If the logic of Cadbury Schweppes’s demerger was to bring the strengths of its confectionery business to the fore, it appears to have worked.

Yesterday, in its first trading update since spinning off Dr Pepper Snapple through a US listing, Cadbury raised its sales guidance for the second time in five weeks. The company, which with the exception of its rump beverages business in Australia is now a pure play on chocolate and gum, reported that sales growth in the second quarter was above the 7 per cent reported for the first three months of the year. Last month it said that first-half revenue growth would be above the top end of the 4 per cent to 6 per cent forecast.

Trading in the Americas was “excellent”, it is taking market share in Britain and sales in emerging markets are rising in double digits. Further, despite an increased marketing spend, operating margins have risen by at least 1.5 percentage points – indicating that Cadbury is successfully recovering higher raw material costs, which it expects to rise by 5 per cent to 6 per cent this year.

The bigger question hanging over the numbers is whether last month’s $23 billion (£11.7 billion) tie-up between Mars and Wrigley – which in sales terms will leapfrog Cadbury to become the world’s largest confectionery group – will induce the slimmed-down British company to bulk up once more. The favoured theory – evident in Cadbury’s rich forward earnings multiple of 21 times – is that it might seek a merger with Hershey of the US, despite noises to the contrary from Todd Stitzer, chief executive, and from the chairman of the Hershey Trust, which would have the ultimate say. Failing that, Kraft is seen as a possible partner.

Cadbury insists that its strategy is unchanged. Indeed, Mars’s swoop on Wrigley might be seen as a belated endorsement of Cadbury’s “total confectionery” model, through which it broke into the high-growth chewing gum market four years ago with the purchase of Adams. Further, it has the fastest projected earnings growth among the major European food producers: a forecast 13 per cent this year and next.

The problem for investors is that, notwithstanding the momentum behind both sales and profits, the share price is assuming a takeover that may not emerge. Cadbury may embark on the acquisition trail itself.

The other worry is potential pressures on trading. Burgeoning emerging market growth has underpinned Cadbury and its peers for the past four years. However, as UBS this week observed, that growth could be slowed by the erosion of consumers’ purchasing power in those territories by food and fuel price inflation. There is also the risk that raw material price rises, particularly that of cocoa, will outstrip expectations in the second half of this year. At 628p, Cadbury can be no more than a hold.

Accsys

Accsys Technologies’ product may be wood – or more specifically a process of wood preservation – but its business model is closer to a drug developer or a semiconductor designer than a supplier of timber. The AIM-listed company owns the rights to a chemical treatment that gives fast-growing softwood the strength and durability of tropical hardwood – providing a non-toxic substitute for increasingly scarce and expensive hardwoods used in windows, doors, decking and cladding and energy-intensive alternatives such as metal and PVC. Rather than treat the wood itself (which would be capital intensive and require shipping it great distances), Accsys has opted to license the technology to regional partners under long-term royalty agreements.

The drawback for the stock market – the shares have fallen one third since last year’s equity fundraising – is that its technology is still at an early stage of commercialisation.

However, as yesterday’s full-year results show, Accsys is making steady progress: it has secured licences in China and the Middle East, made a maiden €7 million (£5.5 million) profit and is sitting on €46 million of cash – such that it is paying a dividend, albeit a nominal one. It is confident of securing additional licences within six months. However, as with a drug developer or a semiconductor designer of similar maturity, Accsys sits at a steep multiple: 28 times current-year earnings at yesterday’s €2.75. Further, Accsys’s principal end-market – construction – is faltering just as its methods gain wider acceptance. There will be better times to buy.

Norcros

When Norcros delisted nine years ago, it did so amid frustration that the stock market was failing to value it correctly. To judge by its performance since regaining a quote last summer – its shares have fallen 67 per cent to touch a new low yesterday – the owner of Triton showers and Johnson tiles might be tempted to do so again. But whereas it was the dot-com boom that depressed Norcros’s valuation last time, the sell-off of the past year appears to have stronger foundations.

First, under its eight years of private equity ownership, the company has been heavily geared: it left the stock market with £12 million of net debt but now has £47 million – more than the value of its equity. Second, Norcros’s prospects have fallen sharply since last summer, and are getting still worse: spending on showers and tiles is closely linked to refurbishment activity, which has yet to feel the full effect of the slowdown in housing transactions. Its South African arm – which accounts for one third of sales – has been hit by higher interest rates and power shortages. At 25½p, or four times current-year earnings, a 13 per cent dividend yield is the sole attraction. But that is insufficient reason to buy.

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