2006 preliminary results - investis digital
TRANSCRIPT
2006 Preliminary ResultsAnalyst Presentation20 February, 2007
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 that 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 presentation
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.
Results Overview and Operating Review
Todd StitzerChief Executive Officer
4
Today’s Agenda
Operating Review Todd Stitzer
Financial Review Ken Hanna
Summary and Outlook Todd Stitzer
5
2006 Group Highlights
• The third year of:
- Revenue growth at double historic rate
- Double digit emerging market growth
- Double digit gum growth
- Share gains in US carbonates
- Fuel for Growth cost savings
- Significant operational and strategic progress
• Offset by UK recall and Nigeria
6
2006 Financial Overview
• Underlying Revenues +4%
• 3 out of 4 regions growing strongly
• Underlying margins maintained
- Cost savings offset commodity cost headwinds
- Further investment in growth
• Underlying Profit before Tax +9%
• Final dividend +10%; 8% increase for full year
7
Continued Momentum in Confectionery
• Confectionery revenue growth +4%
• Shares ahead or maintained in 13 of top 20 markets
• Innovation and emerging markets (+10%) key drivers
• Gum +10%: strong growth in all geographies
• Chocolate +1%: good performance outside the UK (+5%)
• Candy flat: impacted by Halls in the US and non-core brands
• Bolt-on acquisitions in emerging markets
8
Securing and Growing Beverages
• Beverages revenue growth +4%
• Another good performance from Americas Beverages
• Australia beverages performed well
• Exit from beverages in Europe, Syria and South Africa: total £1.4bn proceeds
• US bottler and distributor acquisitions significantly strengthened route to market
9
Americas Beverages: Continued Good Performance
• Good performance during year of significant organisational change
• Successful innovation and early benefits of IBS consolidation
Full Year 2006
£m
2,566
584
2006 vs 2005 (constant FX)
underlying acq/disp total
Revenues +3% +42% +45%
Underlying Profit from Ops*
+7% +5% +12%
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items,UK product recall and IAS 39 adjustment
10
Third Year of Share Growth in Carbonates
• Third year of market share growth in US carbonates
Source: Nielsen
US Carbonate Market Share Performance
-60
-40
-20
0
20
40
60
80
YO
Y S
har
e Chan
ge
(bps)
2003 2004 2005 2006
11-5
0
5
10
15
20
25
30
Dr Pepper Sunkist A&W Canada Dry
7 UP
Share Growth in US CSDs
Source: Nielsen
YO
Y S
har
e Chan
ge
(bps)
Through Strong Performances on Core Brands …
• Performance boosted by better sales execution in CSBG
12-15
-10
-5
0
5
10
15
Yea
r on y
ear
volu
me
gro
wth
(%
)
7 UP Bottler volumes 2004 - 2006
2004 2005 Q1’06 Q2’06 Q3’06 Q4’06
… With Improving 7 UP Performance
• Relaunched regular 7 UP in May; diet 7 UP in November
• More natural proposition
13
Growth in Core US Non-Carbonates
• Core non-carbonates +3%
Core Non-Carbonate Revenue Performance
0
1
2
3
4
5
6
% R
even
ue
Chan
ge
2004 2005 2006
14
Revitalising Snapple… A Multi-Stage Programme
Source: Nielsen
Mainstream Premium Super Premium
% RTD Tea Vol 77% 22% 1%
% RTD Tea $ 59%
Snapple Vol Share 0% 50% 42%
37% 4%
Volu
me
Cas
es
US Ready to Drink Tea Market
+99%
+1%
+40%
15
Early Success with Snapple Super Premium Teas…
• Successful launch of Snapple super-premium teas
• Small but fast growing category
• Number one premium tea brand
• Further additions to the range in 2007
16
Following With Snapple Mainstream Launch in Second Quarter
