ii view: check out Experian's 10% share price jump

by Keith Bowman from interactive investor |

Sales rose, it is trading in Germany and, despite coronavirus, the shares are at pre-pandemic prices.

Full-year results to 31 March 2020

  • Organic revenue up 8% to $5.18 billion
  • Operating profit up 2% to $1.19 billion
  • Net debt up 19% to $3.89 billion
  • Final dividend payment unchanged at 32.5 US cents
  • Total dividend for the year up 1% to 47 cents

Guidance:

  • Estimating first quarter organic revenue fall of between 5% to 10%
  • Not currently providing full-year estimates

Chief executive Brian Cassin said:

"The past year was a strong one for Experian. The Covid-19 crisis began to escalate late into our financial year with limited financial impact in full year 2019/20.

“The vast majority of our employees are working from home and our operations continue to function smoothly. Our business is strongly cash generative and we have a robust balance sheet and funding liquidity.

"The Covid-19 pandemic has highlighted the fundamental importance of data as we tackle this unprecedented challenge. We are confident that, once the crisis abates, we will be well placed to continue to deliver on our growth agenda.”

ii round-up:

Credit data company Experian (LSE:EXPN) reported accelerating sales growth in these latest full-year results. 

Fourth-quarter like-for-like or organic revenues grew by 10% compared with 7% in the third quarter, aided by double-digit growth in North and Latin America. 

Investment in a wide range of unique sources of data helped fuel business-to-business or B2B growth, while direct relationships with consumers grew from 55 million in 2019 to 82 million.

Experian, which employs over 17,000 people across 45 countries, also recently took a foothold in Germany, acquiring a majority stake in the nation’s second largest credit bureau. 

An unchanged final dividend giving a 1% increase year-over-year appeared to underline management confidence in the outlook.  

Experian shares rose by more than 5% in early UK trading and are up a similar amount year-to-date.  

But, following its end of March year end, the coronavirus had begun to impact as credit decisions on items such as new cars and houses declined. Organic revenue fell by 5% in April and is now expected to be down between 5% and 10% for the first quarter. Given the degree of uncertainty, management is currently offering no full-year guidance. 

Group measures to battle Covid-19 have included cost cuts and temporary director salary reductions, although under efforts to hit the ground running once conditions improve, no staff have been furloughed. 

ii view:

An increase in credit and big data has benefited companies such as Experian. Allowing it to provide quicker and more reliable assessments of credit worthiness. Widening access to affordable credit in emerging markets has also helped grow its international diversity. Now, a move into Germany takes it into the world’s fourth-largest economy.  

For investors, expansion in both products offered and geographical location have played their part in growing sales over recent years. Consumer-related sales in Latin America rose by 129% over the year to $40 million, albeit from a low starting point. Direct consumer relationships in Brazil now total 45 million.

But net debt is up by nearly a fifth, while its UK & Irish division continues to underperform – adjusted earnings (EBIT) fell by 22% over the full-year.  That said, there is clearly appetite for shares in high-quality businesses like Experian given they now trade roughly where they did before the crisis took hold. 

Positives: 

  • Company enjoys both product and geographical diversity
  • Six years of consecutive dividend growth

Negatives:

  • Declining revenue for its second-biggest region the UK & Ireland
  • Net debt up 19% year-over-year to $3.89 billion

The average rating of stock market analysts:

Strong hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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