2001 Interim Results Analyst Presentation

2001 INTERIM RESULTS
1
SAFE HARBOUR STATEMENT
This presentation 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. It should be read 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.
2
2001 Interim Results
Analysts’ Presentation
25th July 2001
3
JOHN SUNDERLAND
Chief Executive Officer
4
PRESENTATION FORMAT
Introduction
John Sunderland
Financial Results
David Kappler
Operating Performance
John Brock
Business Review
John Sunderland
5
OVERVIEW
2001 Interim Results
Half Y/E June
2001
2000
%
2,458
400
1,954
322
+26
+24
351
308
+14
Pence
11.5
3.35
9.9
3.20
+16
+5
%
%
20.9
15.1
21.1
14.9
-0.2pts
+0.2pts
Sales
Underlying Operating Profit*
£m
£m
Underlying Profit Before Tax*
£m
Underlying EPS*
Dividends per share
Marketing/Sales
Trading Margin*
*
Pence
Excludes goodwill amortisation, restructuring charges and disposal gains
6
2001 INTERIM HIGHLIGHTS
• Good performance overall
• Volume (2%) and revenue (4%) growth healthy
• DPSU and CTB responding to slower market
conditions
• Excellent results from Mott’s, European Beverages,
Emerging market and French confectionery
• Acquisitions continue to strengthen existing
operations
7
Financial Results
DAVID KAPPLER
Chief Financial Officer
8
GROUP DEVELOPMENTS
Acquisitions -
Hollywood
Pepsi Lion Nathan
Snapple
Trebor Wuxi
Mantecol
Carteret
Spring Valley/Wave
Slush Puppie
La Casera
(Aug 2000)
(Sept 2000)
(Oct 2000)
(Nov 2000)
(Jan 2001)
(Jan 2001)
(Jan 2001)
(Jan 2001)
(Jul 2001)
Shareholding -
South Africa
Egypt
(45% minority acquired Dec 2000)
(20% minority acquired early in 2nd Half)
Divestments -
Amalgamated Beverages
RC International
(Shareholding sold Dec 2000)
(July 2001)
Net Spend £1.6bn
9
2001 INTERIM ANALYSIS
Acquisitions/
Disposals
Exchange
Effects
2001
69
+4%
353
+18%
82
+4%
2,458
+26%
154
29
78
13
38
11
31
4
2
0
2
1
25
0
5
0
1
1
19
1
0
1
(2)
0
229
34
85
14
39
13
(32)
(8)
0
(2)
(42)
32
+11%
32
+11%
17
+6%
372
+28%
Half Y/E June (£m)
2000
Group Net Sales
1,954
Underlying Trading Profit
N American Beverages
European Beverages
European Confectionery
Americas Confectionery
Asia Pacific
Africa, India, Middle East
Central Costs †
Underlying Trading Profit* 291
Increased
Activity
* Excludes goodwill amortisation, restructuring charges and disposal gains
† Reallocation of costs between Centre + Regions gives £4m increase in 2000 Central Costs
10
2001 INTERIM EARNINGS
Half Y/E June (£m)
2001
2000
%
Underlying Trading Profit*
- Associates
Underlying Operating Profit*
- Interest
Underlying Profit Before Tax*
- Restructuring
- Goodwill amortisation
- Profit on disposal
Reported Profit Before Tax
- Tax on operations
- Minorities
Reported Earnings
372
28
400
(49)
351
(19)
(20)
2
314
(100)
(13)
201
291
31
322
(14)
308
(11)
(2)
0
295
(89)
(18)
188
+28
(10)
+24
***
+14
*
+6
+7
Excludes goodwill amortisation, restructuring charges and disposal gains
11
2001 INTERIM EARNINGS PER SHARE
2001
Pence
2000
Pence
10.0
9.4
(%)
+7
Reported EPS
Adjustments:
0.6
0.4
- Restructuring
0.9
0.1
- Goodwill amortisation
0
0
11.5
9.9
- Profit on disposal
Underlying EPS
+16
Created by:
-
Base Business
+11
-
Acquisitions/Disposals
-
-
Exchange
+5
12
2001 INTERIM CASH FLOW
Half Y/E June (£m)
2001
2000
Underlying Trading Profit *
372
291
Depreciation
71
74
Other Items
(44)
(33)
Working Capital Movement
(101)
(117)
Funds from Operating Activities
298
215
Capital Expenditure/Disposals
(67)
(45)
Interest, Tax & Dividends