• Leveraging CSBG low cost manufacturing and distribution reach
• Launch of mainstream Snapple in Q2
17
Further Expansion into Growth Categories .. Accelerade
• Intellectual property/ brand acquired in 2006
• Entry into $6.8bn fast growing functional sports drink category
• Patented carbohydrate – protein drink
• Differentiated position: for the serious athlete
18
Integration of CS Bottling Group on Track
• Improving performance on CS brands
• Franchise brands continue to grow strongly
** - excludes water
CSBG Volume Performance (ex Easley/All American)
Total +2% +7%
Volume Growth v PY Jan - Apr
Flat
+16%
May - Dec
CS Brands +6%
Franchise Brands** +17%
19
Americas Confectionery: Another Good Year
• Another year of excellent progress
• Margin gains driven by Canada and Brazil
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items,UK product recall and IAS 39 adjustment
Full Year 2006
£m
1,330
207
2006 vs 2005 (constant FX)
underlying acq/disp total
Revenues +7% - +7%
Underlying Profit from Ops*
+20% - +20%
20
20
22
24
26
28
30
32
34
2006 Share +300bps
Dec CS Share32.2%
Strong Growth in Gum With Further Share Gains in US…
Source: IRI
US Gum Market Share Jan 2004 – Dec 2006
Jan ‘04 Jan ‘06 Dec ‘06
US G
um
Mar
ket
Shar
e (%
)
21
…Driven by Trident and Stride
• Innovation continues to drive US market growth
• Led by Trident and Stride
US Brand Performance and Market Shares
Retail sales (val) 2006 YTD Growth
Dec Share
Trident +26% 17.1%
Dentyne +6% 8.9%
Stride n/a 2.9%
US Gum Market +8%
Bubblicious +7% 2.5%
Source: IRI (December 2006)
22
Halls Strengthening With Innovation and Marketing in US
• Investments in marketing and innovation
-15
-10
-5
0
5
10US Cough Market and Halls Value Sales Growth
Gro
wth
vs
Prior
Yea
r (%
)
Jan 06 Jun 06 Dec 06
Cough Market
Halls
23
Continued Double-Digit Growth in Latin America
• Latin America revenues +12%
• Strong innovation in Mexico in 2H in gum and candy
24
EMEA: A Challenging Year
• Revenues ahead despite significant challenges
• Profitability impacted by difficult trading and increased investment
Full Year 2006
£m
2,318
276
2006 vs 2005 (constant FX)
underlying acq/disp total
Revenues +1% +3% +4%
Underlying Profit from Ops*
-11% -4% -15%
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items,UK product recall and IAS 39 adjustment
25
UK Confectionery… Improving Market Performance in Q4
• Difficult third quarter: hot summer and product contamination
• Improved fourth quarter with satisfactory Christmas
Source: Nielsen (Dec 2006)
UK Confectionery Market Performance 2006
Vs Last Year (%) 1H FY
-0.2
-1.1
+1.3
-0.3%
Q3 Q4 Dec
Chocolate -5.5% +1.2 +2.1
Confectionery -4.7% +0.7 +1.6
26
Improving Share Trends… CS Share Held in 2006
• Share trends improving in fourth quarter
• CS share of UK chocolate at 34%
• CS share of UK confectionery held at 31%
Source: Nielsen (Dec 2006)
CS Market Share Performance 2006
Vs Last Year (bps)
1H FY
-10
flat
+90
+80
Q3 Q4 Dec
Chocolate -130 -85 -50
Confectionery -90 -50 -20
27
Increased Marketing and Innovation in Q4 2006
28
Continues in 2007... Significant Activity on Chocolate
29
Continues in 2007... Significant Activity on Chocolate
30
Bringing Innovation to the UK Gum Market
• Current market value £250m - £300m
• Market in decline; per capita consumption under-developed
• 95% products functional; >50% chew for distraction
Gum Market Growth and Consumption
Growth 05/06 Per Cap. (Index)
75
100
France +9% 88
UK -4%
US +8%
Source: Nielsen/IRI/Euromonitor
31
With the Launch of Trident - Our Number One Global Gum Brand
