2003 Cadbury Schweppes Plc Interim Report
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working together to create brands people love Interim Report 2003 our brands Cadbury Schweppes is a major international beverage and confectionery company, selling much loved brands in almost 200 countries worldwide. We welcome the Adams range of products to our portfolio and here we show some of our top selling brands. Half year highlights Contents % growth Halfyear highlights 1 % growth Constant Letter to Shareowners 2 2003 2002 Reported Currency Operating and Financial Review 4 Sales £m 2,700 2,354 +15 +18 Group Profit and Loss Account 8 Underlying Operating Profit* £m 436 429 +2 +8 Statement ofTotal Recognised – Goodwill amortisation £m (44) (25) Gains and Losses 8 – Major restructuring £m (26) (17) Summarised Group Balance Sheet 9 Total Operating Profit £m 366 387 –5 +1 Reconciliation ofMovements in Underlying Profit Before Tax** £m 365 386 –5 +1 Shareholders’ Funds 9 Profit Before Tax £m 294 349 –16 –9 Group Cash Flow Statement 10 Underlying EPS pence 12.4 12.9 –4 +2 Turnover and Operating Basic EPS pence 9.2 11.3 –19 Profit Analysis 11 Dividends per share pence 3.65 3.50 +4 Notes 12 *Includes associates Independent Review Report **Underlying profit before tax and earnings per share (EPS) includes associates, excludes goodwill to Cadbury Schweppes plc 15 amortisation, major restructuring charges and disposal gains/losses (see notes 7 and 8 on page 13 Forward Looking Statements 15 for a reconciliation to profit before tax and earnings per share) Shareowner Information 16 l Underlying EPS up 2% at constant currency1 l Excluding acquisitions2, base business grew underlying EPS by 5% l Continued strong growth from Cadbury Trebor Bassett l Americas Beverages sales up 2% and profits up 5% at constant currency l Asia Pacific profits down, due to shortfalls in Australia l Overall, Adams performance in line with acquisition plan l New organisational structure in place and planning for future growth 1 Constant currency growth excludes the impact ofexchange rate movement during the period. 2 The contribution from acquisitions equates to the half-year impact of businesses acquired or disposed ofin the current and prior year. Interim Report 2003 Cadbury Schweppes 1 Letter to Shareowners Overall we had a reasonable first Our European beverage business made halfagainst a background ofgenerally a slow start to the year, mainly due weak trading conditions in many ofourto competitive market conditions and key markets. delayed integration benefits. Excluding acquisitions, the base Profits from our Asia Pacific region business grew underlying earnings per were impacted by weaker results from share by 5% at constant exchange rates, our operations in Australia, caused driven by another strong performance in part by disruption resulting from from our confectionery businesses in a complex IT implementation late Europe, Africa and the Middle East. in 2002. Cadbury Trebor Bassett (CTB) continued “Adams performed in line with expectations and the integration process is on track.” to produce excellent results growing Adams, acquired on 30 March 2003, both sales and market share. performed in line with expectations and the integration process is on track. Our beverage business in the Americas did well to achieve like-for-like sales Overall, exchange rate movements up 1% and underlying operating profit and the consolidation ofacquisitions up 5% in a challenging market. The US had a significant impact on the results carbonated soft drinks market has seen reducing reported underlying earnings industry sales hit by extreme weather per share by 6% and 3% respectively. and weaker consumer demand. As expected performance in the half was also impacted by changes to 7 UP’s distribution arrangements. 2 Cadbury Schweppes Interim Report 2003 Outlook David Kappler, Chief Financial Officer, Dividends Looking to the full year, we see the will retire from Cadbury Schweppes The Board has declared an interim performance of the Group remaining in May 2004. The Board is grateful dividend of3.65 pence, up from broadly similar to that seen in the for his contribution during 38 years 3.50 pence in 2002. This will be paid first half. with the Group and especially as on 17 October 2003 to Ordinary CFO over the last eight years. Details Shareholders on the Register at the close We expect flat to modestly increased ofhis successor will be announced in ofbusiness on 19 September 2003. profits from Americas Beverages, due course. Americas Confectionery and European Beverages; a continued strong performance from EMEA with the “The new management team has taken exception ofDandy; and some modest improvement in Asia Pacific. decisive action to develop its plans for accelerated growth from 2004 and beyond.” As we have