 
 
 
Potential impact on other comprehensive income - gain/(loss)
 
 
 
 
 
20% increase in functional currency
309

182

81

114

84

(72
)
-

698

20% decrease in functional currency
(370
)
(219
)
(97
)
(136
)
(100
)
86

-

(836
)
 
 
 
 
 
 
 
 
 
¹ These represent the notional amounts of derivative financial instruments.
 
 
 
 
 

The group holds foreign currency cash flow hedges totalling US$1,559 million at 31 March 2014 (2013: US$1,228 million). The foreign exchange gains or losses on these contracts are recorded in the cash flow hedging reserve until the hedged transactions occur, at which time the respective gains and losses are transferred to inventory, property, plant and equipment, goodwill or to the income statement as appropriate.
 
The group holds net investment hedges totalling US$5,617 million at 31 March 2014 (2013: US$5,937 million). The foreign exchange gains or losses on these contracts are recorded in the net investment hedging reserve and partially offset the foreign currency translation risk on the group's foreign currency net assets.
 
(ii) Interest rate risk
As at 31 March 2014 42% (2013: 46%) of consolidated gross borrowings were in fixed rates taking into account interest rate swaps and forward rate agreements.
 
The group's policy is to borrow (directly or synthetically) in floating rates, reflecting the fact that floating rates are generally lower than fixed rates in the medium term. However, a minimum of 25% of consolidated net borrowings is required to be in fixed rates for a minimum duration of 12 months. The extent to which group borrowings may be in floating rates is further restricted by the impact a 1% increase in interest rates would have on finance costs. The policy excludes any inflation-linked debt, where there will be a natural hedge within business operations, and also excludes borrowings arising from acquisitions in the previous six months. Exposure to movements in interest rates in group borrowings is managed through interest rate derivatives.














47
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

21. Financial risk factors (continued)
 
 
 
 
 
The cash flow interest rate risk sensitivities on variable debt and interest rate swaps are shown in the table below. This analysis assumes all other variables, in particular foreign currency rates, remain constant. The analysis was performed on the same basis for 2013, based on reasonably possible changes in interest rates.
 
2014

2013 1

 
US$m

US$m

Net debt
14,303

15,600

Less: fixed rate debt2
(11,824
)
(14,050
)
Variable rate debt
2,479

1,550

Adjust for:
 
 
Financial derivatives
4,712

5,515

Net variable rate debt exposure
7,191

7,065

 
 
 
+/- 100 bps change
 
 
Potential impact on profit for the year
72

71

 
 
 
+/- 100 bps change
 
 
Potential impact on other comprehensive income
-

8

 
 
 
¹ As restated (see note 28).
2 Includes non-current fixed rate borrowings, accrued interest, fair value adjustments on borrowings designated as fair value hedges and the carrying value of financing-related derivative financial instruments. Current fixed rate borrowings are assumed to be exposed to interest rate risk owing to maturity in the following financial year.

Fair value sensitivity analysis for fixed income instruments
Changes in the market interest rates of non-derivative financial instruments with fixed interest rates only affect income if these are measured at their fair value. As such, all financial instruments with fixed rates of interest that are accounted for at amortised cost are not subject to interest rate risk as defined in IFRS 7.    

The group holds derivative contracts with a nominal value of US$6,414 million as at 31 March 2014 (2013: US$6,704 million) which are designated as fair value hedges. In the case of these instruments and the underlying fixed rate bonds, changes in the fair values of the hedged item and the hedging instrument attributable to interest rate movements materially net off in the income statement in the same period.

Interest rate profiles of financial liabilities    
The following table sets out the underlying borrowings (excluding net financing-related derivatives) exposed to either fixed interest rates or floating interest rates and revises this for the effect of interest rate and cross currency swaps.

 
 
 
2014

 
 
 
2013

 
Total borrowings

Effect of derivatives

Total
exposure

 
Total borrowings

Effect of derivatives

Total
exposure

 
US$m

US$m

US$m

 
US$m

US$m

US$m

Fixed rate interest
11,824

(4,712
)
7,112

 
14,050

(5,515
)
8,535

Floating rate interest
5,223

4,712

9,935

 
4,498

5,515

10,013

Total interest-bearing borrowings
17,047

-

17,047

 
18,548

-

18,548



(iii) Price risk
Commodity price risk
The group is exposed to variability in the price of commodities used in the production or in the packaging of finished products, such as the price of malt, barley, sugar and aluminium. Commodity price risk is managed within minimum and maximum guard rails principally through multi-year fixed price contracts with suppliers and, where appropriate, derivative contracts. The group hedges a proportion of commodity supply and price risk for a period of up to five years.

At 31 March 2014 the notional value of commodity derivatives amounted to US$143 million (2013: US$89 million). No sensitivity analysis has been provided on these outstanding contracts as the impact is considered to be immaterial.

Equity securities price risk
The group is exposed to equity securities price risk because of investments held by the group and classified on the balance sheet as available for sale investments. No sensitivity analysis has been provided on these outstanding contracts as the impact is considered to be immaterial.



48
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)


21. Financial risk factors (continued)

b. Credit risk
Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.

Financial instruments
The group limits its exposure to financial institutions by setting credit limits on a sliding scale based on their credit ratings and generally dealing only with counterparties with a minimum credit rating of BBB- by Standard & Poor's and Baa3 from Moody's. For banks with a lower credit rating, or with no international credit rating, a maximum limit of US$5 million is applied, unless specific approval is obtained from either the Chief Financial Officer or the audit committee of the board. The utilisation of credit limits is regularly monitored. To reduce credit exposures, the group has ISDA Master Agreements with most of its counterparties for financial derivatives, which permit net settlement of assets and liabilities in certain circumstances.

Trade and other receivables
There is no significant concentration of credit risk with respect to trade receivables as the group has a large number of customers which are internationally dispersed. The type of customers range from wholesalers and distributors to smaller retailers. The group has implemented policies that require appropriate credit checks on potential customers before sales commence. Credit risk is managed by limiting the aggregate amount of exposure to any one counterparty.

The group considers its maximum credit risk to be US$4,480 million (2013: US$5,052 million) which is the total of the group's financial assets.

c. Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.

The group finances its operations through cash generated by the business and a mixture of short-term and medium-term bank credit facilities, bank loans, corporate bonds and commercial paper with a range of maturity dates. In this way, the group ensures that it is not overly reliant on any particular liquidity source or that maturities of borrowings sourced in this way are not overly concentrated.

Subsidiaries have access to local bank credit facilities, but are principally funded by the group.

Liquidity risk faced by the group is mitigated by having diverse sources of finance available to it and by maintaining substantial unutilised banking facilities and reserve borrowing capacity, as indicated by the level of undrawn facilities.

Undrawn borrowing facilities
 
 
The group had the following undrawn committed borrowing facilities available at 31 March in respect of which all conditions precedent had been met at that date.
 
2014

2013

 
US$m

US$m

Amounts expiring:
 
 
Within one year
214

281

Between one and two years
41

17

Between two and five years
3,019

554

In five years or more
-

2,500

 
3,274

3,352



At 31 March 2014 the group had the following core lines of credit that were available for general corporate purposes.
SABMiller plc:
• US$2,500 million committed syndicated revolving credit facility, which was due to expire in April 2018.
SABMiller Holdings Inc:
• US$500 million revolving credit facility, which was due to expire in September 2016.

In May 2014 the group amended its existing US$2,500 million committed syndicated facility, shown as undrawn in the table above, extending the maturity to May 2019 and re-instating the option of two one-year extensions. The group also entered into a five-year US$1,000 million committed syndicated facility maturing May 2019, with the option of two one-year extensions. The facility replaced the existing US$500 million committed syndicated facility due to mature in September 2016, also shown as undrawn in the table above, which has been voluntarily cancelled.

49
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

21. Financial risk factors (continued)
 
 
 
 
 
 
 
 
 
The table below analyses the group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual settlement date. The amounts disclosed in the table are the contractual undiscounted cash flows. The amounts disclosed for financial guarantee contracts represent the maximum possible cash outflows for guarantees provided in respect of associates' bank facilities, which would only be payable upon the occurrence of certain default events. Should such events occur, certain remedies are available that could mitigate the impact.
 
Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over
5 years

At 31 March 2014
US$m

US$m

US$m

US$m

Borrowings
(4,898
)
(1,149
)
(5,558
)
(6,568
)
Net settled derivative financial instruments
(28
)
-

(14
)
(29
)
Gross settled derivative financial instruments - inflows
2,926

64

-

-

Gross settled derivative financial instruments - outflows
(2,990
)
(69
)
-

-

Trade and other payables
(3,265
)
(23
)
-

-

Financial guarantee contracts
(208
)
-

-

-

 
 
 
 
 
At 31 March 2013
 
 
 
 
Borrowings
(3,466
)
(4,468
)
(5,881
)
(9,407
)
Net settled derivative financial instruments
(11
)
(13
)
(13
)
-

Gross settled derivative financial instruments - inflows
1,338

43

-

-

Gross settled derivative financial instruments - outflows
(1,367
)
(44
)
-

-

Trade and other payables
(3,391
)
(119
)
-

-

Financial guarantee contracts
(234
)
-

-

-



Capital management
The capital structure of the group consists of net debt (see note 27c) and shareholders’ equity.

The group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

Besides the minimum capitalisation rules that may apply to subsidiaries in different countries, the group’s only externally imposed capital requirement relates to the group’s core lines of credit which include a net debt to EBITDA financial covenant which was complied with throughout the year.

The group monitors its financial capacity and credit ratings by reference to a number of key financial ratios and cash flow metrics including net debt to adjusted EBITDA and interest cover (the ratio of adjusted EBITDA to adjusted net finance costs). These provide a framework within which the group’s capital base is managed including dividend policy.

If the group fails to meet the financial targets required by the ratings agencies, a credit rating downgrade could impact the average interest rate of borrowings and the future availability of credit to the group.

The group is currently rated Baa1/stable outlook by Moody’s Investors Service and BBB+/positive outlook by Standard & Poor’s Ratings Services.

Fair value estimation
 
 
 
 
 
The following tables present the group's financial assets and liabilities that are measured at fair value on a recurring basis and the fair values of other assets and liabilities that are not measured at fair value, but the fair value is required to be disclosed in the financial statements.
 
 
Level 1
Level 2

Level 3

Total

Recurring fair value measurements
 
US$m
US$m

US$m

US$m

At 31 March 2014
 
 
 

 

 

Assets
 
 
 

 

 

Derivative financial instruments
 
-
769

-

769

Available for sale investments
 
-
10

12

22

Total assets
 
-
779

12

791

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivative financial instruments
 
-
(115
)
-

(115
)
Total liabilities
 
-
(115
)
-

(115
)





50
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

21. Financial risk factors (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 1

Level 2

Level 3

Total

Recurring fair value measurements
 
US$m

US$m

US$m

US$m

At 31 March 2013
 
 
 
 
 
Assets
 
 

 

 

 

Derivative financial instruments
 
-

843

-

843

Available for sale investments
 
-

10

12

22

Total assets
 
-

853

12

865

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivative financial instruments
 
-

(86
)
-

(86
)
Total liabilities
 
-

(86
)
-

(86
)
 
 
 
 
 
 
 
Carrying amount

Level 1

Level 2

Level 3

Total

Assets and liabilities for which fair values are disclosed
US$m

US$m

US$m

US$m

US$m

At 31 March 2014
 
 

 

 

 

Assets
 
 

 

 

 

Investments in listed associates
 
 
 
 
 
- Anadolu Efes
1,566

1,580

-

-

1,580

- Distell Group
224

716

-

-

716

- Delta Corporation
141

354

-

-

354

- Tsogo Sun Holdings
375

1,046

-

-

1,046

Total assets
2,306

3,696

-

-

3,696

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Borrowings
(17,047
)
(15,344
)
(2,456
)
(67
)
(17,867
)
Total liabilities
(17,047
)
(15,344
)
(2,456
)
(67
)
(17,867
)

There have been no transfers between levels during the year ended 31 March 2014 (2013: none).

The levels of the fair value hierarchy and its application to the group’s assets and liabilities are described below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

The fair value of assets and liabilities traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the group is the current bid price.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

The fair values of financial instruments that are not traded in an active market (for example, over the counter derivatives or infrequently traded listed investments) are determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

The fair values of derivatives included in level 2 incorporate various inputs including the credit quality of counterparties, spot and forward foreign exchange rates and interest rate curves.

The fair values of borrowings included in level 2 are based on the net present value of the anticipated future cash flows associated with these instruments, using rates currently available for debt on similar terms, credit risk and remaining maturities.

Valuation techniques for other level 2 instruments could include standard valuation models based on market parameters for interest rates, yield curves or foreign exchange rates, quotes for similar instruments from financial counterparties or the use of comparable arm's length transactions, and discounted cash flows.

Level 3: Inputs for the asset or liability that are not based on observable market data.

Specific valuation techniques, such as discounted cash flow analysis, are used to determine fair value of the remaining financial instruments.



51
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

21. Financial risk factors (continued)

Valuation process
The group's treasury function is responsible for performing fair value measurements for financial instruments. The fair value measurement calculations are subject to review procedures and are performed in accordance with policies defined by the treasury committee.

Other fair value measurements are performed by the group's finance department. Significant level 3 valuations are reviewed and approved by the finance, control and assurance committee in the relevant region on a by exception basis. Valuations falling into this category are usually immaterial.

22. Derivative financial instruments
 
 
 
 
 
 
 
 
 
 
Current derivative financial instruments
2014 
 
 
2013 
 
 
 
 
Notional value

Assets

Liabilities

 
Notional
value

Assets

Liabilities

 
 
 
US$m

US$m

US$m

 
US$m

US$m

US$m

Fair value hedges
 
 
 

 

 

 
 
 

 

Interest rate swaps
 
 
1,588

32

-

 
-

-

-

Cash flow hedges
 
 
 
 
 
 
 
 
 
Forward foreign currency contracts
 
1,450

21

(8
)
 
1,228

1

(12
)
Commodity contracts
 
 
105

-

(12
)
 
55

-

(4
)
Net investment hedges
 
 
 
 
 
 
 
 
 
Forward foreign currency contracts
 
 
2,396

27

(35
)
 
-

-

-

Cross currency swaps
 
 
335

43

-

 
-

-

-

Held for trading
 
 
 
 
 
 
 
 
 
Embedded derivatives
 
 
-

-

-

 
1

1

-

Interest rate swaps
 
 
96

-

(1
)
 
940

25

(4
)
Forward foreign currency contracts
 
1,985

14

(20
)
 
1,709

37

(14
)
Cross currency swaps
 
 
7

4

(2
)
 
203

47

-

 
 
 
7,962

141

(78
)
 
4,136

111

(34
)
 
 
 
 
 
 
 
 
 
 
Financing-related current derivative financial instruments amount to a net asset of US$67 million (2013: US$93 million).
 
