Experian Plc (EXPN) Ordinary USD0.10

Organic revenue, which excludes the effect of exchange rates, rose 11%, reflecting growth across all geographies bar the Europe, Middle East, Africa and Asia Pacific region. There was growth across all business segments, and trading was at the top end of expectations.

The group's upped its full year guidance for organic revenue growth between 12% and 13%,previously 11-13%, and ''strong'' margin growth.

The shares fell 1.5% following the announcement.

Our View

Experian's been riding a wave of increased borrowing as the global economy sputters back to life following the pandemic. The group'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.

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. Not only is revenue moving in the right direction, but a far reaching transformation programme means margins improved substantially at the half year.

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.

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 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.

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 well 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.

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Third Quarter Trading Update (organic, constant currency)

Revenue in North America, the largest segment, rose 13% reflecting 10% and 19% growth in business-to-business (B2B) and Consumer Services respectively. Consumer Services was the fastest growing segment, with a free membership base of 49m. Volumes on the lending comparison platform were particularly strong as customers used the platform to shop for credit cards.

Latin America saw revenue rise 11%, but including the impact of acquisitions and currency movements that figure was higher at 21%. B2B revenue rose 10%, helped by higher bureau volumes. Free consumer memberships rose to 68m and credit comparison marketplace and identity management services saw strong demand, contributing to a 19% rise in Consumer Services revenue.

Revenue in the UK and Ireland was up 8%. B2B revenue rose 6% helped by strong credit organisation and pre-qualification volumes as well as progress in new segments like "buy now, pay later". Transaction volumes in the credit comparison marketplace were strong, reflecting free membership growth (now 10.8m). This helped Consumer Services revenue rise 13%.

Europe, Middle East, Africa and Asia Pacific benefitted from a bureau acquisition in Spain, but on an organic basis revenue was flat as lingering covid-related headwinds continued to weigh.

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