Experian Plc (EXPN) Ordinary USD0.10

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Experian’s full year revenue grew organically by 7% to $7.5bn, in the middle of the group’s 6-8% guidance range. There was growth in all regions, although at 1%, the UK and Ireland lagged other territories.

Underlying operating profit increased by 11% to $2.1bn, when ignoring currency movements. The underlying margin grew by 0.7 percentage points compared to target growth of 0.3-0.5 points. This was helped by growth in consumer services, economies of scale and productivity benefits from investments in technology.

The improved profitability drove a $0.2bn increase in free cash flow to $1.4bn. Net debt increased by $0.6bn to $4.7bn driven by acquisition spend which more than doubled to $1.2bn.

This year Experian has guided for organic revenue growth of 6-8% and further margin expansion of 0.3-0.5 percentage points.

The annual dividend has been increased by 7% to $0.625 per share.

The shares fell 1.4% in early trading.

Our view

With expectations running high ahead of Experian’s full-year results, better-than-expected progress on margins wasn’t enough to distract investors from signs of slower growth in Latin America.

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

With interest rates so far this year staying stubbornly high in the core US market, lending conditions are a little weak, but Experian's broad range of products and services position it well across various market conditions. The proof’s in the pudding, and strong, dependable, top line growth and margin expansion despite softer conditions is impressive.

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. Meanwhile increased interest in new mortgages is providing something of a tailwind.

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 200mn. 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 forego, 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 weighing on the outlook.

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, this provides stability and helps support the ongoing dividend payments and share buybacks. Though there are no guarantees.

All in Experian's robust market position, strategic investments in technology, and diversified growth opportunities paint a positive long-term picture. But stubborn borrowing costs, and question marks around demand for lending, are very real near-term risks. With the valuation ahead of the long-term average investor sentiment could take a disproportionate hit if these risks materialise.

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.

Responsibility to oversee ESG issues is assigned to a management committee, and ESG reporting now follows all leading reporting standards. Experian has a very strong environmental policy and a strong whistleblower programme. ESG targets are linked to executive performance but aren’t specifically linked to pay. There is a strong data privacy and security policy in place, alongside a very strong cybersecurity programme.

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.

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