(277)
(227)
Free Cash Flow
Acquisitions and Disposals
Other
(46)
(57)
(186)
(43)
(5)
(51)
(Inc) in Borrowings
(275)
(113)
*
Excludes goodwill amortisation, restructuring charges and disposal gains
13
EPS GROWTH MODEL
Model
2001 Interim
Volume
2%
2%
Price / Mix
2%
2%
Operational Gearing
4%
4%
-
1%
2%
2%
10%
11%
2%-5%
-
N/A
5%
12%-15%
16%
Half Y/E June
Reinvestment & Efficiency
Cash Generation
Acquisition
Currency
14
KEY RATIOS
Half Y/E June
2001
2000
Trading Margin %*
15.1
14.9
Marketing to Sales %
20.9
21.1
- including BG (times)
7.3
21.7
- excluding BG (times)
9.4
74.0
Capex to Sales %
2.8
2.2
Working Capital (av. Weeks of sale)
3.2
3.6
Interest Cover
*
Excludes goodwill amortisation, restructuring charges and dispos al gains
15
OVERVIEW
2001 Interim Results
Half Y/E June
*
2001
2000
%
Sales
£m
2,458
1,954
+26
Underlying Operating Profit*
£m
400
322
+24
Underlying Profit Before Tax*
£m
351
308
+14
Underlying EPS*
Pence
11.5
9.9
+16
Dividends per share
Pence
3.35
3.20
+5
Excludes goodwill amortisation, restructuring charges and dispos al gains
16
Operating Performance
JOHN BROCK
Chief Operating Officer
17
OPERATIONAL OVERVIEW
Focus
• Sustaining beverage performance
• Aggressively addressing confectionery performance
• Integrating existing businesses and acquisitions
Results
• 2% underlying beverage growth
• 2% underlying confectionery growth
• Integration: on track and within budget
18
NORTH AMERICA BEVERAGES
Dr Pepper / Seven Up
Volumes
• Dr Pepper
• 7Up
• Strong flavour performance
Healthy underlying profits growth
• Concentrate price increases
• Production efficiencies
• More efficient field marketing
19
NORTH AMERICA BEVERAGES
• Mott’s
- excellent performance
- strong volume and profit gains
• Snapple
- synergy benefits higher than anticipated
- slow first quarter; better second quarter
- strong second half programme
• DPSU Bottling Group
- volume growth ahead of market
20
EUROPEAN BEVERAGES
• Excellent profits growth in recent years
-
focus on profitable brands and channels (France and Spain)
-
investment behind marketing
-
improved efficiencies
• Performance sustained in first half 2001
-
13% rise in trading profits
-
significant increase in marketing spend
21
EUROPEAN CONFECTIONERY
Cadbury Trebor Bassett Performance
•
UK market remains challenging : volumes down
•
CTB volumes ahead due to sugar and franchise
•
Profits down reflecting higher levels of investment
22
EUROPEAN CONFECTIONERY
Cadbury Trebor Bassett Achievements
• Key to growth is innovation, availability and
supported brands
• CTB achievements to date
- successful integration on time and within budget
- benefits of focus: growth in core sugar portfolio,
Cadbury Dairy Milk and Easter
- London Underground agreement
- Commonwealth Games
23
EUROPEAN CONFECTIONERY
• Ireland - increased volumes, profits and shares
• Strong performance from Continental European operations
• Encouraging performance in France
– strong growth in sugar
– investment in marketing
– Hollywood integration on track
• Russia volumes 16% ahead and losses reduced
• Cadbury Wedel market growth, and
share and profit gains
24
AMERICAS CONFECTIONERY
• Successful integration in Canada
- market growth
- Cadbury Trebor Allan share growth in sugar
- some chocolate sales slippage given focus on merger
• Volume led recovery at Jaret in the US
• Stani in Argentina outperforms a difficult market
- successful new product activity : functional gum and chocolate