• Bringing confectionery benefits to a functional category
• Leverages most successful gum technologies and brand
• Major investment in marketing, sales and point of sale activity
32
Significant Investment in Driving Continued Growth in Gum
• Significant incremental investment in gum in 2006
• Further roll out of centre-filled
• Trident launched in Turkey
• Packaging innovation with bottle gum
33
And Investing in Affordable Confectionery in Africa
• Good growth in Africa, Middle East (+9%)
• Launch of affordable offerings in South Africa
• Significant investment and pressure on capacity
Countlines+15%
CDM+8%
Eclairs+25%
Halls+31%
34
Asia Pacific: Continued Strong Performance Across the Region
• Another good year; stronger second half
• Operational leverage and cost control offset commodity headwinds
Full Year 2006
£m
1,205
165
2006 vs 2005 (constant FX)
underlying acq/disp total
Revenues +7% - +7%
Underlying Profit from Ops*
+10% - +10%
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items,UK product recall and IAS 39 adjustment
35
Developed Markets... Good Results in ANZ
• Developed markets +5%; strong market growth in ANZ
• Growth in premium and dark chocolate
• Share gains in candy through TNCC
36
…Further Gum Market Share Gains in Japan
• Third successive year of innovation driven share gains
CS Gum Market Share Performance in Japan 2003 - 2006
YTD 2003
14.9%
2004 2005 2006
Gum 15.5% 16.8% 18.4%
Source: IRI
37
Double-Digit Emerging Market Growth
• Emerging markets +17%
• Exceptional performance in India across range
Source: ORG Retail Audit
CS India Market Share
Sugar 5.7% 6.4%
Year to Dec 2005 2006
Chocolate 71.4% 71.8%
Financial ReviewKen HannaChief Financial Officer
40
Agenda
• Underlying revenue growth and margin analyses
• Three key factors
- Acquisition of CSBG
- UK product recall
- Cadbury Nigeria
• Income statement
• Cash flow
• Outlook 2007
41
Base Business Revenue Growth: Regional Performance
AmericasConfectionery
£92m+7%
£62m+3.5%
AmericasBeverages
EMEA
£19m1%
Asia Pacific
£84m+7%
Total Group
£256m+4%
42
Confectionery Revenue Growth
EMEA +6%
Am Confy+12%
Asia Pac +17%
72% of growth
28% of growth
Am Confy+4%
Asia Pac +5%
EMEA -1%
Emerging
+10%
Developed
+2%
Developed Emerging Group
2%
10% 4%
Third consecutive year of double-digit growth from emerging markets
43
Beverages Revenue Growth
3%
US CSDs
US CSDs
US non-CSDs
4%
Beverages
Australia
Mexico2.5%
US non-CSDs
6%
AustraliaMexico
11%
44
Underlying Profit from Operationsand Margin
Nigeria
CSBG
(30)bps (110)bps
FY 2006 Constant FX
Incl M&A
14.5%
FY 2005
15.9%
Basebusiness
0bps
UK Recall
FY 2006 Constant FX
Excl M&A
Other M&A ex CSBG &
Nigeria
0bps 15.9% 0bps
45
Increased Input Costs
2006 H1 H2 FY
Sugars & SweetenersAluminium
£6m £19m £25m
Oil and energy £19m £6m £25m
Oil price/barrel $67 $65 $66
46
Growth-Related Investment
• Incremental growth investment £35m
- H1 £17m; H2 £18m
- Increased S&T resources focused on category innovation
- Strengthened RTM in Latin America, US, Russia & Poland
- Investment behind Snapple NPD & fountain
• Marketing spend broadly flat
- Up 4% in confectionery; down -4% in beverages
• Emphasis on in-store promotions in beverages following acquisition
of CSBG
47
Exceptional Costs of UK Product Recall
£m H1 06 H2 06 FY 06
Customer returns 5 - 5
Stock destroyed & costs 5 5 10
Remediation costs 3 14 17
Increased media - 5 5
Total direct cost 13 24 37
Insurance recovery (6) (1) (7)
Net direct cost 7 23 30
Direct costs (net of insurance) excluded from underlying performance
