Experian Plc (EXPN) Ordinary USD0.10

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Experian reported first half revenue growth of 12%, ignoring currency moves, to $4.1bn. That reflected organic growth of 8% (7.9% expected). Growth was broad based across geographies and business lines.

Underlying operating profit rose 14% to $1.1bn, with margins improving to 28.3%.

Underlying free cash flow rose 26% to $535mn and net debt ended the half at $5.2bn.

An interim dividend of $0.2125 was announced, up 10%.

Full year guidance has been raised. Revenue growth is now expected at 11% (with 8% organic growth), and margins are on track to improve by 0.3-0.5 percentage points.

The shares fell 1.4% in early trading.

Our view

Experian’s first-half results were strong, despite challenges in markets outside North America. This demonstrates the breadth of strengths offered by diversified growth avenues, technological innovation, and solid fundamentals.

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

The US credit bureau market, dominated by Experian, Equifax, and TransUnion, forms the core of Experian's operations, where it connects borrowers with lenders. This market concentration provides pricing power, allowing cash from core operations to fuel growth in new areas.

The lending environment in the core North American region is still subdued, but some green shoots are emerging. Experian's broad range of products and services positions it well across various market conditions. The proof’s in the pudding, and strong, dependable top-line growth and margin expansion despite uncertain conditions are impressive.

The Consumer Services division differentiates Experian from peers and has shown impressive growth, driven by recent investments and strategic initiatives. It’s further bolstered by a significant rise in free members, now totalling over 208mn. With financial literacy becoming more widespread, Experian is well-positioned to capitalise on this trend, offering tools that empower consumers to manage their credit and financial health more effectively.

As the world continues to digitise, we think Experian's data-led solutions for businesses and consumers are likely to see increasing demand. Identity verification, credit assessments, and fraud prevention are critical services that businesses cannot easily forgo, adding a layer of resilience to revenue streams.

Latin America is a region where the group is looking to expand further. Its financial services sector is undergoing substantial upgrades, presenting some structural growth opportunities. But for now, economic challenges, especially in Brazil, are keeping growth on a leash.

Artificial Intelligence (AI) remains a focal point for innovation. Experian's vast and unique data sets provide a robust foundation for AI applications. Integration is already underway, and we see substantial potential for future advancements in this area.

Strong cash generation and a healthy balance sheet are attractive qualities. Net debt relative to underlying cash profit is below the target range, which helps support the ongoing dividend payments and share buybacks. Though there are no guarantees.

Experian's robust market position, strategic investments in technology, and diversified growth opportunities paint a positive long-term picture. The valuation looks attractive, and we see upside on offer. That said, sentiment has come under pressure as peers are upping their game, a key risk to monitor.

Environmental, Social and Governance (ESG) risk

The commercial services industry is low/medium risk in terms of ESG. Social and governance risks are the most acute - like product governance, data privacy & security, and labour relations - as exposure to environmental risks is minimal. Companies operating within facilities maintenance are also exposed to community relations and emissions risks.

Experian’s overall management of material ESG issues is strong.

A management committee is responsible for overseeing ESG issues, and ESG reporting now follows all leading reporting standards. A strong data privacy and security policy and cybersecurity programme are in place. However, major data breaches in 2015, 2020, and 2021 suggest more improvements could be made.

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 LSEG. 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.

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