Five stocks to watch in May


Anpario reported sales up 2% to 31 December 2014 in its full-year results to December 2014. Using constant exchange rates revenues were up 6%.

The difference was down to the strength of sterling, which reduced the value of Anpario's overseas earnings, and the fact that Anpario's US dollar revenues increased most, by 27% in 2014. Lower costs enabled the company to achieve an adjusted profit 14% higher than in 2013, despite the strong pound.

Anpario remains cash rich and debt-free and the new financial year has started well, according to chairman and majority shareholder Richard Rose.

Anpario manufactures natural animal feed additives in Worksop; it sold them to 71 countries in 2014. The additives promote animal growth by improving health.

Although they are more expensive than antibiotics, the use of antibiotics as growth promoters was outlawed in the EU in 2006, and is under pressure from the US Food and Drug Administration and consumers in the US.

Although enforcement is patchy, large meat producers supplying these markets and their own growing internal markets are seeking alternatives, which is why Anpario is focusing on the largest pig and poultry producers in China, Brazil and the Americas. It's the potential of these markets, responsible for half of global production, that attracts investors.

A share price of 310p values the enterprise at £61 million, about 22 times adjusted profit in 2014. The earnings yield is 5%.


In the full year to December 2014, market research firm BrainJuicer raised revenue by 1% and adjusted profit by 19%. The company's underlying performance (a 5% increase in revenue) was better, but the value of the majority of BrainJuicer's revenue and profit, which is earned abroad, was reduced on conversion into sterling. BrainJuicer also maintained a positive cash balance despite raising its dividend 11% and paying a special dividend.

The results were further muted by a 28% fall in revenue from BrainJuicer's small qualitative research arm, Juice Generation, and the failure30to convert its new 'preferred supplier' status with large consumer companies into significant quantitative research business.

Juice Generation is BrainJuicer's qualitative research arm and revenues from it are more volatile because projects can be large and of limited duration. But they can open the doors of marketing departments that might become customers of BrainJuicer's higher-margin quantitative products.

So far, becoming a preferred supplier of market research to large businesses has not delivered the millions of pounds that might have been expected from each new relationship, but BrainJuicer believes this is a matter of time.

A share price of 390p values the enterprise at £49 million, or about 13 times adjusted profit in 2014. The earnings yield is 8%. That's pretty good value, even if growth comes in fits and starts.


Dialight's full-year results for the year to December 2014 were a partial return to form for the manufacturer of LED lighting systems. Revenue increased 22% and adjusted operating profit increased 30% compared to 2013, when revenue and profit fell markedly for the first time since the launch of its first industrial light in 2009.

Because of superior performance, LED lighting is replacing traditional incandescent and fluorescent lighting. Dialight's disappointing performance in 2013 was mainly due to delayed contracts in another division. The lighting division grew revenue by 50% in 2013, and 46% in 2014.

However, profitability has not been fully restored to the go-go levels Dialight achieved in 2011 and 2012, and cash flow is very low relative to accounting profit, as Dialight spends on stock to meet its growth expectations.

The company is targeting demanding lighting environments such as mines, oil rigs and factories, where the reliability of its technically advanced products is most appreciated.

As with the rapid adoption of any new technology, there are two big concerns. The first, competition, is already evident in markets for less demanding applications such as traffic lights, although the company expects innovation to keep it ahead in markets where specifications are more critical. The second concern – what happens when all its customers have super long-lasting LEDs – may be far away. The company says market penetration of LED lighting is in the low single digits.

A share price of 800p values the enterprise at £272 million, about 17 times adjusted profit in 2014. The earnings yield is 6%.


In full-year results for the year to December 2014, Sagentia saw a 7% decline in revenue and a 9% decline in adjusted profit. Net cash increased 20%.

The research and development consultancy earned 78% of its revenue abroad, most of it in North America, and it would have grown over the year but for the higher average US dollar/sterling exchange rate, which reduced the value of reported revenue and profit.

The company rents out its 150-odd scientists to work on a wide range of projects for companies in the health, consumer, industrial and oil and gas sectors. Mostly they work on research and development projects, from initial concepts up to the point of manufacture.

The acquisition of OTM, an oil and gas -20 consultancy, in 2013, and Oakland – which like Sagentia is based in Cambridge – last month, -30 has resulted in the formation of a smaller technology advisory division, which also includes-50 another Sagentia business, HealthTech Advisory. The advisory businesses work on smaller fixed-fee projects, using Sagentia's commercial and scientific know-how to help technology businesses with research, development planning and strategy.

Sagentia is developing a reputation for commercial innovation. This, combined with its proximity to Cambridge, helps it to attract good scientists (who are well-rewarded), and means it is probably creating a virtuous circle.

A share price of 145p values the enterprise at £39 million, or about 10 times adjusted profit. The earnings yield is 10%.


Printhead manufacturer Xaar is demonstrating its credentials as a boom-bust stock. It posted a 20% decline in revenue and 33% fall in adjusted profit in full-year results to December 2014, as the company grappled with conditions in China, where slowing property and construction markets reduced the demand for ceramic tiles with patterns printed by Xaar's digital 1002 printhead. Nearly half of the world's ceramic tiles are manufactured in China.

The rapid co-1n0version of tile decoration from traditional printing to digital inkjet continues, and buoyant markets caused a dramatic surge in profitability in 2012 and 2013. But that was reversed in 2014. Xaar earns 71% of revenue from industrial applications, of which 95% relate to ceramic tiles.
Heightened competition also forced Xaar to reduce prices. Nevertheless, Xaar achieved a 20% return on capital in 2014, and although the cash balance fell 12% it is still quite sizeable. Xaar expects £90 million in revenue in 2015. Although that would be £19 million lower than 2014, it would mark a return to stability.

Stability is not guaranteed though. Xaar describes the Chinese tile market as volatile, and the company is paying for under-used capacity it will need when growth returns.

Longer-term, the company's prosperity rests not only on recovery but on commercialising new markets with new iterations of its current technology and next generation 'Thin Film' technology, dubbed P (for platform) 4.

A share price of 410p values the enterprise at £288 million or about 15 times adjusted 2014 earnings. The earnings yield is 7%.

Profitability in 2014 was very close to the long-run average including even grimmer years in 2008 and 2009. On that basis, the shares are flirting with value territory.

This feature was written for our sister publication Money Observer