Cadbury ahead by 6% but margins slip

A BUMPER final quarter - helped by British shoppers who bought chocolates as cheap last- minute Christmas presents - underpinned a modest profits advance at Cadbury Schweppes, the sweets and fizzy drinks company.

Taxable profits rose 6 per cent to pounds 332m for the 12 months to 2 January. But overall profit margins slipped back to 11 from 11.1 per cent, reflecting tight operating conditions worldwide.

Trading profits in the UK, Cadbury's most important geographical earnings base, rose 7 per cent to pounds 172m. Dominic Cadbury, chief executive, said that momentum built by Christmas sales ran into the new year as shops had to restock shelves.

Total profits from UK confectionery fell from pounds 84m to pounds 83m, although the 1992 figure was depressed by a pounds 14m restructuring charge. Excluding this, the division's profits jumped 15 per cent.

In contrast to the better-than- expected performance at home, Cadbury had harder times in Continental Europe. Trading was particularly difficult in Spain, where profits fell pounds 19m as the company faced a concerted marketing push by Nestle. The Spanish economy cooled in the latter part of the year after the excitment generated by the Barcelona Olympic games.

Total trading profits from the Continent slumped 35 per cent to pounds 49m, down from pounds 76.2m.

Profits also fell in the Pacific Rim trading areas, but support was drawn from the Americas, where Cadbury had the benefit of a first-time contribution from Aguas Minerales, the Mexican drinks business it bought for pounds 184m in April last year.

Sir Graham Day, chairman, who is also head of the electricity generator National Power, said: 'Our 1992 results are a creditable performance in a year when most of the major markets in which we operate were in recession.'

While pre-tax profits rose, earnings per share dropped 2.5 per cent to 26.8p. Retained profits, the figure on which earnings per share are calculated, also rose but the Aguas acquisition increased the number of shares in issue.

The company said the Aguas purchase had a positive effect on profits and blamed the decline in earnings per share on the pounds 14m restructuring cost in UK chocolate manufacturing.

By adopting the new FRS3 accounting standards, Cabury was obliged to include the one-off cost in earnings per share. Without that cost the company said earnings would have risen 3 per cent.

The results prompted a series of profit upgrades by stockbrokers' analysts. BZW and Nomura now believe Cadbury will make pounds 400m pre-tax this year. David Lang, the top-rated food manufacturing analyst at Henderson Crosthwaite, believes that restructuring costs in Spain will limit profits to pounds 385m.

The generally optimistic City sentiment pushed the shares up 14p to a record high of 508p. The final dividend of 9.9p, up 6. per cent, made a total payment for the year of 13.2p, 5.6 per cent higher than 1991.

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