23 February 2012
Q: What’s your take on the financial numbers and is 7% revenue growth enough to meet your profit and earnings targets?
A: Yes, I think these are an excellent set of results, not just in terms of the 11% growth in profits and earnings per share but also in the way we’ve achieved them. We’ve grown market share. We’ve grown share of all our key segments. The volume decline we’ve experienced over the last few years is now moderating and pricing has remained strong, so that gives me a lot of confidence that we can continue to meet our guidance in terms of earnings growth over the years to come.
Q: What was the impact of foreign exchange over the year for the business?
A: Foreign exchange was essentially flat over 2011 but we did get an appreciation of Sterling in the last few months of the year particularly against some of our commodity currencies like the Real and the Rand, so that will leave us with a bit of a headwind for FX going into 2012. It’s a little early to talk about the exchange rates for 2012, but compared with, say, a constant currency EPS, it would affect us by about 3.5p if current exchange rates were maintained for the rest of the year.
Q: On operating margins you’ve guided towards a 50 to 100 basis point expansion but have exceeded this in 2011. What was behind the margin improvement?
A: Well it’s been a lot of hard work. Operating margin has gone up by 230 basis points in 2011. Some of that was the benefit of some businesses we disposed of in 2010 so that amounted to about 90 basis points and FX worked for us this time in terms of operating margin and that accounted for about 30 basis points. But underlying constant currency, operating margin was up by 110 basis points last year and that’s an extremely good performance.
Q: So you’ve hit your 35% target a year early and you’ve met your £800m cost savings target two years early. Are you still less efficient than your peers and what’s the next target?
A: Well I like to talk in terms of operating margin increases and we’ve said now for a number of years that we’ll grow our operating margin by 50 to 100 basis points a year and that target remains very much in place and we’ll stop that when I believe we’ve reached the level of efficiency that we ought to reach. That will be when our margins are lot closer to those of our peer group.
Cash and balance sheet
Q: You’ve launched a EUR600m 10 year bond in the middle of quite sizeable market turmoil. Why did you decide to bolster your balance sheet in this way?
A: Well we took advantage of relatively low interest rates and also to push out the debt maturities and it allowed us to refinance a maturing piece of debt that was coming up.
Q: You also said you would look at the share buyback programme at the full year, so what are you announcing today?
A: Yes, we’re announcing an 11% increase in our dividends today and also an increase in the share buyback programme from £750m to £1.25b. That allows us to return most of our free cash flow to our shareholders and at the same time retain a very strong balance sheet which I think in the current economic climate is the right thing to do.