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Cadbury Schweppes (CBRY) – Finals PTP: £915m (£931m) Divi: 15.5p (14p)

A strong second half recovery from the chocolates and sweets manufacturer failed to divert attention away from the absence of an anticipated capital return. When the demerger of the US beverages arm was originally announced the company indicated that it expected to pay a special dividend, which analysts thought would be some 40p. However, finance director Ken Hanna indicated that with the turmoil in the debt market this strategy would have burdened the US business with too much debt. Martin Deboo of Investec thinks that hedge funds had been buying in anticipation of this, but he believes that ‘it is better to have the money in the valuation of the US beverages business than up front in a special dividend’.

Cadbury has an army of over 20,000 private shareholders. The group confirmed to Shares that it realises that they may not want a stake in US beverages and will provide them with a dealing facility.

The group is optimistic about the outlook for the confectionery business, which once again enjoyed an increase in market share. The roll-out of Trident gum has been a spectacular success. Cadbury is trading more successfully in emerging markets such as Brazil and Russia. Margins are benefiting from strong cost control

The company confirmed that the Demerger Circular will be issued next month. The demerger should be completed by the end of June.

The group confirmed that Roger Carr, chairman of Mitchells & Butler (MAB) and Centrica (CNA), will become its chairman too. Martin Deboo is forecasting earnings of 32.4p rising to 35.6p next year.

Shares says: Despite the disappointment over the capital return, defensive qualities make the shares worth holding.

by: John Marshall