 
 
 
 
 
 
 
 
 
Non-current derivative financial instruments
2014 
 
 
2013 
 
 
 
 
Notional value

Assets

Liabilities

 
Notional
value

Assets

Liabilities

 
 
 
US$m

US$m

US$m

 
US$m

US$m

US$m

Fair value hedges
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
 
3,826

217

(28
)
 
5,404

428

(13
)
Cross currency swaps
 
 
1,000

35

-

 
1,300

78

-

Cash flow hedges
 
 
 
 
 
 
 
 
 
Forward foreign currency contracts
 
109

-

(1
)
 
-

-

-

Commodity contracts
 
 
38

-

(4
)
 
34

-

(2
)
Interest rate swaps
 
 
-

-

-

 
611

-

(10
)
Cross currency swaps
 
 
1,111

204

-

 
1,250

59

-

Net investment hedges
 
 
 
 
 
 
 
 
 
Forward foreign currency contracts
 
18

-

(1
)
 
2,334

36

(16
)
Cross currency swaps
 
 
631

102

(2
)
 
999

81

-

Held for trading
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
 
600

37

(1
)
 
300

-

(11
)
Forward foreign currency contracts
 
-

-

-

 
116

5

-

Cross currency swaps
 
 
246

33

-

 
203

45

-

 
 
 
7,579

628

(37
)
 
12,551

732

(52
)
 
 
 
 
 
 
 
 
 
 
Financing-related non-current derivative financial instruments amount to a net asset of US$596 million (2013: US$684 million, restated).
 
 
 
 
 
 
 
 
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
(i) Fair value hedges
 
 
 
 
 
 
 
 
 
The group has entered into several interest rate swaps and cross currency swaps to pay floating and receive fixed interest which have been designated as fair value hedges to hedge exposure to changes in the fair value of its US dollar and euro fixed rate borrowings. Borrowings are designated as the hedged item as part of the fair value hedge. The borrowings and the interest rate swaps have the same critical terms.
As at 31 March 2014 the carrying value of the hedged borrowings was US$7,214 million (2013: US$7,202 million).

52
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

22. Derivative financial instruments (continued)
 
 
 
 
 
 
 
 
 
 
(ii) Cash flow hedges
 
 
 
 
 
 
 
 
 
The group has entered into forward exchange contracts designated as cash flow hedges to manage short-term foreign currency exposures to expected net operating costs including future trade imports and exports.
 
 
 
 
 
 
 
 
 
 
The group has entered into commodity contracts designated as cash flow hedges to manage the future price of commodities. As at 31 March 2014 the notional amount of forward contracts for the purchase price of corn was US$20 million (2013: US$13 million), of aluminium was US$122 million (2013: US$75 million) and of sugar was US$1 million (2013: US$1 million).
 
 
 
 
 
 
 
 
 
 
The group has entered into cross currency swaps designated as cash flow hedges to manage foreign currency exposures on interest payments.
 
 
 
 
 
 
 
 
 
 
The following table indicates the period in which the cash flows associated with derivatives that are cash flow hedges are expected to occur and impact the income statement.
 
 
 
Carrying amount

Expected
cash flows

Less than 1 year

 
Between 1 and 2 years

Between 2 and 5 years

Over 5 years

 
 
 
US$m

US$m

US$m

 
US$m

US$m

US$m

At 31 March 2014
 
 
 
 
 
 
 
 
 
Forward foreign currency contracts
 
12

9

11

 
(2
)
-

-

Commodity contracts
 
 
(16
)
(20
)
(13
)
 
(6
)
(1
)
-

Cross currency swaps
 
 
204

118

(16
)
 
98

34

2

 
 
 
200

107

(18
)
 
90

33

2

 
 
 
 
 
 
 
 
 
 
At 31 March 2013
 
 
 
 
 
 
 
 
 
Forward foreign currency contracts
 
(11
)
(11
)
(11
)
 
-

-

-

Commodity contracts
 
 
(6
)
(8
)
(4
)
 
(3
)
(1
)
-

Cross currency swaps
 
 
59

(66
)
(20
)
 
29

(19
)
(56
)
Interest rate swaps
 
 
(10
)
(10
)
(4
)
 
(6
)
-

-

 
 
 
32

(95
)
(39
)
 
20

(20
)
(56
)
 
 
 
 
 
 
 
 
 
 
(iii) Hedges of net investments in foreign operations
The group has entered into several forward foreign currency contracts and cross currency swaps which it has designated as hedges of net investments in its foreign subsidiaries in South Africa, Australia, the Czech Republic, Poland, Colombia and Peru to hedge the group's exposure to foreign exchange risk on these investments.
 
 
Analysis of notional amounts on derivative financial instruments designated as net investment hedges is as follows. Notional amounts have been translated to US dollars at the closing rate at 31 March.
 
 
 
 
 
 
 
2014 

2013 

 
 
 
 
 

 

 
 

US$m

US$m

Forward foreign currency contracts:
 
 
 
 
 
 
 

 

Australian dollar
 
 
 
 
 
 
 
695

1,042

Colombian peso
 
 
 
 
 
 
 
180

243

Czech koruna
 
 
 
 
 
 
 
336

278

Peruvian nuevo sol
 
 
 
 
 
 
 
403

185

Polish zloty
 
 
 
 
 
 
 
114

187

South African rand
 
 
 
 
 
 
 
686

399

Cross currency swaps:
 
 
 
 
 
 
 
 
 
Australian dollar
 
 
 
 
 
 
 
258

289

Czech koruna
 
 
 
 
 
 
 
382

379

Polish zloty
 
 
 
 
 
 
 
193

179

South African rand
 
 
 
 
 
 
 
133

152

 
 
 
 
 
 
 
 
3,380

3,333

 
 
 
 
 
 
 
 
 
 
Held for trading derivative financial instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(i) Interest rate swaps
 
 
 
 
 
 
 
 
 
The group has entered into interest rate swaps to manage exposures to fluctuations in interest rates arising from the group's borrowings. The derivatives are fair valued based on discounted future cash flows with gains and losses taken to the income statement.
 
 
 
 
 
 
 
 
 
 

53
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

22. Derivative financial instruments (continued)
 
 
 
 
 
 
 
 
 
 
(ii) Forward foreign currency contracts
 
 
 
 
 
 
 
 
The group has entered into forward foreign currency contracts to manage short-term foreign currency exposures to expected future trade imports and exports and to manage foreign currency exposures on intercompany loan balances. The derivatives are fair valued based on discounted future cash flows with gains and losses taken to the income statement.
 
 
 
 
 
 
 
 
 
 
(iii) Cross currency swaps
 
 
 
 
 
 
 
 
 
The group has entered into cross currency swaps to manage foreign currency exposures on intercompany loan balances. These derivatives are fair valued based on discounted future cash flows with gains and losses taken to the income statement.
 
 
 
 
 
 
 
 
 
 
Fair value (loss)/gain on financial instruments recognised in the income statement
 
 
 
 
 
 
 
 
 
 
 
 
2014 

2013

 
 
 
 

 

 

 
 
US$m

US$m

Derivative financial instruments:
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
 
 
 
 
 
 
(9
)
8

Interest rate swaps designated as fair value hedges
 
 
 
(43
)
(7
)
Forward foreign currency contracts
 
 
 
(3
)
17

Fair value loss on forward foreign currency contracts transferred from other comprehensive loss
 
 
(2
)
(5
)
Forward foreign currency contracts designated as fair value hedges
 
 
 
-

3

Cross currency swaps
 
 
 
(27
)
19

Cross currency swaps designated as fair value hedges
 
 
 
(1
)
-

Embedded derivatives
 
 
 
 
 
 
 
1

-

Other fair value gains
 
 
 
15

18

 
 
 
 
 
 
 
 
(69
)
53

Other financial instruments:
 
 
 
 
 
 
 
 
 
Non-current borrowings designated as the hedged item in a fair value hedge
 
 
 
43

7

Total fair value (loss)/gain on financial instruments recognised in the income statement
 
 
(26
)
60

 
 
 
 
 
 
 
 
 
 
Fair value gains or losses on borrowings and derivative financial instruments held to hedge interest rate risk on borrowings were recognised as part of net finance costs. Fair value gains or losses on all other derivative financial instruments are recognised in operating profit.

23. Other financial instrument disclosures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of total financial instruments
The table below reconciles the group’s accounting categorisation of financial assets and liabilities (based on initial recognition) to the classes of assets and liabilities as shown on the face of the balance sheet.
 
Fair value through income statement

Loans and receivables

Available
for sale

Financial liabilities held at amortised cost

Not categorised as a financial instrument

Total

 
Non-
current

Current

 
US$m

US$m

US$m

US$m

US$m

US$m

 
US$m

US$m

At 31 March 2014
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Available for sale investments
-

-

22

-

-

22

 
22

-

Derivative financial instruments
769

-

-

-

-

769

 
628

141

Trade and other receivables
-

1,608

-

-

352

1,960

 
139

1,821

Cash and cash equivalents
-

2,081

-

-

-

2,081

 
-

2,081

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Derivative financial instruments
(115
)
-

-

-

-

(115
)
 
(37
)
(78
)
Borrowings
-

-

-

(17,047
)
-

(17,047
)
 
(12,528
)
(4,519
)
Trade and other payables
-

-

-

(3,289
)
(583
)
(3,872
)
 
(25
)
(3,847
)

54
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

23. Other financial instrument disclosures (continued)
 
 
 
 
 
 
 
Fair value through income statement

Loans and receivables

Available
for sale

Financial liabilities held at amortised cost

Not categorised as a financial instrument

Total

 
Non-
current

Current

 
US$m

US$m

US$m

US$m

US$m

US$m

 
US$m

US$m

At 31 March 2013
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Available for sale investments
-

-

22

-

-

22

 
22

-

Derivative financial instruments
843

-

-

-

-

843

 
732

111

Trade and other receivables
-

1,916

-

-

295

2,211

 
144

2,067

Loan participation deposit
-

100

-

-

-

100

 
100

-

Cash and cash equivalents
-

2,171

-

-

-

2,171

 
-

2,171

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Derivative financial instruments
(86
)
-

-

-

-

(86
)
 
(52
)
(34
)
Borrowings
-

-

-

(18,548
)
-

(18,548
)
 
(16,079
)
(2,469
)
Trade and other payables
-

-

-

(3,524
)
(612
)
(4,136
)
 
(132
)
(4,004
)
 
 
 
 
 
 
 
 
 
 
Offsetting financial assets and financial liabilities
 
 
 
 
The following table provides details of financial assets and liabilities that are subject to offsetting, enforceable master netting arrangements, or similar agreements.

 
 
 
 
Gross amounts of financial assets

Gross amounts of financial liabilities

Net amounts recognised in the balance sheet

 
Related amounts of financial instruments not set off in the balance sheet

Net amount

 
 
 
 
US$m

US$m

US$m

 
US$m

US$m

At 31 March 2014
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
769

-

769

 
(106
)
663

Trade and other receivables
 
 
 
1,640

(32
)
1,608

 
-

1,608

Cash and cash equivalents
 
 
 
2,090

(9
)
2,081

 
-

2,081

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Borrowings
 
 
 
41

(17,088
)
(17,047
)
 
-

(17,047
)
Derivative financial instruments
 
 
 
-

(115
)
(115
)
 
106

(9
)
 
 
 
 
 
 
 
 
 
 
At 31 March 2013
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
843

-

843

 
(77
)
766

Trade and other receivables
 
 
 
1,948

(32
)
1,916

 
-

1,916

Cash and cash equivalents
 
 
 
2,324

(153
)
2,171

 
-

2,171

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Borrowings
 
 
 
185

(18,733
)
(18,548
)
 
-

(18,548
)
Derivative financial instruments
 
 
 
-

(86
)
(86
)
 
77

(9
)
 
 
 
 
 
 
 
 
 
 
For the financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements above, each party to the agreement will have the option to settle the amounts on a net basis in the event of default of the other party. A default event includes failure by a party to make a payment when due; failure by a party to perform any other obligation required by the agreement if such failure is not remedied within the periods defined in each contract; or bankruptcy.
 
 
 
 
 
 
 
 
 
 
The group holds other receivables and borrowings balances with the same financial counterparties. Where these arrangements meet the set-off rules under IFRS, the balances have been reported net on the balance sheet.


55
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

24. Provisions
 
 
 
 
 
 
 
 
 
Demerged

Post-

 

 

 

 

 
 
 
entities and

retirement

Taxation-
related

 

Payroll-

Onerous

 

 

 
litigation

benefits

Restructuring

related

contracts

Other

Total

 
US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

At 1 April 2012
125

309

265

217

71

214

72

1,273

Exchange adjustments
(4
)
(16
)
(3
)
(1
)
(3
)
1

(1
)
(27
)
Charged/(credited) to the income statement
 
 
 
 
 
 
 
 
- Additional provision in year1
1

32

21

19

14

2

18

107

- Amounts reversed
-

-

(25
)
(5
)
-

-

(1
)
(31
)
Utilised in the year
(4
)
(43
)
(7
)
(110
)
(13
)
(56
)
(19
)
(252
)
Remeasurements of defined benefit plans1
  recorded in other comprehensive loss
-

19

-

-

-

-

-

19

Transfer from current tax liabilities
-

-

7

-

-

-

-

7

Transfer between categories
7

-

(10
)
(6
)
9

(1
)
1

-

At 31 March 2013
125

301

248

114

78

160

70

1,096

Exchange adjustments
(5
)
(20
)
(8
)
(10
)
(6
)
(17
)
(2
)
(68
)
Charged/(credited) to the income statement
 
 
 
 
 
 
 
 
- Additional provision in year
24

18

12

37

9

-

7

107

- Amounts reversed
(11
)
-

(32
)
(28
)
-

(2
)
(5
)
(78
)
Utilised in the year
(20
)
(31
)
(5
)
(31
)
(26
)
(32
)
(7
)
(152
)
Remeasurements of defined benefit plans
  recorded in other comprehensive loss
-

(22
)
-

-

-

-

-

(22
)
Transfer between categories
-

-

1

-

-

-

(1
)
-

At 31 March 2014
113

246

216

82

55

109

62

883

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014 

2013 

Analysed as:
 
 
 
 
 
 
US$m

US$m

Current
 
 
 
 
 
 
450

558

Non-current
 
 
 
 
 
 
433

538

 
 
 
 
 
 
 
883

1,096

 
 
 
 
 
 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
 
Demerged entities and litigation
During the year ended 31 March 1998 the group recognised a provision of US$73 million for the disposal of certain demerged entities in relation to equity injections which were not regarded as recoverable, as well as potential liabilities arising on warranties and the sale agreements. During the year ended 31 March 2014 US$1 million (2013: US$1 million) of this provision was utilised in regard to costs associated with SAB Ltd’s previously disposed of remaining retail interests. The residual balance of US$7 million relates mainly to the disposal of OK Bazaars (1929) Ltd to Shoprite Holdings Ltd (Shoprite). As disclosed in previous annual reports, a number of claims were made by Shoprite in relation to the valuation of the net assets of OK Bazaars at the time of the sale and for alleged breaches by SAB Ltd of warranties contained in the sale agreements. These claims are being contested by SAB Ltd.

There are US$106 million (2013: US$115 million) of provisions in respect of outstanding litigation within various operations, based on management’s expectation that the outcomes of these disputes are expected to be resolved within the forthcoming four years.

While a provision for claims has been recorded, the actual outcome of the disputes and the timing of the resolution cannot be estimated by the directors at this time. The further information ordinarily required by IAS 37, ‘Provisions, contingent liabilities and contingent assets’ has not been disclosed on the grounds that it can be expected to seriously prejudice the outcome of the disputes.

Post-retirement benefits
The provision for post-retirement benefits represents the provision for medical benefits for retired employees and their dependants in South Africa, for post-retirement medical and life insurance benefits for eligible employees and their dependants primarily in Europe, medical and other benefits in Latin America, and pension provisions for employees primarily in Latin America, Europe, and Asia Pacific. The principal assumptions on which these provisions are based are disclosed in note 31.

