Preliminary Results Part 2

RNS Number : 1728M

Experian plc

19 May 2010

 



Group income statement                                               

for the year ended 31 March 2010   

			2010			2009
	Notes		US$m			US$m
Revenue	6		3,880			3,873
Cost of sales			(1,889)			(1,824)
Gross profit			1,991			2,049
Distribution costs			(419)			(387)
Administrative expenses			(879)			(1,049)
Operating expenses			(1,298)			(1,436)
Operating profit			693			613
Finance income				196		182
Finance expense				(286)		(259)
Net finance costs	9		(90)			(77)
Share of post-tax profits of associates			58			42
Profit before tax	6		661			578
Group tax expense	10		(17)			(84)
Profit after tax for the year from continuing operations			644			494
(Loss)/profit for the year from discontinued operations	11		(8)			12
Profit for the year			636			506
Attributable to:
Owners of Experian plc			600			486
Minority interests			36			20
Profit for the year			636			506
			US cents			US cents
Earnings per share
Basic	12		59.0			48.0
Diluted	12		58.1			47.5
Earnings per share from continuing operations
Basic	12		59.8			46.8
Diluted	12		58.9			46.3
Full year dividend per share		13	23.0			20.0

Group statement of comprehensive income

for the year ended 31 March 2010

		2010		2009
		US$m		US$m
Profit for the year		636		506
Other comprehensive income:
Fair value gains/(losses) - available for sale financial assets		5		(8)
Actuarial losses - defined benefit pension plans		(20)		(146)
Currency translation differences		209		(428)
Reclassification of cumulative fair value losses - available for sale financial assets		5		-
Reclassification of cumulative exchange gain - divestments		-		(3)
Total other comprehensive income for the year, net of tax (note 10)		199		(585)
Total comprehensive income for the year, net of tax		835		(79)
Attributable to:
Owners of Experian plc		760		(55)
Minority interests		75		(24)
Total comprehensive income for the year, net of tax		835		(79)

Non-GAAP measures - reconciliation of profit before tax to Benchmark PBT

		2010		2009
	Notes	US$m		US$m
Profit before tax	6	661		578
exclude: exceptional items	8	72		117
exclude: amortisation of acquisition intangibles	8	140		132
exclude: goodwill adjustment	8	-		1
exclude: charges in respect of the demerger-related equity incentive plans	8	28		32
exclude: financing fair value remeasurements	8	9		(19)
exclude: tax expense on share of profits of associates	6	-		2
Benchmark PBT - continuing operations	6	910		843
		2010		2009
Benchmark earnings per share from continuing operations		US cents		US cents
Basic	12	67.1		62.3
Diluted	12	66.1		61.6

Group balance sheet

at 31 March 2010

		2010		2009
	Notes	US$m		US$m
Non-current assets
Goodwill		3,412		3,125
Other intangible assets		1,233		1,189
Property, plant and equipment		451		479
Investments in associates		243		332
Deferred tax assets		176		13
Trade and other receivables		8		5
Available for sale financial assets		33		26
Other financial assets		88		61
		5,644		5,230
Current assets
Inventories		3		4
Trade and other receivables		800		738
Current tax assets		4		17
Other financial assets		27		21
Cash and cash equivalents		175		129
		1,009		909
Assets classified as held for sale	21	25		-
		1,034		909
Current liabilities
Trade and other payables		(1,062)		(995)
Loans and borrowings		(17)		(314)
Current tax liabilities		(154)		(91)
Provisions		(59)		(66)
Other financial liabilities		(20)		(22)
		(1,312)		(1,488)
Liabilities classified as held for sale	21	(12)		-
		(1,324)		(1,488)
Net current liabilities		(290)		(579)
Total assets less current liabilities		5,354		4,651
Non-current liabilities
Trade and other payables		(14)		(42)
Loans and borrowings		(1,834)		(2,003)
Deferred tax liabilities		(213)		(135)
Provisions		(14)		(15)
Retirement benefit obligations	15	(88)		(58)
Other financial liabilities		(754)		(499)
		(2,917)		(2,752)
Net assets		2,437		1,899
Equity
Share capital	19	102		102
Share premium	19	1,453		1,449
Retained earnings		16,591		16,251
Other reserves		(15,860)		(16,017)
Attributable to owners of Experian plc		2,286		1,785
Minority interests		151		114
Total equity		2,437		1,899

Group statement of changes in total equity

for the year ended 31 March 2010

	Share capital (Note 19)	Share premium (Note 19)	Retained earnings	Other reserves	Attributable to  owners of  Experian plc	Minority interests	Total equity
	US$m	US$m	US$m	US$m	US$m	US$m	US$m
At 1 April 2009	102	1,449	16,251	(16,017)	1,785	114	1,899
Comprehensive income:
Profit for the year	-	-	600	-	600	36	636
Other comprehensive income:
Fair value gains - available for sale financial assets	-	-	5	-	5	-	5
Actuarial losses - defined benefit pension plans	-	-	(20)	-	(20)	-	(20)
Currency translation differences	-	-	-	170	170	39	209
Reclassification of cumulative fair value losses - available for sale financial assets	-	-	5	-	5	-	5
Total other comprehensive income	-	-	(10)	170	160	39	199
Total comprehensive income	-	-	590	170	760	75	835
Transactions with owners:
Employee share incentive plans:
- value of employee services	-	-	67	-	67	-	67
- proceeds from shares issued	-	4	-	-	4	-	4
Exercise of share options	-	-	(103)	151	48	-	48
Purchase of own shares by employee trusts	-	-	-	(164)	(164)	-	(164)
Liability on put option over minority interests	-	-	(8)	-	(8)	-	(8)
Minority interests arising on business combinations	-	-	-	-	-	4	4
Dividends paid during the year	-	-	(206)	-	(206)	(42)	(248)
Transactions with owners	-	4	(250)	(13)	(259)	(38)	(297)
At 31 March 2010	102	1,453	16,591	(15,860)	2,286	151	2,437

	Share capital (Note 19)	Share premium (Note 19)	Retained earnings	Other reserves	Attributable to  owners of  Experian plc	Minority interests	Total equity
	US$m	US$m	US$m	US$m	US$m	US$m	US$m
At 1 April 2008	102	1,442	16,065	(15,653)	1,956	161	2,117
Comprehensive income:
Profit for the year	-	-	486	-	486	20	506
Other comprehensive income:
Fair value losses - available for sale financial assets	-	-	(8)	-	(8)	-	(8)
Actuarial losses  - defined benefit pension plans	-	-	(146)	-	(146)	-	(146)
Currency translation differences	-	-	-	(384)	(384)	(44)	(428)
Reclassification of cumulative exchange gain - divestments	-	-	(3)	-	(3)	-	(3)
Total other comprehensive income	-	-	(157)	(384)	(541)	(44)	(585)
Total comprehensive income	-	-	329	(384)	(55)	(24)	(79)
Transactions with owners:
Employee share incentive plans:
- value of employee services	-	-	57	-	57	-	57
- proceeds from shares issued	-	7	-	-	7	-	7
Exercise of share options	-	-	(11)	20	9	-	9
Minority interests arising on business combinations	-	-	-	-	-	2	2
Disposal of minority interests	-	-	-	-	-	(1)	(1)
Dividends paid during the year	-	-	(189)	-	(189)	(24)	(213)
Transactions with owners	-	7	(143)	20	(116)	(23)	(139)
At 31 March 2009	102	1,449	16,251	(16,017)	1,785	114	1,899

