Cadbury Schweppes plc reports on earnings performance for the 52 weeks to 31December 2000:
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| 2000 | 1999 | % Change | |
| £m | £m | ||
| Sales | 4,575 | 4,301 | +6 |
| Underlying* Operating Profit | 841 | 747 | +13 |
| Underlying* Profit Before Tax | 792 | 686 | +15 |
| Underlying* EPS | 25.8p | 22.5p | +15 |
| Free Cash Flow | 401 | 292 | +37 |
| Dividends per share | 10.5p | 10.0p | +5 |
| * before restructuring, goodwill amortisation and disposal gains | |||
Summary
Underlying pre-tax profit and earnings per share both rose by 15%.
Record free cash flow of £401 million.
Excellent beverage performance with Dr Pepper/Seven Up outperforming the US market, Mott’s delivering record performance, and profits up 36% in European beverages.
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Satisfactory confectionery performance with market share gains in UK chocolate, strong volumes in Australia and progress in main emerging markets.
Business significantly strengthened by acquisitions – including Snapple in the US, Hollywood in France and Lion Nathan soft drinks operations in Australia.
Financial targets set for the next four year phase of Managing for Value.
John Sunderland, Cadbury Schweppes’ CEO, said:
“2000 was another good year for Cadbury Schweppes with successful execution of our strategy delivering the financial targets to which we are committed. Strong brands, actively managed in growth markets, continue to drive performance. We also made significant progress towards improving our business portfolio. We acquired strong companies which bolstered our position in a number of key markets and reorganised our management structure to enhance performance. With even greater focus on growth and efficiency, we are confident Cadbury Schweppes will continue to deliver growth in shareowner value in the next phase of our Managing for Value programme”.
Operating Review
Beverage operations had an excellent year, with trading profits in Europe up 36% and 14% in the US.
The US carbonated soft drink (CSD) market was flat for the year, with volumes subdued by aggressive retail pricing above inflation. DPSU grew volumes by 1%, with market share up by 0.3 points. 7 UP’s overall performance was encouraging. DPSU volumes for the fourth quarter (see below) were adversely affected by unusually intense competitive pricing and marketing activity in December.
Mott’s turned in a strong performance, helped by the Hawaiian Punch acquisition. Profits at our associate company, Dr Pepper/Seven Up Bottling Group, rose significantly reflecting volume and margin gains.
The refreshment beverage market is expected to recover from the unusual conditions seen in 2000 and record positive growth in 2001, helped by more modest CSD price increases and continued growth in non-CSDs.
The outstanding performance in European beverages was driven by successful restructuring in Spain and focus on higher margin channels, plus further efficiency improvements in the bottling joint venture in France. The Australian beverage business also had a good year.
Volume growth in confectionery was impacted by sluggish performance in the UK market, although chocolate market share rose, and specific issues in the US, Egypt and South Africa. Offsetting these were strong performances from the Australian business, and many emerging markets, including China, which exceeded expectations to record a profit of almost £1 million. Sales rose by 12% in India and 21% in Russia.
The integration of Cadbury Trebor Bassett is proceeding according to plan and remains integral to plans to boost volume growth in the UK market. The success in building volumes by 4% in the Australian market augurs well for similar initiatives in the UK. 2001, however, is likely to prove a transitional year for UK confectionery with full year benefits from restructuring expected in 2002.
In Continental Europe, confectionery volumes grew in all key countries. In the Americas, Canada and Argentina made good progress. Our Argentinean business will be bolstered by the Mantecol acquisition.