48
Trading Impact of UK Product Recall
£m 2006
Sales impact
Credit notes issued for returned product in H1 (5)
Lower sales in H2 (25-30)
Total impact on sales (30-35)
Underlying Operating Profit impact
Impact net of insurance recovery (5-10)
49
Nigeria – Underlying Performance
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items, UK product recall and IAS39 adjustment
# Excludes intangibles amortisation, goodwill impairment, restructuring, non-trading items, UK product recall, Nigeria adjustment and IAS 39 adjustment
** The capacity to offset losses via a minority interest is limited by Cadbury Nigeria net liability position
£m 2005 2006
Revenue - 59
Underlying Earnings 6 (13)
Underlying Loss from Operations* - (12)
Associates 6 (1)
Net finance cost - (6)
Underlying Profit/Loss before Tax# 6 (19)
Taxation - -
Minorities** - 6
UEPS Impact 0.3p (0.6p)
50
Nigeria – One-off Costs
£m 2006
Goodwill written off (15)
2006 Charges outside Underlying
CS Group share of one-time charges booked by
Cadbury Nigeria(23)
• Recovery will take some time
• Restructuring required in 2007
51
CSBG Financial Performance
£m Jan – Apr Pre-acq
May-Dec Post-acq
FY 06 Pro-forma
Total CSBG
Impact on CS Group Margin -40bps -110bps -150bps
Revenue 388 753 1,141
Underlying Operating Profit 20 36 56
Margin 5.2% 4.8% 4.9%
• Overall performance in line with acquisition case
• CSBG marginally accretive in 2006
52
Summary Income Statement
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items, UK product recall and IAS39 adjustment
# Excludes intangibles amortisation, goodwill impairment, restructuring, non-trading items, UK product recall, Nigeria adjustment and IAS 39 adjustment
£m 2005 2006
Revenue 6,432 7,427
Nigeria – cost outside underlying - (23)
Underlying Profit from Operations* 1,025 1,073
Associates 28 7
Net finance cost (188) (149)
Underlying Profit Before Tax# 865 931
Restructuring (71) (133)
Amortisation and impairment (6) (38)
Non-trading items 25 40
UK product recall - (30)
IAS 39 adjustment 22 (9)
Reported Profit Before Tax 835 738
Taxation (135) (215)
Discontinued Operations 76 642
Minorities (11) 4
Reported Earnings 765 1,169
53
Restructuring Costs
Treatment of restructuring from 2007
• Expect restructuring cost of c1% of sales in underlying from 2007
• £123m Fuel for Growth charge in 2006 will be reallocated to underlying in
comparatives
£m 2005 2006
Fuel for Growth (71)
CSBG integration - ( 10)
Total (71) ( 133)
(123)
54
Earnings Per Share
# At constant currency
p/share 2005 2006# Growth
Underlying EPS 33.9 32.1
Growth Factors
• Increase in underlying tax rate (3%)
Underlying EPS before M&A 4%
• Sale of beverages (6%)
• Increase in number of shares (1%)
• Acquisition of CSBG -%
• Impact of Cadbury Nigeria (3%)
Underlying EPS after M&A (5%)
(5%)
• Operating performance 8%
55
Cash Flow
£m 2005 2006
Cash Generated from Operations 1,327 1,212
Tax (excluding disposals) (206) (256)
Net Capital Expenditure (261) (300)
Interest (199) (186)
Dividends (257) (270)
Free Cash Flow 404 200
• Impact of one time items c£100m
- Sale of beverages
- Nigeria
- UK exceptional
56
• 3 years of reduction in DSO’s
• Like-for-like* trade working capital reduction in DSO’s – 11 days
• Value of reduction – c£200m
0
10
20
30
40
50
60
2003 2004 2005 2006
Working Capital
* Like-for-like excludes Europe Beverages, CSBG and Cadbury Nigeria
Day
s
57
Balance Sheet Efficiency
Dec 2005 Dec 2006
£3,900m
2.9x
6.8x
EBIT/Net interest 5.7x 6.0x
Net Debt £m £2,909m
EBITDA# /Net interest 7.5x
