Annual Report & Accounts 2006
Total Page:16
File Type:pdf, Size:1020Kb
Annual Report & Accounts 2006 & Accounts Report Annual Cadbury Schweppes plc Annual Report & Accounts 2006 13 +44 (0) 20 7830 5200 Fax: 3 1 409 quare, London W1J 6HB London quare, S y ele k elephone: +44 (0) 20 7 T www.cadburyschweppes.com 25 Ber Cadbury Schweppes plc Schweppes Cadbury We are the world’s largest confectionery company and have strong regional beverages businesses in North America and Australia. We make, market and sell unique brands which give pleasure to millions of people around the world every day. We are recognised as a highly respected company and an employer of choice. 01 Performance highlights and strategic review 41 Directors’ report 45 Corporate governance report 53 Directors’ remuneration report 69 Financial review 95 Financial record 101 Financial statements © Cadbury Schweppes plc 2007 173 Financial statements for Cadbury Schweppes plc The Company’s commitment to environmental issues has been reflected 185 Shareowner information in the production and dispatch of this Annual Report & Accounts. 188 Index “Sunkist” is a registered trade mark of Sunkist Growers, Inc. Printed on Revive 50:50 Silk, a 50% recycled paper with FSC certification. The composition of the paper is 25% de-inked post consumer waste, 25% unprinted pre-consumer waste and 50% virgin fibre. All pulps used are Elemental Chlorine Registered Office and Group Headquarters Registrars Free (ECF) and the manufacturing mill is accredited with the ISO 14001 standard 25 Berkeley Square, London W1J 6HB, UK Computershare Investor Services PLC, for environmental management. The use of the FSC logo identifies products which Registered in England and Wales No. 52457 P.O.Box 82, contain wood from well-managed forests certified in accordance with the rules of the Forest Stewardship Council. Telephone number +(44) (0) 20 7409 1313 The Pavillions, Bridgwater Road, www.cadburyschweppes.com Bristol BS99 7NH, UK Tel: +(44) (0) 870 873 503 50% Group Secretary Fax: +(44) (0) 870 703 6103 Cert no. SGS-COC-1732 Hester Blanks Photography by Michael Heffernan, Philip Gatward and George Brooks Senior independent non-executive Director Roger Carr is our senior independent non-executive Director Designed and produced by 35 Communications and our Deputy Chairman. He may be contacted at the registered office as detailed above. Printed in England at St Ives Westerham Press Performance highlights 2006 > Revenue growth of 4% 1, driven by innovation and by emerging markets +10% > Underlying profit before tax +9% > Confectionery revenues +4%; gum revenues +10%; Trident +23% > Beverage revenues +4%; 60bps share gain in US carbonates; Dr Pepper +2% > Underlying margins flat, despite increases in commodity costs and growth investment > Dr Pepper/Seven Up Bottling Group performing in line with acquisition case > Proposed final dividend +10% to 9.9p taking full year increase to +8% Except where stated all movements are at constant exchange rates. 1 Like-for-like revenue growth at constant currency. Reported Constant currency currency £ millions 2006 growth growth2 2005 Revenue – Base business 6,628 +3% +4% 6,432 – Acquisitions/Disposals 799 – Total 7,427 +15% +16% 6,432 Underlying profit from operations1 1,073 +5% +6% 1,025 Profit profit from operations 909 -9% -7% 995 Underlying profit before tax1 931 +8% +9% 865 Profit before tax 738 -12% -10% 835 Discontinued operations 642 76 Underlying EPS1&3 31.6 -7% -5% 33.9 Reported EPS3 56.4 37.3 Dividend per share 14.0p +8% n/a 13.0p 1 Cadbury Schweppes believes that Underlying profit from operations, Underlying profit before tax, Underlying earnings and Underlying earnings per share provide additional information on Underlying trends to shareowners. The term Underlying is not a defined term under IFRS, and may not therefore be comparable with similarly titled profit measurements reported by other companies. It is not intended to be a substitute for, or superior to, IFRS measurements of profit. (see Note 1(y), page 122). 2 Constant currency growth excludes the impact of exchange rate movements during the period. 3 EPS is presented on a basic total group basis including earnings contributed by Europe, Syria and South Africa Beverages. Revenue growth1 Margin2 Free Cash Flow3 Dividend growth % % % +4 14.4 £200m +8 1 Like-for-like revenue growth at constant currency. 2 Underlying margin including the effect of acquisitions and disposals at reported exchange rates. 3 Free Cash Flow as defined on page 71. Cadbury Schweppes Annual Report & Accounts 2006 Performance highlights 01 Business overview Americas Beverages Americas Confectionery Americas Beverages sells carbonated and Americas Confectionery sells gum and non-carbonated drinks in the US, Canada candy in all of the major countries in North and Mexico. In carbonates, it has leading and South America, and chocolate mainly brands in the flavours (non-cola) category, in Canada and Argentina. Its largest markets including Dr Pepper, 7 UP, A&W, Sunkist, are the US, Canada, Mexico, Brazil and Peñafiel, Schweppes and Canada Dry. Its Argentina. Its biggest brands are Trident, non-carbonate brands include still fruit Dentyne, Halls and Bubbaloo/Bubbalicious. juices, iced teas and water, with Snapple, A new gum brand, Stride, was launched Mott’s, Hawaiian Punch and Clamato being in the US in 2006. Other important brands the four largest brands. It also distributes include Cadbury, Clorets, Chiclets, brands owned by third-parties, such as Swedish Fish, Sour Patch Kids, Mantecol Monster energy drink, Glaceau vitamin and Beldent. water and Fiji mineral water. 