said previously, 2003 is a year oftransition for Cadbury Corporate Social Responsibility Schweppes as we consolidate Adams, Our Corporate Social Responsibility manage the changes to 7 UP’s agenda and ethical trading are at the distribution arrangements in a heart ofour business culture. depressed US beverage market and put in place the organisational changes We seek to make a positive announced in February. contribution to the communities in which we operate around the globe – The new management team and from Mexico to Ghana, from India organisational structure is settling to the USA. Our scope is wide – down well with all ofthe regional education partnerships, building basic and functional teams now substantially infrastructure, ethical sourcing, in place. The new team has taken developing sustainable farming. decisive action to redress areas of Our employees across the world underperformance while at the are increasingly involved in these same time developing its plans for programmes. accelerated growth from 2004 and beyond. Separately, we share the growing concerns about obesity. Its prevention We are confident that the requires individuals to make personal opportunities arising from the Adams decisions about adopting a balanced business combined with a more focused lifestyle, one where a sensible diet and growth and efficiency agenda will physical activity combine in proportion. establish a stronger and more As a responsible member ofthe food sustainable platform for future growth. industry we believe we can play a John Sunderland positive role in finding solutions. The Board We are therefore working with different We would like to record the Board’s bodies, including the World Health appreciation ofDerek Bonham’s Organisation, to help people make significant contribution to the business informed choices and develop as Chairman from May 2000 to integrated approaches to diet, physical May 2003. activity and good health. Todd Stitzer Interim Report 2003 Cadbury Schweppes 3 Operating and Financial Review The regional commentaries The first half performance in the region by 2%. The strengthening ofthe Euro below reflect the changes to the was significantly influenced by three increased sales by £24 million and organisational structure announced main factors: underlying operating profits by in February 2003. £4 million. • A sharp slow-down in the soft drinks “Sales” refers to net sales value (NSV) market in the US caused by the Our European Beverage operations had not volumes or tonnage. With the combination ofextreme weather a slow first half in generally weak and acquisition ofAdams, management (a very cold winter and wet spring) competitive markets. considers NSV to be the best measure and weak consumer demand in the ofGroup performance. Volumes to fountain and food service channel In Spain, the business is performing sales metrics now vary widely around • Changes to the distribution soundly with costs benefiting from the the Group. In addressing this, NSV is arrangements for 7 UP which successful integration of La Casera, consistent with Cadbury Schweppes resulted in 7 UP sales falling by 16% despite increased competition. In policy ofManaging for Value. This seeks in the half, in line with expectations France, sales are down year-on-year to maximise profitable growth through • Fountain and food service issues which and much ofthe cost synergies a balanced mix ofvolume and pricing. led to declines in Dr Pepper sales. planned for this year from Orangina are now likely to be delayed into The contributions from the Adams These negative influences were offset next year. business, acquired at the end ofMarch, on the positive side by price and mix are included in the respective regional improvements, more disciplined In Germany, Apollinaris & Schweppes results. Adams’ performance and indirect cost and trade spend outperformed the market. Underlying outlook is commented on separately. management, and good performances market weakness was exacerbated by from a number of our flavour carbonate the introduction ofa mandatory Americas Beverages and still brands. deposit scheme for non-returnable Americas Beverages made underlying packaging at the beginning ofthe year operating profits of £245 million on Sunkist sales were up 11% and and first half underlying operating sales of£847 million. At constant Hawaiian Punch by 9%, the latter profits were impacted by increased exchange rates, sales rose by 2%. Of mainly due to flavour extensions. investment in new returnable capacity this 1% was contributed by acquisitions Snapple sales were ahead by 3% on the and marketing. (mainly Nantucket Nectars) and 1% back ofhigher pricing and good growth by the base business. Exchange rate in grocery and Yoo-Hoo was ahead Europe, Middle East and Africa (EMEA) movements reduced reported