Group cash flow statement

for the year ended 31 March 2010

		2010		2009
	Notes	US$m		US$m
Cash flows from operating activities
Cash generated from operations	16(a)	1,157		1,102
Interest paid		(107)		(157)
Interest received		39		29
Dividends received from associates		41		28
Tax paid		(48)		(39)
Net cash inflow from operating activities		1,082		963
Cash flows from investing activities
Purchase of property, plant and equipment		(58)		(75)
Purchase of other intangible assets	16(c)	(256)		(230)
Sale of property, plant and equipment		30		-
Purchase of investments in associates		(7)		(29)
Disposal of other financial assets and investments in associates		118		-
Acquisition of subsidiaries, net of cash acquired		(41)		(179)
Disposal of subsidiaries		(11)		191
Net cash flows used in investing activities		(225)		(322)
Cash flows from financing activities
Issue of ordinary shares		4		7
Receipt of share option proceeds		60		9
Purchase of own shares by employee trusts and in respect of employee share incentive plans		(178)		-
New borrowings		692		71
Repayment of borrowings		(1,217)		(278)
Capital element of finance lease rental payments		(2)		(3)
Net receipts/(payments) from derivative financial instruments held to manage currency profile		33		(160)
Net receipts/(payments) from equity swaps		14		(11)
Payment into bank deposit		(14)		(29)
Dividends paid		(248)		(213)
Net cash flows used in financing activities		(856)		(607)
Exchange and other movements		35		(37)
Net increase/(decrease) in cash and cash equivalents - continuing operations		36		(3)
Net decrease in cash equivalents - discontinued operations	11	-		(17)
Net increase/(decrease) in cash and cash equivalents		36		(20)
Cash and cash equivalents at 1 April		127		147
Cash and cash equivalents at the end of the year		163		127

Notes to the financial statements

for the year ended 31 March 2010

1. Corporate information and basis of preparation

Experian plc (the 'Company'), which is the ultimate parent company of the Experian group of companies ('Experian' or the 'Group'), is incorporated and registered in Jersey under Jersey Companies Law as a public company limited by shares and is resident in Ireland. The Company's shares are traded on the London Stock Exchange's Regulated Market.

The financial information set out in this preliminary announcement does not constitute the Group's statutory financial statements, which comprise the annual report and audited financial statements, for the years ended 31 March 2010 or 31 March 2009 but is derived from the statutory financial statements for the year ended 31 March 2010. The Group's statutory financial statements for the year ended 31 March 2010 will be delivered to the Jersey Registrar of Companies in due course. The auditors have reported on those financial statements and have given an unqualified report which does not contain a statement under Article 111(2) or Article 111(5) of the Companies (Jersey) Law 1991. The Group's statutory financial statements for the year ended 31 March 2009 have been delivered to the Jersey Registrar of Companies. The auditors reported on those financial statements and gave an unqualified report which did not contain a statement under Article 111(2) or Article 111(5) of the Companies (Jersey) Law 1991.

The Group's statutory financial statements are prepared in accordance with International Financial Reporting Standards ('IFRS' or 'IFRSs') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations applicable to companies reporting under IFRS. The Group's statutory financial statements are presented in US dollars, as this is the most representative currency of the Group's operations, and they are rounded to the nearest million. They are prepared under the historical cost convention, as modified for the revaluation of available for sale financial assets and certain other financial assets and financial liabilities including derivatives. Except as indicated in note 2, the Group's statutory financial statements have been prepared on a basis consistent with the year ended 31 March 2009. The principal exchange rates used are set out in note 5.

This preliminary announcement has been prepared in accordance with the Listing Rules of the UK Financial Services Authority, using the accounting policies applied in the preparation of the Group's statutory financial statements for the year ended 31 March 2010. Those policies were published in full in the Group's statutory financial statements for the year ended 31 March 2009 and are available on the Corporate website, at www.experianannualreport.ie.

Other than those disclosed in this preliminary announcement, no significant events impacting the Group have occurred between 31 March 2010 and 19 May 2010 when the financial information was approved for issue.

2. Presentation of financial information

There have been two significant developments in financial reporting which became effective for Experian at the start of the current financial year and these have been taken into account in the presentation of the Group's statutory financial statements:

a) IAS 1 'Amendment - Presentation of Financial Statements'

This revised standard requires that the Group statement of changes in total equity is now presented as a primary statement. The standard also prohibits the presentation of items of income and expense within this statement and requires such 'non-owner changes in equity' to be presented separately from 'owner changes in equity'. Accordingly the standard requires that all 'non-owner changes in equity' are shown in a performance statement and, as permitted by the standard, the Group has elected to comply with this requirement by presenting a Group income statement and a Group statement of comprehensive income. Items in the Group statement of comprehensive income and Group statement of changes in total equity are shown net of related tax.

Notes to the financial statements (continued)

for the year ended 31 March 2010

2. Presentation of financial information (continued)

b) Segmental reporting - adoption of IFRS 8 'Operating Segments'

Under IFRS 8, an operating segment is a component of an entity:

·     that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components);

·     whose operating results are regularly reviewed by the chief operating decision maker to assess its performance and make decisions about resources to be allocated to the segment; and

·     for which discrete financial information is available.

Experian is organised into, and managed on a worldwide basis over, the following five operating segments, based on geographical areas, supported by its central Group functions:

·     North America;

·     Latin America;

·     UK and Ireland;

·     Europe, Middle East and Africa ('EMEA'); and

·     Asia Pacific.

The chief operating decision-maker, identified in accordance with the requirements of IFRS 8, assesses the performance of the above operating segments on the basis of EBIT, as defined in note 4.

The 'All other segments' category required to be disclosed under IFRS 8 has been captioned in these financial statements as EMEA/Asia Pacific. This combines information in respect of the EMEA and the Asia Pacific segments as, on the basis of their share of the Group's results and net assets, neither of these operating segments is individually reportable under IFRS 8. Accordingly the information given in respect of this category is comparable to that previously disclosed under IAS 14 in respect of EMEA/Asia Pacific.

Experian separately presents information equivalent to segment disclosures in respect of the costs of its central Group functions under the caption of 'Central Activities', as management believes that the reporting of this information is helpful to users of the financial statements. Information disclosed under Central Activities includes costs arising from finance, treasury and other global functions.

Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties. There is no material impact from inter-segment transactions on the Group's results.

Segment information for the full year provided to the chief operating decision-maker, and reportable under IFRS 8, is presented in note 6. This includes analysis of the Group's revenues over groups of service lines. This is supplemented by additional voluntary disclosure of the profitability of those same groups of service lines within note 7, and is equivalent to disclosures previously provided of segmental information analysed by business segment under IAS 14. For ease of reference, Experian continues to use the term 'business segments' when discussing the results of groups of service lines.

The North America and the UK and Ireland segments derive revenues from all of the Group's major service lines. The Latin America, EMEA and Asia Pacific segments currently do not derive revenue from the Interactive service line.