Net Debt/EBITDA# 2.2x
# EBITDA is defined as earnings before interest, tax, depreciation, intangibles amortisation, goodwill impairment, restructuring costs, non-trading items, UK product recall, IAS 39 adjustment and excludes associates
2007 Outlook
59
Americas Beverages - 2007 Factors
• Higher concentrate pricing in CSDs
• First full year of CSBG cost synergies
• Aggressive Snapple investment plan
• Launch of Accelerade
• Potential savings from oil (@c$60/barrel) offset by increase in corn
prices
60
Americas Confectionery - 2007 Factors
• Full benefit from Stride launch
• Price increase in US gum and Halls
• Investing behind Route to Market in emerging markets
61
EMEA - 2007 Factors
• UK gum launch
• Reinvigorating UK chocolate
• Continued roll-out of centre-filled gum in the region
• Pace of recovery progress in Nigeria
62
Asia Pacific - 2007 Factors
• Withdrawal from co-packing arrangement
• Aggressive ANZ retailer environment
• Higher sugar & aluminium costs
• Strong momentum from emerging markets
63
Summary
• Outlook 2007
• Extensive supplementary schedules
• Calendar 2007
- AGM: 24 May
- Trading Update: 19 June
- Interim Results: 1 August
- Trading Update: 11 December
2006 Summary and OutlookTodd StitzerChief Executive Officer
66
2006 Summary
• Superior TSR growth: 2003 -2006 +63%
• Confectionery share gains in most key markets
• Revitalisation of North America Beverages
• M&A activity strengthens both beverages and confectionery positions
• Strengthened leadership and capabilities
• Nurtured colleagues and communities
67
New Financial Scorecard
• Revenue growth of 3-5% per annum
• Growth in margins over time
• Growth in ROIC over time
• Dividend growth more in line with earnings growth
• Maintain efficient balance sheet
68
Drivers of Performance:
• Using all levers of value to drive returns
• Relentless cost reduction
• Aggressively exploiting strong business platforms
69
Driving Superior Returns
• Strengthening financial position
• Use all financial levers to drive value
• Maintain efficient balance sheet
• Growing dividends more in line with earnings
70
Relentless Focus on Costs
• Significant opportunity to reduce costs
• Reconfiguration of supply chain
• Centralised approach to category management
• Investing in growth
• Delivering margin growth over time
71
Exploiting our Strengthened Business Platforms
• Confectionery
- Fewer, bigger brands and innovations
- Leveraging our market positions and distribution
• Beverages
- Expanding into higher growth categories
- Exploiting strengthening route to market
72
Backing Large-Scale Innovation with Substantial Investment
• Expanding into UK gum
• Increased investment in UK chocolate
• Continued roll-out of centre filled gum
• Further expansion of Stride
• Investment in Snapple
• Launch of Accelerade
Investing in Fewer, Bigger Growth Platforms
73
2007 Summary
• Strong innovation programme in first half
• Initiatives to underpin growth in confectionery and beverages
• Significant investment in marketing and innovation, weighted to 1H
• Sweetener cost increases; 2H benefits from energy price declines
• Cost savings from Fuel for Growth and full year of CSBG synergies
74
Supplementary Information
77
£m 2005 Increased Activity M&A Exchange
Effects 2006
Americas Beverages 1,781 62 738 (15) 2,566
Americas Confectionery 1,228 92 - 10 1,330
EMEA 2,257 19 61 (19) 2,318
Asia Pacific 1,157 84 - (36) 1,205
Central 9 (1) - - 8
Total Group 6,432 256 799 (60) 7,427
Sales Analysis
78
Underlying Profit from Operations *