- integration of Mantecol
25
ASIA PACIFIC
Confectionery
• Continued progress in Australia and New Zealand
-
sales up 5%
-
successful new product transfers (Dream and Breakaway)
-
benefits of sales reorganisation in Australia
• Chinese volumes and profits ahead
Food & Beverages
• Focused on integration
• Volumes and Profits ahead
26
AFRICA, INDIA, MIDDLE EAST
• Good profits growth across the region
• India sales up 9%; profits up 19%
• Recovery in Egypt driven by market share gains
• Bromor profits benefit from growth of low cost
products and Energade
27
JOHN SUNDERLAND
Chief Executive Officer
28
GROWING FOR VALUE
The Crusade for ‘Good Growth’
29
CULTURAL CHANGE
•
Growth targets as element of incentives for every
manager and Business Unit
•
Strengthen our commercial teams
•
Focus communication on ‘Growth’
•
Training and development redirected at growth
-
“Unlocking Good Growth” programme (top 150)
-
Sales and Marketing Academy (1,500 commercial
managers)
30
ROUTES TO GROWTH
• Organic
• Acquisition
31
ORGANIC GROWTH
• Exploiting our advantaged brands
• Developing even wider availability
• Greater innovation
• Leveraging customer relationships
32
EXPLOITING ADVANTAGED BRANDS
CDM Megabrand:
Consistent growth results to date
2000 FY
vs 1999
UK
Australia
India
South Africa
2001 HY
vs 2000
+11%
+6%
+6%
+6%
+21%
+16%
+7%
+12%
34
EXPLOITING ADVANTAGED BRANDS
• Developing Markets
South Africa
India
China
Malaysia
Poland
Egypt
Choclairs Volume Growth
2001 Half Year +14%
35
EXPLOITING ADVANTAGED BRANDS
Clamato
Hispanic Programme Launched
Volumes
10%
1999
1998
-10%
1997
0.0%
1996
Yr on Yr Growth
20%
2000
2001
Sales up +9% in Total US and +12% in Total Hispanic Markets
Source: Neilsen
36
AVAILABILITY
•
Major new analysis to identify opportunities for
driving profitable growth through improved
availability
•
Piloted in our confectionery businesses in India and
the UK, and in Mexico for beverages
•
India has identified substantial opportunities for
growth from distribution and availability
37
AVAILABILITY
•
Cadbury India has c.70% market share of the chocolate
market
•
Significant variations in urban penetration levels
•
Achieving internal ‘best in class’ outlet penetration
across the urban market = sales uplift of 65% - 80%
•
Ramped up sales force to develop ‘best in class’
availability in all urban areas
OVER 50,000 NEW OUTLETS OPENED IN FIRST HALF 2001
38
INNOVATION
• Greater Focus
• More Resources
39
INNOVATION
Cadbury Trebor Bassett : New Launches
BRUNCH BAR
MINI SOFTMINTS
SNOWFLAKE
40
INNOVATION
Cadbury Miniature Heroes
Full Year 2000
Ist Half 2001
+27%
+42%
41
INNOVATION
Dream : Best Practice Transfer
NEW ZEALAND 1999 launch
• Dream share: 8% moulded category
AUSTRALIA 2001 launch
• Rapidly achieved 9% share of
moulded category
CANADA 2001 launch
• Initial 2001 sell-in excellent
42
INNOVATION
Snapple
43
LEVERAGING CUSTOMER RELATIONSHIPS
No 1 Supplier in confectionery market
Developed
Developing
UK
India
Australia
South Africa
Ireland
China
New Zealand
Poland
Canada
Malaysia
France
Egypt
25%
of
Volume
44
LEVERAGING CUSTOMER RELATIONSHIPS
and Cadbury Schweppes Collaboration
DPSU
• DSD Vendor of the Year
1999
• Dedicated Account Teams
• Linked IT systems manage
US inventories and pricing
• 2001 YTD Sales + 19%
MOTT’S
• CFPR partnership integrates
all systems and inventory
data
• Hawaiian Punch “VPI” status
& joint promotion
programmes doubled 2000
volume.
