ii view: Experian forecasts better year ahead

This data company often collects information at little or no cost and sells it on. Buy, sell or hold? 

Full-year results to 31 March

• Continued activities or organic revenue up 4% to $5.36 billion (£3.81 billion)
• Total revenue up 6%
• Adjusted profit flat at $1.38 billion (£980 million)
• Second interim dividend of 32.5 US cents per share (around 23.1p per share)
• Total dividend for the year unchanged at 47 US cents per share (around 33.4p per share)

Chief executive Brian Cassin said:

"We have again shown Experian's resilience in the face of external shocks, which is due to the diversity of our portfolio and our successful innovation-led investments in new opportunities. We are off to a strong start to FY22. For the year, we expect organic revenue growth in the range of 7-9%, total revenue growth of 11-13% and strong EBIT margin accretion, all at constant currency.

“Data will also be a key driver of economic growth as the recovery gathers pace and we will be a leading champion in using data to create a better tomorrow."

ii round-up:

Credit data and information services group Experian (LSE:EXPN) today reported results broadly matching analysts’ expectations.

Adjusted profit for the pandemic-hit year came in flat at $1.38 billion, with 5% organic revenue growth in the final quarter at the top end of management forecasts. Organic revenue growth for the current first quarter is expected to be between 15% and 20%, flattered by an easy comparison with the same period in 2020 when Covid first struck.  

Experian’s data helps consumers buy cars and houses and helps companies offer credit prudently. Significant pandemic and related job uncertainty this time last year caused consumers to rein in big ticket purchases. Organic revenue growth for the current financial year is expected to range between 7% and 9%, up from 2020’s 4%. 

Experian shares fell by more than 2% in UK trading, having risen by more than a third since pandemic induced market lows in March 2020. However, they have underperformed the wider stock market. Shares for US rival Equifax (NYSE:EFX) have more than doubled over the same time. 

Organic revenue growth for its consumer services business grew by 17% over the year, driven by North America and Brazil. Its free consumer memberships rose by 28 million to a total of 110 million. A growing array of consumer data appeals to its corporate customers. Brazil at 59 million members provides its biggest country segment, with the USA at 41 million and the UK at 9.5 million. 

Experian Boost, which allows consumers to add pieces of data to their credit reports, helped North American revenue to grow by 16%. Latin America revenues more than doubled in the year, the UK improved as the year went on. 

Business-to-Business (B2B) revenues came in flat, with growth in North America data and decisioning offset by declines elsewhere. A 2% fall in the first half was countered by a 2% increase in the second half. 

A second interim dividend of 32.5 US cents per share left the total for the year unchanged at 47 US cents per share. 

ii view:

Experian sells data to credit-granting institutions, individuals and other users, along with analytical tools and marketing data. Data is obtained from several sources, including customers, often at low or no cost. It employs over 17,000 staff across 44 countries. Geographically, North America generates its largest slug of sales at around 65%. Next comes the UK and Ireland at around 14%, then Latin America at 12%, with Asia and the rest of the world making up the balance. It is the number one UK and Brazilian consumer and business credit data bureau and among the top three in the US. 

For investors, the pandemic and the first half of 2020 demonstrated Experian’s economic susceptibility. Consumers are unlikely to want to take on credit and make big ticket purchases if their jobs could be lost. An estimated one-year price/earnings ratio (PE) above the three- and 10-year averages also suggests the shares are not especially cheap. 

But growth in data generally appears to offer further opportunity. A restructuring programme at its UK and Irish business is also underway. And its global consumer membership base during this latest year surpassed 100 million. While an uncertain economic outlook injects some caution, and the shares have underperformed the wider market over the past year, there is value in data. Backing from major investors and an estimated analyst fair value share price of £29.29 implies long-term potential.   

Positives: 

• Company enjoys both product and geographical diversity
• Net debt down 2% to $3.83 billion

Negatives:

• Asia/EMEA organic revenue fell 14%
• First quarter organic revenue declined due to Covid-19

The average rating of stock market analysts:

Buy