Experian reported first half revenues of $3.1bn, with organic growth of 16% year-on-year. That reflects a very strong result from the Consumer business, as well as good numbers from the company's business-to-business (B2B) units. Guidance for full year revenue growth has increased to 11-13% (previously 9-11%).
Underlying operating profits increased 25% to $806m, benefitting from restructuring activity in the UK.
The group announced an interim dividend of 16 cents per share, up 10% year-on-year.
Experian shares were broadly flat following the announcement.
Experian's recovery since the first months of the pandemic has been remarkable. Mortgage volumes have held up well in the US, and products servicing the US healthcare market have delivered the steady growth expected throughout the cycle.
The recently revamped Consumer business has been a big winner more recently, after a long period in the doldrums. Credit matching has become more attractive as lending criteria ease and more consumers have been searching for credit cards and personal loans.
In North America, the Consumer division has been helped by the introduction of Experian Boost. Boost allows consumers to add new data sets, such as utilities bills and Netflix subscriptions, to their credit reports. That's likely doing a lot to improve awareness and engagement, while also helping Experian's customers make more tailored credit decisions.
We're particularly encouraged by the improvement in the UK & Ireland seen at the half year. Not only is revenue moving in the right direction, but a far reaching transformation programme means margins have improved substantially.
Longer term, we think the pandemic will accelerate many existing trends, from online shopping to working from home. Most of them generate a huge volume of data or require significant data analysis to function effectively. That can only be good news for Experian.
Historically Experian has been good at exploiting new markets. Newer healthcare and automotive businesses were boosting business-to-business (B2B) sales before the pandemic. While Automotive sales will always struggle in an economic downturn, the new sectors should provide long term growth opportunities. Latin America has also been a particular success, accounting for around 12% of profits despite economic and political turmoil in Brazil, the region's biggest market.
Given the large quantities of sensitive personal data Experian holds, perhaps our biggest concern (aside from a short-term economic slowdown) is the group's exposure to cybercrime. Rival Equifax was caught out a couple of years ago, and Experian was rapped on the knuckles by UK regulators last year for breaching GDPR rules. It's not an insignificant risk and increases in regulatory costs can't be ruled out either.
We suspect regulatory costs are one reason margins have remained stubbornly flat for years. That might be changing, but we remain cautious for now - especially given the company's PE ratio is some 61% ahead of its long run average. Experian has guided for ''strong'' operating margin this year and the group needs to deliver to justify its valuation.
Experian key facts
- Price/Earnings ratio: 36.1
- Ten year average Price/Earnings ratio: 22.4
- Prospective dividend yield (next 12 months): 1.2%
All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
Half Year Results (Constant Exchange Rates)
North America sales came in at $2.0bn, with organic growth of 16% year-on-year. That reflected very strong results from Consumer, up 24% as free membership numbers increased 31% and the group's credit matching services grew. B2B reported revenue growth of 13% - driven by new product take up, expansion into the Automotive and Health space and increased lending. Underlying operating profits rose 21% to $737m.
The Latin America business reported organic revenue growth of 20%, reaching $362m. Consumer led performance, with organic growth of 64% thanks to new product launches. B2B reported 15% year-on-year growth, driven by economic recovery across the region. Underlying operating profit rose 30% to $87m.
UK & Ireland revenues rose 15% organically to $408m, with 30% growth in Consumer and 11% growth in B2B. In both cases this reflected increased lending activity. Operating profits rose 150% to $85m as the groups transformation plan gathers pace.
The EMEA/Asia Pacific region reported revenues of $253m and organic growth of 6%. Operating losses narrowed from $34m a year ago to $21m.
Free cash flow came in at $663m, up from $555m last year. The group reported underlying cash flow, which includes investment in intangibles, of $473m versus $411m a year ago.
The group reported net debt at the end of the half of $4.3bn, up from $4.1bn at the same time last year.
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