Notes to the financial statements (continued)

for the year ended 31 March 2010

3. Other recent accounting developments

The following accounting standards, amendments and interpretations issued by the IASB and the IFRIC are effective for the Group's accounting periods beginning on or after 1 April 2009 but have had no material effect on the results or financial position of the Group disclosed within these financial statements:

·        Amendment to IFRS 2 - 'Share-Based Payments'

·        Amendment to IAS 23 - 'Borrowing Costs'

·        Amendments to IAS 32 and IAS 1 - 'Puttable Financial Instruments and Obligations arising on Liquidation'

·        Amendments to IAS 39 and IFRS 7 - 'Reclassification of Financial Instruments'

·        Improvements to IFRSs (May 2008)

·        IFRIC 13 - 'Customer Loyalty Programmes'

·        IFRIC 15 - 'Agreements for the Construction of Real Estate'

·        IFRIC 16 - 'Hedges of a Net Investment in a Foreign Operation'

At the balance sheet date, a number of new standards, amendments and interpretations were in issue but are not yet effective for the Group and have not been early adopted:

·        Amendment to IAS 27 - 'Consolidated and Separate Financial Statements'

·        Amendment to IAS 39 - 'Eligible Hedged Items'

·        Amendment to IFRS 2 - 'Group Cash-Settled Share-Based Payment Transactions'

·        Revision to IFRS 3 - 'Business Combinations'

·        Improvements to IFRSs (April 2009)

·        Amendments to IFRIC 9 and IAS 39 - 'Embedded Derivatives'

·        IFRIC 17 - 'Distributions of Non-Cash Assets to Owners'

·        IFRIC 18 - 'Transfers of Assets from Customers'

The amendments to IAS 27 and IFRS 3 will impact the accounting treatment of acquisitions in the Group's statutory financial statements. If they had been adopted, the other new standards, amendments or interpretations would have had no material effect on the results or financial position of the Group disclosed within these financial statements although a number would lead to additional or revised disclosures.

4. Use of non-GAAP measures in the financial statements

The Group has identified certain measures that it believes will assist understanding of the performance of the business. The measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but management has included them as they consider them to be important comparables and key measures used within the business for assessing performance.

The following are the key non-GAAP measures identified by the Group and used in the Group's statutory financial statements:

Benchmark profit before tax ('Benchmark PBT')

Benchmark PBT is defined as profit before amortisation of acquisition intangibles, goodwill impairments, charges in respect of the demerger-related equity incentive plans, exceptional items, financing fair value remeasurements, tax and discontinued operations. It includes the Group's share of associates' pre-tax profit.

Earnings before interest and tax ('EBIT')

EBIT is defined as profit before amortisation of acquisition intangibles, goodwill impairments, charges in respect of the demerger-related equity incentive plans, exceptional items, net finance costs, tax and discontinued operations. It includes the Group's share of associates' pre-tax profit.

Notes to the financial statements (continued)

for the year ended 31 March 2010

4. Use of non-GAAP measures in the financial statements (continued)

Benchmark earnings

Benchmark earnings represents Benchmark PBT less attributable tax and minority interests. Benchmark earnings attributable to minority interests represents that portion of Benchmark earnings that relate to minority interests. Benchmark PBT less attributable tax is designated as overall benchmark earnings.

Benchmark earnings per share ('Benchmark EPS')

Benchmark EPS represents Benchmark earnings divided by the weighted average number of shares in issue, and is disclosed to indicate the underlying profitability of the Group.

Exceptional items

The separate reporting of non-recurring exceptional items gives an indication of the Group's underlying performance. Exceptional items are those arising from the profit or loss on disposal of businesses, closure costs of major business units or costs of significant restructuring programmes. All other restructuring costs are charged against EBIT in the segments in which they are incurred.

Operating cash flow

Operating cash flow is calculated as cash generated from operations adjusted for outflows in respect of the purchase of property, plant and equipment and other intangible assets and adding dividends from associates but excluding any cash inflows and outflows in respect of exceptional items. It is defined as EBIT less changes in working capital, plus depreciation/amortisation, less capital expenditure, less profit retained in associates.

Net debt

Net debt is calculated as total debt less cash and cash equivalents and other highly liquid bank deposits with original maturities greater than three months. Total debt includes loans and borrowings (and the fair value of derivatives hedging loans and borrowings), overdrafts and obligations under finance leases. Accrued interest is excluded from net debt.

5. Foreign currency

The principal exchange rates used in these financial statements are as follows:

	Average			Closing
	2010	2009		2010	2009	2008
Sterling : US dollar	1.58	1.69		1.52	1.43	1.99
US dollar : Brazilian real	1.88	1.96		1.79	2.30	1.75
Euro : US dollar	1.41	1.41		1.35	1.33	1.58

Assets and liabilities of undertakings whose functional currency is not the US dollar are translated into US dollars at the exchange rates ruling at the balance sheet date. Their income statements are translated into US dollars at average exchange rates (unless these averages are not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rates on the dates of the transactions).

Notes to the financial statements (continued)

for the year ended 31 March 2010

6. Segment information

i) Income statement
	Continuing operations1
	North  America		Latin America	UK and Ireland		EMEA/ Asia Pacific3			Total operating segments		Central Activities		Total continuing  operations
Year ended 31 March 2010	US$m		US$m	US$m		US$m			US$m		US$m		US$m
Revenue from external customers2	2,068		559	792		461			3,880		-		3,880
Reconciliation from EBIT to profit/(loss) before tax - continuing operations
EBIT	623		166	212		52			1,053		(62)		991
Net interest (note 9(b))	-		-	-		-			-		(81)		(81)
Benchmark PBT	623		166	212		52			1,053		(143)		910
Exceptional items (note 8)	(45)		-	(10)		(11)			(66)		(6)		(72)
Amortisation of acquisition intangibles	(48)		(39)	(39)		(14)			(140)		-		(140)
Charges in respect of the demerger-related equity incentive plans	(11)		-	(7)		(2)			(20)		(8)		(28)
Financing fair value remeasurements	-		-	-		-			-		(9)		(9)
Profit/(loss) before tax	519		127	156		25			827		(166)		661
	Continuing operations1
	North  America	Latin America			UK and Ireland		EMEA/ Asia Pacific3	Total operating segments		Central Activities		Total continuing  operations
Year ended 31 March 2009	US$m	US$m			US$m		US$m	US$m		US$m		US$m
Revenue from external customers2	2,083	462			902		426	3,873		-		3,873
Reconciliation from EBIT to profit/(loss) before tax - continuing operations
EBIT	616	118			213		49	996		(57)		939
Net interest (note 9(b))	-	-			-		-	-		(96)		(96)
Benchmark PBT	616	118			213		49	996		(153)		843
Exceptional items (note 8)	(49)	-			(30)		(22)	(101)		(16)		(117)
Amortisation of acquisition intangibles	(48)	(38)			(34)		(12)	(132)		-		(132)
Goodwill adjustment	(1)	-			-		-	(1)		-		(1)
Charges in respect of the demerger-related equity incentive plans	(14)	-			(9)		(3)	(26)		(6)		(32)
Financing fair value remeasurements	-	-			-		-	-		19		19
Tax expense on share of profits of associates	(2)	-			-		-	(2)		-		(2)
Profit/(loss) before tax	502	80			140		12	734		(156)		578
1    In the year ended 31 March 2010, a loss before tax of US$8m arose in respect of discontinued operations, which comprised the Group's transaction processing activities in France. In the year ended 31 March 2009, additional revenue from external customers of US$201m and profit before tax of US$26m arose in respect of these discontinued operations. Further information on discontinued operations is shown in note 11. 2    Revenue from external customers arose principally from the provision of services. There is no material inter-segment revenue. 3    EMEA/Asia Pacific represents all other operating segments.

	2010	2009
ii) Revenue by country - continuing operations	US$m	US$m
USA	2,064	2,079
UK	784	893
Brazil	556	457
Other	476	444
Total	3,880	3,873
1      No single customer accounted for 10% or more of the Group's revenue from external customers in the year ended 31 March 2010 and the year ended 31 March 2009. 2      The Company is resident in Ireland.  Revenue with Irish external customers represents less than 1% of the Group's revenue from external customers and accordingly all the Group's revenues is attributable to foreign countries.

iii) Revenue by business segment - continuing operations

The analysis by business segment of revenue from external customers is given within note 7.

