Cadbury Schweppes has admitted that its performance is still being hit by problems with a huge IT implementation in 2005.
The company announced a tough cost-cutting regime, alongside plans to sell off the Schweppes drinks empire and focus on its key confectionery business last week.
Cadbury’s cost-cutting measures will include additional IT and back-office process outsourcing as well as the closure of around 10 plants.
The firm is expected to axe 7,500 jobs in total and will take an exceptional £450 million charge for restructuring costs, which are also set to require capital expenditure of £200m over the next three years.
Announcing its new strategy issued ahead of its interim results, which are expected in August, Cadbury said it aimed to boost performance as well as reduce costs.
The chocolate maker admitted that IT problems were still holding it back, saying it expected improved profits from its UK and Ireland confectionery business “where performance has been below expectations as a result of the IT systems implementation in 2005 and the product recall in 2006”.
This is the second year running that Cadbury has been forced to admit that the 2005 implementation of its Probe IT overhaul has harmed performance.
In June last year, chief executive Tod Stitzer admitted the IT problems had contributed to a £12m deficit.
Stitzer said there had been manufacturing and supply chain problems after the implementation of the £200m five-year global IT programme, originally aimed at consolidating IT systems across the giant Cadbury Schweppes group.
Probe aimed to create an integrated system based on SAP’s enterprise resource planning system for sales, finance, planning, manufacturing, distribution, marketing and purchasing. The project was also expected to produce £500m efficiency savings.
But implementation problems caused an excess of stock, which then had to be sold at a discount, leading to losses for the firm.
Ironically, the move to rationalise Cadbury Schweppes’ IT systems through the Probe project was prompted by the need to pull together the fragmented infrastructure amassed by the firm through a string of acquisitions. The planned sale of the Schweppes drinks arm means company will now have to carefully separate its IT systems from those of the confectionary enterprise.