ii view: Experian raises full-year guidance

Demand for credit data in North and Latin America helped drive performance at Experian. 

Half-year results to 30 September 2019

• Revenue up 6% to $2.49 billion
• Pre-tax profit up 2% to $480 million
• Dividend up 4% to 14.5 US cents per share

Guidance:

Full-year organic revenue growth raised to 7 to 8% from 6 to 8%

Chief executive Brian Cassin said:

"We have started the year well. First-half organic revenue growth was 7%, with acceleration in Q2. This reflects successful execution on big new addressable market opportunities, the global roll out of our innovative platforms and considerable momentum in Consumer Services as we invest in Experian Boost."

ii round-up:

Credit and information services company Experian (LSE:EXPN) reported positive half-year results.

Continued momentum in its Business to Business (B2B) services and strong growth in Consumer Services, largely across North and Latin America, helped drive an acceleration in organic revenue growth to 7%.

In North America, demand for mortgage and automotive credit data, along with data to US healthcare providers all performed well. The introduction of Experian Boost, a service to allow consumers to strengthen their credit profiles using non-traditional sources like utility or mobile phone bills aided its US Consumer Services business. 

By sales, North America is by far its biggest region, generating 60% of 2018 revenues.

In Latin America, economic and business confidence recovery in Brazil helped fuel revenue growth. Experian now has 39 million consumer members, or over 18% of the population contributing to its database. 

Headquartered in Dublin, management raised its full-year organic revenue growth forecast to between 7 and 8% from 6 to 8% previously. 

The share price rose by 2% in mid-morning UK stock market trading. 

ii view:

An increase in credit and big data has benefitted 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. 

For investors, the shares do not look obviously cheap, sat on a prospective price/earnings (PE) ratio of just under 30 compared to a 10-year average of around 21. The forward dividend yield, although covered more than twice by earnings, again is not highly attractive at around 1.6%. However, full-year organic revenue guidance was raised, pointing to growing management confidence in the outlook. 

Positives: 

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

Negatives:

• Flat revenue performance for its second biggest region the UK & Ireland
• Net debt of $4.06 billion, up from $3.26 billion as of 31 March 2019

The average rating of stock market analysts:

Weak buy