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items, UK product recall and IAS39 adjustment
£m 2005Increased Activity
M&AExchange
Effects2006
Americas Beverages 524 35 29 (4) 584
Americas Confectionery 172 34 - 1 207
EMEA 328 (37) (11) (4) 276
Asia Pacific 157 15 - (7) 165
Central Costs (156) (3) - - (159)
Total Group 1,025 44 18 (14) 1,073
79
Overview of Technical Guidance
FY 2007
• Fuel for Growth savings: £90m
• Underlying P&L restructuring charge: 1% of revenue
• M&A restructuring outside underlying: £30m
• Underlying net interest rate: c5%
• Underlying tax rate: 30%-31%
• Capital expenditure: 5%-5.5% of revenue
• Nigeria Minority Interest £nil
80
Restatement of 2006 Underlying Profit
Before Tax to include FfG Restructuring£m Reported Restructur’g Restated
7 -
Underlying Profit from Operations
Americas Beverages 584 (1) 583
Americas Confectionery 207 (11) 196
EMEA 276 (65) 211
Asia Pacific 165 (15) 150
Central Costs (159) (31) (190)
Underlying Profit from Operations** 1,073 (123) 950
Associates 7
Net Finance Cost (149) - (149)
Underlying Profit before Taxation# 931 (123) 808
Restructuring (133) 123 (10)
Other non-underlying items (60) - (60)
Reported Profit before Taxation 738 - 738
** Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items, UK product recall and IAS39 adjustment
# Excludes intangibles amortisation, goodwill impairment, restructuring, non-trading items, Nigeria adjustment and IAS 39 adjustment
81
M&A Activity – Non-Core Disposals
Completed
Announced
Monkhill (UK)
Cottees Foods (Australia)
Piasten (Germany) June 2005
Holland House Cooking Wines (US) December 2005
Grandma’s Molasses (US) January 2006
Europe Beverages Division February 2006
Slush Puppie (US) April 2006
Syria Beverages April 2006
Bromor (S. Africa) August 2006
Allan Candy (Canada)
Cadbury Italy
82
Completed
Green & Black’s (UK) May 2005
5% DPSUBG (US) June 2005
Cadbury Nigeria (majority) February 2006
30% Kent (Turkey) April 2006
55% DPSUBG (US) May 2006
Dan Products (S.Africa) June 2006
All American Bottling Co June 2006
7Up Bottling Co of San Francisco (Easley) August 2006
Cott Passaic/Cott Essex June 2006
M&A Activity - Acquisitions
83
Fuel for Growth Progress
Completed2003/5
Completed2006
Cumulative
Gross Savings 180 90
123
51
Total Spend 595 174 769
270
Restructuring 383 506
Capex 212 263
• Continuing Operations
- Cumulative savings by end of 2007 £360m
- Savings expected in 2007 £90m
84
Nigeria Reconciliation
£m UnderlyingNon
UnderlyingTotal
Revenue 59
(12)
Goodwill - (15) (15)
(1)
(6)
(19)
-
6
(13)
- 59
(0.6p)
Underlying Earnings (40) (53)
Profit from Operations (2) (14)
Associates (23) (24)
Net finance cost - (6)
Profit Before Tax (40) (59)
Taxation - -
Minorities - 6
EPS Impact (2.6p)
85
CSBG Performance is in line with Acquisition Case
£m 2006
Synergy benefits within Americas Beverages 6
Interest (24)
Reduction in income from associate (post-tax) (9)
Contribution to underlying earnings 2
Contribution to operating profit 42
Taxation at 39% (7)
UEPS Impact 0.1p
CSBG accretive to underlying earnings in 2006
CSBG reported operating profit 36
86
Associates - Underlying
£m 2005 2006
14
6
6
Other 2 3
Total 28 7
DPSUBG/CSBG (2)
Cadbury Nigeria (1)
Camelot 7
• CSBG consolidated from 2 May 2006
• Cadbury Nigeria consolidated from 20 February 2006
87
Financing Costs
£m 2005 2006
Interest income 31 23
Underlying interest on net debt (199) (174)
Interest expense (230) (197)
Average net interest rate 5.0% 5.1%
Net interest charge (199) (174)
Pension financing credit 11 25
