Investment: South African brewer seeks pounds 200m in London

SOUTH AFRICAN Breweries, the world's fourth biggest brewer, which is moving its primary listing from Johannesburg to London next month and raising up to pounds 200m of new money to fund expansion in emerging markets, made life as difficult as possible for investors yesterday.

The pathfinder prospectus, which journalists were allowed to see but not to keep yesterday, is short on hard numbers, but long on the potential for the group once it is free to raise capital to expand outside its South African homeland.

The growth record is good. Over the seven years from 1992 to March 1998, turnover has risen by 65 per cent in real terms. Earnings per share over the same period have more than doubled to 6.01 rand (about 60p today), an average compound growth rate of 13.1 per cent, and the return on equity has averaged 17.3 per cent.

Almost 80 per cent of profits are generated inside South Africa, however, which creates a potential problems for UK investors if either inflation or exchange controls reduce the flow of earnings into sterling.

The breweries alone contribute 57 per cent. Beer consumption is rising strongly and beer itself costs 20p a pint, but SAB has 98 per cent of the local market and could itself be vulnerable to a determined push from outside competition.

Soft drinks accounted for 14 per cent of profits last year, more than half of that from the joint venture with Coca-Cola which comes up for renewal in 2007. Hotels and gaming generated 5 per cent. SAB's retail and most of its industrial interests have been sold off over the last two years and the remaining industrial holding company, PGSI, accounted for 27 per cent of turnover but only 3 per cent of profits. It is up for sale as soon as the price is right.

Brewing outside South Africa generated another 23 per cent of profits last year, but almost wholly from emerging markets in Africa and Poland, where most of the new money will be invested. There are no plans to enter the UK market.

Existing shares are being split on a two-for-one basis, up to pounds 150m worth of new shares are being placed with institutions, mainly in the UK, with a further pounds 50m in reserve, and two South African companies, JIC and Anglo- American, are selling 38 million shares between them in the hope of raising around pounds 200m.

Another South African holding company, Bevcon, has agreed not to sell any of its 28.5 per cent stake in SAB but this lock-in expires on 8 January next year.

The share price in South Africa is pounds 10.20 at the current exchange rate. It values the entire company at around pounds 4bn after the placing and after the split sets a target share price of around 500p and a possible 12 times future earnings.

But this is not necessarily a guide to a fair price in London. Less dynamic but safer rivals include Bass, on 16 times earnings, Heineken on 12 times and Carlsberg on 34 times. Something less than 500p would make the shares more attractive when dealings begin on 2 March.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'