Taxation-related
The group has recognised various provisions in relation to taxation exposures it believes may arise. The provisions principally relate to non-corporate taxation and interest and penalties on corporate taxation in respect of a number of group companies. Any settlement in respect of these amounts will occur as and when the assessments are finalised with the respective tax authorities.

Restructuring
This includes the remaining provision for restructuring costs related to Europe which management expects to be utilised within two years, along with restructuring provisions primarily in Australia and Latin America which are expected to be utilised over the course of the next three years.

56
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

24. Provisions (continued)

Payroll-related
This principally relates to employee entitlement provisions of US$30 million (2013: US$37 million) in Asia Pacific and employee long service awards of US$16 million (2013: US$17 million) in South Africa. In 2013 the balance also included US$18 million of cash-settled share-based payment provisions within Corporate.

Onerous contracts
This includes provisions for unfavourable supply contracts for malt, glass, aluminium cans and concentrated fruit juice for non-alcoholic beverages, as well as provisions for surplus property leases in Australia, which management expect to be utilised within six years.

Other provisions
Included within other provisions are environmental provisions and other provisions. These are primarily expected to be utilised within three years.

25. Share capital
 
 
 
 
2014 
2013 
2012 
 
US$m
US$m
US$m
Group and company
 
 
 
Called up, allotted and fully paid share capital
 
 
 
1,672,647,930 ordinary shares of 10 US cents each (2013: 1,669,731,799, 2012: 1,664,323,483)
 167 
 167 
 166 
50,000 deferred shares of £1.00 each (2013, 2012: 50,000)
-
-
-
 
 167 
 167 
 166 
 
 
 
 
 
 
 
 
 
Ordinary shares of 10 US cents each
Deferred shares of £1 each
Nominal
value
US$m
At 1 April 2011
 1,659,040,014 
 50,000 
 166 
Issue of shares - share incentive plans
 5,283,469 
-
-
At 31 March 2012
 1,664,323,483 
 50,000 
 166 
Issue of shares - share incentive plans
 5,408,316 
-
 1 
At 31 March 2013
 1,669,731,799 
 50,000 
 167 
Issue of shares - share incentive plans
 2,916,131 
-
-
At 31 March 2014
 1,672,647,930 
 50,000 
 167 

Changes to authorised share capital
With effect from 1 October 2009 the company adopted new articles of association which removed any previous limit on the authorised share capital. Directors are still limited as to the number of shares they can at any time allot because allotment authority continues to be required under the Companies Act 2006, save in respect of employee share plans.

Changes to issued share capital
During the year the company issued 2,916,131 (2013: 5,408,316, 2012: 5,283,469) new ordinary shares of 10 US cents to satisfy the exercise of options granted under the various share incentive plans, for consideration of US$54 million (2013: US$102 million, 2012: US$96 million).

Rights and restrictions relating to share capital
Convertible participating shares
Convertible participating shares were originally issued to Altria as part of the Miller Brewing Company transaction in 2002 but were subsequently converted into ordinary shares.  There are no convertible participating shares currently in issue. Altria is however entitled to require the company to convert its ordinary shares back into convertible participating shares so as to ensure that Altria’s voting shareholding does not exceed 24.99% of the total voting shareholding.

If Altria's ordinary shares were converted into convertible participating shares, the convertible participating shares would rank pari passu with the ordinary shares of the company in relation to a distribution of the profits of the company and a return of capital. On a poll vote at general meetings of the company, Altria would be entitled to vote in respect of its convertible participating shares on the basis of one-tenth of a vote for every convertible participating share on all resolutions other than a resolution:
(i) proposed by any person other than Altria, to wind up the company;
(ii) proposed by any person other than Altria, to appoint an administrator or to approve any arrangement with the company’s creditors;
(iii) proposed by the board, to sell all or substantially all of the undertaking of the company; or
(iv) proposed by any person other than Altria, to alter any of the class rights attaching to the convertible participating shares or to approve the creation of any new class of shares,
in which case Altria would be entitled on a poll to vote on the resolution on the basis of one vote for each convertible participating share.





57
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

25. Share capital (continued)

Conversion into ordinary shares
If Altria's ordinary shares are converted into convertible participating shares, the provisions governing possible conversion back into ordinary shares would apply. These state that upon a transfer of convertible participating shares by Altria to any person other than to an affiliate of Altria, such convertible participating shares shall convert into ordinary shares. In addition, Altria is entitled to require the company to convert its convertible participating shares into ordinary shares in the event of a takeover offer for the company, or a third party acquiring more than a 24.99% voting shareholding, provided certain conditions are met.

The company must use its best endeavours to procure that the ordinary shares arising on conversion of the convertible participating shares are admitted to the Official List and to trading on the London Stock Exchange’s market for listed securities, admitted to listing and trading on the JSE Ltd, and admitted to listing and trading on any other stock exchange upon which the ordinary shares are from time to time listed and traded, but no admission to listing or trading need be sought for the convertible participating shares while they remain convertible participating shares.    

Deferred shares
The deferred shares do not carry any voting rights and do not entitle their holders to receive any dividends or other distributions. In the event of a winding up deferred shareholders would receive no more than the nominal value. Deferred shares represent the only non-equity share capital of the group.

Share-based payments
The group operates various share incentive plans. The share incentives outstanding are summarised as follows.

 
 
 
 
2014

2013

2012

Scheme
 
 
 
Number

Number

Number

GBP share options
 
 
 
16,035,174

17,809,920

16,622,334

ZAR share options
 
 
 
10,108,718

12,939,245

13,024,503

GBP stock appreciation rights (SARs)
 
 
 
5,170,646

1,955,529

2,820,144

ZAR stock appreciation rights (SARs)
 
 
 
1,178,200

-

-

GBP performance share awards
 
 
 
6,802,427

7,505,723

6,880,114

GBP value share awards
 
 
 
11,297,444

11,721,564

6,877,784

GBP cash-settled awards
 
 
 
-

-

335,940

Total share incentives outstanding1
 
 
 
50,592,609

51,931,981

46,560,819

 
 
 
 
 
 
 
1Total share incentives outstanding exclude shares relating to the BBBEE scheme.
 
 
 
 
 
 
 
The exercise prices of incentives outstanding at 31 March 2014 ranged from £0 to £33.30 and ZAR96.25 to ZAR527.49 (2013: £0 to £28.28 and ZAR53.30 to ZAR401.06, 2012: £0 to £25.48 and ZAR53.30 to ZAR290.23). The movement in share awards outstanding is summarised in the following tables.
 
 
 
 
 
 
 
GBP share options
 
 
 
 
 
 
GBP share options include share options granted under the Executive Share Option Plan 2008, the Approved Executive Share Option Plan 2008, the Executive Share Option (No.2) Scheme, the Approved Executive Share Option Scheme and the International Employee Share Scheme. No further grants can be made under the now closed Executive Share Option (No.2) Scheme, the Approved Executive Share Option Scheme, or the International Employee Share Scheme, although outstanding grants may still be exercised until they reach their expiry date.
 
 
 
 
Number

Weighted
average
exercise
price

Weighted average fair value at grant date

 
 
 
 
of options

GBP

GBP

Outstanding at 1 April 2011
 
 
 
15,088,057

13.46

-

Granted
 
 
 
4,417,346

22.51

6.47

Lapsed
 
 
 
(679,700
)
18.88

-

Exercised
 
 
 
(2,203,369
)
11.44

-

Outstanding at 31 March 2012
 
 
 
16,622,334

15.91

-

Granted
 
 
 
4,637,730

24.01

5.85

Lapsed
 
 
 
(583,250
)
20.28

-

Exercised
 
 
 
(2,866,894
)
12.52

-

Outstanding at 31 March 2013
 
 
 
17,809,920

18.42

-

Granted
 
 
 
496,498

33.10

6.65

Lapsed
 
 
 
(308,467
)
23.00

-

Exercised
 
 
 
(1,962,777
)
13.76

-

Outstanding at 31 March 2014
 
 
 
16,035,174

19.36

-

 
 
 
 
 
 
 

58
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

25. Share capital (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
ZAR share options
 
 
 
 
 
 
Share options designated in ZAR include share options granted under the South African Executive Share Option Plan 2008 and the Mirror Executive Share Purchase Scheme (South Africa). No further grants can be made under the Mirror Executive Share Purchase Scheme (South Africa), although outstanding grants may still be exercised until they reach their expiry date.
 
 
 
 
Number

Weighted
average
exercise
price

Weighted average fair value at grant date

 
 
 
 
of options

ZAR

ZAR

Outstanding at 1 April 2011
 
 
 
13,686,079

169.64

-

Granted
 
 
 
2,943,373

283.07

105.43

Lapsed
 
 
 
(524,849
)
218.17

-

Exercised
 
 
 
(3,080,100
)
138.30

-

Outstanding at 31 March 2012
 
 
 
13,024,503

200.73

-

Granted
 
 
 
2,912,565

381.88

134.46

Lapsed
 
 
 
(456,401
)
263.02

-

Exercised
 
 
 
(2,541,422
)
154.55

-

Outstanding at 31 March 2013
 
 
 
12,939,245

248.38

-

Granted
 
 
 
644,300

511.07

133.13

Lapsed
 
 
 
(615,083
)
332.30

-

Exercised
 
 
 
(2,859,744
)
186.52

-

Outstanding at 31 March 2014
 
 
 
10,108,718

277.52

-

 
 
 
 
 
 
 
GBP SARs
 
 
 
 
 
 
GBP SARs include stock appreciation rights granted under the Stock Appreciation Rights Plan 2008 and the International Employee Stock Appreciation Rights Scheme. No further grants can be made under the now closed International Employee Stock Appreciation Rights Scheme, although outstanding grants may still be exercised until they reach their expiry date.
 
 
 
 
Number

Weighted
average
exercise
price

Weighted average fair value at grant date

 
 
 
 
of SARs

GBP

GBP

Outstanding at 1 April 2011
 
 
 
3,575,370

9.72

-

Granted
 
 
 
64,900

22.50

6.47

Lapsed
 
 
 
(26,583
)
11.44

-

Exercised
 
 
 
(793,543
)
8.85

-

Outstanding at 31 March 2012
 
 
 
2,820,144

10.25

-

Granted
 
 
 
60,600

23.95

5.81

Lapsed
 
 
 
(9,600
)
15.94

-

Exercised
 
 
 
(915,615
)
8.66

-

Outstanding at 31 March 2013
 
 
 
1,955,529

11.39

-

Granted
 
 
 
3,807,632

33.29

6.67

Lapsed
 
 
 
(154,963
)
27.69

-

Exercised
 
 
 
(437,552
)
8.70

-

Outstanding at 31 March 2014
 
 
 
5,170,646

27.25

-

 
 
 
 
 
 
 
ZAR SARs
 
 
 
 
 
 
ZAR SARs include stock appreciation rights granted under the South African Stock Appreciation Rights Sub-Plan 2008.
 
 
 
 
Number

Weighted
average
exercise
price

Weighted average fair value at grant date

 
 
 
 
of SARs

ZAR

ZAR

Outstanding at 1 April 2013
 
 
 
-

-

-

Granted
 
 
 
1,209,900

527.49

140.05

Lapsed
 
 
 
(31,700
)
527.49

-

Outstanding at 31 March 2014
 
 
 
1,178,200

527.49

-

 
 
 
 
 
 
 
 
 
 
 
 
 
 

59
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

25. Share capital (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
GBP performance share awards
 
 
 
 
 
 
GBP performance share awards include awards made under the Executive Share Award Plan 2008, the Performance Share Award Scheme and the International Performance Share Award Sub-Scheme. No further awards can be made under the Performance Share Award Scheme and the International Performance Share Award Sub-Scheme, although outstanding awards remain and will vest, subject to the achievement of their respective performance conditions on their vesting date.
 
 
 
 
Number

Weighted
average
exercise
price

Weighted average fair value at grant date

 
 
 
 
of awards

GBP

GBP

Outstanding at 1 April 2011
 
 
 
7,364,124

-

-

Granted
 
 
 
2,208,640

-

20.46

Lapsed
 
 
 
(278,760
)
-

-

Released to participants
 
 
 
(2,413,890
)
-

-

Outstanding at 31 March 2012
 
 
 
6,880,114

-

-

Granted
 
 
 
3,471,222

-

22.32

Lapsed
 
 
 
(254,284
)
-

-

Released to participants
 
 
 
(2,591,329
)
-

-

Outstanding at 31 March 2013
 
 
 
7,505,723

-

-

Granted
 
 
 
2,102,870

-

30.86

Lapsed
 
 
 
(483,188
)
-

-

Released to participants
 
 
 
(2,322,978
)
-

-

Outstanding at 31 March 2014
 
 
 
6,802,427

-

-

 
 
 
 
 
 
 
GBP value share awards
 
 
 
 
 
 
The 3,606,720 (2013:4,843,780, 2012: 4,034,340) value share awards during the year ended 31 March 2014 granted represent the theoretical maximum number of awards that could possibly vest in the future, although in practice it is extremely unlikely that this number of awards would be released.
 
 
 
Number of value shares (per £10 million of additional

Theoretical maximum

Weighted
average
exercise
price 

Weighted average fair value at grant date

 
 
 
value)

shares at cap

GBP

GBP

Outstanding at 1 April 2011
 
 
1,022

3,168,200

-

-

Granted
 
 
1,205

4,034,340

-

7.27

Lapsed
 
 
(97
)
(324,756
)
-

-

Outstanding at 31 March 2012
 
 
2,130

6,877,784

-

-

Granted
 
 
1,270

4,843,780

-

7.02

Outstanding at 31 March 2013
 
 
3,400

11,721,564

-

-

Granted
 
 
680

3,606,720

-

11.84

Lapsed
 
 
(220
)
(3,109,297
)
-

-

Released to participants
 
 
(1,012
)
(921,543
)
-

-

Outstanding at 31 March 2014
 
 
2,848

11,297,444

-

-

 
 
 
 
 
 
 
Of the 921,543 shares released, 384,684 shares are deferred and remain subject to forfeiture and 344,516 shares were subsequently converted to nil-cost options and remained outstanding at 31 March 2014 for the benefit of Graham Mackay's estate.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

60
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

25. Share capital (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
GBP cash-settled awards
 
 
 
 
 
 
GBP share incentives included under the Associated Companies' Cash Award Plan 2011.
 
 
 
 
Number

Weighted
average
exercise
price

Weighted average fair value at grant date

 
 
 
 
of awards

GBP

GBP

Outstanding at 1 April 2011
 
 
 
-

-

-

Granted
 
 
 
335,940

-

20.35

Outstanding at 31 March 2012
 
 
 
335,940

-

-

Released to participants
 
 
 
(335,940
)
-

-

Outstanding at 31 March 2013 and 31 March 2014
 
 
 
-

-

-

 
 
 
 
 
 
 
Outstanding share incentives
 
 
 
 
 
 
The following table summarises information about share incentives outstanding at 31 March.
 