Underlying net finance cost (188) (149)
88
Non-Trading Items
£m 2005 2006
3
Disposal of properties (1) 22
Disposal of investments 4 (3)
19
Reported 25 40
Monkhill factory insurance recovery 25
Disposal of non-core businesses (4)
89
Discontinued Operations
£m 2005 2006
76
-
Reported 76 642
Sale of beverages 591
Write-back of tax provisions 51
90
Minority Interests
£m 2005 2006
(5)
(4)
-
Other (2) (1)
Total (11) 4
Non-equity minority interest (QUIPS) -
Kent (1)
Cadbury Nigeria 6
• 2006 Minority interest is a positive credit due to the share of post-acquisition losses in Nigeria
• Cadbury Nigeria consolidated from 20 February 2006; Cadbury Schweppes holds 50.02% of Cadbury Nigeria
• 30% of Kent minority acquired on 10 April 2006; Cadbury Schweppes holds 96% of Kent
91
Cash Flow
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items, UK product recall and IAS39 adjustmentUnderlying Profit from Operations includes profit from discontinued operations
£m 2005 2006
Underlying Profit from Operations* 1,145 1,076
Depreciation 207 232
Exceptional - (30)
Other items 11 (34)
Working Capital 37 (16)
Tax (excluding disposals) (206) (256)
Restructuring (104) (83)
Cash generated from operations 1,296 1,145
Capital Expenditure (298) (384)
Disposals 37 84
Interest (199) (186)
Dividends (257) (270)
Pension funding 31 67
Free Cash Flow 404 200
92
• Property Assets (Proceeds included in Free Cash Flow)
- 2005 £30m
- 2006 £50m
• On track to achieve target proceeds of £100m by 2007
• Non-core Businesses (Proceeds not included in Free Cash Flow)
• Disposals to date £160m
- Grandma’s Molasses Slush Puppie
- Holland House Cooking Wines Bromor
• On track to deliver target proceeds of £250 - £300m by 2007
Non-Core Disposals
93
Balance Sheet
£m 2005 2006
7,661
(4)
654
Retirement benefit obligations (369) (204)
Provisions and deferred tax liabilities (1,007) (1,123)
Net Borrowings (3,900) (2,909)
Net Assets 3,035 3,696
Ordinary Shareholders’ Funds 3,008 3,688
Minority Interests 27 8
Total Capital Employed 3,035 3,696
Non-current assets 7,815
Net working capital 104
Assets held for sale less associated liabilities 13
94
Net Debt
£m 2006
Pension deficit funding (67)
Acquisitions net of disposals (including taxes) 865
Borrowings assumed on acquisitions/disposed (320)
Exchange and other 315
Closing net debt at 31 Dec 06 (2,909)
Opening net debt at 1 Jan 06 (3,900)
IAS 39 Adjustment (2)
Free cash flow 200
95
Borrowing Profile
Full Year 2005 2006
21%
41%
38%
84%
3.4yrs
Average interest rate 4.8% 4.6%
Group average interest rate 5.0% 5.1%
More than 3 Years 20%
Fixed rate debt:
% total debt 75%
Average length of fix 2.8yrs
Debt Maturity Profile
Less than 1 Year 37%
1-3 Years 43%
96
Sales, Profits and Borrowings by Currency
£m 2006 %
Sales generated in:US dollars 2,792 37%Sterling 1,086 15%
Australian dollars 762 10%
Australian dollars 123 11%
Other (279) (10%)
Other 310 29%
Other 2,213 30%
Euro 574 8%
574(11)
77
2,529146
Euro 513 18%
Euro 7%
Net borrowing held in:Dollar Block 87%Sterling 5%
Underlying Operating Profit* generated in:US dollars 54%Sterling (1%)
* Profit from Operations before associates, intangibles amortisation, goodwill impairment, restructuring, non-trading items, UK product recall and IAS39 adjustment
97
Exchange Rates
Rate vs Sterling Year end2006
FY 2006Average
FY 2005Average
% mvtAverage
US $ 1.96
2.28
1.48
2.49
1.85
13.8
+1.6%
21.1
Canadian $ 2.09
1.82
2.20
1.46
2.39
South African Rand 12.5 11.5 +8.7%
Mexican Peso 20.0
(5.0%)
19.8
Euro 1.47 +0.7%
+1.0%
Australian $ 2.44 +2.1%