Notes to the financial statements (continued)

for the year ended 31 March 2010

7. Information on business segments (including non-GAAP disclosures)

	Continuing operations1
	Credit Services	Decision Analytics	Marketing Services	Interactive	Total business segments	Central Activities		Total  continuing operations
Year ended 31 March 2010	US$m	US$m	US$m	US$m	US$m	US$m		US$m
Revenue from external customers2	1,669	441	734	1,036	3,880	-		3,880
Reconciliation from EBIT to profit/(loss) before tax - continuing operations
EBIT	605	119	86	243	1,053	(62)		991
Net interest (note 9(b))	-	-	-	-	-	(81)		(81)
Benchmark PBT	605	119	86	243	1,053	(143)		910
Exceptional items (note 8)	(20)	(5)	(33)	(8)	(66)	(6)		(72)
Amortisation of acquisition intangibles	(57)	(6)	(45)	(32)	(140)	-		(140)
Charges in respect of the demerger-related equity incentive plans3	-	-	-	-	-	(28)		(28)
Financing fair value remeasurements	-	-	-	-	-	(9)		(9)
Profit/(loss) before tax	528	108	8	203	847	(186)		661
	Continuing operations1
	Credit Services	Decision Analytics	Marketing Services	Interactive	Total business segments		Central Activities		Total  continuing operations
Year ended 31 March 2009	US$m	US$m	US$m	US$m	US$m		US$m		US$m
Revenue from external customers2	1,666	487	770	950	3,873		-		3,873
Reconciliation from EBIT to profit/(loss) before tax - continuing operations
EBIT	554	142	88	212	996		(57)		939
Net interest (note 9(b))	-	-	-	-	-		(96)		(96)
Benchmark PBT	554	142	88	212	996		(153)		843
Exceptional items (note 8)	(41)	(16)	(23)	(9)	(89)		(28)		(117)
Amortisation of acquisition intangibles	(54)	(6)	(40)	(32)	(132)		-		(132)
Goodwill adjustment	-	-	(1)	-	(1)		-		(1)
Charges in respect of the demerger-related equity incentive plans3	-	-	-	-	-		(32)		(32)
Financing fair value remeasurements	-	-	-	-	-		19		19
Tax expense on share of profits of associates	(2)	-	-	-	(2)		-		(2)
Profit/(loss) before tax	457	120	24	171	772		(194)		578
1    In the year ended 31 March 2010, a loss before tax of US$8m arose in respect of discontinued operations, which comprised the Group's transaction processing activities in France. In the year ended 31 March 2009, additional revenue from external customers of US$201m and profit before tax of US$26m arose in respect of these discontinued operations. Further information on discontinued operations is shown in note 11. 2    Revenue from external customers arose principally from the provision of services. There is no material inter-segment revenue. 3    No allocation by business segment is made for charges in respect of the demerger-related equity incentive plans as the underlying data is maintained only to provide an allocation by operating segment.

Notes to the financial statements (continued)

for the year ended 31 March 2010

8. Exceptional and other non-GAAP measures

	2010	2009
	US$m	US$m
Exceptional items
Restructuring costs	41	92
Loss arising in connection with arrangements with FARES	4	-
Cessation of bureau activities	3	15
Loss on disposal of businesses	24	3
Demerger and related restructuring costs	-	7
Total exceptional items	72	117
Other non-GAAP measures
Amortisation of acquisition intangibles	140	132
Goodwill adjustment	-	1
Charges in respect of the demerger-related equity incentive plans	28	32
Financing fair value remeasurements	9	(19)
Total other non-GAAP measures	177	146

Exceptional items and other non-GAAP measures are in respect of continuing operations. Exceptional items are charged to administrative expenses.

Exceptional items

Expenditure of US$41m (2009: US$92m) arose in the year in connection with the Group's strategic programme of cost efficiency measures. Of this US$21m (2009: US$51m) related to redundancy, US$17m (2009: US$34m) related to offshoring activities, infrastructure consolidations and other restructuring activities and US$3m (2009: US$7m) related to asset write-offs.

During the year, Experian recognised a loss of US$4m in connection with arrangements with FARES primarily as a result of the reclassification through the Group income statement of earlier losses in respect of holdings of First Advantage Corporation Class A common stock.

During the year ended 31 March 2010, and as previously announced, the Group completed the closure of its Canadian credit bureau and terminated its joint venture bureau in Japan. Charges associated with the closure of the bureaux in the year ended 31 March 2009 included US$13m of fixed asset write-offs, including the related investment in associate, and a further US$2m of closure costs.

The loss on disposal of businesses in the year ended 31 March 2010primarily arose as a result of the disposal of the National Business Database in North America.

Demerger and related restructuring costs in the year ended 31 March 2009 comprised legal and professional fees, together with costs in connection with the cessation of a number of subsidiaries of the former GUS plc.

Cash outflows in respect of exceptional items are analysed in note 16(d).

Other non-GAAP measures

IFRS requires that, on acquisition, specific intangible assets are identified and recognised separately from goodwill and then amortised over their useful economic lives. These include items such as brand names and customer lists, to which value is first attributed at the time of acquisition. The Group has excluded amortisation of these acquisition intangibles from its definition of Benchmark PBT because such a charge is based on judgments about their value and economic life.

A goodwill adjustment of US$1m arose in the year ended 31 March 2009 under IFRS 3 'Business Combinations' on the recognition of previously unrecognised tax losses on prior years' acquisitions. The corresponding tax benefit reduced the tax charge for that year by US$1m.

Charges in respect of demerger-related equity incentive plans relate to one-off grants made to senior management and at all staff levels at the time of the demerger, under a number of equity incentive plans. The cost of these one-off grants is being charged to the Group income statement over the five years from flotation in October 2006, but excluded from the definition of Benchmark PBT. The cost of all other grants is being charged to the Group income statement and included in the definition of Benchmark PBT.

Notes to the financial statements (continued)

for the year ended 31 March 2010

8. Exceptional and other non-GAAP measures (continued)

An element of the Group's derivatives is ineligible for hedge accounting under IFRS. Gains or losses on these derivatives arising from market movements, together with gains and losses on put options in respect of acquisitions, are credited or charged to financing fair value remeasurements within finance income and finance expense in the Group income statement.

9. Net finance costs

	2010	2009
	US$m	US$m
a) Net finance costs
Interest income:
Expected return on pension plan assets	47	69
Other interest income	19	28
Interest income	66	97
Financing fair value gains:
Movement in fair value of Serasa put option	-	21
Other financing fair value gains	130	64
Financing fair value gains	130	85
Finance income	196	182
Interest expense:
Interest expense on pension plan liabilities	48	52
Other interest expense	99	141
Interest expense	147	193
Financing fair value losses:
Movement in fair value of Serasa put option	113	-
Other financing fair value losses	26	66
Financing fair value losses	139	66
Finance expense	286	259
Net finance costs	90	77
b) Net interest expense included in Benchmark PBT
Net finance costs	90	77
Financing fair value remeasurements	(9)	19
Net interest expense included in Benchmark PBT	81	96
c) Financing fair value remeasurements included in net finance costs
Financing fair value gains	(130)	(85)
Financing fair value losses	139	66
Charge/(credit) in respect of financing fair value remeasurements	9	(19)

Notes to the financial statements (continued)

for the year ended 31 March 2010

10. Group tax expense

The effective rate of tax is 2.6% (2009: 14.5%) based on the profit before tax for the year ended 31 March 2010 of US$661m (2009: US$578m) and the Group tax expense of US$17m (2009: US$84m). The Group tax expense comprises a UK tax credit of US$103m (2009: credit of US$43m) and non-UK tax charge of US$120m (2009: US$127m).