Number

Weighted average remaining contractual
life in years

Number

Weighted average remaining contractual
life in years

Number

Weighted average remaining contractual
life in years

Range of exercise prices
2014

2014

2013

2013

2012

2012

GBP share options
 
 
 
 
 
 
£4 - £5
-

-

-

-

204,850

1.0

£5 - £6
-

-

9,000

0.6

73,418

1.6

£6 - £7
2,900

0.1

356,310

1.1

401,993

2.1

£8 - £9
407,721

1.1

452,944

2.1

622,494

3.1

£9 - £10
72,500

4.6

78,275

5.6

78,275

6.6

£10 - £11
734,900

2.5

942,994

3.4

1,097,744

4.4

£11 - £12
958,936

3.1

1,117,686

4.1

1,456,403

5.1

£12 - £13
2,857,346

4.8

3,311,385

5.7

4,781,927

6.8

£17- £18
3,500

5.6

17,200

6.6

28,700

7.6

£19 - £20
2,472,347

6.2

3,072,050

7.2

3,603,984

8.2

£20 - £21
23,200

6.7

46,950

7.7

66,950

8.7

£22 - £23
3,647,746

7.2

3,872,096

8.2

4,185,596

9.2

£23 - £24
4,276,980

8.2

4,443,930

9.2

-

-

£25 - £26
13,400

7.9

20,000

8.7

20,000

9.7

£28 - £29
69,100

8.7

69,100

9.7

-

-

£31 - £32
3,804

9.7

-

-

-

-

£33 - £34
490,794

9.2

-

-

-

-

 
16,035,174

6.3

17,809,920

7.0

16,622,334

7.1

 
 
 
 
 
 
 
ZAR share options
 
 
 
 
 
 
R50 - R60
-

-

7,500

0.1

172,932

1.1

R60 - R70
-

-

49,900

0.6

229,400

1.2

R70 - R80
-

-

40,500

1.1

68,500

2.1

R80 - R90
-

-

-

-

10,000

0.2

R90 - R100
196,300

0.9

363,507

2.0

519,607

3.0

R110 - R120
-

-

-

-

40,000

3.4

R120 - R130
365,513

2.0

527,300

2.9

757,940

3.9

R140 - R150
617,800

4.3

931,600

5.3

1,292,300

6.3

R150 - R160
328,200

4.9

426,100

6.0

629,600

7.0

R160 - R170
235,650

3.1

362,150

4.1

461,100

5.1

R180 - R190
721,700

3.9

1,041,100

4.9

1,377,700

5.9

R210 - R220
979,300

5.8

1,665,750

6.8

2,455,350

7.8

R220 - R230
1,043,900

6.7

1,985,700

7.7

2,140,000

8.7

R250 - R260
485,000

7.2

519,600

8.2

542,400

9.2

R290 - R300
1,936,235

7.7

2,155,793

8.7

2,327,674

9.7

R310 - R320
583,700

8.2

625,850

9.2

-

-

R400 - R410
2,006,120

8.7

2,236,895

9.7

-

-

R510 - R520
609,300

9.2

-

-

-

-

 
10,108,718

6.7

12,939,245

7.2

13,024,503

7.2


61
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

 
 
 
 
 
 
 
25. Share capital (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding share incentives (continued)
 
 
 
 
 
 
 
Number

Weighted average remaining contractual
life in years

Number

Weighted average remaining contractual
life in years

Number

Weighted average remaining contractual
life in years

Range of exercise prices
2014

2014

2013

2013

2012

2012

GBP SARs
 
 
 
 
 
 
£4 - £5
-

-

-

-

219,168

1.1

£6 - £7
12,334

0.1

243,734

1.1

344,018

2.1

£8 - £9
250,768

1.1

299,010

2.1

460,085

3.1

£9 - £10
2,275

4.6

2,275

5.6

9,100

6.6

£10 - £11
306,359

2.1

384,784

3.1

522,934

4.1

£11 - £12
426,451

3.1

485,283

4.1

651,500

5.1

£12 - £13
306,627

4.3

355,943

5.3

481,839

6.3

£13 - £14
8,700

3.6

12,400

4.6

16,700

5.6

£19 - £20
44,500

6.2

49,900

7.2

49,900

8.2

£22 - £23
61,600

7.2

61,600

8.2

64,900

9.2

£23 - £24
58,100

8.2

60,600

8.2

-

-

£31 - £32
31,496

9.7

-

-

-

-

£33 - £34
3,661,436

9.2

-

-

-

-

 
5,170,646

7.5

1,955,529

3.8

2,820,144

4.3

 
 
 
 
 
 
 
ZAR SARs
 
 
 
 
 
 
R520 - R530
1,178,200

9.7

-

-

-

-

 
 
 
 
 
 
 
GBP performance share awards
 
 
 
 
 
 
£0

6,802,427

1.3

7,505,723

1.5

6,880,114

1.1

 
 
 
 
 
 
 
GBP value share awards
 
 
 
 
 
 
£0

11,297,444

3.1

11,721,564

2.6

6,877,784

3.0

 
 
 
 
 
 
 
GBP cash-settled awards
 
 
 
 
 
 
£0

-

-

-

-

335,940

1.0

 
 
 
 
 
 
 
Total share incentives outstanding
50,592,609

5.2

51,931,981

5.1

46,560,819

5.4

 
 
 
 
 
 
 
Exercisable share incentives
 
 
 
 
 
 
The following table summarises information about exercisable share incentives outstanding at 31 March.
 
Number

Weighted
average
exercise
price

Number

Weighted
average
exercise
price

Number

Weighted
average
exercise
price

 
2014

2014

2013

2013

2012

2012

GBP share options
7,860,114

14.90

5,792,390

11.27

5,103,986

10.46

ZAR share options
4,582,263

185.88

4,915,057

164.84

5,004,479

140.97

GBP SARs
1,369,214

11.39

1,783,429

10.35

2,705,344

9.80

 
 
 
 
 
 
 
Share incentives exercised or released
 
 
 
 
 
 
The weighted average market price of the group's shares at the date of exercise or release for share incentives exercised or released during the year were:
 
Number

Weighted
average market
price

Number

Weighted
average market
price

Number

Weighted
average market
price

 
2014

2014

2013

2013

2012

2012

Share incentives designated in GBP
5,644,850

31.53

6,709,778

26.81

5,410,802

23.01

Share incentives designated in ZAR
2,859,744

512.29

2,541,422

385.70

3,080,100

278.19

Total share incentives exercised or released
  during the year
8,504,594

 
9,251,200

 
8,490,902

 



62
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

25. Share capital (continued)

Broad-Based Black Economic Empowerment (BBBEE) scheme
On 9 June 2010 the initial allocation of participation rights was made in relation to the BBBEE scheme in South Africa. A total of 46.2 million new shares in The South African Breweries (Pty) Ltd (SAB), representing 8.45% of SAB’s enlarged issued share capital, were issued. The shares in SAB will be exchanged at the end of the estimated 10-year scheme term for shares in SABMiller plc based on a repurchase formula linked, inter alia, to the operating performance of SAB. No performance conditions and exercise prices are attached to these shares, although the employee component has a four-year vesting period. The weighted average fair value of each SAB share at the grant date was ZAR40.

Weighted average fair value assumptions
The fair value of services received in return for share awards granted is measured by reference to the fair value of share awards granted. The estimate of the fair value of the services received is measured based on a binomial model approach except for the awards under Performance Share Award schemes, the Executive Share Award Plan 2008 (including value share awards) and the BBBEE scheme which have been valued using Monte Carlo simulations, and awards under the cash-settled scheme which have been valued based on an analytic approach.

The Monte Carlo simulation methodology is necessary for valuing share-based payments with total shareholder return (the measure of the returns that a company has provided for its shareholders, reflecting share price movements and assuming reinvestment of dividends) performance hurdles. This is achieved by projecting SABMiller plc’s share price forwards, together with those of companies in the same comparator group, over the vesting period and/or life of the awards after considering their respective volatilities.

The following weighted average assumptions were used in these option pricing models during the year.
 
2014 
2013 
2012 
Share price¹
 
 
 
- South African share option scheme (ZAR)
 512.06 
 379.21 
 280.49 
- All other schemes (£)
 33.09 
 23.76 
 22.33 
Exercise price¹
 
 
 
- South African share option scheme (ZAR)
 521.78 
 381.88 
 283.07 
- All other schemes (£)
 14.32 
 8.71 
 9.35 
Expected volatility (all schemes)² (%)
 25.3 
 26.1 
 23.1 
Dividend yield (all schemes) (%)
 2.3 
 2.4 
 2.3 
Annual forfeiture rate
 
 
 
- South African share option scheme (%)
 5.0 
 5.0 
 5.0 
- All other schemes (%)
 3.0 
 3.0 
 3.0 
Risk-free interest rate
 
 
 
- South African share option scheme (%)
 6.9 
 7.3 
 7.9 
- All other schemes (%)
 0.8 
 1.0 
 2.3 
 
 
 
 
¹ The calculation is based on the weighted fair value of issues made during the year.
² Expected volatility is calculated by assessing the historical share price data in the United Kingdom and South Africa from seven years prior to the grant date (2013, 2012: since May 2002).


63
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

26. Retained earnings and other reserves
 
 
 
 
 
 
 
a. Retained earnings
 
 
 
 
Treasury and EBT shares

Retained earnings1

Total

 
US$m

US$m

US$m

At 1 April 2011
(657
)
9,648

8,991

Profit for the year
-

4,206

4,206

Other comprehensive loss
-

(104
)
(104
)
Remeasurements of defined benefit plans taken to other comprehensive loss
-

(7
)
(7
)
Share of associates' and joint ventures' other comprehensive loss
-

(163
)
(163
)
Deferred tax credit on items taken to other comprehensive loss
-

66

66

Dividends paid
-

(1,324
)
(1,324
)
Dilution of non-controlling interests as a result of business combinations
-

(5
)
(5
)
Payment for purchase of own shares for share trusts
(52
)
-

(52
)
Buyout of non-controlling interests
-

(7
)
(7
)
Utilisation of EBT shares
48

(48
)
-

Credit entry relating to share-based payments
-

158

158

At 31 March 2012
(661
)
12,524

11,863

Profit for the year
-

3,250

3,250

Other comprehensive loss
-

(22
)
(22
)
Remeasurements of defined benefit plans taken to other comprehensive loss
-

(19
)
(19
)
Share of associates' and joint ventures' other comprehensive loss
-

(22
)
(22
)
Deferred tax credit on items taken to other comprehensive loss
-

19

19

Dividends paid
-

(1,517
)
(1,517
)
Payment for purchase of own shares for share trusts
(53
)
-

(53
)
Utilisation of EBT shares
71

(71
)
-

Credit entry relating to share-based payments
-

189

189

At 31 March 2013
(643
)
14,353

13,710

Profit for the year
-

3,381

3,381

Other comprehensive income
-

54

54

Remeasurements of defined benefit plans taken to other comprehensive income
-

22

22

Share of associates' and joint ventures' other comprehensive income
-

45

45

Deferred tax charge on items taken to other comprehensive income
-

(13
)
(13
)
Dividends paid
-

(1,640
)
(1,640
)
Utilisation of merger relieve reserve
-

265

265

Buyout of non-controlling interests
-

(5
)
(5
)
Payment for purchase of own shares for share trusts
(79
)
-

(79
)
Utilisation of treasury and EBT shares
63

(42
)
21

Credit entry relating to share-based payments
-

178

178

At 31 March 2014
(659
)
16,544

15,885

 
 
 
 
1 As restated (see note 28).
 
 
 

The group’s retained earnings includes amounts of US$753 million (2013: US$734 million, 2012: US$709 million), the distribution of which is limited by statutory or other restrictions.

Treasury and EBT shares reserve
On 26 February 2009 77,368,338 SABMiller plc non-voting convertible shares were converted into ordinary shares and then acquired by the company to be held as treasury shares. While the purchase price for each share was £10.54, the whole amount of the consideration was paid between group companies. On 15 February 2010 5,300,000 of these treasury shares were transferred to the EBT for nil consideration. On 26 March 2013 an additional 4,600,000 treasury shares were transferred to the EBT at no gain or loss to the group. These shares will be used to satisfy awards outstanding under the various share incentive plans. During 2014 1,345,165 treasury shares were used to directly satisfy share awards. As at 31 March 2014 a total of 66,123,173 shares (2013: 67,468,338 shares, 2012: 72,068,338 shares) were held in treasury.

There are two employee benefit trusts currently in operation, being the SABMiller Employees’ Benefit Trust (the EBT) and the SABMiller Associated Companies’ Employees’ Benefit Trust (the AC-EBT). The EBT holds shares in SABMiller plc for the purposes of the various executive share incentive plans. At 31 March 2014 the EBT held 6,833,632 shares (2013: 8,339,106 shares, 2012: 5,605,746 shares) which cost US$152 million (2013: US$126 million, 2012: US$98 million) and had a market value of US$341 million (2013: US$438 million, 2012: US$225 million). These shares have been treated as a deduction in arriving at shareholders’ funds. The EBT used funds provided by SABMiller plc to purchase such of the shares as were purchased in the market. The costs of funding and administering the scheme are charged to the income statement in the period to which they relate.

64
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

26. Retained earnings and other reserves (continued)

a. Retained earnings (continued)
The AC-EBT may hold shares in SABMiller plc for the purposes of providing share incentives for employees of companies in which SABMiller has a significant economic and strategic interest but over which it does not have management control. At 31 March 2014 the AC-EBT held no shares (2013: none, 2012: 335,940 shares) which cost US$nil (2013: US$nil, 2012: US$11 million) and had a market value of US$nil (2013: US$nil, 2012: US$13 million). These shares were treated as a deduction in arriving at shareholders’ funds. The AC-EBT used funds provided by Gardwell Ltd, a wholly owned indirect subsidiary of SABMiller plc, to purchase the shares. The costs of funding and administering the scheme are charged to the income statement in the period to which they relate.

Shares currently held in each EBT rank pari passu with all other ordinary shares, but in both cases the trustees have elected to waive dividends and decline from voting shares, except in circumstances where they may be holding shares beneficially owned by a participant. There were no beneficially owned shares in either EBT as at 31 March 2014 (2012 and 2013: nil).
b. Other reserves
 
 
 
 
 
The analysis of other reserves is as follows.
 
 
 
 
 
 
Foreign

 

Net

 

 

 
currency

Cash flow

investment

Available

 

 
translation

hedging

hedging

for sale

 

 
reserve

reserve

reserve

reserve

Total

 
US$m

US$m

US$m

US$m

US$m

At 1 April 2011
2,183

35

(340
)
3

1,881

Currency translation differences
137

-

-

-

137

Net investment hedges
-

-

(1
)
-

(1
)
Cash flow hedges
-

6

-

-

6

Deferred tax on items taken to other comprehensive loss
-

30

-

-

30

Share of associates' and joint ventures' other comprehensive loss
-

(75
)
-

-

(75
)
At 31 March 2012
2,320

(4
)
(341
)
3

1,978

Currency translation differences
(696
)
-

-

-

(696
)
Net investment hedges
-

-

63

-

63

Cash flow hedges
-

(5
)
-

-

(5
)
Available for sale investments
-

-

-

(1
)
(1
)
Deferred tax on items taken to other comprehensive loss
-

6

-

-

6

Share of associates' and joint ventures' other comprehensive (loss)/income
-

(23
)
-

6

(17
)
At 31 March 2013
1,624

(26
)
(278
)
8

1,328

Currency translation differences
(2,267
)
-

-

-

(2,267
)
Net investment hedges
-

-

102

-

102

Cash flow hedges
-

34

-

-

34

Deferred tax on items taken to other comprehensive income
-

1

-

-

1

Share of associates' and joint ventures' other comprehensive income/(loss)
104

2

-

(6
)
100

At 31 March 2014
(539
)
11

(176
)
2

(702
)
 
 
 
 
 
 
Foreign currency translation reserve
 
 
 
 
 
The foreign currency translation reserve comprises all translation exchange differences arising on the retranslation of opening net assets together with differences between income statements translated at average and closing rates.