35% 47% 18% 17% Share of Group revenue Share of Group profit* Share of Group revenue Share of Group profit* We’re organised around four regional operating units supported by six global functions. The head of each region and function sits on the Chief Executive’s Committee (CEC). The functions’ role is to drive world-class performance across the operating regions. * Underlying profit from operations excluding central costs. 02 Business overview Cadbury Schweppes Annual Report & Accounts 2006 Europe, Middle East and Africa Asia Pacific Europe, Middle East and Africa (EMEA) Asia Pacific’s largest business is an includes our businesses in Western and integrated confectionery and beverage Eastern Europe (including Russia), Southern business in Australia. Its main confectionery and West Africa, and the Middle East. businesses are in New Zealand, Japan, India, The UK is its largest business, selling China, Thailand, Malaysia and Indonesia. chocolate and candy; Trident gum was In confectionery, as well as selling Cadbury launched in the UK in early 2007. EMEA’s branded products, it sells candy under the other major businesses are in France, Trebor and The Natural Confectionery South Africa, Russia, Nigeria, Ireland, Poland, Company brands in Australia; candy and Turkey, Spain and Egypt. In chocolate, brands gum under the Halls, Clorets, Trident and include Cadbury, Wedel, Poulain and Green Dentyne brands in Japan,Thailand and & Black’s; in gum, Hollywood, Trident, Malaysia; and Halls and Bournvita in India. Stimorol and Dirol; and in candy, Bassett’s, Its main beverages brands in Australia are Halls, Maynards and Trebor. Schweppes and Cottee’s. 31% 23% 16% 13% Share of Group revenue Share of Group profit* Share of Group revenue Share of Group profit* Every function has a team in each region with these regional Working with Science and Technology, which leads the groups co-ordinated by a small central team. This structure Group’s technical innovation programme, Global Commercial allows the functions to develop and implement global also develops the Group’s innovation pipeline. Global Supply strategies and processes while remaining closely aligned Chain is responsible for the supply of product to the Group’s with the regions’ commercial interests. customers, and its role covers raw material supply, manufacturing, logistics and working capital management. Global Commercial’s role is to develop global strategies and solutions for categories, customers and markets that enable Our other functions are Human Resources, Finance and IT, the regions to generate higher sales growth than they could Legal and Secretariat. Detailed descriptions of the six functions on their own. are given on pages 29-31. Cadbury Schweppes Annual Report & Accounts 2006 Business overview 03 Chairman’s statement 2006 proved to be a challenging year for Cadbury Schweppes but I am pleased to report that Underlying business performance was satisfactory and most of our major financial targets were achieved. Sir John Sunderland Chairman Key highlights in 2006 Our strategy of focusing on the development of our global > Reported sales were £7.4 billion, a like-for-like confectionery business and our regional beverages portfolio continued to evolve. A number of acquisitions and disposals increase of 4%, in the middle of our target were made in the year which strengthened these businesses. range of 3% to 5%. Operations > Free Cash Flow at £200 million brings our Our global business is divided into four major operating regions. Three of these – our Americas Confectionery and Beverage three-year cumulative total to £1.0 billion businesses and Asia Pacific – performed strongly in 2006 and versus our four-year target of £1.5 billion. delivered handsomely against their key financial targets. It is a particular pleasure to report how well our Adams acquisition > Underlying operating margins excluding has now been integrated into our confectionery businesses acquisitions and disposals were flat, below around the world and what an important contribution it continues to make to our accelerated revenue growth. our target range of 50 to 75 basis points. We faced a demanding cost environment, Our EMEA business (Europe, Middle East and Africa) had a particularly in energy, transport, packaging and more difficult year as it dealt with the triple impact of a slow sugar, but cost savings in other areas enabled start to the year, a major product recall in the United Kingdom in the summer and the discovery of accounting irregularities in us to maintain margins whilst simultaneously our majority-owned Nigerian business in the autumn.