The effective rate of tax based on Benchmark PBT of US$910m (2009: US$843m) and the associated tax charge of US$184m (2009: US$184m), excluding the effect of a one-off tax credit of US$105m (2009: US$20m), is 20.2% (2009: 21.8%). The one-off deferred tax credit in the year ended 31 March 2010 involves UK entities that are still part of the Group but is excluded from the calculation of the effective rate of tax based on Benchmark PBT in view of the size and non-recurring nature of this benefit. The one-off corporation tax credit in the year ended 31 March 2009 was excluded from the calculation of the effective rate of tax based on Benchmark PBT as it related to arrangements involving entities no longer part of the Group. A further tax credit of US$24m arose in the year ended 31 March 2010 following resolution of historic positions and the tax expense of US$17m in the Group income statement and the tax on Benchmark PBT of US$184m are both stated after this credit.

The reconciliation of the tax expense reported in the Group income statement to the Benchmark tax charge is as follows:

	2010	2009
	US$m	US$m
Group tax expense	17	84
Add: one-off tax credit	105	20
Add: tax relief on exceptional items	33	25
Add: tax relief on other non-GAAP measures	29	53
Tax expense on share of profit of associates	-	2
Tax on Benchmark PBT	184	184

In the year ended 31 March 2010, a deferred tax charge of US$3m (2009: credit of US$56m) was recognised in other comprehensive income with the credit in the year ended 31 March 2009 principally relating to actuarial losses on defined benefit pension plans. In the year ended 31 March 2010, a tax credit relating to employee share incentive plans of US$12m (2009: US$4m) was recognised in equity and reported as appropriate within transactions with owners. This amount comprised current tax of US$4m (2009: US$1m) and deferred tax of US$8m (2009: US$3m). 

Notes to the financial statements (continued)

for the year ended 31 March 2010

11. Discontinued operations

The Group disposed of its transaction processing activities in France on 31 October 2008 and the results and cash flows of that business are accordingly classified as discontinued.

Results for discontinued operations

	2010		2009
	US$m		US$m
Revenue	-		201
Cost of sales	-		(147)
Gross profit	-		54
Distribution costs	-		(6)
Administrative expenses	-		(49)
Operating expenses	-		(55)
Loss for discontinued operations	-		(1)
(Loss)/profit on disposal of discontinued operations:
(Loss)/profit on disposal	(8)		27
Tax charge in respect of (loss)/profit on disposal	-		(14)
(Loss)/profit after tax on disposal of discontinued operations	(8)		13
(Loss)/profit for the year from discontinued operations	(8)		12

There was a net cash inflow on the disposal of the transaction processing activities in France of US$191m in the year ended 31 March 2009 on the completion of the sale and a further cash outflow of US$17m in the year ended 31 March 2010 on the settlement of additional related costs. These cash flows are disclosed within net cash flows used in investing activities from continuing operations in the Group cash flow statement.

Cash flows attributable to discontinued operations         

	2010		2009
	US$m		US$m
From operating activities	-		(10)
From investing activities	-		(10)
Exchange and other movements	-		3
Net decrease in cash and cash equivalents in discontinued operations	-		(17)

 

Notes to the financial statements (continued)

for the year ended 31 March 2010

12. Basic and diluted earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders of the Company by a weighted average number of ordinary shares in issue during the year (excluding own shares held in employee trusts, which are treated as cancelled).

The calculation of diluted earnings per share reflects the potentially dilutive effect of employee share incentive plans. The earnings figures used in the calculations are unchanged for diluted earnings per share.

	2010	2009
Basic earnings per share:	US cents	US cents
Continuing and discontinued operations	59.0	48.0
Discontinued operations	0.8	(1.2)
Continuing operations	59.8	46.8
Add back of exceptional and other non-GAAP measures, net of tax	7.3	15.5
Benchmark earnings per share from continuing operations (non-GAAP measure)	67.1	62.3
	2010	2009
Diluted earnings per share:	US cents	US cents
Continuing and discontinued operations	58.1	47.5
Discontinued operations	0.8	(1.2)
Continuing operations	58.9	46.3
Add back of exceptional and other non-GAAP measures, net of tax	7.2	15.3
Benchmark diluted earnings per share from continuing operations (non-GAAP measure)	66.1	61.6
	2010	2009
Earnings attributable to owners of Experian plc:	US$m	US$m
Continuing and discontinued operations	600	486
Discontinued operations	8	(12)
Continuing operations	608	474
Add back of exceptional and other non-GAAP measures, net of tax	73	157
Benchmark earnings attributable to owners of Experian plc (non-GAAP measure)	681	631
	2010	2009
Earnings attributable to minority interests:	US$m	US$m
Continuing and discontinued operations	36	20
Add back of amortisation of acquisition intangibles attributable to the minority, net of tax	9	8
Benchmark earnings attributable to minority interests (non-GAAP measure)	45	28
	2010	2009
Reconciliation of benchmark earnings to profit for the year:	US$m	US$m
Overall benchmark earnings (non-GAAP measure)	726	659
(Loss)/profit from discontinued operations	(8)	12
Loss from exceptional and other non-GAAP measures	(82)	(165)
Profit for the year	636	506
	2010	2009
Weighted average number of ordinary shares:	m	m
Weighted average number of ordinary shares in issue during the year	1,015	1,013
Dilutive effect of share incentive awards	15	12
Diluted weighted average number of ordinary shares	1,030	1,025

Notes to the financial statements (continued)

for the year ended 31 March 2010

13. Dividends

	2010			2009
	US cents per share	US$m		US cents per share	US$m
Amounts recognised and paid during the year:
First interim - paid in January 2010 (2009: January 2009)	7.00	71		6.75	68
Second interim - paid in July 2009 (2009: July 2008)	13.25	135		12.00	121
Ordinary dividends paid on equity shares	20.25	206		18.75	189
Full year dividend for the year ended 31 March	23.00			20.00	203

A dividend of 16 US cents per ordinary share will be paid on 23 July 2010 to shareholders on the register at the close of business on 25 June 2010 and is not included as a liability in these financial statements. This dividend, together with the first interim dividend of 7 US cents per ordinary share paid in January 2010, comprises the full year dividend for the year ended 31 March 2010 of 23 US cents.

Unless shareholders elect by 25 June 2010 to receive US dollars, their dividends will be paid in sterling at a rate per share calculated on the basis of the exchange rate from US dollars to sterling on 2 July 2010.

Pursuant to the Income Access Share arrangements put in place as part of the demerger of Experian and Home Retail Group in October 2006, shareholders in the Company can elect to receive their dividends from a UK source (the 'IAS election'). Shareholders who held 50,000 or fewer Experian shares (i) on the date of admission of the Company's shares to listing on the London Stock Exchange and (ii) in the case of shareholders who did not own shares at that time, on the first dividend record date after they become shareholders in the Company, unless they elect otherwise, will be deemed to have elected to receive their dividends under the IAS election arrangements. Shareholders who hold more than 50,000 shares and who wish to receive their dividends from a UK source must make an IAS election. All elections remain in force indefinitely unless revoked. Unless shareholders have made an IAS election, or are deemed to have made an IAS election, dividends will be received from an Irish source and will be taxed accordingly.