• Mott’s 2001 YTD Sales
+38%
45
CUSTOMER RELATIONSHIPS
Australia
• New salesforce to leverage category leadership
• Working with retailers to drive growth
- management of checkouts
- introduction of secondary locations
Grocery Sales +5% in 2000; +9% in IH 2001
46
GROWTH VIA ACQUISITONS
• Disposal of lower growth assets
• Acquisitions of
- faster growing brand assets
- under exploited brand assets
47
ACQUISITIONS IN HIGHER GROWTH SECTORS
BEVERAGES
CONFECTIONERY
• Snapple
• Hollywood
• Stewart’s
• Sport Life
• Slush Puppie
• Mauna La’i
• Spring Valley
• Wave
48
ACQUISITION OF UNDER EXPLOITED BRANDS
• Hawaiian Punch
(P & G)
• Wedel
(Pepsico)
• La Pie Qui Chante
(Danone)
• Orangina/Yoo-Hoo
(Pernod Ricard)
• La Casera
49
WEDEL MOULDED RANGE
• Since acquisition the Wedel moulded range has
recovered market leadership in brand awareness
and brand loyalty
• Value and Volume leadership regained
Full Year 2000
+7%
First Half 2001
+19%
50
HAWAIIAN PUNCH IN MOTT’S
Volume Growth (Y-O-Y)
First Half 2001
+50%
2000
+32%
Performance versus Acquisition
Net Sales ($m’s)
2000
Actual
2000
Index vs.
Acq. Case
Acq. (%)
155
124
125
51
OUTLOOK
• Economic uncertainty ahead
• Further acquisitions announced
• Remain confident re 2001 targets
• Growing for Value important for the longer term
52
2001 INTERIM RESULTS
53
2001 INTERIM RESULTS
Supplementary Data
54
2001 INTERIM SALES
Continuing Operations
£ million
N American Beverages
European Beverages
European Confectionery
Americas Confectionery
Asia Pacific
Africa, India, Mid East
Central Costs
Continuing Operations
2000
Increased Acquisitions
Activity
Exchange
Effects
2001
649
23
249
80
1001
220
9
0
9
238
609
3
58
10
680
115
0
3
8
126
240
15
37
(16)
276
118
18
6
(9)
133
3
1
0
0
4
1954
69
353
82
2458
+4%
+18%
+4%
+26%
55
2001 INTERIM BALANCE SHEET
2000
Full Year
£ million
2001
3163
Brands and Goodwill
3364
1815
1106
Fixed Assets
1131
1073
456
Associates & Investments
491
(224)
467
(190)
4762
(1548)
3165
(296)
3214
2869
294
Ordinary Shareholders’ Funds 2898
315
Minority Interests
2468
401
2927
3214
2869
(569)
Gross Working Capital
4156
(1229)
2927
2633
Net Borrowings
2000
56
MARKETING EXPENDITURE
Continuing Operations
£ million
767
887
693
677
475
408
358
319
1997
515
70
357
412
445
336
359
1998
1999
2000
2001
1st Half
2nd Half
Acquisitions
57
2001 INTERIM RESULTS
US GAAP ADJUSTMENTS
£ million
2001
2000
UK GAAP Net Income
201
188
(51)
(41)
5
(5)
155
142
Adjustments
- Amortisation of Intangibles
- Other
US GAAP Net Income
58
2001 INTERIM RESULTS
US GAAP
2001
2000
Net Income per ADS*
UK£
0.31
0.28
Underlying net income per ADS*
UK£
0.31
0.28
Converted into US $ at
period end closing rate
US$
0.43
0.43
1.40
1.52
Exchange Rate £1
*One ADS represents four ordinary shares
59
EXCHANGE RATES
Average Rates vs Sterling
Average
2001
2000
US $
1.44
1.57
8%
Canadian $
2.21
2.30
4%
Euro
1.60
1.64
2%
Australian $
2.74
2.57
(7%)
South African Rand
11.41
1.29
(11%)
Mexican Peso
13.64
14.93
9%
%
Change
60
2001 INTERIM RESULTS
61