MARKET COMMENT
Sweet, Safe, Steady, Buy

By Maynard Paton (TMFMayn)
July 23, 2003

Those hunting for a stock market safe haven must look at Cadbury Schweppes (LSE: CBRY)(NYSE: CSG). Though today's interim results showed profit growth stalling, the chocolate and fizzy drinks group remains an archetypal buy and forget investment. At today's price, the shares look sweet for a blue chip portfolio.

Cadbury themselves described the six-month performance as 'reasonable'. Buoyed by the $4.2b acquisition of US gum firm Adams, sales improved 15% to £2.7b. Underlying profits though fell 5% to £365m as Cadbury's US drinks businesses encountered various difficulties. But even with a 'very cold' winter and contract issues with a major customer, beverages such as Dr Pepper and 7Up can still generate margins of 29%. The dividend was raised 4% to 3.65p per share.

Cadbury investors should not expect a sudden return to earnings growth. In the short term,  'flat to modestly improved' profits are expected from most of the company's main divisions. Also, a group restructure and the bedding in of the Adams business will keep management busy for the rest of the year. Still, Cadbury remains a sizeable player in the global confectionery and soft drinks industries, and its many popular brands should underpin steady-but-spectacular progress over time.

Based on broker forecasts made before today's results, Cadbury's 350p shares trade on a forward price to earnings ratio of under 12 and carry a dividend yield of 3.4%. The present rating is cheaper than that witnessed during the 'old economy' trough of early 2000 and, in fact, is the most seen attractive at any time for at least the last five years. These shares are ones to buy and tuck away.