2005 Highlights
- Revenue growth ahead of goal ranges at 6.3% (5.4% including Europe Beverages)
- 6% confectionery growth: Trident +21%; Halls +9%; Cadbury Dairy Milk +7%
- 6% beverage growth: US carbonates outperform, driven by Dr Pepper
- Underlying operating margins +30bps in challenging cost environment
- Underlying profit before tax +12% at £873 million (+13% as reported)
- Underlying earnings per share +9% at 33.9 pence (+10% as reported)
- Significant increase in free cash flow to £404 million
- Adams performance strong and growing ahead of the acquisition plan
- Successful sale of Europe Beverages for €1.85 billion (£1.26 billion)
(except where stated all movements are at constant exchange rates and exclude the impact of the 53rd week in 2004)
Todd Stitzer, Chief Executive Officer said: "2005 was an excellent year with innovation driving success in both our confectionery and beverage businesses. Revenue growth at 6% is the best the Group has seen in over a decade and shows that our strategy is delivering exciting products for consumers and strong results for our shareowners."
£ millions |
2005
(52 wks) |
2004
(53 wks) |
Reported
Currency
Growth %
vs. 53wks |
Constant
Currency
Growth %
vs. 52wks2  |
Constant
Currency3
Growth %
vs. 52wks2 |
|
| Revenue |
6,508 |
6,085 |
+7 |
+8 |
+6 |
| |
|
|
|
|
|
| Underlying Profit from Operations 1 |
1,033 |
954 |
+8 |
+10 |
+8 |
| Underlying operating margin |
15.9 |
15.7 |
+20bps |
+30bps |
+30bps |
| |
|
|
|
|
|
| Profit from Operations |
1,003 |
825 |
+22 |
+23 |
+21 |
| |
|
|
|
|
|
| Underlying Profit before Tax 1 |
873 |
771 |
+13 |
+14 |
+12 |
| Profit before Tax |
843 |
642 |
+31 |
+33 |
+31 |
| |
|
|
|
|
|
| Underlying EPS 1 & 4 |
33.9 |
30.7 |
+10 |
+11 |
+9 |
| Reported EPS 4 |
37.3 |
25.9 |
+44 |
+45 |
+44 |
| |
|
|
|
|
|
| Dividend per share |
13.0p |
12.5p |
+4 |
n/a |
n/a |
As required by IFRS 5, Europe Beverages is classified as a discontinued operation. Revenue, Profit from Operations and Profit before tax for the 52 weeks to 1 January 2006, exclude Europe Beverages. The prior year comparative information has been re-presented on a consistent basis (see note 9 on page 22).
1 Underlying profit from operations and underlying Profit before Tax exclude brand intangible amortisation (£6m), restructuring costs (£72m), non-trading items (£25m) and the impact of fair value accounting under IAS 39 (£23m). Underlying earnings per share also excludes the tax effects of these adjustments and the credit arising on the recognition of the UK deferred tax asset (£104m) and the intra-group transfer of intellectual property assets (£11m). A full reconciliation between underlying and reported measures is included in the segmental analysis on pages 16 and 17 (of the full 2005 preliminary results press release).
2 Excluding the estimated impact of revenues and profits in the 53rd week of 2004 (see note 3 page 12 of the full 2005 preliminary results press release)
3 Constant currency growth excludes the impact of exchange rate movements during the period (see note 3 page 12 of the full 2005 preliminary results press release)
4 EPS is presented on a basic total group basis and therefore includes the earnings contribution from Europe Beverages
Basis of Preparation
As required by IFRS 5, Europe Beverages is classified as a discontinued operation. Revenue, Profit from Operations and Profit before tax for the 52 weeks to 1 January 2006, exclude Europe Beverages. The prior year comparative information has been re-presented on a consistent basis.
In 2005, the Group's financial results consisted of 52 weeks of trading, whereas in 2004 the statutory results consisted of 53 weeks of trading. A full explanation of the impact of the 53rd week adjustment and reconciliation between the reported and 52-week figures is included in Note 3 on page 12 (of the full 2005 preliminary results press release).
Over 80% of the Group's revenues and profits in 2005 were generated outside the United Kingdom. The impact of exchange rate movements on the Group's Income Statement and free cash flow generation are shown separately. In 2005, movements in exchange rates, primarily the Mexican Peso and Australian Dollar, increased the Group's revenues by 2%, underlying pre-tax profit by 2% and underlying earnings per share by 2%.
Comments on the Group and regional performances in the commentaries on pages 2 to 7 (of the full 2005 preliminary results press release), are made on the continuing business, excluding Europe Beverages, on a 52 week basis. Comments on movements in revenues, underlying profit from operations and margins are made on a 52 week 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 over 50,000 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
- Free cash flow (as explained in our Report & Accounts) 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 (see note 14 on page 23 of the full 2005 preliminary results press release)
3. Basis of Preparation
Impact of Exchange Rates
Over 80% of the Group's sales and profits in 2005 were generated outside the United Kingdom. Constant currency growth was calculated by applying the 2004 exchange rates to the 2005 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 month's 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.
53rd Week
In 2005, Cadbury Schweppes' financial year consisted of 52 weeks. In 2004, Cadbury Schweppes had an additional week's trading: the statutory results for 2004 were for the 53 weeks to 2 January 2005. The extra week in 2004 resulted in additional turnover and profit from operations compared to 2005. In order to provide more meaningful comparisons and consistent with the approach adopted in the prior year, estimates of the additional revenues and profits generated in the 53rd week of 2004 have been excluded from the analysis of base business (2004 - 52 weeks). Management believes this provides the most consistent underlying 52 week like-for-like analysis. In 2004, it was not possible to quantify the exact profit impact of the 53rd week and in determining the impact on the prior year, management had to exercise judgment. Operating costs were allocated on a reasonable and consistent basis across the Group. These costs included direct costs allocated as a determinable gross margin percentage consistent with base business, costs separately identifiable as relating to the 53rd week and indirect costs pro-rated with additional days of sales. Interest has been adjusted for on a pro-rated basis. These adjustments were tax effected at the Group's 2004 underlying tax rate.