It is not just banks and hedge funds that have been suffering from the fallout from the US sub-prime mortgage lending downturn. Credit reference agencies have been caught up in it too.

That much was evident from yesterday’s first-quarter update from Experian, the £6.5 billion business information group spun-off from GUS last October. Sales at LowerMyBills, its US online lead generation service, which directs customers from search engines to potential loan providers, saw its sales fall 20 per cent year-on-year, a sharp acceleration from an 8 per cent drop in the previous quarter.

But the impact on Experian should not be overstated. The company says the US sub-prime market has now stabilised, meaning that the three months to June 30 should prove the low point. It has also been busily diversifying away from sub-prime to prime and credit card-based lending, such that the former has fallen from 85 per cent as a percentage of LMB’s sales to 70 per cent now. Based on the current pipeline, that proportion should fall to 50 per cent in the second half of the year.

More to the point, LMB accounts for only 2 per cent of Experian’s sales. The rest of the company’s interactive businesses continue to grow strongly, such that, despite the drag of LMB, the division’s organic sales rose by 10 per cent.

There was little to disturb elsewhere in the statement. Underlying growth across the group was 7 per cent in the first quarter, in line with forecasts and matching the pace of the previous quarter. Further, Experian continues to predict a pickup in sales in the second half.

But yesterday’s update also indicated the extent to which Experian is insulated from any slowdown in consumer finance. Despite a clampdown by high street banks on unsecured lending, underlying sales in the UK and Irish Republic were up 6 per cent year on year. It seems that, rather than concentrating on customer acquisition, banks are spending more time cross-selling products, collecting credit and reviewing their loan portfolios more frequently. Ironically, these activities create demand for Experian’s services that are typically higher margin than those for straightforward loan origination. Elsewhere, Experian has just completed the $1.2 billion purchase of a 65 per cent stake in Serasa, Brazil’s biggest provider of consumer credit data. Here, sales are rising at 20 per cent a year, while the country’s demographics – 34 per cent of its 190 million population are under 19 – promise long-term sustainable growth.

But Experian remains something of an oddity within the FTSE 100, hampered by a lack of domestic peer group comparisons – the US, by contrast, has the likes of Equifax, Fair Isaac and Harte Hanks – and poor investor understanding of what is a complex business. That means that, at 19 times 2007 earnings, Experian is undervalued for a company with strong cash flow and high operational gearing. All the more so given recent private equity takeovers of rivals Acxiom and First Data that would also appear to make Experian vulnerable to similar approaches. Buy at 616p.

StatPro Group

This AIM-listed software provider has more reason than most companies to please its professional investors. They are also its customers. StatPro, founded in 1994, develops computer programs that enable fund managers to analyse the performance of their portfolios, calculate returns and manage risk.

As such, it has benefited both from the long-term growth and increase in diversity of assets under management, as well as higher spending on technology as money managers seek to improve efficiency and comply with tighter regulation.

But StatPro stirred unease in their ranks this year after its £27 million acquisition of FRI, a Canadian provider of fixed-income bond data, the biggest deal in its history. The purchase saw its proportion of US dollar revenues rise from 15 per cent to 25 per cent, and those in Canadian dollars from 2 per cent to 18 per cent. This, combined with confusion over the revenue recognition policies of FRI, triggered downgrades to its profit forecasts. StatPro’s shares fell 29 per cent in a matter of weeks.

So yesterday’s first-half trading update, in which StatPro said that trading was in line with forecasts, served to reassure. So did its disclosure that it had won a clutch of “significant” contracts.

The rationale behind deals such as FRI, its eighth in six years as a public company, is to increase the cross-selling of acquired products to existing clients. With its customers buying, on average, 1.6 of its products as against the eight on offer, there is clearly scope for that ratio to rise.

Here, it is being helped by regulatory changes such as MiFID, which has increased demand for additional data feeds. After this year’s hiccup, StatPro, up 8p to 93p, sits at 13.3 times 2007 earnings, or 10.7 times 2008.

Too cheap for a company growing organically at more than 15 per cent, with operating margins of 25 per cent and 85 per cent of its revenues recurring. Buy.

Capital Pub Company

It takes a brave man to float a pub business just a few weeks before a smoking ban, but David Bruce and Clive Watson, the founders of the newly listed Capital Pub Company, have been around the block too many times to let such matters interfere with their long-term strategy.

Mr Bruce, who in bygone days founded the Firkin brew-pub chain, and Mr Watson, once of Regent Inns, have seen plenty of ups and downs during their careers, but have enjoyed their fair share of successes, and Capital looks set to be another.

Both men are good at spotting market trends. In its heyday, Firkin’s highly branded approach and puerile sense of humour (everything was Firkin this and Firkin that) secured a loyal following among students and real ale enthusiasts alike.

However, times have changed and today the duo reckon that unbranded, individual freehouses are where it’s at. They are also sticking to Greater London and will buy only freeholds, on the ground that the underlying property value of Capital’s pubs will insure it against any trading vagaries.

In trading terms yesterday’s full-year figures are ahead of forecasts, with sales up 47 per cent to £14.2 million and pretax profits, excluding flotation costs, up 41 per cent to £1.7 million.

Less than two weeks in, it is too early to judge the impact of England’s smoking ban, although the initial signs, despite the dire weather, are positive. Although Capital’s drink-led focus might be expected to make it more vulnerable to the ban, its pubs also do good food and 21 of its 23 outlets have outside areas. The shares, floated at 165p last month, are now at 158p, reflecting smoking concerns. However, with a net asset value of 182p a share and five further pub acquisitions in the pipeline, the downside should be limited. Hold.

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