ii view: Experian shares retreat from record high

Raising forecasts and upping the dividend by 10%. We assess prospects for this data giant.

First-half results to 30 September

• Total revenue up 23% to $3.06 billion
• Adjusted profit (EBIT) up 25% to $806 million
• Interim dividend up 10% to 16 US cents per share

Guidance:

• Now expects total full year revenue growth of 15% to 17%, up from a previous 13% to 15%

Chief executive Brian Cassin said:

"We had a very good first half performance with total revenue growth of 23% at actual exchange rates. Our growth is being enabled by a successful innovation-led strategy which has financial inclusion at its heart. Our aim is to empower consumers and businesses globally, improving financial health for all by using our capabilities as a force for good to transform lives and power opportunities."

ii round-up:

Global information services company Experian (LSE:EXPN) reported a solid first-half performance as it continues to improve post the pandemic. 

Total revenue improved 23% to $3.06 billion, helping adjusted profit to expand by a quarter to $806 million.

Shares in Experian, whose data helps consumers buy cars and houses and helps companies offer credit prudently, fell as much as 4% in UK trading, having gained by over 80% since pandemic induced market lows in March 2020. US rival Equifax (NYSE:EFX) have more than doubled during that time, while the wider FTSE 100 index is up by 46%. 

Significant pandemic and related job uncertainty during 2020 caused consumers to rein in big ticket purchases. The strong performance for the six months to the 30 September underlaid another upgrade in management’s full-year expectations. 

Organic revenue growth of between 11% to 13% and total revenue growth of 15% to 17% is now expected. That’s up from a previous organic range of 9% to 11% and total revenue of 13% to 15%.

Consumer Services revenue grew 27% during the period, with its free global consumer membership base rising by 26 million year-over-year to 122 million. Organic business to business sales rose by 12%, aided by growth across all geographical regions. 

Expanded sales and profit bankrolled a 10% increase in the interim dividend to 16 US cents per share. 

A third-quarter trading update is scheduled for 14 January.

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. Its growing array of consumer data held appeals to its corporate customers. Its free consumer membership base of 122 million is made up of 65 million Brazilians, 47 million US residents and around 10 million UK consumers. Geographically, North America generates its largest slug of sales at around 67%. 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 has demonstrated Experian’s economic susceptibility. Consumers are far less likely 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 obviously cheap. 

But growth in data generally looks to offer further opportunity. Bolt-on acquisitions remain ongoing and its global free consumer membership base, providing it with data, is now over 120 million. In all, and while an uncertain economic outlook gives some reason for caution, the increasing value of data offers firm long-term foundation for continued investor support.

Positives: 

• Company enjoys both product and geographical diversity
• Raising full year revenue forecasts

Negatives:

• Ongoing economic and Covid related uncertainty
• Subject to currency movements

The average rating of stock market analysts:

Buy