The Company offers a Dividend Reinvestment Plan ('DRIP') which enables those shareholders who receive their dividends under the IAS election arrangements to use their cash dividends to purchase Experian shares. Such shareholders who wish to participate in the DRIP for the first time, in respect of the second interim dividend for the year ended 31 March 2010 to be paid on 23 July 2010, should return a completed and signed DRIP mandate form to be received by the Company's Registrars, by no later than 25 June 2010. For further details please contact the Registrars.

The employee trusts waived their entitlements to dividends of US$2m (2009: US$2m).

14. Capital expenditure, disposals and capital commitments

During year ended 31 March 2010 the Group incurred capital expenditure of US314m (2009: US$315m (including US$10m in respect of discontinued operations)).

Excluding any amounts in connection with the disposal of businesses, the book value of other intangible fixed assets and property, plant and equipment disposed of in the year ended 31 March 2010 was US$34m and the amount realised was US$30m.

At 31 March 2010, the Group had capital commitments in respect of property, plant and equipment and intangible assets and for which contracts had been placed of US$44m (2009: US$22m).

Notes to the financial statements (continued)

for the year ended 31 March 2010

15. Retirement benefit obligations - defined benefit plans

Amounts recognised in the Group balance sheet
	2010	2009
	US$m	US$m
Retirement benefit obligations - funded plans:
Present value of funded plans' liabilities	860	614
Fair value of funded plans' assets	(822)	(595)
Deficit in the funded plans	38	19
Retirement benefit obligations - unfunded plans:
Present value of unfunded pension arrangements	36	26
Liability for post-retirement healthcare	14	13
Retirement benefit obligations - unfunded plans	50	39
Net retirement benefit obligations	88	58
The Group's retirement benefit obligations and assets are denominated primarily in sterling.
Movements in amounts recognised in the Group balance sheet
	2010	2009
	US$m	US$m
At 1 April	58	(132)
Differences on exchange	3	9
Total amounts recognised in Group income statement	11	(7)
Actuarial losses recognised within other comprehensive income	28	202
Contributions paid by the Group	(12)	(14)
At 31 March	88	58
Expenses/(income) recognised in the Group income statement
	2010	2009
	US$m	US$m
Administrative costs (after exceptional income of US$nil (2009: US$3m))	10	10
Net finance expense/(income)	1	(17)
Total charge/(credit) to Group income statement	11	(7)
Actuarial assumptions
	2010	2009
	%	%
Rate of inflation	3.7	3.4
Rate of increase for salaries	4.7	5.2
Rate of increase of pensions in payment and deferred pensions	3.6	3.4
Rate of increase in medical costs	7.7	6.5
Discount rate	5.5	6.9
The mortality assumptions used at 31 March 2010 remain broadly unchanged from those used at 31 March 2009.

Notes to the financial statements (continued)

for the year ended 31 March 2010

16. Notes to the Group cash flow statement

		2010	2009
	Notes	US$m	US$m
a) Cash generated from operations
Operating profit		693	613
(Profit)/loss on sale of property, plant and equipment		(2)	6
Loss on sale of other intangible assets		3	3
Loss on disposal of businesses		24	3
Depreciation and amortisation		417	420
Goodwill adjustment		-	1
Losses in respect of associates		4	5
Charge in respect of equity incentive plans		61	52
Change in working capital	16(b)	(22)	7
Movement in exceptional items included in working capital		(21)	(8)
Cash generated from operations		1,157	1,102
b) Change in working capital
Decrease/(increase) in inventories		1	(2)
(Increase)/decrease in receivables		(38)	24
Increase/(decrease) in payables		18	(11)
Difference between pension cost in Group income statement and contributions paid		(3)	(4)
Change in working capital		(22)	7
c) Purchase of other intangible assets
Databases		168	153
Internally generated software		45	38
Internal use software		43	39
Purchase of other intangible assets		256	230
d) Cash outflow in respect of exceptional items
Total exceptional items	8	72	117
Working capital movements		21	8
Asset write-offs		(3)	(15)
Losses in respect of associates		(4)	(5)
Loss on disposal of businesses		(24)	(3)
Cash outflow in respect of exceptional items		62	102

17. Reconciliation of cash generated from operations to operating cash flow (non-GAAP measure)

		2010	2009
	Notes	US$m	US$m
Cash generated from operations	16(a)	1,157	1,102
Purchase of property, plant and equipment		(58)	(75)
Purchase of other intangible assets	16(c)	(256)	(230)
Sale of property, plant and equipment		30	-
Dividends received from associates		41	28
Add back of net cash outflow from exceptional items	16(d)	62	102
Operating cash flow		976	927

Notes to the financial statements (continued)

for the year ended 31 March 2010

18. Analysis of net debt (non-GAAP measure)

	2010	2009
	US$m	US$m
Cash and cash equivalents (net of overdrafts)	163	127
Bank deposits with maturity greater than three months	44	29
Derivatives hedging loans and borrowings	(2)	28
Debt due within one year	-	(295)
Finance leases	(8)	(9)
Debt due after more than one year	(1,824)	(1,990)
Net debt	(1,627)	(2,110)
Net debt by balance sheet caption:
Cash and cash equivalents	175	129
Loans and borrowings (current)	(17)	(314)
Loans and borrowings (non-current)	(1,834)	(2,003)
Net debt by balance sheet caption	(1,676)	(2,188)
Bank deposits within financial assets	44	29
Accrued interest	7	21
Derivatives hedging loans and borrowings	(2)	28
Net debt	(1,627)	(2,110)

At 31 March 2010, the Group had undrawn committed borrowing facilities of US$1,932m (2009: US$1,050m) which expire more than two years after the balance sheet date.

During the year ended 31 March 2010, the Group issued 4.75% Guaranteed notes 2020 with a nominal value of €500m at an issue price of 99.914%. During the year ended 31 March 2010, 6.375% Eurobonds 2009 with a par value of £203m were redeemed at the date of their maturity.

19. Share capital and share premium

	Number of shares		Called up share  capital	Share premium account
	m		US$m	US$m
At 1 April 2008	1,023.4		102	1,442
Allotted under share option plans	1.9		-	7
At 31 March 2009	1,025.3		102	1,449
Allotted under share option plans	0.8		-	4
At 31 March 2010	1,026.1		102	1,453

Notes to the financial statements (continued)

for the year ended 31 March 2010

20. Acquisitions and disposals

(a) Acquisitions for the year ended 31 March 2010

The Group made several acquisitions during the year, none of which is considered to be individually material.

In aggregate, the acquired businesses contributed revenues of US$12m to the Group for the periods from their respective acquisition dates to 31 March 2010. The acquired businesses contributed aggregate profit after tax of US$1m to the Group for the periods from their respective acquisition dates to 31 March 2010. If these acquisitions had been completed on 1 April 2009, further revenues of US$29m would have been reported. It has been impracticable to estimate the impact on Group profit after tax had the acquired entities been owned from 1 April 2009, as their accounting policies and period end dates did not accord with those of the Group prior to their acquisition.

There have been no material gains, losses, error corrections or other adjustments recognised in the year ended 31 March 2010 that relate to acquisitions that were effected in the current or previous years. Contingent consideration settled during the year on acquisitions made in previous years was US$9m.

(b) Disposals

During the year ended 31 March 2010, there was a loss of US$24m on the disposal of a number of the Group's smaller businesses including the National Business Database in North America with a related cash inflow of US$6m. Costs and cash outflows during the year ended 31 March 2010 in respect of the earlier disposal of the transaction processing activities in France are detailed in note 11.

21. Assets and liabilities classified as held for sale

During the year, approval was given to a number of small disposals and accordingly the assets and liabilities of the businesses involved are classified as held for sale at 31 March 2010. The transactions have been completed since the balance sheet date and the resulting gain or loss on disposal will be recognised in the year ending 31 March 2011.

