Triple boost helps Reckitt clean up

Dicom's return to form is not tempting; Don't make a meal of Northern troubles

The household products group Reckitt Benckiser is scrubbing up well. Latest trading figures have prompted it to raise its already ambitious targets for the year.

Net revenue is now scheduled to rise 7 per cent rather than 6 per cent, while net income will climb 18 per cent rather than 14 per cent. Since these targets have been met in the first nine months of the year and its chief executive, Bert Becht, must have a fair idea how the group got on in the tenth, it will take an unexpected disaster for things to go down the pan now.

There are three pleasing aspects to the performance. First, the improvement is broadly based, with Dettol disinfectant, Finish dishwasher detergent, Airwick air fresheners, Calgonit scale remover and Wax Strips hair remover all cleaning up.

Second, the juggernaut shows no signs of slowing down. The third quarter was particularly strong, with pre-tax profits up 26 per cent to £167m, taking the nine-month total to £436m, 19 per cent higher than for the same period of 2002.

Third, the main market of western Europe boosted sales by 16 per cent -- 8 per cent stripping out favourable currency movements -- and North America continued to recover as products were launched successfully. Developing markets maintained their momentum.

The wisdom of buying raw materials at favourable prices early in the year helped to boost margins, which meant more could be spent on advertising without squeezing profits.

Last May, we advised readers to wait until the shares dropped a little before buying. Those who took their chance in July at about 1075p are now 200p to the good, with Reckitt adding 29p to 1274p yesterday.

While Reckitt should be a core holding in any portfolio, investors face the same dilemma they were up against in May: the good news has already moved the share price a long way since it hit a low of 940p in March. Once again, there may be better chances to buy as the impact of the results wears off. Don't miss the opportunity when it arises.

Dicom's return to form is not tempting

Along with the rest of the technology sector, Dicom shares have rallied hard this year. But unlike some technology firms still awaiting an accompanying uplift in trading, Dicom seems to be seeing a return to form.

Trading has improved markedly since the end of the Iraq war and it is predicting "good" growth prospects this year in its core business of electronic document capture.

That, to you and me, means it offers companies a service that allows them to collect all their documents - electronic or paper-based - and store them centrally. The technology is hardly a reinvention of the wheel but one, it says, that can help companies save money by making offices more efficient.

Pre-tax profits of £1.5m in the first quarter to 30 September were slightly ahead of the same quarter last year. Sales, stripping out disposals, rose 1 per cent. That might not sound particularly exciting, but given that it is the company's traditionally quietest quarter and given the tough climate, it is not bad either.

While it says its second quarter is usually far stronger, Dicom is still not confident enough to put any material value on its order book. Analysts forecast the company will make profits of about £13m this year. At 677.5p, the stock is on a forward multiple of about 16 times, which is not tempting.

Don't make a meal of Northern troubles

Northern Foods' attempts to be at the top of the food chain have run into trouble in recent times. It has struggled in "tough trading conditions" that saw the company oust its chief executive in September, as profits headed south.

Yesterday, the company, which makes Goodfellas pizza and Fox's biscuits, and is a leading supplier of ready-made meals to the big supermarkets, reported a 16 per cent drop in pre-tax profits to £32.5m for the six months to the end of September, despite revenues rising by 6.5 per cent.

The strong euro and this summer's hot weather helped to drive up raw materials costs that until recently the company had struggled to pass on to its customers.

However, this result was still at the top end of expectations and shares closed up 6 per cent at 143p yesterday.

There is plenty of scope for greater efficiency in a business that has basically been run as 18 autonomous units and a programme of restructuring has begun.

However, the finance director, Sean Christie, says that any "big strategic moves" will have to wait for the arrival of a new chief executive, upon whom much will depend.

The company has a strong customer base and good mix of products. On a forward multiple of 10 times, the shares trade at around the mid valuation in the sector. That seems right for now. Hold.