65
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

27a. Reconciliation of profit for the year to net cash generated from operations
 
 
 
 
2014 

2013 1

2012 1

  
US$m

US$m

US$m

Profit for the year
3,650

3,487

4,462

Taxation
1,173

1,192

1,121

Share of post-tax results of associates and joint ventures
(1,226
)
(1,213
)
(1,134
)
Net finance costs
645

726

554

Operating profit
4,242

4,192

5,003

Depreciation:
 
 
 
- Property, plant and equipment
621

641

672

- Containers
233

226

237

Container breakages, shrinkages and write-offs
80

38

34

Net profit on disposal of businesses
(72
)
(79
)
(1,258
)
Gain on remeasurement of existing interest in joint venture on acquisition
-

-

(66
)
Profit on disposal of investment in associate
-

-

(103
)
Loss/(gain) on dilution of investment in associate
18

(4
)
 - 

(Profit)/loss on disposal of property, plant and equipment
(17
)
13

(15
)
Amortisation of intangible assets
427

450

273

Impairment of goodwill
-

11

-

Impairment of intangible assets
8

-

-

Impairment of property, plant and equipment
52

39

-

Impairment of working capital balances
55

31

16

Amortisation of advances to customers
40

45

24

Unrealised net gain from fair value hedges
-

-

(20
)
Dividends received from other investments
(1
)
(1
)
(1
)
Charge with respect to share options
141

184

132

Charge with respect to Broad-Based Black Economic Empowerment scheme
13

17

29

Other non-cash movements
(163
)
(45
)
22

Net cash generated from operations before working capital movements
5,677

5,758

4,979

Increase in inventories
(73
)
(14
)
(45
)
Decrease/(increase) in trade and other receivables
128

(107
)
(25
)
Increase in trade and other payables
113

82

374

Decrease in provisions
(89
)
(177
)
(46
)
Increase in post-retirement benefit provisions
14

12

-

Net cash generated from operations
5,770

5,554

5,237

 
 

 

 

1 As restated (see note 28).
 

 

 



66
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

27b. Reconciliation of net cash generated from operating activities to free cash flow
 
 
 
 
2014 

2013 

2012 

 
US$m

US$m

US$m

Net cash generated from operating activities
3,431

4,101

3,937

Purchase of property, plant and equipment
(1,401
)
(1,335
)
(1,473
)
Proceeds from sale of property, plant and equipment
70

30

116

Purchase of intangible assets
(84
)
(144
)
(166
)
Proceeds from sale of intangible assets
-

4

-

Investments in joint ventures
(188
)
(272
)
(288
)
Investments in associates
(199
)
(23
)
-

Repayment of investments by associates
-

-

14

Dividends received from joint ventures
903

886

896

Dividends received from associates
224

113

120

Dividends received from other investments
1

1

1

Dividends paid to non-controlling interests
(194
)
(131
)
(109
)
Free cash flow
2,563

3,230

3,048



27c. Analysis of net debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents on the balance sheet are reconciled to cash and cash equivalents on the cash flow statement as follows.
 
 
 
 
 
 
2014 

2013 

 
 
 
 
 
 
US$m

US$m

Cash and cash equivalents (balance sheet)
2,081 

2,171 

Overdrafts
(213)

(212)

Cash and cash equivalents (cash flow statement)
1,868 

1,959 

 
 
 
 
 
 
 
 
The group has amended its net debt definition to include derivative financial instruments designated as net investment hedges as these hedges are considered to be inextricably linked to the underlying borrowings because they are used to mitigate the foreign currency exchange risk arising from the group’s foreign currency borrowings. The change in this definition has resulted in a reduction in net debt of US$101 million at 31 March 2013, and US$45 million at 1 April 2012.
 
 
 
 
 
 
 
 
Net debt is analysed as follows.
 
 
 
 
 
 
 
Cash and cash
 
 
 
 

 

 
 

 
equivalents

 

 
Derivative

 
 
 
 
(excluding

 

 
financial

Finance

Gross

Net

 
overdrafts)

Overdrafts

Borrowings

instruments

leases

debt

debt

 
US$m

US$m

US$m

US$m

US$m

US$m

US$m

At 1 April 20121
745

(139
)
(19,067
)
665

(21
)
(18,562
)
(17,817
)
Exchange adjustments
(83
)
32

131

-

1

164

81

Cash flow
1,512

(105
)
560

(5
)
6

456

1,968

Disposals
(3
)
-

-

-

-

-

(3
)
Other movements
-

-

75

117

(21
)
171

171

At 31 March 20131
2,171

(212
)
(18,301
)
777

(35
)
(17,771
)
(15,600
)
Exchange adjustments
(65
)
4

26

(24
)
3

9

(56
)
Cash flow
(25
)
(5
)
1,244

(188
)
9

1,060

1,035

Other movements
-

-

248

98

(28
)
318

318

At 31 March 2014
2,081

(213
)
(16,783
)
663

(51
)
(16,384
)
(14,303
)
 
 

 

 

 

 

 

 

1 As restated for the change in definition of net debt.


67
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

27d. Major non-cash transactions

2014
Major non-cash transactions in the year included the following.
Additional profit realised on the disposal of the group's Angolan operations in Africa in 2012.

Broad-Based Black Economic Empowerment (BBBEE) related charges in South Africa, including share-based payment charges in relation to the employee component of the BBBEE scheme, together with the loss on the dilution of the group's investment in its associate, Distell Group Ltd, as a result of the exercise of share options issued as part of its BBBEE scheme.

Impairment charges relating to the closure of the Warnervale brewery and impairment of the Bluetongue brand in Australia.    
            
2013
Major non-cash transactions in the year included the following.
The additional profit realised on the disposal in the prior year of the group’s Angolan operations in Africa in 2012.

2012
Major non-cash transactions in the year included the following.
The disposal of the group’s Angolan operations, Coca-Cola Bottling Luanda SARL, Coca-Cola Bottling Sul De Angola SARL, Empresa de Cervejas N’Gola Norte SA, and its interest in Empresa de Cervejas N’Gola SARL, in Africa in exchange for a 27.5% interest in BIH Angola.

The contribution of the group’s Russian beer business, SABMiller RUS LLC, and Ukrainian beer business, PJSC Miller Brands Ukraine, to Anadolu Efes in exchange for a 24% economic interest in the enlarged Anadolu Efes group.

The remeasurement of the group’s existing 50% interest in the Pacific Beverages joint venture to fair value on the acquisition of the remaining 50% interest.

28. Restatements
 
 
 
 
 
 
 
 
 
 
The amendment to IAS 19, ‘Employee benefits’, was adopted retrospectively from 1 April 2013. The group has restated the consolidated financial statements accordingly. The quantitative impact of adopting this standard on the prior period consolidated financial statements is detailed in the tables below. No material adjustments to the balance sheets at 31 March 2013 and 31 March 2012 have been required as a result of the adoption of the amended standard.
 
 
 
 
 
 
 
 
 
 
The group adopted IFRS 10, 'Consolidated financial statements' retrospectively from 1 April 2013. Adopting this standard has resulted in two investments that were previously classified as joint ventures being recognised as subsidiaries by MillerCoors. The investments were previously equity accounted and are now fully consolidated. The group has restated the consolidated financial statements accordingly. The change in accounting policy has had no impact on net assets attributable to owners or total comprehensive income, but has resulted in an increase in EBITA for the year ended 31 March 2013 of US$7 million (2012: US$7 million), an increase in EBITDA for the year ended 31 March 2013 of US$18 million (2012: US$18 million), an increase in the group's share of associates' and joint ventures' net finance costs for the year ended 31 March 2013 of US$nil (2012: US$1 million) and an offsetting increase in the group's share of associates' and joint ventures' non-controlling interests for the year ended 31 March 2013 of US$7 million (2012: US$6 million).
 
 
 
 
 
 
 
 
 
 
As part of the regular review of accounting practices and policies, fair value gains and losses on financial instruments, and exchange gains and losses have now been presented on a net basis within net finance costs. Comparatives have been restated for consistency. The quantitative impact of this change in presentation is detailed in the table below.
 
 
 
 
 
 
 
 
 
 
 
Year ended
31 March
2012

IAS 19 adjustments

Finance costs reclassification

Year ended
31 March 2012
as restated

 
Year ended
31 March
2013

IAS 19 adjustments

Finance costs reclassification

Year ended
31 March 2013
as restated

 
US$m

US$m

US$m

US$m

 
US$m

US$m

US$m

US$m

Consolidated income statement
Operating profit
5,013

(10
)
-

5,003

 
4,203

(11
)
-

4,192

 
 
 
 
 
 
 
 
 
 
Net finance costs
(562
)
8

-

(554
)
 
(735
)
9

-

(726
)
Finance costs
(1,093
)
8

225

(860
)
 
(1,417
)
9

222

(1,186
)
Finance income
531

-

(225
)
306

 
682

-

(222
)
460

 
 
 
 
 
 
 
 
 
 
Share of post-tax
  results of
  associates and
  joint ventures
1,152

(18
)
-

1,134

 
1,244

(31
)
-

1,213

Profit before
  taxation
5,603

(20
)
-

5,583

 
4,712

(33
)
-

4,679

Taxation
(1,126
)
5

-

(1,121
)
 
(1,201
)
9

-

(1,192
)
Profit for the year
4,477

(15
)
-

4,462

 
3,511

(24
)
-

3,487


68
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

28. Restatements (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended
31 March
2012

IAS 19 adjustments

 
Year ended
31 March
2012
as restated

Year ended
31 March 2013

IAS 19 adjustments

Year ended
31 March 2013
as restated

 
 
 
US$m

US$m

 
US$m

US$m

US$m

US$m

Consolidated statement of comprehensive income
Profit for the year
4,477

(15
)
 
4,462

3,511

(24
)
3,487

 
 
 
 
 
 
 
 
 
 
Items that will not be reclassified subsequently to profit or loss
Net remeasurements of defined benefit plans
(9
)
2

 
(7
)
(21
)
2

(19
)
Tax on items that will not be reclassified
71

(5
)
 
66

28

(9
)
19

Share of associates’ and joint ventures’ other
  comprehensive loss
(180
)
18

 
(162
)
(57
)
31

(26
)
Total items that will not be reclassified
  subsequently to profit or loss
(118
)
15

 
(103
)
(50
)
24

(26
)
 
 
 
 

 

 
 

 

 

 

Total items that may be subsequently reclassified
  to profit or loss
95

-

 
95

(650
)
-

(650
)
 
 
 
 

 

 
 

 

 

 

Other comprehensive loss for the period,
  net of tax
(23
)
15

 
(8
)
(700
)
24

(676
)
Total comprehensive income for the year
4,454

-

 
4,454

2,811

-

2,811


29. Acquisitions and disposals
 
 
 
 
 
 
 
 
 
In December 2013 the group acquired the trade and assets of a wine and spirits business in Africa for consideration of US$42 million, of which US$3 million is deferred. The business combination has been accounted for using the acquisition method. The residual value over the net assets acquired has been recognised as goodwill of US$7 million in the financial statements.
 
 
 
 
 
Non-controlling interests
 
 
 
 
The following non-controlling interests were acquired for cash consideration of US$5 million, generating additional equity of US$5 million.
Company
% acquired
Effective %
holding after
acquisition of
non-controlling
interest
Form of consideration
Country
SABMiller Brands Korea
 24 
 75 
Cash
South Korea
 
 
 
 
 
Disposals
 
 
 
 
In May 2013 a net profit of US$47 million, after associated costs, was realised on the disposal of the non-core milk and juice business in Panama, in Latin America.

30. Commitments, contingencies and guarantees
 
 
 
 
 
 
 
a. Operating lease commitments
 
 
 
The minimum lease rentals to be paid under non-cancellable leases at 31 March are as follows.
 
 
 
 
2014 

 
2013 

 
US$m

 
US$m

Land and buildings
 
 
 
Within one year
67

 
65

Later than one year and less than five years
147

 
152

After five years
30

 
33

 
244

 
250

 
 
 
 
Plant, vehicles and systems
 
 
 
Within one year
58

 
54

Later than one year and less than five years
124

 
129

After five years
16

 
91

 
198

 
274


69
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

30. Commitments, contingencies and guarantees (continued)
 
 
 
 
 
 
 
b. Other commitments
 
 
 
 
2014 

 
2013 

 
US$m

 
US$m

Capital commitments not provided in the financial information
 
 
 
Contracts placed for future expenditure for property, plant and equipment
271

 
239

Contracts placed for future expenditure for intangible assets
16

 
3

Share of capital commitments of joint ventures
55

 
48

 
 
 
 
Other commitments not provided in the financial information
 
 
 
Contracts placed for future expenditure
3,736

 
2,632

Share of joint ventures' other commitments
393

 
379

 
 
 
 
Contracts placed for future expenditure in 2014 primarily relate to minimum purchase commitments for raw materials and packaging materials, which are principally due between 2014 and 2021. Additionally, as part of the business capability programme the group had entered into contracts for the provision of IT, communications and consultancy services and in relation to which the group had commitments of US$120 million at 31 March 2013. Following the conclusion of the business capability programme, no material commitments were held relating to the programme at 31 March 2014.
 
 
 
 
The group’s share of joint ventures’ other commitments primarily relate to MillerCoors’ various long-term non-cancellable advertising and promotion commitments.
 
 
 
 
c. Contingent liabilities and guarantees
 
 
 
 
2014 

 
2013 

 
US$m

 
US$m

Guarantees to third parties¹
4

 
2

Litigation²
1

 
15

Other contingent liabilities
3

 
2

 
8

 
19


1 Guarantees to third parties
These primarily relate to guarantees given by Grolsch and Nile Breweries Ltd to banks in relation to loans taken out by trade customers and suppliers respectively.

2 Litigation
The group has a number of activities in a wide variety of geographic areas and is subject to certain legal claims incidental to its operations. In the opinion of the directors, after taking appropriate legal advice, these claims are not expected to have, either individually or in aggregate, a material adverse effect upon the group’s financial position, except insofar as already provided in the consolidated financial statements. These include claims made by certain former employees in Ecuador arising out of events which took place before the group’s investment in Ecuador in 2005, in respect of which, based on legal advice that they have no valid legal basis, the directors have determined that no provision is required and that they should continue to be contested.

Other
SABMiller and Altria entered into a tax matters agreement (the Agreement) on 30 May 2002, to regulate the conduct of tax matters between them with regard to the acquisition of Miller and to allocate responsibility for contingent tax costs. SABMiller has agreed to indemnify Altria against any taxes, losses, liabilities and costs that Altria incurs arising out of or in connection with a breach by SABMiller of any representation, agreement or covenant in the Agreement, subject to certain exceptions.

The group has exposures to various environmental risks. Although it is difficult to predict the group’s liability with respect to these risks, future payments, if any, would be made over a period of time in amounts that would not be material to the group’s financial position, except insofar as already provided in the consolidated financial statements.


70
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

31. Pensions and post-retirement benefits
 
 
 
 
 
 
 
The group operates a number of pension schemes which have been designed and are administered in accordance with local conditions and practices in the countries concerned and include both defined contribution and defined benefit schemes. The majority of the schemes are funded and the schemes' assets are held independently of the group's finances. The assets of the schemes do not include any of the group's own financial instruments, nor any property occupied by or other assets used by the group. Pension and post-retirement benefit costs are assessed in accordance with the advice of independent professionally qualified actuaries. Generally, the projected unit method is applied to measure the defined benefit scheme liabilities.
 
