We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Experian - Broad based organic growth

Equity research team | 18 January 2017 | A A A
Experian - Broad based organic growth

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Experian Plc Ordinary USD0.10

Sell: 3,489.00 | Buy: 3,490.00 | Change 39.00 (1.13%)
Chart View factsheet

Market closed | Prices delayed by at least 15 minutes | Switch to live prices

Total third quarter revenues grew 6% at constant exchange rates. Organic growth of 4% was driven by strong performances in the Credit Services, Decision Analytics and Marketing Services divisions. This more than outweighed an expected decline in Consumer Services, down 7%. The shares fell 1% following the announcement.

Our View

Experian may be best known for providing consumers with credit scores - but that's an increasingly small (and challenging) part of the business. Providing credit data to lenders remains the group's core business but it is increasingly turning its data mining expertise to marketing and analytics.

The group continues to deliver consistent mid-single digit revenue growth, despite competitive pressure in the US and UK consumer businesses, and a prolonged recession in Brazil (which accounts for 88% of Latin American revenues).

If we had a complaint, it's that margins have remained stubbornly flat. Experian should be a highly scalable operation, but increased regulatory costs, amongst other things, have held it back. Fortunately the group has the size and expertise to handle the burden and still invest to defend and grow market share.

The group is rolling out new services in Latin America, where more than 90% of current revenues come from providing credit services to institutions like banks. Initial performance has been strong, and with a consumer offering in the pipeline, the market looks to have plenty of potential.

Despite a considerably improved performance in the last 18 months, the group sees fewer synergies between its email/cross-channel marketing operations and the rest of the business. As result it announced its intention to sell the division back in November. The group is yet to confirm what it will do with the cash, but we'll be interested to see what path it takes when the sale is eventually completed - further share buybacks or M&A are both possibilities.

At 20.1 times expected earnings, Experian trades on a lofty rating, although analysts expect both earnings and dividends to increase in the coming years. The group offers a prospective yield of 2.3%, and has grown the dividend every year since listing in 2006.

Third Quarter Results

All regions saw positive organic growth at constant currency, with strong performances from Latin America (+8%) and EMEA/Asia Pacific (+6%).

North America, the group's largest division, saw organic revenue grow 3%, driven by Credit Services. Latin America delivered robust growth in the Decision Analytics and Marketing Services, up 48% and 55% respectively, while EMEA/Asia Pacific also saw positive performances in these two divisions.

Experian reports results in dollars, and as a result the fall in sterling has negatively impacted reported results. UK and Ireland revenues are down 17% on a reported basis, despite organic growth of 2%. However, this move has been partially offset by strength in the Brazilian Real, resulting in reported revenues from Latin America rising 22%, versus 8% organic growth.

On the 31st December 2016 the group had completed $324m of its planned $400m share buyback.

If current exchange rates prevail through to the end of the year, the group expects a resultant headwind of around 1% to benchmark EBIT.

Unless otherwise stated, all estimated figures, including prospective dividend yields, are taken from a consensus of analyst forecasts compiled by Thomson Reuters. These estimates should not be taken as a reliable indicator of future performance.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.