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Experian - on track for full year

Growth in the first quarter was in-line with expectations. Organic revenue rose 8%, which excludes the effect of exchange rates...

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Growth in the first quarter was in-line with expectations. Organic revenue rose 8%, which excludes the effect of exchange rates and reflected growth in all regions.

Experian still expects full year organic revenue growth of 7-9%.

Shares were broadly unmoved following the announcement.

View the latest Experian share price and how to deal

Our View

Experian's position as a digital middleman between borrowers and lenders has been a sweet spot as demand for data from both sides continues with strength.

We've been pleasantly surprised by the extent of the success for the Consumer business. This division was given some real TLC in recent years and that work has paid off. We also view this area as a very strong asset for the long term. As people become more financially knowledgeable, with education around personal finance becoming more mainstream, Experian's primed to benefit. Credit matching has become more attractive too as lending criteria ease and more consumers have been searching for credit cards and personal loans.

The threat of global recession shouldn't be ignored, as on one hand, difficult conditions mean people may turn to borrowing, a severe economic shock could see demand for Experian's products wobble. Weak macroeconomic conditions are already denting performance in some core regions.

It's not a totally gloomy picture, while things have slowed, overall we're particularly encouraged by the improvement in the UK & Ireland. Not only is revenue moving in the right direction, but a far reaching transformation programme means margins improved substantially.

Longer term, we think the trends underpinning Experian's business model, like online shopping and working from home, are here to stay. 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. Plus, the group's business products are critical as economic conditions worsen. Effectively evaluating the health of customers is all the more critical for banks and other lenders as belts start to tighten.

Historically Experian's 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 like Buy Now Pay Later should provide long term growth opportunities.

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 has been rapped on the knuckles by UK regulators for breaching GDPR rules. It's not an insignificant risk and increases in regulatory costs can't be ruled out either.

The group's valuation has come under pressure in recent months, which may well reflect concerns over the medium-term economic outlook. We continue to think Experian has a strong product and much improved operating model which should be considered a long-term benefit. However, ups and downs are increasingly likely in the medium-term.

Experian key facts

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.

First Quarter Trading Updates (figures are organic)

North America (65% of group revenue) saw revenue rise 7%, reflecting strong underlying credit bureau volumes, as well as "good" demand for analytics and software, and expansion in health, targeting, automotive and verification services. Business to Business (B2B) rose 5%, while consumer services were up 13%. The stronger growth in Consumer Services reflects a strong showing from Experian's credit marketplace.

There was double digit revenue growth of 18% in Latin America (13% group revenue). B2B revenue rose 15%, while Consumer Services jumped 42% - reflecting strong trading from the group's credit collection and credit comparison marketplaces.

The UK and Ireland (14% group revenue) and EMEA/Asia Pacific (8% group revenue) saw revenue rise 5% and 1% respectively.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

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 disclosure for more information.

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Written by
Sophie Lund-Yates
Sophie Lund-Yates
Lead Equity Analyst

Sophie is a lead on our Equity Research team, providing research and regular articles on a selection of individual companies and wider sectors. Sophie's specialities are Retail, Fast Moving Consumer Goods (FMCG), Aerospace & Defence as well as a few of the big tech names including Facebook and Apple.

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Article history
Published: 14th July 2022