Interactive Investor

ii view: Experian shares rally on robust first half

Shares in this FTSE 100 credit data firm fell 22% in 2022 but have held steady this year. We assess prospects.

15th November 2023 15:40

by Keith Bowman from interactive investor

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First-half results 30 September

  • Revenue up 5% to $3.4 billion (£2.8 billion)
  • Adjusted profit up 6% to $929 million (£752 million)
  • Interim dividend up 6% to 18 US cents per share
  • Net debt up 4% to $4.3 billion (£3.5 billion)

Chief executive Brian Cassin said:

“Overall, we are successfully executing our strategy for growth and this continues to help us to navigate the macroeconomic environment well.”

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ii round-up:

Global information services company Experian (LSE:EXPN) today detailed sales matching City estimates as it outlined growth in every region and across both corporate and consumer sectors.

Organic revenues for the first half to the end of September rose 5% year-over-year, outperforming a recent weak showing from US rival TransUnion (NYSE:TRU) and pushing adjusted profit up 6% to £929 million.

Shares in the FTSE 100 company rose more than 5% in UK trading having come into this latest news down by a similar amount year-to-date. US rival Equifax Inc (NYSE:EFX) remains little changed year-to-date, as does TransUnion following a near one-fifth fall over the last month.

Experian’s data helps consumers buy cars and houses and assists companies in offering credit prudently. The Dublin headquartered company reiterated its expectation for full-year organic sales to rise between 4% and 6%, potentially a slight easing from last year’s 7% growth.

Consumer related sales led the way during this latest half year, gaining 6%, helped by a 21 million increase in free members globally to 178 million. Corporate, or business-to-business (B2B) sales rose 4%, aided by new products and a push to add new company customers. 

Geographically, Latin America and Brazil led, with sales up 11%. Organic sales for its biggest North American region, accounting for around two-thirds of overall revenues, improved 4%.

Broker UBS reiterated its ‘buy’ stance on the shares post the results, flagging an estimated fair value target price of £33 per share. 

ii view:

Experian employs over 22,000 people across more than 30 countries. Its Consumer Services business aids millions of people better manage and improve their financial position and helps them to protect against fraud and identity theft. Activities for its B2B division help corporate customers provide better customer experiences by managing and analysing data that will help them solve problems, drive better decisions and outcomes, and prevent fraud.

For investors, more expensive borrowing may see consumers attempt to repay debt rather than apply for new loans, while costs for businesses generally remain elevated. The importance of data protection should not be ignored, while an estimated one-year price/earnings ratio (PE) close to the 10-year average might also suggest the shares are not obviously cheap. 

On the upside, still relatively low rates of unemployment in many of its key markets should help underpin demand for credit. There are also growing hopes that US interest rates have peaked. A look out for bolt-on acquisition opportunities persists, while Experian's largely Brazilian business has been expanded into Colombia, Peru, Chile and Panama. 

For now, and while some caution appears sensible, the increasing value of data looks to provide grounds for continued long-term 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:

Strong hold

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