Along with pawnbrokers and insolvency practitioners, credit reference agencies might sound like a rock-solid recessionary play. The share price of Experian — down by more than half since last year’s high — suggests otherwise.

The problem is that, although credit scorers enjoy a surge in demand when economies turn down — from banks seeking help in managing their loan portfolios and collecting credit — that boost typically fails to offset the loss of business that accompanies better days: bread-and-butter credit origination procedures such as credit card and personal loan applications, mortgage approvals and the like.

This time round, Experian must also contend with a wave of failures and consolidations among banks, which account for about round four fifths of its clients. The short-term effect in the case of mergers can be that banks push for lower prices to reflect the higher volume of business they are putting Experian’s way.

In that light, yesterday’s first-half trading update might have been expected to have been a lot worse. Indeed, underlying revenue growth in the three months to September 30 rose for the first time in five quarters: to 5 per cent, from only 1 per cent in the three months to June 30. Further, underlying sales rose in all five of its divisions. Part of that turnaround can be pinned on a technicality. Having now been part of Experian for more than a year, growth from Serasa, Brasil’s biggest provider of consumer credit data, where sales are rising 18 per cent, can now be deemed underlying.

Yet the improvement is also witness to the shift in demand towards recession-related products, such as software used to identify fraud. Elsewhere, interactive services, which enable consumers to access their own credit scores, continue to grow: up 20 per cent in America and more than 40 per cent in Britain.

There were other developments, not all of them positive. Tight capital markets mean that Experian has been unable to offload PriceGrabber, the American price comparison website that might have been expected to fetch at least $400 million (£231 million). It has sold its French transaction processing business for ¤203 million (£158 million), albeit that the disposal will modestly dilute current-year earnings. Experian has a dominant position in its sector and is highly cash-generative. However, with the effects of the last few weeks yet to be felt and Experian unable to see too far ahead, it feels too soon to call the turn. At 300½p, or nine times earnings, avoid.

Marston's

The problem with Marston’s is not deciding whether it makes sense as a long-term investment, but when to start buying. In April, Tempus recommended the shares, then trading at 196¼p, as a “hold”, only to see them plummet amid a wider sell-off of the pub sector. The question now is how far the decline in the trading environment has to go — and to what extent that is priced into the shares.

The wider economic picture is far from ideal. With recession in Britain inevitable, pub operators, which rely on discretionary spending, are particularly vulnerable. Throw in cost inflation — Marston’s expects an additional outlay of £12 million in the coming year on energy, staffing, food and duty — not to mention the smoking ban and cheap supermarket booze, and these are among the toughest times that the pub trade has ever faced. Marston’s is not the sort of company to obfuscate, as evidenced by its revelation that its managed pub division will need to deliver like-for-like sales growth of

3 per cent to maintain the current level of operating profit. Given that it has just reported a decline of 0.6 per cent in the year to October 4, such a figure seems highly unlikely.

The comfort is that, although highly leveraged (net borrowings of £1.2 billion), Marston’s remains well within its debt covenants and banking arrangements: it has £160 million of headroom on a facility that does not come up for renewal until August 2010. The final dividend also appears safe for now, which, at a forecast 13.3p for the full year, gives a yield of 12 per cent on yesterday’s close. At 112p, an eight-year low, the shares trade on less than five times 2009 earnings, but with forecasts likely to fall, they can be no more than a hold.

Pure Circle

A company that produces a high-intensity extract from a plant native to South America is not the sort of venture you might expect to find listed on the London Stock Exchange — but Pure Circle’s raw material is the stevia leaf, a sweetener used for centuries by the Guaraní tribes of Paraguay, and its product is Rebaudioside-A, or Reb-A, a zero-calorie alternative to sucralose and saccharin that has been sold to Cargill and is now drawing interest from PepsiCo and its peers.

The early stage of Pure Circle’s development — operating profits of $6 million (£3.5 million) on sales of $33 million — means that yesterday’s maiden full-year results were of only passing interest, other than confirming that the bulk of last year’s IPO proceeds ($44 million in cash) are still in place. More eagerly awaited is the imminent decision of the Food and Drug Administration on whether to clear Reb-A as a safe ingredient for the American market. With Reb-A already approved in Switzerland, Australia and New Zealand and the six-month deadline on the FDA ruling only weeks away, the signs appear to be good. The clear opportunity is for Reb-A to gain acceptance as a “natural” additive to soft drinks — a sector sorely in need of innovation to arrest falling sales — and as a complement to sugar, a market worth $50 billion. Pure Circle, a refining and sales operation, has access to much of the world’s stevia crop and strong ties to likely customers. At 154½p, this is a high- risk stock whose prospects will soon become clearer. A speculative buy.

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