 
 
 
The group also provides medical benefits, which are unfunded, for retired employees and their dependants in South Africa, the Netherlands and Latin America.
 
 
 
 
The total pension and post-retirement medical benefit costs recognised in the income statement are as follows.
 
2014 

2013 1

2012 1

  
US$m

US$m

US$m

Defined contribution scheme costs
106

110

97

Defined benefit pension plan costs
11

20

17

Post-retirement medical and other benefit costs
7

11

13

 
 
 
 
1 As restated (see note 28).
 
 
 
 
 
 
 
The amounts recognised in the balance sheet are determined as follows.
 
 
 
 
2014

2013

2012

 
US$m

US$m

US$m

Portion of defined benefit obligation that is partly or wholly funded
(405
)
(379
)
(408
)
Fair value of plan assets
479

453

436

Surplus of funded plans
74

74

28

Impact of asset ceiling
(78
)
(87
)
(40
)
Deficit of funded plans
(4
)
(13
)
(12
)
Portion of defined benefit obligation that is unfunded
(155
)
(193
)
(185
)
Medical and other post-retirement benefits
(87
)
(95
)
(112
)
Provisions for defined benefit plans
(246
)
(301
)
(309
)
 
 
 
 
Accruals for defined contribution plans
(4
)
(7
)
(3
)
 
 
 
 
The group operates various defined contribution and defined benefit schemes. Details of the main defined benefit schemes are provided below.

Latin America pension plans
The group operates a number of pension plans throughout Latin America. Details of the major plan are provided below.

The Colombian Labour Code Pension Plan is an unfunded plan of the defined benefit type and covers all salaried and hourly employees in Colombia who are not covered by social security or who have at least 10 years of service prior to 1 January 1967. The plan is financed entirely through company reserves and there are no external assets. The most recent actuarial valuation of the Colombian Labour Code Pension Plan was carried out by independent professionally qualified actuaries at 28 February 2014 using the projected unit credit method. All salaried employees are now covered by social security or private pension fund provisions. The principal economic assumptions used in the preparation of the pension valuations are shown below and take into consideration changes in the Colombian economy.

Grolsch pension scheme
The Grolsch pension scheme, named Stichting Pensioenfonds van de Grolsche Bierbrouwerij, is a funded scheme of the defined benefit type, based on average salary with assets held in separately administered funds. The latest valuation of the Grolsch pension scheme was carried out at 31 March 2014 by an independent actuary using the projected unit credit method.

Carlton & United Breweries pension scheme
The Carlton & United Breweries pension scheme, named AusBev Superannuation Fund, provides accumulation style and defined benefits to employees. The company funds the defined benefits, administration and insurance costs of the scheme as a benefit to employees who elect to be members of this scheme. The board of trustees is responsible for the governance of the scheme on behalf of the members. The latest actuarial valuation of the Carlton & United Breweries pension scheme was carried out at 30 June 2011 by an independent actuary using the projected unit credit method. The valuation update for the scheme was carried out at 31 March 2014 by an independent actuary. The defined benefits section is now closed to new members.

South Africa pension schemes
The group operates a number of pension schemes throughout South Africa. Details of the major schemes are provided below.

The ABI Pension Fund, Suncrush Pension Fund and Suncrush Retirement Fund are funded schemes of the defined benefit type based on average salary with assets held in separately administered funds. The governance of the schemes is the responsibility of the boards of trustees on behalf of the members, subject to the provisions of local legislation and the rules of each scheme.

The ABI Pension Fund no longer has any active or pensioner members. There are surplus assets remaining in the scheme that will be distributed to former members in due course.

71
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

31. Pensions and post-retirement benefits (continued)

South Africa pension schemes (continued)
The Suncrush Pension Fund has pensioners where the pension liabilities have been outsourced to an insurance provider. The trustees have made a provision in the fund rules for the active members such that benefits will be paid to members on exit for their benefits valued as at 1 July 2005. No further benefits are being accrued for active members.

The Suncrush Retirement Fund has no liabilities and is in the process of being closed down.

Risks
The most significant risks the group is exposed to through its defined benefit pension plans and post-employment medical plans are as follows.

Volatility of investment returns
Those schemes that hold assets are exposed to volatility in investment returns on those assets, which may be higher or lower than the assumed expected return on those assets. Asset mix is varied for each individual scheme to ensure investment volatility risk is appropriately managed.

Salary, pension and healthcare cost inflation risk
Scheme liabilities for the defined benefit pension and post-retirement medical plans are calculated based on assumed rates of salary, pension and/or healthcare cost inflation. Increases in these inflation rates will lead to higher liabilities.

Change in discount rate
A decrease in corporate bond yields results in a decrease in the discount rate and therefore an increase in plan liabilities. This will be partially offset by an increase in value of plan assets where the scheme holds bonds.

Mortality rates
The majority of the group's obligations to provide benefits under both the defined benefit pension plans and medical and other post-retirement benefits are for the life of the member. Increases in life expectancy will result in increases in the scheme liabilities associated with the schemes. The group ensures mortality rate assumptions incorporated in the actuarial calculations of the present value of scheme liabilities are from reliable sources.

Principal actuarial assumptions at 31 March (expressed as weighted averages)
 
 
 
 
 
 
 
 
Defined benefit pension plans
 
 
Medical and other post-retirement benefits
 
 
 
 
 
 
 
 
 
Latin America

Grolsch

 
Other

 
South
Africa

Other

At 31 March 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate (%)
 
 
 
 
 
 
 
6.9

3.4

 
4.5

 
9.9

6.4

Salary inflation (%)
 
 
 
 
 
 
 
3.0

2.0

 
3.4

 
-

-

Pension inflation (%)
 
 
 
 
 
 
 
3.0

0.7

 
3.7

 
-

-

Healthcare cost inflation (%)
 
 
 
 
 
 
-

-

 
-

 
8.7

3.0

Mortality rate assumptions
 
 
 
 
 
 
 
 
 
 
 
 
 
 - Retirement age:
 
 
Males
 
 
 
 
55

65

 
62

 
63

58

 
 
 
Females
 
 
 
 
51

65

 
60

 
63

54

- Life expectations on retirement age:
 
 
 
 
 
 
 
 
 
 
 
 
 
Retiring today:
 
Males
 
 
 
 
26

21

 
19

 
16

25

 
 
 
Females
 
 
 
 
35

24

 
23

 
19

32

Retiring in 20 years:
 
Males
 
 
 
 
26

23

 
19

 
17

25

 
 
 
Females
 
 
 
 
35

25

 
23

 
20

32

At 31 March 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate (%)
 
 
 
 
 
 
 
5.0

3.8

 
4.6

 
8.8

4.9

Salary inflation (%)
 
 
 
 
 
 
 
2.5

2.0

 
3.9

 
-

-

Pension inflation (%)
 
 
 
 
 
 
 
2.5

0.7

 
3.2

 
-

-

Healthcare cost inflation (%)
 
 
 
 
 
 
-

-

 
-

 
7.5

2.3

Mortality rate assumptions
 
 
 
 
 
 
 
 
 
 
 
 
 
 - Retirement age:
 
 
Males
 
 
 
 
55

65

 
62

 
63

57

 
 
 
Females
 
 
 
 
50

65

 
61

 
63

53

- Life expectations on retirement age:
 
 
 
 
 
 
 
 
 
 
 
 
 
Retiring today:
 
Males
 
 
 
 
27

21

 
22

 
16

25

 
 
 
Females
 
 
 
 
36

24

 
23

 
20

32

Retiring in 20 years:
 
Males
 
 
 
 
27

23

 
22

 
16

25

 
 
 
Females
 
 
 
 
36

25

 
23

 
20

32


72
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

31. Pensions and post-retirement benefits (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defined benefit pension plans
 
 
Medical and other post-retirement benefits
 
 
 
 
 
 
 
 
 
Latin America

Grolsch

 
Other

 
South
Africa

Other

At 31 March 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate (%)
 
 
 
 
 
 
 
7.5

4.8

 
6.0

 
9.3

7.0

Salary inflation (%)
 
 
 
 
 
 
 
3.5

2.0

 
3.8

 
-

-

Pension inflation (%)
 
 
 
 
 
 
 
3.5

2.0

 
3.2

 
-

-

Healthcare cost inflation (%)
 
 
 
 
 
 
-

-

 
-

 
7.8

3.0

Mortality rate assumptions
 
 
 
 
 
 
 
 
 
 
 
 
 
 - Retirement age:
 
 
Males
 
 
 
 
55

65

 
66

 
63

57

 
 
 
Females
 
 
 
 
50

65

 
61

 
63

53

- Life expectations on retirement age:
 
 
 
 
 
 
 
 
 
 
 
 
 
Retiring today:
 
Males
 
 
 
 
27

21

 
22

 
16

24

 
 
 
Females
 
 
 
 
36

24

 
23

 
20

31

Retiring in 20 years:
 
Males
 
 
 
 
27

23

 
22

 
16

24

 
 
 
Females
 
 
 
 
36

25

 
23

 
20

32

The movement in the defined benefit pension plan liabilities is as follows.
 
Defined benefit pension plans
 
 
Latin America

 
Grolsch
 
 
Other
 
 
Total
 
 
Present value of scheme liabilities

 
Present value of scheme liabilities

Fair value of plan assets

Total

 
Present value of scheme liabilities

Fair value of plan assets

Total

 
Present value of scheme liabilities

 
Fair value of plan assets

Total

 
US$m

 
US$m

US$m

US$m

 
US$m

US$m

US$m

 
US$m

 
US$m

US$m

At 1 April 2011
(175
)
 
(305
)
333

28

 
(48
)
52

4

 
(528
)
 
385

(143
)
Benefits paid
18

 
11

(11
)
-

 
15

(14
)
1

 
44

 
(25
)
19

Contributions paid by plan
  participants
-

 
(3
)
-

(3
)
 
-

-

-

 
(3
)
 
-

(3
)
Employer contributions
-

 
-

9

9

 
-

(5
)
(5
)
 
-

 
4

4

Current service cost
-

 
(4
)
-

(4
)
 
(2
)
-

(2
)
 
(6
)
 
-

(6
)
Interest (costs)/income1
(13
)
 
(15
)
16

1

 
(7
)
8

1

 
(35
)
 
24

(11
)
Remeasurements1:
(6
)
 
(21
)
26

5

 
(11
)
(3
)
(14
)
 
(38
)
 
23

(15
)
- Return on plan assets,
excluding amounts
included in interest
income
-

 
-

26

26

 
-

(3
)
(3
)
 
-

 
23

23

- Gain/(loss) from change
in demographic
assumptions
2

 
-

-

-

 
-

-

-

 
2

 
-

2

- Loss from change in
financial assumptions
(6
)
 
(28
)
-

(28
)
 
(3
)
-

(3
)
 
(37
)
 
-

(37
)
- Experience (losses)/gains
(2
)
 
7

-

7

 
(8
)
-

(8
)
 
(3
)
 
-

(3
)
Reversal of provision
10

 
-

-

-

 
-

-

-

 
10

 
-

10

Acquisitions
-

 
-

-

-

 
(52
)
51

(1
)
 
(52
)
 
51

(1
)
Exchange adjustments
(6
)
 
18

(21
)
(3
)
 
3

(5
)
(2
)
 
15

 
(26
)
(11
)
At 31 March 2012
(172
)
 
(319
)
352

33

 
(102
)
84

(18
)
 
(593
)
 
436

(157
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 As restated (see Note 28).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

73
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

31. Pensions and post-retirement benefits (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defined benefit pension plans
 
 
Latin America

 
Grolsch
 
 
Other
 
 
Total
 
 
Present value of scheme liabilities

 
Present value of scheme liabilities

Fair value of plan assets

Total

 
Present value of scheme liabilities

Fair value of plan assets

Total

 
Present value of scheme liabilities

 
Fair value of plan assets

Total

 
US$m

 
US$m

US$m

US$m

 
US$m

US$m

US$m

 
US$m

 
US$m

US$m

At 31 March 2012
(172
)
 
(319
)
352

33

 
(102
)
84

(18
)
 
(593
)
 
436

(157
)
Benefits paid
17

 
11

(11
)
-

 
11

(8
)
3

 
39

 
(19
)
20

Contributions paid by plan
  participants
-

 
(3
)
-

(3
)
 
-

-

-

 
(3
)
 
-

(3
)
Employer contributions
-

 
-

17

17

 
-

2

2

 
-

 
19

19

Current service cost
(1
)
 
(4
)
-

(4
)
 
(3
)
-

(3
)
 
(8
)
 
-

(8
)
Interest (costs)/income1
(12
)
 
(14
)
15

1

 
(5
)
5

-

 
(31
)
 
20

(11
)
Remeasurements1:
(17
)
 
19

18

37

 
(1
)
-

(1
)
 
1

 
18

19

- Return on plan assets
   excluding amounts
   included in interest
   income
-

 
-

18

18

 
-

-

-

 
-

 
18

18

- Gain/(loss) from change
   in demographic
   assumptions
2

 
(4
)
-

(4
)
 
-

-

-

 
(2
)
 
-

(2
)
- (Loss)/gain from change
   in financial assumptions
(12
)
 
16

-

16

 
-

-

-

 
4

 
-

4

- Experience (losses)/gains
(7
)
 
7

-

7

 
(1
)
-

(1
)
 
(1
)
 
-

(1
)
Settlements and
  curtailments
-

 
-

-

-

 
3

(3
)
-

 
3

 
(3
)
-

Exchange adjustments
4

 
12

(14
)
(2
)
 
4

(4
)
-

 
20

 
(18
)
2

At 31 March 2013
(181
)
 
(298
)
377

79

 
(93
)
76

(17
)
 
(572
)
 
453

(119
)
Benefits paid
16

 
11

(11
)
-

 
5

(5
)
-

 
32

 
(16
)
16

Contributions paid by plan
  participants
-

 
(3
)
-

(3
)
 
-

-

-

 
(3
)
 
-

(3
)
Employer contributions
-

 
-

10

10

 
-

3

3

 
-

 
13

13

Current service cost
(1
)
 
(3
)
-

(3
)
 
(3
)
-

(3
)
 
(7
)
 
-

(7
)
Past service cost
-

 
6

-

6

 
-

-

-

 
6

 
-

6

Interest (costs)/income
(9
)
 
(12
)
14

2

 
(2
)
3

1

 
(23
)
 
17

(6
)
Remeasurements:
23

 
(17
)
(10
)
(27
)
 
5

2

7

 
11

 
(8
)
3

- Return on plan assets
   excluding amounts
   included in interest
   income
-

 
-

(10
)
(10
)
 
-

-

-

 
-

 
(10
)
(10
)
- Gain from change
   in demographic
   assumptions
8

 
-

-

-

 
-

-

-

 
8

 
-

8

- Gain/(loss) from change
   in financial assumptions
11

 
(20
)
-

(20
)
 
2

-

2

 
(7
)
 
-

(7
)
- Experience gains
4

 
3

-

3

 
3

2

5

 
10

 
2

12

Exchange adjustments
11

 
(22
)
28

6

 
7

(8
)
(1
)
 
(4
)
 
20

16

At 31 March 2014
(141
)
 
(338
)
408

70

 
(81
)
71

(10
)
 
(560
)
 
479

(81
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 As restated (see Note 28).
 
 
 
 
 
 
 
 
 
 
 
 
 







74
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

31. Pensions and post-retirement benefits (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The fair value of assets in pension schemes is as follows.
 
