Interactive Investor

ii view: Experian profit recovers from the pandemic

18th May 2022 11:55

Keith Bowman from interactive investor

Shares for this FTSE 100 credit checking company are down by over a fifth in 2022. We assess prospects. 

Full-year results to 31 March

  • Total revenue up 17% to $6.28 billion (£5 billion)
  • Adjusted profit up 19% to $1.64 billion (£1.33 billion)
  • Net debt down 1.9% to $3.95 billion (£3.2 billion)
  • Second interim dividend of 35.75 US cents per share
  • Total dividend for the year up 10% to 51.75 US cents per share

Chief executive Brian Cassin said:

"Experian's mission to help people improve their financial health is more important now than ever, with many households facing the challenge of rising inflation. We take great pride in our ability to make a positive difference to people's lives by making it easier, cheaper and faster for people and organisations to access financial services."

ii round-up:

Global information services company Experian (LSE:EXPN) today reported gains in both sales and profits as consumer confidence to borrow recovered from the worst of the pandemic.

Sales excluding acquisitions or organic revenues climbed 12%, with adjusted profit rising by almost a fifth to $1.64 billion, marginally below City forecasts. 

Experian shares retreated by over 3% in early UK trading, having fallen by around a quarter year-to-date coming into these latest results. Shares for US rival Equifax (NYSE:EFX) are down by around a third over that time. The FTSE All World index has fallen by close to 15% during 2022. 

Experian flagged its expectations for organic revenue growth of between 7% to 9% for the year ahead, down from the 12% achieved over 2021, although with modest profit margin improvement expected. That broadly matched City hopes for 2022. 

Experian’s data helps consumers buy cars and houses and assists companies in offering credit prudently.

Sales for its Consumer services business rose by just over a fifth and free consumer memberships grew by 24 million year-over-year to 134 million. Data obtained is often analysed and then later sold to businesses. Organic revenues for its Business-to-business division climbed 9%, helped by a rebound in demand for autos following the Covid crisis. 

Revenue for its biggest sales generator, the US, rose by nearly 17% to $4.12 billion. 

A declared dividend of 35.75 US cents per share leaves the total payment for the year up 10% to 51.75 US cents per share.

ii view:

Experian’s Business-to-Business activities help corporations provide better customer experiences by managing and analysing data that will help them solve problems, drive better decisions and outcomes, and prevent fraud. Its Consumer Services business aids millions of people in countries such as the USA, the UK and Brazil better manage and improve their financial position and helps them to protect against fraud and identity theft. 

For investors, rising interest rates are more likely to see consumers attempting to repay debt rather than applying for new loans. Elevated inflation and a cost-of-living crisis add to consumer desire to reduce borrowings, while an estimated one-year price/earnings ratio (PE) above the 10-year average also suggests the shares are not necessarily cheap. 

On the upside, growth in data generally looks to offer further opportunity, and bolt-on acquisitions continue to be made with its sizeable Brazilian business recently added to. On balance, and while some caution looks sensible given an uncertain economic outlook, the increasing value of data arguably provides long-term reason for continued investor support.

Positives: 

  • Company enjoys both product and geographical diversity
  • Growing free consumer memberships

Negatives:

  • Economic outlook uncertainty
  • Subject to currency movements

The average rating of stock market analysts:

Buy

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