Financial Review
Sales rose 6% to £4,575 million (£4,301 million), with underlying operating profit up 13% at £841 million (£747 million). Underlying profit before tax, which excludes goodwill amortisation, disposal gains and restructuring, rose 15% to £792 million (£686 million). The restructuring charge of £50 million (£75 million) was driven by reorganisation in the UK and acquisitions. Goodwill amortisation rose to £13 million (£3 million) and will be significantly higher in 2001. Profit on disposals of £27 million was well down on £350 million in 1999 when the Group sold many of its global beverage operations. Taking account of these adjustments, profit before tax was £756 million (£958 million). Earnings per share on an underlying basis rose by 15 per cent to 25.8p (22.5p), and the Board has proposed a final dividend of 7.3p making 10.5p (10p) for the year.
The Group’s marketing to sales ratio rose by 1.3 percentage points to 19.4%, and trading margin grew to 16.9% (16.2%).
Economic profit, a key financial indicator for management, grew by 16% to £446 million. This was a function of improved operational and financial efficiency. These helped return on invested capital grow to 10.9%, more than 2% over the Group’s cost of capital.
The Group also delivered an exceptional cash performance, with free cash flow of £401 million (£292 million). Interest cover was 16x, while the net debt figure was £1.2 billion.
The first four-year phase of the Managing for Value programme has seen significantly improved financial performance. The targets of delivering annual double-digit growth in EPS and generating at least £150 million in free cash flow were exceeded, and the stretching target of doubling total shareholder return (TSR) in four years almost achieved. Underlying EPS growth rose from an average 6% in the period 1989-96 before the programme, to 11% in 1997-2000. Over the same period, annual free cash flow rose to an average £252 million, from under £100 million. Similarly, TSR averaged 16% over the same period, compared to 9% in the 1989-96 period.
In the next four-year phase of Managing for Value, the stretching commitments to double shareholder return every four years, and deliver annual double digit earnings increases remain, while the annual free cash flow target has been doubled to £300 million from £150 million.
Acquisitions
Acquisitions are an important element of the Company’s growth strategy and are performing to or ahead of expectation. 2000 and early 2001 saw a number of significant deals which substantially strengthened the businesses in North America, Australia, China and France. In the US, beverages acquisitions included Snapple, Mauna La’i, and Slush Puppie. The Lion Nathan soft drinks operations and Spring Valley were beverage acquisitions in Australia. The purchase of Hollywood in France was Cadbury Schweppes’ largest ever confectionery acquisition. Other confectionery deals were Wuxi Leaf in China and Mantecol in Argentina.
Outlook
Market conditions in the US are challenging with the economy slowing. We also face demanding first-half comparatives in the beverages business. However, the economies of Europe and emerging markets currently appear less exposed to a downturn. Taken together, and mindful of initiatives underway to foster growth and improve efficiency, 2001 should be another good year for Cadbury Schweppes. The Company also expects to participate further in the consolidation opportunities that will arise in the beverage and confectionery industries.
DPSU Fourth Quarter and Full Year US Volume Results
DPSU’s fourth quarter results were impacted by unusual market and competitive conditions in December but, for the year overall, DPSU continued to outperform the US CSD market with volumes up 1% in a flat market. The Dr Pepper brand continued its 17-year record of increased volume with a share gain of 0.2 points.
| BRANDS | Q4 | Full Year |
| Dr Pepper | -2% | +1% |
| 7 UP | -5% | 0% |
| All Others | -1% | +1% |
| Total DPSU | -2% | +1% |
| Total Market (estimated) | +1% | 0% |
Dividend
The proposed final dividend of 7.3 pence per Ordinary Share will be paid on 18 May 2001 to Ordinary Shareholders on the Register at the close of business on 23 February 2001.
For further information:
David Kappler, Chief Financial Officer
Sally Jones, Corporate Communications Director
Dora McCabe, Head of Group Public Relations
| Cadbury Schweppes plc: | 020-7409-1313 |
| Angus Maitland/Philip Gawith, | |
| The Maitland Consultancy | 020-7379-5151 |
Notes to Editors:
- Group Profits and Loss Account
Movements in Shareholders’ Funds
Group Balance Sheet
Group Cash Flow Statement
Sales and Trading Profit Analysis
- Notes to the Schedules