 
 
 
 
 
 
 
 
Defined benefit pension plans
 
 
 
 
 
 
 
 
 
 
Latin America

 
Grolsch

 
Other

Total

 
 
 
 
 
 
 
 
 
US$m

 
US$m

 
US$m

US$m

At 31 March 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities - quoted
 
 
 
 
 
 
 
 
-

 
137

 
18

155

Bonds - quoted
 
 
 
 
 
 
 
 
-

 
251

 
22

273

Cash and cash equivalents
 
 
 
 
 
 
 
-

 
-

 
26

26

Property and other
 
 
 
 
 
 
 
 
-

 
20

 
5

25

Total fair value of assets
 
 
 
 
 
 
 
 
-

 
408

 
71

479

Present value of scheme liabilities
 
 
 
 
 
 
 
(141
)
 
(338
)
 
(81
)
(560
)
(Deficit)/surplus in the scheme
 
 
 
 
 
 
 
(141
)
 
70

 
(10
)
(81
)
Unrecognised pension asset due to limit
-

 
(70
)
 
(8
)
(78
)
Pension liability recognised
 
 
 
 
 
 
 
(141
)
 
-

 
(18
)
(159
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At 31 March 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities - quoted
 
 
 
 
 
 
 
 
-

 
126

 
20

146

Bonds - quoted
 
 
 
 
 
 
 
 
-

 
235

 
21

256

Cash and cash equivalents
 
 
 
 
 
 
 
 
-

 
-

 
31

31

Property and other
 
 
 
 
 
 
 
 
-

 
16

 
4

20

Total fair value of assets
 
 
 
 
 
 
 
 
-

 
377

 
76

453

Present value of scheme liabilities
 
 
 
 
 
 
 
(181
)
 
(298
)
 
(93
)
(572
)
(Deficit)/surplus in the scheme
 
 
 
 
 
 
 
(181
)
 
79

 
(17
)
(119
)
Unrecognised pension asset due to limit
-

 
(79
)
 
(8
)
(87
)
Pension liability recognised
 
 
 
 
 
 
 
 
(181
)
 
-

 
(25
)
(206
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At 31 March 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities - quoted
 
 
 
 
 
 
 
 
-

 
102

 
31

133

Bonds - quoted
 
 
 
 
 
 
 
 
-

 
229

 
14

243

Cash and cash equivalents
 
 
 
 
 
 
 
 
-

 
-

 
34

34

Property and other
 
 
 
 
 
 
 
 
-

 
21

 
5

26

Total fair value of assets
 
 
 
 
 
 
 
 
-

 
352

 
84

436

Present value of scheme liabilities
 
 
 
 
 
 
 
(172
)
 
(319
)
 
(102
)
(593
)
(Deficit)/surplus in the scheme
 
 
 
 
 
 
 
(172
)
 
33

 
(18
)
(157
)
Unrecognised pension asset due to limit
-

 
(33
)
 
(7
)
(40
)
Pension liability recognised
 
 
 
 
 
 
 
 
(172
)
 
-

 
(25
)
(197
)

75
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

31. Pensions and post-retirement benefits (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In respect of defined benefit pension plans in South Africa, which are included in 'Other', the pension asset recognised is limited to the extent that the employer is able to recover a surplus either through reduced contributions in the future or through refunds from the scheme. Pension fund assets have been set equal to nil as the surplus apportionment exercise required in terms of the South African legislation has not yet been completed.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The pension asset recognised in respect of Grolsch is limited to the extent that the employer is able to recover a surplus either through reduced contributions in the future or through refunds from the scheme. The limit has been set equal to nil due to the terms of the pension agreement with the pension fund.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The movements in the asset ceiling are as follows.
 
 
 
 
 
Defined benefit pension plans
 
 
 
 
 
 
 
 
 
 
 
 
Grolsch

 
Other

Total

 
 
 
 
 
 
 
 
 
 
 
US$m

 
US$m

US$m

Asset ceiling at 1 April 2011
 
 
 
 
 
(28
)
 
(25
)
(53
)
Interest costs
 
 
 
 
 
 
 
 
 
 
(1
)
 
-

(1
)
Change in the asset ceiling, excluding amounts included in interest costs
 
 
 
 
 
(3
)
 
11

8

Exchange adjustments
 
 
 
 
 
 
 
 
 
 
(1
)
 
7

6

Asset ceiling at 31 March 2012
 
 
 
 
 
(33
)
 
(7
)
(40
)
Interest costs
 
 
 
 
 
 
 
 
 
 
(1
)
 
(1
)
(2
)
Change in the asset ceiling, excluding amounts included in interest costs
 
 
 
 
 
(46
)
 
(1
)
(47
)
Exchange adjustments
 
 
 
 
 
 
 
 
 
 
1

 
1

2

Asset ceiling at 31 March 2013
 
 
 
 
 
(79
)
 
(8
)
(87
)
Interest costs
 
 
 
 
 
 
 
 
 
 
(3
)
 
(1
)
(4
)
Change in the asset ceiling, excluding amounts included in interest costs
 
 
 
 
 
18

 
(1
)
17

Exchange adjustments
 
 
 
 
 
 
 
 
 
 
(6
)
 
2

(4
)
Asset ceiling at 31 March 2014
 
 
 
 
 
(70
)
 
(8
)
(78
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The movement in the post-employment medical benefit liabilities is as follows. The obligations are wholly unfunded.
 
 
 
 
 
 
 
 
 
Medical and other post-retirement benefits
 
 
 
 
 
 
 
 
 
 
South Africa
 
 
Other

Total

 
 
 
 
 
 
 
 
 
 
 
US$m

 
US$m

US$m

Present value of scheme liabilities at 1 April 2011
 
 
 
 
 
 
(71
)
 
(43
)
(114
)
Benefits paid
 
 
 
 
 
 
 
 
 
 
-

 
4

4

Contributions paid by plan participants
 
 
 
 
 
2

 
-

2

Current service cost
 
 
 
 
 
 
 
 
 
 
(2
)
 
(1
)
(3
)
Interest costs
 
 
 
 
 
 
 
 
 
 
(6
)
 
(4
)
(10
)
Remeasurements:
 
 
 
 
 
 
 
 
 
 
1

 
(1
)
-

- Gain from change in demographic assumptions
 
 
 
 
 
-

 
5

5

- Loss from change in financial assumptions
 
 
 
 
 
-

 
(3
)
(3
)
- Experience gains/(losses)
 
 
 
 
 
1

 
(3
)
(2
)
Exchange adjustments
 
 
 
 
 
 
 
 
 
 
10

 
(1
)
9

Present value of scheme liabilities at 31 March 2012
 
 
 
 
 
 
(66
)
 
(46
)
(112
)
Benefits paid
 
 
 
 
 
 
 
 
 
 
-

 
5

5

Contributions paid by plan participants
 
 
 
 
 
2

 
-

2

Current service cost
 
 
 
 
 
 
 
 
 
 
(1
)
 
(1
)
(2
)
Interest costs
 
 
 
 
 
 
 
 
 
 
(6
)
 
(3
)
(9
)
Remeasurements:
 
 
 
 
 
 
 
 
 
 
14

 
(5
)
9

- Gain from change in demographic assumptions
 
 
 
 
 
10

 
5

15

- Loss from change in financial assumptions
 
 
 
 
 
(2
)
 
(3
)
(5
)
- Experience gains/(losses)
 
 
 
 
 
6

 
(7
)
(1
)
Exchange adjustments
 
 
 
 
 
 
 
 
 
 
10

 
2

12

Present value of scheme liabilities at 31 March 2013
 
 
 
 
 
 
(47
)
 
(48
)
(95
)
Benefits paid
 
 
 
 
 
 
 
 
 
 
-

 
3

3

Contributions paid by plan participants
 
 
 
 
 
2

 
-

2

Current service cost
 
 
 
 
 
 
 
 
 
 
(1
)
 
(1
)
(2
)
Interest costs
 
 
 
 
 
 
 
 
 
 
(4
)
 
(1
)
(5
)
Remeasurements:
 
 
 
 
 
 
 
 
 
 
(3
)
 
5

2

- Gain from change in demographic assumptions
 
 
 
 
 
-

 
2

2

- (Loss)/gain from change in financial assumptions
 
 
 
 
 
(1
)
 
2

1

- Experience (losses)/gains
 
 
 
 
 
(2
)
 
1

(1
)
Exchange adjustments
 
 
 
 
 
 
 
 
 
 
7

 
1

8

Present value of scheme liabilities at 31 March 2014
 
 
 
 
 
 
(46
)
 
(41
)
(87
)

76
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

31. Pensions and post-retirement benefits (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The sensitivity of the pension plan and medical and other post-retirement medical benefit liabilities at 31 March 2014 to changes in the principal actuarial assumptions is as follows.
 
 
 
 
 
 
 
 
 
Defined benefit pension plans
 
 
Medical and other post-retirement benefits
 
 
 
 
 
 
 
 
Change in assumption
 
Increase
Decrease

 
Increase

Decrease

 
 
 
 
 
 
 
US$m
US$m

 
US$m

US$m

Discount rate
 
 
 
 
 
 
 
1
%
63

 
80

 
7

8

Salary growth rate
 
 
 
 
 
 
 
1
%
8

 
7

 
-

-

Pension growth rate
 
 
 
 
 
 
 
1
%
74

 
43

 
-

-

Life expectancy
 
 
 
 
 
 
 
1 year

9

 
9

 
2

2

Healthcare cost inflation
 
 
 
 
 
 
 
1
%
-

 
-

 
9

8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above sensitivity analyses assume a change in a single assumption while all other assumptions are held constant. When calculating the sensitivities, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, consistent with the method used to calculate the defined benefit obligation recognised in the balance sheet.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For funded defined benefit plans, the group is required to provide funding where the fair value of the assets of the scheme are not sufficient to meet the defined benefit obligations. The South Africa pension schemes no longer have any active members, therefore, funding will only be required in the event that the scheme becomes less than 100% funded. The remaining funded defined benefit plans are funded using recommendations provided by the scheme's actuaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contributions expected to be paid into the group's major defined benefit schemes during the year ending 31 March 2015 are US$25 million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The weighted average duration of the defined benefit obligation is 14 years.


 
32. Related party transactions
 

 

 

 
 
 

 

 

 
a. Parties with significant influence over the group: Altria Group, Inc (Altria) and the Santo Domingo Group (SDG)
 
Altria is considered to be a related party of the group by virtue of its 26.8% equity shareholding in SABMiller plc. There were no transactions with Altria during the year.
 
 
 
 
 
 
SDG is considered to be a related party of the group by virtue of its 14.0% equity shareholding in SABMiller plc. During the year ended 31 March 2014 the group made donations of US$14 million (2013: US$nil, 2012: US$33 million) to the Fundación Mario Santo Domingo, pursuant to the contractual arrangements entered into at the time of the Bavaria transaction in 2005, under which it was agreed that the proceeds of the sale of surplus non-operating property assets owned by Bavaria SA and its subsidiaries would be donated to various charities, including the Fundación Mario Santo Domingo. At 31 March 2014 US$nil (2013 and 2012: US$nil) was owing to the SDG.
 
 
 
 
 
 
 
b. Associates and joint ventures
 
 
 
 
Details relating to transactions with associates and joint ventures are analysed below.
 
 
2014 

2013 

2012 

 
 
US$m

US$m

US$m

 
Purchases from associates1
(168
)
(227
)
(214
)
 
Purchases from joint ventures2
(93
)
(97
)
(86
)
 
Sales to associates3
9

46

39

 
Sales to joint ventures4
23

25

28

 
Dividends receivable from associates5
224

113

150

 
Dividends received from joint ventures6
903

886

896

 
Royalties received from associates7
25

27

13

 
Royalties received from joint ventures8
2

2

2

 
Management fees, guarantee fees and other recoveries received from associates9
11

17

24

 
Management fees paid to joint ventures10
(2
)
(2
)
(1
)
 
Sale of associate to joint venture11
-

21

-

 
 
 

 

 

 
1 The group purchased canned Coca-Cola products for resale from Coca-Cola Canners of Southern Africa (Pty) Limited (Coca-Cola Canners); inventory from Distell Group Ltd (Distell) and Associated Fruit Processors (Pty) Ltd (AFP); and accommodation from Tsogo Sun Holdings Ltd (Tsogo Sun), all in South Africa.
 
2 The group purchased lager from MillerCoors LLC (MillerCoors).
 
3 The group made sales of lager to Tsogo Sun, Delta Corporation Ltd (Delta), Anadolu Efes Biracılık ve Malt Sanayii AŞ (Anadolu Efes) and Distell, and in 2012 also Empresa Cervajas De N'Gola SARL (ECN), and Société des Brasseries et Glacières Internationales SA and Brasseries Internationales Holding Ltd (Castel).
 
4 The group made sales to MillerCoors and in 2012 also Pacific Beverages Pty Ltd.

77
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

32. Related party transactions (continued)
 

 

 

 
 

 

 

5 The group had dividends receivable from Castel of US$97 million (2013: US$21 million, 2012: US$61 million), Coca-Cola Canners of US$5 million (2013: US$11 million, 2012: US$6 million), Distell of US$20 million (2013: US$21 million, 2012: US$22 million), Tsogo Sun of US$34 million (2013: US$33 million, 2012: US$41 million), Delta of US$17 million (2013: US$12 million, 2012: US$3 million), International Trade and Supply Limited of US$18 million (2013: US$14 million, 2012: US$6 million), Grolsch (UK) Ltd US$1 million (2013: US$1 million, 2012: US$2 million), Anadolu Efes of US$32 million (2013: US$nil, 2012: US$nil) and Kenya Breweries Ltd of US$nil (2013: US$nil, 2012: US$9 million).
6 The group received dividends from MillerCoors.
7 The group received royalties from Delta and Anadolu Efes, and in 2012 also Kenya Breweries Ltd.
8 The group received royalties from MillerCoors.
9 The group received management fees from Delta, guarantee fees from Delta and BIH Brasseries Internationales Holding (Angola) Ltd (BIH Angola), and other recoveries from AFP. In the 2012 management fees were also received from ECN.
10 The group paid management fees to MillerCoors.
11 In 2013 the group sold its interest in Foster's USA LLC to MillerCoors for cash consideration.
 
 
 
 
 
 

2014 

2013 

At 31 March
 

US$m

US$m

Amounts owed by associates - trade1
  

42

68

Amounts owed by joint ventures2
  

5

5

Amounts owed to associates3
  

(39
)
(150
)
Amounts owed to joint ventures4
  

(16
)
(14
)
 
 
 
 
1 Amounts owed by AFP, Delta, BIH Angola and Anadolu Efes.
 

 

 

2 Amounts owed by MillerCoors.
 

 

 

3 Amounts owed to Coca-Cola Canners, Castel and Tsogo Sun. At 31 March 2013 this balance included US$100 million received in compensation for the loan participation deposit relating to the Angolan businesses managed by Castel.
4 Amounts owed to MillerCoors.
 

 

 

 
 

 

 

Guarantees provided in respect of associates' bank facilities are detailed in note 21.
 
 
 
 
c. Transactions with key management
 

 

 

The group has a related party relationship with the directors of the group and members of the excom as key management. At 31 March 2014 there were 25 (2013: 26, 2012: 27) members of key management.
Key management compensation is provided in note 6c.
 