	US$m
Assets classified as held for sale:
Other intangible assets	16
Property, plant and equipment	2
Trade receivables - net	6
Other prepayments and accrued income	1
Assets classified as held for sale	25
Liabilities classified as held for sale:
Tax liabilities	6
Accruals and deferred income	6
Liabilities classified as held for sale	12

Notes to the financial statements (continued)

for the year ended 31 March 2010

22. Related parties

FARES

In October 2009, the Group announced the following arrangements in respect of FARES, which is owned 20% by Experian and 80% by The First American Corporation ('FAC'), and in respect of First Advantage Corporation ('FADV'), an associate of FARES:

·     Following an offer by FAC to acquire the issued and outstanding shares of FADV Class A common stock in consideration for shares in FAC, Experian has elected to tender its direct and indirect holdings in FADV Class A common stock for shares in FAC. Experian directly and indirectly holds some 3.8m shares of FADV Class A common stock with a value of approximately US$69m and, on exchange and conversion, will hold some 2% of the total issued share capital of FAC.

·     Experian has agreed in principle that FARES will dispose of its interests in two business assets (the plant management and imaged documents businesses) to FAC with Experian receiving a cash consideration on completion of US$48m.

·     Experian and FAC have agreed in principle to amend the buy-out arrangements governing Experian's 20% interest in the balance of FARES (excluding the FARES interest in FADV and the two business assets disposed of to FAC). Under the amended terms, if the buy-out is exercised in 2010, cash consideration of some US$314m will be payable to Experian by 31 December 2010. Thereafter the consideration payable for Experian's 20% interest in FARES will revert to a set valuation multiple, consistent with the current terms.

In connection with these arrangements:

·     Experian received cash of US$70m from the sale during the year of all the shares in FAC which it received in exchange for its direct and indirect holdings in FADV Class A common stock.

·     FARES disposed of its interests in the two business assets and Experian received cash consideration of US$48m in the year ended 31 March 2010.

·     Experian received notice from FAC in respect of the exercise of its buy-out option on 22 April 2010 and will accordingly report the results of FARES as a discontinued operation in the Group financial statements for the year ending 31 March 2011. Any gain on disposal will also be reported in the Group financial statements for that year.

·     Experian recognised an exceptional loss of US$4m primarily as a result of the reclassification through the Group income statement of earlier losses in respect of the holdings of FADV Class A common stock and a fair value gain of US$9m on the FAC option which is reported within financing fair value remeasurements (note 9).

Cash inflows of US$118m in respect of the transactions completed in the year ended 31 March 2010 are disclosed within net cash flows used in investing activities from continuing operations in the Group cash flow statement.

During the year the Group made net sales and recharges, under normal commercial terms and conditions that would be available to third parties, to FARES and its associate FADV of US$28m (2009: US$25m).

Other associates

The Group's interests in other associated undertakings are not individually material. There were additions of US$7m during the year ended 31 March 2010 principally in respect of the arrangements with seven of India's leading financial services institutions to operate a credit information bureau in India. As part of the application process, Experian can only hold a maximum of 49% of the equity of the licensed entity and this has been a key factor in classifying this investment as an associate.

Other related party transactions

There were no other material related party transactions.

Notes to the financial statements (continued)

for the year ended 31 March 2010

23. Contingencies

There are a number of pending and threatened litigation claims involving the Group in North America and Latin America which are being vigorously defended. The directors do not believe that the outcome of any such pending or threatened litigation will have a materially adverse effect on the Group's financial position. However, as is inherent in legal proceedings, there is a risk of outcomes unfavourable to the Group. In the case of unfavourable outcomes the Group would benefit from applicable insurance recoveries.

24. Events occurring after the end of the reporting period

Details of the second interim dividend approved since the end of the reporting period are given in note 13.

On 22 April 2010, Experian received notice from FAC of the exercise of its buy-out option in respect of Experian's interest in FARES (see note 22).

As indicated in note 21, the Group completed some small disposals following the balance sheet date.

25. Company website

The Company has a website which contains up-to-date information on Group activities and published financial results. The directors are responsible for the maintenance and integrity of statutory and audited information on this website. The work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the preliminary announcement since it was initially presented on the website. Jersey legislation and the United Kingdom regulation governing the preparation and dissemination of financial information may differ from requirements in other jurisdictions.

Notes to the financial statements (continued)

for the year ended 31 March 2010

26. Risks and uncertainties 

Experian has a risk management framework which provides a structured and consistent process for identifying, assessing and responding to risks. These risks are assessed in relation to the Group's strategy to focus on data and analytics, drive profitable growth and optimise capital efficiency.

Risk management operates at all levels throughout the Group, across geographies, business lines and operational support functions. The Board is ultimately responsible for risk management, which includes the Group's risk governance structure and maintaining an appropriate internal control framework. Management's responsibility is to manage risk on behalf of the Board. By reporting regularly to the Board and to the Audit Committee, the internal audit and the global risk management functions provide support to the Board in maintaining effective risk management across the Group.

The key components of the Group's existing risk management framework, which are regularly reviewed, have operated throughout the year ended 31 March 2010, with some minor enhancements to further embed social, ethical and environmental (SEE) risks into the risk process in support of the Group's corporate responsibility strategy.

Risk factors

Risks to Experian's business are either specific to Experian's business model, such as information security, or more general, such as the impact of competition. Experian has identified the following principal risks and uncertainties.

a) Principal risks

i) Risk area - Loss or inappropriate usage of data

Potential impact - The Group's business requires the appropriate and secure utilisation of consumer and other sensitive information by its business units or its third party partners. Internet-based electronic commerce requires the secure transmission of confidential information over public networks, and several of our products are accessed through the Internet. Security breaches in connection with maintaining data and the delivery of our products and services could harm our reputation, business and operating results.

Mitigation strategies - The Group has established rigorous information security policies, standards, procedures, and recruitment and training schemes, which are embedded throughout its business operations. The Group also screens new third party partners carefully and conducts targeted audits on their operations. Continued investments are made in IT security infrastructure, including the significant use of data and communications encryption technology.

ii) Risk area - Dependence upon third parties to provide data and certain operational services

Potential impact - The Group's business model is dependent upon third parties to provide data and certain operational services, the loss of which could significantly impact the quality of and demand for our products. Similarly, if one of our outsource providers, including third parties with whom we have strategic relationships, were to experience financial or operational difficulties, their services to us would suffer or they may no longer be able to provide services to us at all, significantly impacting delivery of our products or services.

Mitigation strategies - The Group's legal, regulatory and government affairs departments work closely with senior management to adopt strategies to help secure and maintain access to public and private information. The Group's global strategic sourcing department works closely with senior management to select and negotiate agreements with strategic suppliers based on criteria such as delivery assurance and reliability.

Notes to the financial statements (continued)

for the year ended 31 March 2010

26. Risks and uncertainties(continued)

iii) Risk area - Exposure to legislation or regulatory reforms

Potential impact - Changes in the legislative, regulatory and judicial environment in the countries in which the Group operates may adversely affect our ability to collect, manage, aggregate, use, exchange and sell data.  Proposed US financial services reforms and potential amendments to the Fair Credit Reporting Act (FCRA) could impact the Group's operating results. For example, the Federal Trade Commission (FTC) issued final rules in February 2010 regarding disclosure requirements for the advertising of free credit report offers.  In addition, the Group is subject to changes in specific countries' tax laws.  Our future effective tax rates could be adversely affected by changes in tax laws.

Mitigation strategies - The Group's legal, regulatory and government affairs departments work closely with senior management to adopt strategies to educate lawmakers, regulators, consumer and privacy advocates, and other stakeholders to support the public policy debate, where appropriate. This includes advocating and promoting new industry self-regulatory standards, when appropriate, to address consumer concerns about privacy and information sharing.

iv) Risk area  - Regulatory compliance

Potential impact - The Group's businesses must comply with federal, regional, provincial, state and other jurisdictional regulations and best practice, including privacy and information security laws.

Mitigation strategies - To the best of Experian's knowledge, the Group is in compliance with data protection requirements in each jurisdiction in which it operates. The Group's regulatory compliance departments work closely with the businesses to adopt strategies to help ensure compliance with jurisdictional regulations and identified business ethics which includes active monitoring of its collection and use of personal data.

v) Risk area - Interruptions in business processes or systems

Potential impact - The Group's ability to provide reliable services largely depends on the efficient and uninterrupted operation of our computer network systems, data and call centres, as well as maintaining sufficient staffing levels. System or network interruptions, or the unavailability of key staff or management resulting from a pandemic outbreak, could delay and disrupt our ability to develop, deliver or maintain our products and services, causing harm to our business and reputation and resulting in loss of customers or revenue.

Mitigation strategies - Comprehensive business continuity plans and incident management programmes are maintained to minimise business and operational disruptions including pandemic incidents. The Group maintains full duplication of all information contained in databases and runs back-up data centres. Support arrangements have been established with third party vendors and there are strict standards, procedures and training schemes for business continuity. The Group also monitors potential pandemic threats and adjusts action plans.

vi) Risk area - Dependence on recruitment and retention of highly skilled personnel

Potential impact - The ability of the Group to meet the demands of the market and compete effectively with other IT suppliers is, to a large extent, dependent on the skills, experience and performance of its personnel. Demand is high for individuals with appropriate knowledge and experience in the IT and business services market. The inability to attract, motivate or retain key talent could have a serious consequence on the Group's ability to service client commitments and grow our business.

Mitigation strategies - Effective recruitment programmes are ongoing across all business areas, as well as personal and career development initiatives. Talent identification and development programmes have been implemented and are reviewed annually. Compensation and benefits programmes are competitive and also regularly reviewed.

Notes to the financial statements (continued)

for the year ended 31 March 2010

26. Risks and uncertainties(continued)

b) Other risks

i) Risk area - Exposure to material adverse litigation

Potential impact - The Group is regularly involved in a number of pending and threatened litigation claims, including a number of class actions in the United States. As is inherent in all legal proceedings, litigation outcomes cannot be predicted with certainty and there is a risk of unfavourable outcomes to the Group.

Mitigation strategies - The Group vigorously defends all pending and threatened litigation claims. The Group employs internal counsel and engages external counsel to assist in the effective management and disposal of litigation proceedings. Insurance coverage is maintained against litigation risks where such coverage is feasible and appropriate.

ii) Risk area - Exposure to country and regional risk (political, financial, economic, social) particularly in North America and United Kingdom

Potential impact - The Group's global footprint subjects its businesses to economic, political and other risks associated with international sales and operations. A variety of factors, including changes in a specific country's or region's political, economic, or regulatory requirements, as well as the potential for geopolitical turmoil, including terrorism and war, could result in loss of services, prevent our ability to respond to agreed service levels or fulfil other obligations. These risks are generally outside the control of the Group.

Mitigation strategies - The Group's portfolio is diversified by geography, by product, by sector and by client in order to protect itself against many of these fluctuations, especially those that are restricted to individual territories and market sectors. The Group operates in over 90 countries and derives 73% of its revenue from North America and the United Kingdom.

iii) Risk area - Exposure to consolidation among clients and markets

Potential impact - The financial services, mortgage, retail and telecommunications industries are intensely competitive and have been subject to consolidation. Consolidation in these and other industries could result in reductions in the Group's revenue and profits through price compression from combined service agreements or through a reduced number of clients.

Mitigation strategies - No single client accounts for more than 1% of the Group's revenue, which reduces the probability of this potential risk having a significant impact on the Group's business. In addition, the Group continues to expand in other vertical markets such as the public sector, telecommunications, utilities and healthcare, as well as invest in a wide range of countercyclical products and solutions, across all relevant business lines.

iv) Risk area - Acquisitions may not meet expectations

Potential impact - The Group's acquisitions, strategic alliances, joint ventures and divestitures may result in financial outcomes that are different than expected.

Mitigation strategies - The Group assesses all acquisitions rigorously, using both in-house experts and professional advisers. In addition, the Group conducts extensive post-acquisition reviews to ensure performance remains consistent with the acquisition business plan.

v) Risk area - Exposure to the unpredictability of financial markets (foreign exchange, interest rate and other financial risks)

Potential impact - As the Group operates on an international basis, it is exposed to the risk of currency fluctuations and the unpredictability of financial markets in which it operates.

Mitigation strategies - The Group's financial risk management focuses on the unpredictability of financial markets and seeks to minimise potentially adverse effects on the Group's financial performance.

Notes to the financial statements (continued)

for the year ended 31 March 2010

26. Risks and uncertainties(continued)

vi) Risk area - Exposure to increasing competition

Potential impact - The Group operates in a number of geographic, product and service markets that are highly competitive. Competitors may develop products and services that are superior to ours or that achieve greater market acceptance than our products and services which could result in the loss of clients or reduction in revenue.

Mitigation strategies - The Group is committed to continued research and investment in new data sources, people, technology and products to support its strategic plan.

vii) Risk area - Loss or infringement of intellectual property rights

Potential impact - The Group's success depends, in part, upon proprietary technology and related intellectual property rights. The extent to which intellectual property rights can be protected varies in different jurisdictions. Third parties may claim that the Group is infringing their intellectual property rights or our intellectual property rights could be infringed by third parties. If the Group does not enforce our intellectual property rights successfully, our competitive position may suffer, which could harm our operating results.

Mitigation strategies - The Group, where appropriate and feasible, relies upon a combination of patent, copyright, trademark and trade secret laws, as well as various contractual restrictions, to protect our proprietary technology and continues to monitor this situation. The Group also vigorously defends all third party infringement claims.

viii) Risk area - Data centre security breaches

Potential impact - The Group is highly dependent on information technology networks and systems to process, transmit and store electronic information. Security breaches of our data centres can create system disruptions, shutdowns or unauthorised disclosure of confidential information.

Mitigation strategies - The Group's data centres are protected against physical break-ins. The Group has strict standards, procedures and training schemes for physical security.

Key aspects of the Experian risk management framework:

·        Defined and communicated business principles and strategies

·        Clear Group objectives, supported by financial and non-financial key performance indicators ('KPIs')

·        Standardised process to identify, evaluate and manage significant risks on an ongoing basis

·        Control reviews and follow-ups performed by management, internal audit and third parties

·        Budgetary controls and monthly performance reviews, including achievement of objectives and KPIs

·        Regional risk management committees with local oversight of risk management processes

·        Executive risk management committee with global oversight of risk management processes

·        Regular reporting on risk by senior management to the Audit committee

·        Audit Committee regular risk updates to the Board

Statement of directors' responsibilities

The directors confirm that, to the best of their knowledge, the financial statements are prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Group taken as a whole; and the management report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, and a description of the principal risks and uncertainties that they face is included in note 26.

At the date of this statement, the names and functions of the directors in office are those listed in the Experian annual report 2009, save that Ms Danon left the Board on 31 December 2009.

By order of the Board

Charles Brown

Company Secretary

19 May 2010

 

END

 

 

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