First Half 2006 Highlights
- Revenue growth of 4%, driven by innovation and emerging markets
- Accelerating confectionery growth: Trident +31% and Cadbury Dairy Milk +7%
- Continuing good beverage growth: US carbonate share gains led by Dr Pepper +3%, Sunkist +10% and A&W Root Beer +11%
- Underlying operating margins +10 bps
- Underlying profit before tax +14%
- Underlying earnings per share -4%; +4% excluding dilution from Europe Beverages disposal
- Acquisitions and disposals strengthen portfolio: Beverages disposals realise £1.4 billion
- Dr Pepper/Seven Up Bottling Group performing strongly: integration on track
(except where stated all movements are at constant exchange rates and are on a 6 month comparative basis)
Todd Stitzer, Chief Executive Officer said: "Our performance in the first half of the year has been good with three out of four regions performing well. Exciting new innovation is driving growth in both beverages and confectionery. We expect to deliver revenue growth towards the upper end of our goal range for the full year but are still monitoring the trading impact of the UK product recall."
Other reconciling items between Underlying Profit from Operations and Underlying Profit before Tax includes restructuring charges (£30m), brand intangible amortisation (£3m), non-trading items (£24m - gain) and the impact of fair value accounting under IAS 39 (£5m - gain). Underlying EPS also excludes the profit on disposal recorded within discontinued operations (£581m - gain), the tax effects of these adjustments and the credit arising on the intra-group transfer of intellectual property assets (£7m - gain). A full reconciliation between underlying and reported measures is included in the segmental analysis on pages 19 and 20.
Including the estimated impact on revenues and profits of an extra 9 days trading in 2005 (see note 3: Basis of Preparation on page 13 of the full 2006 Interim Results - Press Release
)
Constant currency growth excludes the impact of exchange rate movements during the period (see note 3: Basis of Preparation on page 13 of the full 2006 Interim Results - Press Release)
EPS is presented on a basic total group basis including earnings contributed by Europe, Syria and South Africa Beverages.
Basis of Preparation
A full explanation of the basis of preparation is included in Note 3: Basis of Preparation on page 13 of the full 2006 Interim Results - Press Release. A summary is set out below:
Comments on the Group and regional performances in the commentaries on pages 2 to 7 are made on the continuing business, excluding discontinued operations, on a 6 month basis. Comments on movements in revenues, underlying profit from operations and margins are made on a 6 month constant exchange rate basis.
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1. About Cadbury Schweppes
Cadbury Schweppes is the world's largest confectionery company and has strong regional beverages businesses in North America and Australia. With origins stretching back over 200 years, today Cadbury Schweppes' products - which include brands such as Cadbury, Schweppes, Halls, Trident, Dr Pepper, Snapple, Trebor, Dentyne, Bubblicious and Bassett - are enjoyed in almost every country around the world. The Group employs around 60,000 people.
2. Cadbury Schweppes' Financial Goal Ranges
In pursuit of the Group's goal of superior shareowner returns, three external financial performance goal ranges have been set for the 2004-2007 period. These are:
- Revenue growth of between 3% and 5% per annum excluding the impact of acquisitions and disposals at constant currency
- Underlying operating margin growth (before brand intangible amortisation, restructuring costs, non-trading items and the volatility introduced from IAS 39 fair value accounting) of between 50 and 75 basis points per annum at constant currency excluding the impact of the acquisition of CSBG
- Free cash flow (as defined in Note 14, page 27) totalling £1.5 billion at constant currency over the four year period. Cadbury Schweppes' definition of free cash flow is after the payment of dividends
3. Basis of Preparation
Impact of Exchange Rates
Over 80% of the Group's sales and profits in 2006 were generated outside the United Kingdom. Constant currency growth was calculated by applying the 2005 exchange rates to the 2006 reported results for the base business (excluding acquisitions).
Acquisitions and Disposals
The contribution from acquisitions and disposals during the period equates to the first twelve months' impact of businesses acquired or disposed of in the current and prior year. Once an acquisition or disposal has lapped its acquisition date then it is included within the base business results.
6-month pro-forma comparatives information
From 2006 the Group's financial year will be aligned with the calendar year, sub-divided into 12 calendar months. The 2006 interim reporting period covers the six months ending 30 June 2006 (a period of 26 weeks). In 2005, the Group's financial results consisted of the 52 weeks ending 1 January 2006, sub-divided into 13 four-week periods. The 2005 interim results (and the comparative information presented for these 2006 interim results) covered the 24-week period ended 19 June 2005. As a consequence the 2006 interim period is two weeks longer than the comparative period.
In order to provide more meaningful comparisons, estimates have been made of the additional revenues and profits which would have been generated had the 2005 interim period been prepared on a six-month basis. Base business growth is presented against these pro-forma numbers so as to exclude the impact of the additional two weeks trading in the 2006 interim period.
The additional revenue which it is estimated would have been realised had the comparative period been prepared for a six month period rather than as a 24 week period has been calculated from the Group's underlying reporting systems for those extra shipping days within the additional two week period or estimated based on a reasonable pro-ration of the results reported in the 7th period of 2005. It is not possible to quantify the exact profit impact which would have occurred had the prior year comparative consisted of 6 months and, in determining the impact, management has had to exercise judgment. Operating costs have been allocated on a reasonable and consistent basis across the Group. These costs include direct costs allocated as a determinable gross margin percentage consistent with base business, costs separately identifiable as relating to the additional two weeks and indirect costs pro-rated with additional days of trading. Interest has been adjusted on a pro-rated basis. These adjustments have been tax affected at the Group's underlying effective tax rate for the year.
Forward Looking Statements
This material may be deemed to include forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the US Securities Exchange Act of 1934. These forward-looking statements are only predictions and you should not rely unduly on them. Actual results might differ materially from those projected in any such forward-looking statements, which involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. In evaluating forward-looking statements, which are generally identifiable by use of the words "may", "will", "should", "expect", "anticipate", "estimate", "believe", "intend" or "project" or the negative of these words or other variations on these words or comparable terminology, you should consider various factors including the risks outlined in our Form 20-F filed with the SEC. Although we believe the expectations reflected in forward-looking statements are reasonable we cannot guarantee future results, levels of activity, performance or achievements. This material should be viewed in conjunction with our periodic interim and annual reports and registration statements filed with the Securities and Exchange Commission, copies of which are available from Cadbury Schweppes plc, 25 Berkeley Square, London W1J 6HB, UK.