 
 
33. Post balance sheet events

On 18 July 2014 the group announced that it had successfully placed approximately 67% of its shareholding in Tsogo Sun, a company listed on the Johannesburg Stock Exchange, through an institutional placing for a total gross consideration of ZAR 7,600 million (approximately US$707 million). A further ZAR 200 million (approximately US$19 million) worth of shares are expected to be purchased by members of Tsogo Sun’s executive management team, and the balance of the group’s shareholding will be bought back by Tsogo Sun for ZAR 2,800 million (approximately US$261 million), subject to Tsogo Sun shareholder approval. The buyback is expected to be completed on or about 5 September 2014, following which the group will no longer hold any ordinary shares in Tsogo Sun.
34. Principal subsidiaries, associates and joint ventures
 
 
 
 
 
 
 
The principal subsidiary undertakings of the group as at 31 March were as follows.
 
Country of
Principal
Effective interest
Name
incorporation
activity
2014 
2013 
Corporate
 
 
 
 
SABMiller Holdings Ltd
United Kingdom
Holding company
100%
100%
SABMiller Africa & Asia BV1
Netherlands
Holding company
100%
100%
SABMiller Holdings SA Ltd
United Kingdom
Holding company
100%
100%
SABMiller International BV
Netherlands
Trademark owner
100%
100%
SABMiller SAF Limited
United Kingdom
Holding company/Financing
100%
100%
SABMiller Southern Investments Ltd
United Kingdom
Holding company
100%
100%
SABMiller Procurement GmbH
Switzerland
Procurement
100%
100%
SABSA Holdings Ltd
South Africa
Holding company
100%
100%
SABMiller America Holdings Ltd
United Kingdom
Holding company
100%
-
SABMiller Australia Holdings Ltd
United Kingdom
Holding company
100%
-
SABMiller SI Ltd
United Kingdom
Holding company
100%
-
 
 
 
 
 

78
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

34. Principal subsidiaries, associates and joint ventures (continued)
 
 
 
Country of
Principal
Effective interest
Name
incorporation
activity
2014
2013
Latin American operations
 
 
 
Bavaria SA2
Colombia
Brewing/Soft drinks
99%
99%
Cervecería Argentina SA Isenbeck
Argentina
Brewing
100%
100%
Cervecería del Valle SA
Colombia
Brewing
99%
99%
Cervecería Hondureña, SA de CV
Honduras
Brewing/Soft drinks
99%
99%
Cervecería Nacional (CN) SA2
Ecuador
Brewing
96%
96%
Cervecería Nacional SA2
Panama
Brewing
97%
98%
Cervecería San Juan SA2
Peru
Brewing/Soft drinks
92%
92%
Cervecería Unión SA
Colombia
Brewing
98%
98%
Industrias La Constancia, SA de CV
El Salvador
Brewing/Soft drinks
100%
100%
Unión de Cervecerías Peruanas Backus y Johnston SAA2
Peru
Brewing
94%
94%
 
 
 
 
 
European operations
 
 
 
 
SABMiller Europe BV1
Netherlands
Holding company
100%
100%
SABMiller Holdings Europe Ltd
United Kingdom
Holding company
100%
100%
SABMiller Netherlands Cooperatieve WA
Netherlands
Holding company
100%
100%
Birra Peroni Srl
Italy
Brewing
100%
100%
Compañia Cervecera de Canarias SA
Spain
Brewing
51%
51%
Dreher Sörgyárak Zrt
Hungary
Brewing
100%
100%
Grolsche Bierbrouwerij Nederland BV
Netherlands
Brewing
100%
100%
Kompania Piwowarska SA
Poland
Brewing
100%
100%
Miller Brands (UK) Ltd
United Kingdom
Sales and distribution
100%
100%
Pivovary Topvar as
Slovakia
Brewing
100%
100%
Plzeòský Prazdroj as
Czech Republic
Brewing
100%
100%
Ursus Breweries SA
Romania
Brewing
99%
99%
 
 
 
 
 
North American operations
 
 
 
 
SABMiller Holdings Inc
USA
Holding company/Financing
100%
100%
Miller Brewing Company
USA
Holding company
100%
100%
 
 
 
 
 
African operations
 
 
 
 
SABMiller Africa BV
Netherlands
Holding company
62%
62%
SABMiller Botswana BV
Netherlands
Holding company
62%
62%
SABMiller (A&A) Ltd
United Kingdom
Holding company
100%
100%
SABMiller Investments Ltd
Mauritius
Holding company
80%
80%
SABMiller Investments II BV
Netherlands
Holding company
80%
80%
SABMiller Nigeria Holdings BV
Netherlands
Holding company
50%
50%
SABMiller Zimbabwe BV
Netherlands
Holding company
62%
62%
Accra Brewery Ltd
Ghana
Brewing
60%
60%
Ambo Mineral Water Share Company
Ethiopia
Soft drinks
40%
40%
Botswana Breweries (Pty) Ltd3
Botswana
Sorghum brewing
-
31%
Cervejas de Moçambique SA2
Mozambique
Brewing
49%
49%
Chibuku Products Ltd
Malawi
Sorghum brewing
31%
31%
Crown Beverages Ltd
Kenya
Soft drinks
80%
80%
Heinrich's Syndicate Ltd
Zambia
Soft drinks
62%
62%
Intafact Beverages Ltd
Nigeria
Brewing
38%
38%
International Breweries plc2
Nigeria
Brewing
36%
36%
Kgalagadi Breweries (Pty) Ltd3
Botswana
Brewing/Soft drinks
31%
31%
Maluti Mountain Brewery (Pty) Ltd
Lesotho
Brewing/Soft drinks
24%
24%
MUBEX
Mauritius
Procurement
100%
100%
National Breweries plc2
Zambia
Sorghum brewing
43%
43%
Nile Breweries Ltd
Uganda
Brewing
62%
62%
Pabod Breweries Ltd
Nigeria
Brewing
41%
38%
Rwenzori Bottling Company Ltd
Uganda
Soft drinks
80%
80%
Southern Sudan Beverages Ltd
South Sudan
Brewing
80%
80%
Swaziland Beverages Ltd
Swaziland
Brewing
37%
37%
 
 
 
 
 
 
 
 
 
 

79
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

34. Principal subsidiaries, associates and joint ventures (continued)
 
 
 
Country of
Principal
Effective interest
Name
incorporation
activity
2014
2013
African operations (continued)
 
 
 
 
Tanzania Breweries Ltd2
Tanzania
Brewing
36%
36%
Voltic (GH) Ltd
Ghana
Soft drinks
80%
80%
Voltic Nigeria Ltd
Nigeria
Soft drinks
50%
50%
Zambian Breweries plc2
Zambia
Brewing/Soft drinks
54%
54%
 
 
 
 
 
Asia Pacific operations
 
 
 
 
SABMiller Asia BV  
Netherlands
Holding company
100%
100%
SABMiller Asia Ltd
Hong Kong
Holding company
100%
100%
SABMiller (A&A 2) Ltd
United Kingdom
Holding company
100%
100%
SABMiller Beverage Investments Pty Ltd
Australia
Holding company
100%
100%
SKOL Beer Manufacturing Company Ltd
India
Holding company
100%
100%
Foster's Group Pty Ltd
Australia
Holding company
100%
100%
Cascade Brewery Company Pty Ltd
Australia
Brewing
100%
100%
CUB Pty Ltd
Australia
Brewing
100%
100%
FBG Treasury (Aust.) Pty Ltd
Australia
Financing
100%
100%
Pacific Beverages Pty Ltd
Australia
Brewing
100%
100%
Queensland Breweries Pty Ltd
Australia
Brewing
100%
100%
SABMiller Breweries Private Ltd
India
Brewing
100%
100%
SABMiller Vietnam Company Ltd
Vietnam
Brewing
100%
100%
SABMiller India Ltd
India
Brewing
99%
99%
 
 
 
 
 
South African operations
 
 
 
 
The South African Breweries (Pty) Ltd
South Africa
Brewing/Soft drinks/Holding company
100%
100%
The South African Breweries Hop Farms (Pty) Ltd
South Africa
Hop farming
100%
100%
The South African Breweries Maltings (Pty) Ltd
South Africa
Maltsters
100%
100%
Appletiser South Africa (Pty) Ltd
South Africa
Fruit juices
100%
100%

1 Operates and resident for tax purposes in the United Kingdom.
2 Listed in country of incorporation.
3 In April 2013 Botswana Breweries (Pty) Ltd merged into Kgalagadi Breweries (Pty) Ltd.

The group comprises a large number of companies. The list above includes those subsidiary undertakings which most significantly affect the profit or net assets of the group, or a business segment, together with the principal intermediate holding companies of the group. With the exception of those noted above, the principal country in which each of the above subsidiary undertakings operates is the same as the country in which each is incorporated.

Where the group’s nominal interest in the equity share capital of an undertaking is less than 50%, the basis on which the undertaking is a subsidiary undertaking of the group is as follows.

African operations    
The group's effective interest in the majority of its African operations was diluted as a result of the disposal of a 38% interest in SABMiller Africa BV and SABMiller Botswana BV on 1 April 2001, in exchange for a 20% interest in the Castel group's African beverage interests. The operations continue to be consolidated due to the group’s majority shareholdings, and ability to control the operations.

Botswana Breweries (Pty) Ltd (BBL) and Kgalagadi Breweries (Pty) Ltd (KBL)
SABMiller Botswana held a 40% interest in each of Botswana Breweries (Pty) Ltd and Kgalagadi Breweries (Pty) Ltd with the remaining 60% interest in each held by Sechaba Brewery Holdings Ltd. SABMiller Botswana's shares entitle the holder to twice the voting rights of those shares held by Sechaba Brewery Holdings Ltd. SABMiller Africa BV's 10.1% indirect interest is held via a 16.8% interest in Sechaba Brewery Holdings Ltd. In April 2013 BBL and KBL merged into a single entity, with KBL the surviving legal entity. The shareholding interests in KBL remain unchanged.

Maluti Mountain Brewery (Pty) Ltd (Maluti)
SABMiller Africa BV holds a 39% interest in Maluti with the remaining interest held by a government authority, the Lesotho National Development Corporation (51%), the Privatisation Unit (5.25%), and the Lesotho Unit Trust (4.75%). Maluti is treated as a subsidiary undertaking based on the group's ability to control its operations through its board representation. The day to day business operations are managed in accordance with a management agreement with a group company.

80
 
                                  
SABMiller plc
Notes to the consolidated financial statements (continued)

34. Principal subsidiaries, associates and joint ventures (continued)
 
 
 
 
 
 
 
 
Associates and joint ventures
 
 
 
 
 
The principal associates and joint ventures of the group as at 31 March are as set out below. Where the group's interest in an associate or a joint venture is held by a subsidiary undertaking which is not wholly owned by the group, the subsidiary undertaking is indicated in a note below.
 
 
 
 
 
 
 
Country of
Nature of
 
Effective interest
Name
incorporation
relationship
Principal activity
2014 
2013 
 
 
 
 
 
 
European operations
 
 
 
 
 
Anadolu Efes Biracılık ve Malt Sanayii AŞ1,2
Turkey
Associate
Brewing/Soft drinks
24%
24%
Grolsch (UK) Ltd1
United Kingdom
Associate
Brewing
50%
50%
International Trade and Supply Ltd2
British Virgin Islands
Associate
Sales and distribution
40%
40%
 
 
 
 
 
 
North American operations
 
 
 
 
 
MillerCoors LLC2,3
USA
Joint venture
Brewing
58%
58%
 
 
 
 
 
 
African operations
 
 
 
 
 
BIH Brasseries Internationales Holding Ltd2
Gibraltar
Associate
Holding company for subsidiaries
   principally located in Africa
20%
20%
Société des Brasseries et Glacières Internationales SA2
France
Associate
Holding company for subsidiaries
   principally located in Africa
20%
20%
Algerienne de Bavaroise Spa2,4
Algeria
Associate
Brewing
40%
40%
BIH Brasseries Internationales Holding (Angola) Ltd2
Gibraltar
Associate
Brewing/Soft drinks
27%
27%
Marocaine d'Investissements et de Services SA1,5
Morocco
Associate
Brewing
40%
40%
Skikda Bottling Company SARL2,4
Algeria
Associate
Soft drinks
40%
40%
Société de Boissons de I'Ouest Algerien SARL2,4
Algeria
Associate
Soft drinks
40%
40%
Société des Nouvelles Brasseries2,4
Algeria
Associate
Brewing
40%
40%
Delta Corporation Ltd1,6
Zimbabwe
Associate
Brewing/Soft drinks
25%
25%
 
 
 
 
 
 
Asia Pacific operations
 
 
 
 
 
China Resources Snow Breweries Ltd2
British Virgin Islands
Associate
Holding company for brewing
  subsidiaries located in China
49%
49%
 
 
 
 
 
 
South African operations
 
 
 
 
 
Coca-Cola Canners of Southern Africa (Pty) Ltd2
South Africa
Associate
Canning of beverages
32%
32%
Distell Group Ltd1,7
South Africa
Associate
Wines and spirits
27%
29%
 
 
 
 
 
 
Hotels and Gaming
 
 
 
 
 
Tsogo Sun Holdings Ltd1
South Africa
Associate
Holding company for Hotels and
   Gaming operations
40%
40%

1 Listed in country of incorporation.
2 These entities report their financial results for each 12-month period ending 31 December.
3 SABMiller shares joint control of MillerCoors with Molson Coors Brewing Company under a shareholders' agreement. Voting interests are shared equally between SABMiller and Molson Coors, and each of SABMiller and Molson Coors has equal board representation. Under the agreement SABMiller has a 58% economic interest in MillerCoors and Molson Coors has a 42% economic interest.
4 Effective 18 March 2004, SABMiller acquired 25% of the Castel group's holding in these entities. Together with its 20% interest in the Castel group's African beverage interests, this gives SABMiller participation on a 40:60 basis with the Castel group.
5 SABMiller acquired a 25% direct interest in this holding company on 18 March 2004 which has controlling interests in three breweries, a malting plant and a wet depot in Morocco. This 25% interest together with its 20% interest in the Castel group's African beverage interests, gives SABMiller an effective participation of 40% and the other 60% is held by the Castel group's Africa beverage interests.
6 Interests in this company are held by SABMiller Africa BV which is held 62% by SABMiller Holdings Ltd.
7 This entity reports its financial results for each 12-month period ending 30 June.

The principal country in which each of the above associated undertakings operates is the same as the country in which each is incorporated except that the principal subsidiaries of Société des Brasseries et Glacières Internationales SA, BIH Brasseries Internationales Holding Ltd (Castel) and BIH Brasseries Internationales Holding (Angola) Ltd are in Africa, China Resources Snow Breweries Ltd's principal subsidiaries are in the People's Republic of China and International Trade and Supply Ltd operates in the United Arab Emirates.

81


Independent Auditors’ Report

To the members of SABMiller plc

We have audited the accompanying consolidated financial statements of SABMiller plc and its subsidiaries, which comprise the consolidated balance sheet as of 31 March 2013, and the related consolidated income statement, consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and the related notes for the year then ended.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Other Matter

The accompanying balance sheet of SABMiller plc as of March 31, 2014, and the consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for the years ended March 31, 2014 and March 31, 2012 were not audited, reviewed, or compiled by us and, accordingly, we do not express an opinion or any other form of assurance on them. Our audit of the 2013 financial statements, however, included performing audit procedures on the 2012 comparative information required by International Financial Reporting Standards as adopted by the International Accounting Standards Board.








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Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SABMiller plc and its subsidiaries at 31 March 2013, and the results of their operations and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the International Accounting Standards Board.


/s/ PricewaterhouseCoopers LLP

London
August 4, 2014


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