Five stocks to watch in May


Every bit as idiosyncratic as its name, BrainJuicer increased revenue 17% after a flat 2012. Adjusted profit increased by more than 100%, bouncing back from a sharp decline. All three financial statements show a company in rude health, cash-rich and able to grow and pay shareholders special dividends.

BrainJuicer uses insights from behavioural science to guide market research. For example, researchers ask people to click on images of human faces in different emotional states while they watch TV advertisements and capture their emotional reaction. The company says emotional responses are more important in predicting an advertisement's success than traditional measures, such as the degree to which the advertisement raises brand aware- ness or persuades viewers.

Early adoption of behavioural science differentiates BrainJuicer from much larger global market research agencies, and the company's rapid, profitable growth suggests customers such as Three Mobile agree that its approach is valuable (BrainJuicer worked on the famous dancing pony advertisement).

The firm was caught out by low demand in November and December 2012. It had recruited and trained staff, and higher costs reduced profit. Staff are BrainJuicer's biggest cost and revenue is unpredictable, so growth is not a given.

BrainJuicer says enthusiasm for behavioural science lends the company credibility. While rivals might add a behavioural gloss to their services, BrainJuicer doesn't believe they will adopt it fully, because that would mean admitting their existing techniques are ineffective.

A price of 540p values the enterprise at £66 million or 19 times adjusted 2013 earnings, giving an earnings yield of 5%. Investors may well be right to expect growth. Being different is good for business.


Churchill China reported a 25% increase in profit and a 4% rise in revenue for the full year to 31 December 2013. The potter raised its net cash balance 12% as it reported a steady increase in production levels, which allowed its factory to operate more efficiently.

Churchill China, a Staffordshire potter, is financially strong and it has been reliably profitable. It has adapted to the twin economic threats of Chinese competition and lower demand for tableware from customers who eat out more often. It now sources some of its range from the Far East.

Churchill China earned 76% of revenue in 2013 from the hospitality sector: pubs and restaurants. It says vitrified pin-fired fine china made in Stoke-on-Trent is more dupable than porcelain, stoneware, and bone china, and more suited to the rigours of commercial kitchens.

Since tableware is a relatively small cost for restaurants and hotels, and durability is a bigger factor, the hospitality industry may not be as price-sensitive as retail - and may consequently be more profitable for the company. Churchill China may also have a local advantage in being able to supply customers readily with matching replacements for broken tableware.

The firm aims to maintain its reputation in the UK and extend it abroad, where the superior performance of the fine china is less well appreciated, though sustained investment in quality and efficiency.

Profits will fluctuate with economic activity, as efficiency drops and compounds falling volumes, but the company is stable and has modest growth prospects over the long term.

A share price of 4501p values the firm at just under £43 million or about 15 times adjusted 2013 earnings (an earnings yield of 7%). It's on the cusp of good value.


EMIS supplies software services and IT to NHS GP practices, pharmacies and hospitals. It has reported double-digit revenue and profit growth, although on a per-share basis, growth was more pedestrian than shareholders are used to. Earnings were diluted because the company raised more than £26 million in a placing, to fund acquisitions that it says will enhance profit in 2014.

These acquisitions tipped EMIS from a net cash position into the red, although the debt is relatively modest and the company has the ability to repay it through strong cash flows.

EMIS's principal service is EMIS Web, a software system that helps GPs and practice managers maintain and use patient records, report on performance, diagnose, and coordinate patient appointments.

Just over half of English NHS GP practices use EMIS Web or will be converting to it shortly from the company's legacy software.

The software was written by two GPs in the 1980s and has developed into the market leader. Customers are loyal: 76% of English practices using EMIS have done so for at least 10 years. However, clinical software used in primary care is funded centrally by the NHS, which means EMIS depends on a big and powerful customer.

The company plans to join EMIS to other services it has acquired, such as Rx ProScript (pharmacy management software used by 35% of high street chemists) and those provided by another acquisition, Aspire, to NHS hospitals. The ultimate goal is a single integrated system that will give medical professionals the information they need to improve health.

EMIS thinks it's in the best position to link up patient records because it operates so many of the software systems involved.

Since flotation in 2010, EMIS has been highly profitable in accounting and cash terms, so its shares aren't cheap at 650p. The price values the enterprise at about £425 million or 21 times adjusted 2013 earnings, an earnings yield of 5%.


Nichols reported sales up 2% and adjusted profit up 9%. The company's net cash balance, even after deducting roughly capitalised operating lease obligations, rose by 61% to £25 million. It earns an extraordinary return on capital, probably because the intangible value of its core product, Vimto, formulated a century ago, is not recognised on the balance sheet.

Nichols puts its performance down to favouring value over volume, although success was not uniform. The profit figure ignores £3.7 million of exceptional costs, £1.7 million in a management restructuring and a £2 million provision for costs it may incur in defending litigation from a licensee in Pakistan.

The Vimto manufacturer owns the Panda brand, and it makes drinks under license from Sunkist, Weight Watchers and Levi Roots. Nichols Dispense is a network of distributors that supplies pubs, clubs, schools and the leisure industry with soft drinks and wine. As the owner of Vimto, Nichols' unique 100-year heritage gives it a strong competitive advantage and, although its other businesses may be more humdrum, the company has a long history of growth.

Perhaps the biggest threat comes from the increasing pressure on beverage companies to reduce the sugar in their products. The government may have to resort to a sugar tax to wean us off it.

A price of 1,000p values the enterprise at £338 million, or 20 times adjusted 2013 earnings, an earnings yield of 5%.


Revenues rose 5% and adjusted profit by 6% at Portmeirion. The company's cash balance has declined, but that was due to the purchase of the lease on its ware- house in Stoke-on-Trent, now recorded as an asset on the balance sheet.

Portmeirion's accounts show none of the scars one might expect from a period of fierce competition, principally from imports, that threatened to extinguish the Staffordshire Potteries.

Today, 44% of revenues come from earthenware manufactured in Stoke-on-Trent, and the rest comes from fine bone china, porcelain, glassware, fabrics 15 and table mats sourced in the Far East.

The company has developed its export markets and seeks to protect its market share through continuous improvements in quality, design and manufacturing efficiency. At a price of 760p, the market values the firm at £92 million, about 15 times  adjusted 2013 earnings or an earnings yield of 7%. Like Churchill China, it's on the cusp of good value.

This feature was written for our sister publication Money Observer