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Experian - on track for full year targets after solid first half

Experian's first half revenue came in at $3.4bn, reflecting organic growth of 5%...

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Experian's first half revenue came in at $3.4bn, reflecting organic growth of 5%.

North America, which accounts for about two thirds of business, grew by 4%. Meanwhile Latin America continues to outgrow Experian's other territories, with the majority of the 21 million new members recruited by Consumer Services coming from that region.

In the Business-to-Business division, an expanded product offering helped to offset weaker credit issuance conditions seen by some UK and US lenders.

Underlying operating profit rose 6% to $929m, broadly in line with total revenue growth.

Free cash flow fell from $474m to $376m, largely due to the timing of some payments. At the period end net debt totalled $4.3bn, or 1.8 times cash profit (EBITDA), beating the group's target range 0f 2.0-2.5 times.

Experian reiterated full year organic revenue guidance of 4-6% and continues to expect a modest improvement in operating margin.

The shares were up 3.6% following the announcement.

View the latest Experian share price and how to deal

Our view

Experian is a global information services company specialising in data analytics, credit reporting, and identity verification.

Trading so far this year is tracking in line with guidance, and the direction of travel points to ongoing resilience. That's testament to Experian's broad range of products, which should hold it in good stead in various environments. But there are ongoing signs that lending criteria remains tight in the US and UK, and revenue growth is set to slow slightly in the current financial year. That's something to keep an eye on whilst interest rates remain elevated and consumers' financial resilience becomes increasingly stretched.

We've been pleasantly surprised by the extent of the success of the Consumer business. This division was given some real TLC in recent years and that work has paid off. As people become more financially knowledgeable, with education around personal finance becoming more mainstream, Experian's primed to benefit.

Longer term, as the world continues to digitise, we think the data-led solutions that Experian can offer businesses and consumers will likely keep increasing in demand. Plus, identity, credit and fraud checks are hardly something businesses can ditch altogether, making Experian's product demand more resilient.

There are further opportunities as new technologies take hold too. Latin America is seeing impressive growth as Experian looks to capitalise on a region that's undergoing major upgrades to its financial services sector. The consumer services business now addresses half the adult population.

Technology is the cornerstone of a data business, and AI (Artificial Intelligence) is the topic of the moment. The key to generating true value from AI is having unique data for it to learn from, and that's something Experian has a treasure trove of. AI is already being integrated into products, and we see plenty of opportunities to leverage this technology to add value.

Cash generation remains strong and the balance sheet's looking healthy too, with net debt relative to underlying cash profit below the target range. That gives scope to weather potential storms and supports dividend payments and the ongoing share buyback. Of course, no returns are guaranteed.

We continue to be supportive of Experian's range of products and the evolving importance of data in the modern world. With a long-term view, there's a lot to like. But, there are a few clouds ahead, reflected in a valuation that sits a little below the long-term average.

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.

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
Derren Nathan
Derren Nathan
Head of Equity Research

Derren leads our Equity Research team with more than 15 years of experience in his field. Thriving in a passionate environment, Derren finds motivation in intellectual challenges and exploring diverse ideas within his writing.

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Article history
Published: 15th November 2023