Cadbury Schweppes, under pressure from US corporate raider Nelson Peltz to improve performance, disappointed investors this morning saying there would be no bonus payout to shareholders from the demerger of its US drinks business, Dr Pepper Snapple Group.

Mr Peltz, who forced the spin-off of the drinks business, holds 4.5 per cent of Cadbury’s whose shares fell 6 per cent to 578p in early trading today. He wrote to the Cadbury directors in December threatening to become more active if Cadbury did not return money to shareholders.

Cadbury had previously indicated it would return cash if there was surplus from the demerger, but said today the cost of sourcing debt in turbulent market conditions meant there would be none to distribute.

The company said that it would instead have to reduce the amount of debt on the balance sheet of its US business in order to retain a respectable credit rating.

It is due to float Dr Pepper Snapple business on the New York Stock Exchange by June this year.

Cadbury said: "In the light of current turbulent conditions in the debt markets, particularly the cost and availability of sub-investment-grade debt, it has become clear that both companies can only be financed economically by implementing investment-grade capital structures.”

Cadbury disclosed the news with underlying pre-tax profit for the year to December 31, which fell 2 per cent to £915 million. The market had expected an underlying profit of £929 million.

Revenues rose 7 per cent to £7.97 billion, the largest gain in a decade.

While underlying confectionary profit margins were up 0.3 percentage points, margins fell in the Dr Pepper Snapple business and the company said they were unlikely to recover until 2009.

Underlying margins in its US drinks business were down 0.34 percentage points last year, reflecting acquisitions in the bottling business and losses arising from the launch of its Accelerade drink.

Cadbury expects to increase underlying confectionary sales at the upper end of its 4 to 6 per cent target range in 2008 while beverage revenues are expected to rise by between 3 and 5 per cent this year.

"We are making good progress on our cost reduction initiatives and expect to deliver significant cost savings during the year. As a result, we expect to report meaningful margin progression in 2008 in line with our mid-teens margin goal by 2011," the group said.

Cadbury confirmed today that when the business is split in two, deputy chairman Roger Carr would become chairman of the confectionary company while Wayne Sanders, former head of Kimberly-Clark, will become chairman of Dr Pepper Snapple Group.

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