Investment Column: Polished performance for Reckitt

Positive news keeps Stagecoach steady; Public sector still provides a solid base for Tribal

Stain removal and loo cleaning may be mundane activities to most, but Reckitt Benckiser, the household goods company behind brands such as Harpic, Vanish and Finish, is delivering spectacular results. Yesterday it gave its share price another polish, saying it had made a strong start to 2004.

The group yesterday reconfirmed its target of 5 per cent revenue growth for this year, coupled with double digit profit growth, after revealing that sales for the first quarter were up around 12 per cent. Profits for the first quarter were more than 20 per cent higher.

This growth is mainly down to the launch of two new products - Vanish Oxi Action for removing stains and Lysol Ready Brush for cleaning toilets. These have been selling well and coincided with its predictably strong seasonal sales of flu remedies in Britain and pest controls in the southern hemisphere.

The company has been increasing the amount it spends on marketing its 15 fastest-growing brands. Margins are still holding up well, through cost savings such as reducing the amount of plastic used in bottles and standardising packaging around the world. While rumours abound that Reckitt is set to bid for SSL International, the Durex manufacturer, Reckitt is by no means dependent on an acquisition. It throws off plenty of cash each year, and is in the process of returning £250m to shareholders. This will also prop up earnings.

At the end of last year, this column thought that 940p seemed a little high to buy in, on the view that the gloss of its 2003 results would wear off. That was clearly an overly cautious view, but the question remains as to whether, at 1,439p, there is any more growth in the shares still to come. On yesterday's figures, most analysts were upping their forecasts, and there seems little that will dent the shares in the short term.

Reckitt has consistently outperformed. Those that have stuck with the shares should hold on for another good year.

Positive news keeps Stagecoach steady

A chastened Stagecoach yesterday said that it is to return £250m to shareholders. That news, along with the announcement that full-year results will be ahead of City expectations saw the shares close up 8 per cent at 87.5p.

The bus and rail company's disastrous £1.2bn Coach USA acquisition in 1999 has put the company off trying to grow by buying businesses. Instead, we have a story that relies on organic growth. The group has some 16 per cent of the UK bus market and it has the South West Trains franchise, as well as 49 per cent of Virgin Rail. Stagecoach has a few remaining operations in America, but the rest of Coach USA has been sold off.

Other foreign operations have also been divested, including City Bus in Hong Kong, although there remains a presence in New Zealand.

The company said South West Trains' full-year profits would be "comfortably ahead" of last year's £38.2m. Virgin will report a profit in the second half, against previous expectations of a loss. Also net debt, at £100m, is significantly lower than market expectations.

All of this positive news, plus the current corporate view on acquisitions, means that the company can return £250m, probably through a special dividend worth 18.9p a share. Stagecoach will have to gear up to return the money so there are obviously some risks in that, especially to the company's ability to respond to unexpected events.

Stagecoach shares closed last night on a forward multiple of 14 times revised earning expectations, which seems about high enough. Hold.

Public sector still provides a solid base for Tribal

Since this column tipped Tribal Group in November, the company's reputation has taken a battering.

A February profits warning showed that it is not immune to the pitfalls of its chosen area of business: providing services to the public sector. The company then announced that it had ended talks on a £300m NHS contract. The deal would have provided a nationwide chain of treatment centres but Tribal withdrew from negotiations after the brief was changed.

However a trading update yesterday, ahead of full-year results, provided some reassurance. The company said it would meet the lower forecasts set in February, and there have been improvements elsewhere.

As Evolution Beeson Gregory, the broker, noted yesterday, what the market had feared was a "negative spiral developing" as has been the case with other acquisitive companies. That fear was laid to rest. In fact Tribal announced a small acquisition: a software business for an initial £2.7m.

Despite the risks and frustrations of dealing with the public sector, the state remains a very good bet as a source of revenues. The shares, at 229p, much cheaper than when recommended in November, remain a buy.

News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
i100This Instagram photo does not prove Russian army is in Ukraine
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
News
Morrissey pictured in 2013
people
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
art
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
Field of broken dreams: Andy Bell visits Passchendaele
news5 News's Andy Bell visited the killing fields of the Great War, and his ancestor - known only from his compelling war diary - came to life
Travel
travel
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In my grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel