Cadbury Schweppes Annual Report and Accounts 2006

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In 2003, we set out to transform our performance and create a stronger business, better able to deliver superior and sustainable returns. This meant simplifying our structure and improving our management and capabilities. We also needed to reduce our costs and realise synergies from the Adams acquisition to improve our margins and allow us to reinvest in generating a step-change in revenue growth.

We set five goals to focus our energy and measure our performance, both internally and externally. Since 2003, we've made good progress against these goals. We delivered above average returns to our shareowners and improved our structure, culture and capabilities. We now have much stronger confectionery and beverages businesses and enhanced capabilities to support them.

We also set three financial goals in 2003, for sales, margin and cash flow. We delivered much improved revenue growth in line with the goals we set and improved cash flow generation.

Although we improved our margins, our margin performance was below the goal we set ourselves, because of significant increases in raw material costs in each of the last three years, events in the UK and Nigeria and our continued investment behind revenue growth.

How we've performed against our financial goals:

	2003 Financial goal	2004-2006
Revenue growth	3-5% p.a.	5.1% average p.a.¹
Margin growth	50-75bps p.a.	27bps average p.a.
Free Cash Flow generation²	£1.5bn in 2004-2007	£1.0bn in 2004-2006

2006 performance against goals and priorities

In October 2003, following the acquisition of the Adams business, we set our five strategic goals and ten priorities for 2004-2007, to focus our effort and resources on a small number of clear objectives. This review focuses on our performance against our goals and priorities in 2006.

We made significant operational and strategic progress despite challenges in our Europe, Middle East and Africa region.

In the discussion of our business performance we describe the year-on-year change in our financial performance. In order to highlight the Underlying like-for-like performance of the business this excludes the effects of restructuring costs, amortisation and impairment of intangibles, non-trading items, exceptional items, IAS 39 adjustment and the tax impact of these items. We also show the movements after allowing for the effects of exchange rates, acquisitions and disposals.