Investors expected SAB’s centenary year to be a good one=20 and they were not disappointed, reports Jacques Magliolo
The South African Breweries’ (SAB) centenary year was a=20 momentous one. The country experienced a successful=20 transition to democracy and the group heralded its 100th=20 year of operation with record results — attributable=20 earnings rose by 30 percent to R1,3-billion.
SAB’s growth is linked to our economy and, more=20 particularly, to individuals’ purchasing power. Throughout=20 SAB’s financial year to end-March, the economy showed=20 positive growth, which enabled the level of real consumer=20 spending to reach nearly three percent as the recovery=20 gained momentum in the second half.
Investors are not surprised, however, as the group has=20 increased earnings per share (EPS) for an unbroken run of=20 27 years. It now ranks sixth in the world in terms of=20 hectolitres produced and, on market capitalisation, is the=20 third largest listed company in South Africa. It only ranks=20 behind South African giants De Beers and Anglo American.
In line with higher interest rates, SAB experienced a 16=20 percent jump in net financing costs to R503-million.=20 However, enhanced earnings from associates and a lower=20 effective tax rate of 33 percent (1994: 37 percent)=20 contributed to a 28 percent surge in earnings per share=20 (eps) to 465 cents.
Benefits from expanding its beer operations to regions=20 outside South Africa were also highlighted this year. While=20 profits derived from the South African Beer Division=20 climbed by 23 percent on a four percent volume rise,=20 international beer interests contributed a 32 percent=20
Against this background, SAB was able to strengthen its=20 financial profile and generate cash value-added in excess=20 of R10-billion.
The group’s restraint in purchasing other interests is=20 highlighted in a marginal eight percent increase in net=20 assets, which, together with substantial cash inflows,=20 enabled net interest-bearing debt to total shareholders’=20 funds to fall to 51 percent (1994: 65 percent). This is=20 well within the board’s constraint of 0,70.
The directors have increased their final dividend by 32=20 percent to 153 cents per share, boosting the total ordinary=20 dividends for the year to 200 cents.=20
However, SAB has announced its intention to have a=20 capitalisation issue, which means that shareholders will=20 receive new fully paid shares in lieu of the final cash=20 dividend. Shareholders are warned that, unless they elect=20 otherwise, they will receive these new shares.
What does the immediate future hold for the group, as the=20 political honeymoon recedes and the reconstruction of South=20 Africa lies ahead? Economic growth has decelerated recently=20 and there is concern that disposable incomes could=20 deteriorate due to pressures from higher inflation,=20 interest rates and personal taxes.
Financially, the company is in a sound position to weather=20 political and economic storms. Net cash retained from=20 operating activities exceeded R1,9-billion in 1995, which=20 more than adequately provides for the past year’s capital=20 expenditure and acquisition programme of more than R1,6- billion. As a result, the group was able to repay external=20 financing of some R300-million.