Preliminary Results Part 1
news release
Experian plc
Preliminary results for the year ended 31 March 2010
19 May 2010 ─ Experian, the global information services company, today issues its financial results for the year ended 31 March 2010.
Highlights
· A strong performance, with organic revenue growth, further margin progression and excellent cash flow.
· Revenue from continuing activities up 2% at constant exchange rates. Organic revenue growth of 2%. Total Group revenue of US$3.9bn (2009: US$3.9bn).
· Strong margin progression. EBIT margin from continuing activities up 80 basis points to 24.4%, excluding FARES contribution.
· Continuing EBIT up 6% at constant exchange rates. Total EBIT of US$991m, up 6% at actual exchange rates.
· Profit before tax from continuing operations of US$661m (2009: US$578m). Benchmark profit before tax of US$910m, up 8%.
· Basic EPS of 59.0 US cents (2009: 48.0 US cents). Benchmark EPS of 67.1 US cents, up 8%.
· Excellent cash conversion of 98% (2009: 99%). Net debt reduced by US$483m to US$1,627m.
· Second interim dividend of 16.00 US cents per ordinary share, to give full-year dividend of 23.00 US cents per ordinary share, up 15%.
· Enhanced distribution policy: raising future dividend payout and new US$300m share buyback programme.
John Peace, Chairman of Experian, said:
"Experian has again delivered an excellent financial performance. In light of our ongoing strong cash generation, we are today announcing an increased dividend payout and a share buyback. Experian has considerable opportunities for future growth which it is pursuing with vigour and with focus and I look forward to further progress over the coming year."
Don Robert, Chief Executive Officer of Experian, said:
"Last year we grew revenue, strengthened our market position and delivered significant cost efficiencies, even though there were considerable economic headwinds in some regions. Looking ahead, we see signs of gradual recovery in some of our key markets and we expect a modest contribution from our strategic growth initiatives over the course of the year. For the first half, we expect organic revenue growth to be slightly stronger than the FY10 exit rate. For the year as a whole, we are targeting mid single-digit EBIT growth (from continuing activities at constant currency) and strong cash generation. Longer term, we see significant opportunities to grow and to capitalise on our globally leading position."
Contact
Experian
Don Robert Chief Executive Officer +44 (0)20 3042 4215
Paul Brooks Chief Financial Officer
Nadia Ridout-Jamieson Director of Investor Relations
James Russell Public Relations Director
Finsbury
Rollo Head +44 (0)20 7251 3801
Don Hunter
There will be a presentation today at 9.30am (UK time) to analysts and investors at the Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ. The presentation can be viewed live on the Experian website at www.experianplc.com and can also be accessed live via a dial-in facility on +44 (0)20 3037 9164. The supporting slides and an indexed replay will be available on the website later in the day.
There will be a conference call today for bond analysts and investors at 3.00pm (UK time). This will be broadcast live on the Experian website at www.experianplc.com. The supporting slides and an indexed replay will be available on the website later in the day.
See Appendix 2 for definition of non-GAAP measures used throughout this announcement and Appendix 3 for reconciliation of revenue and EBIT by operating segment.
Roundings
Certain financial data have been rounded within this announcement. As a result of this rounding, the totals of data presented may vary slightly from the actual arithmetic totals of such data.
Forward looking statements
Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements.
About Experian
Experian is the leading global information services company, providing data and analytical tools to clients in more than 90 countries. The company helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Experian employs approximately 15,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; Costa Mesa, California; and São Paulo, Brazil.
For more information, visit http://www.experianplc.com.
Chief Executive Officer's review
Experian performed well in 2010, notwithstanding the challenges presented by the global economic downturn. Our organic revenue growth was 2%, we expanded our margins by 80 basis points to 24.4% and our Benchmark EPS grew by 8% to 67.1 US cents per ordinary share. We also delivered another strong cash performance with free cash flow of US$818m, up 11%. This meant that we ended the year comfortably within our target gearing range, at 1.8x adjusted net debt to EBITDA, including the current value of the Serasa put option. The strength of this performance has enabled us again to raise our full-year dividend, which is up 15% to 23.00 US cents per ordinary share.
We were able to deliver this strong performance because of the balance in our portfolio, the strength of our market position and strong execution against our cost efficiency programme. We were especially pleased with the outstanding performances across Latin America and at Interactive, which helped to offset the drag effect of the global economic recession.
Progress in the year included:
· strong growth in emerging markets, which now account for nearly one fifth of our revenue;
· an increased contribution from non-financial B2B verticals and the consumer channel. We now generate more than 60% of our revenue from outside financial services;
· a strong contribution from products developed in the past five years, which again accounted for over 20% of Group revenue; and
· our cost efficiency programme, which delivered savings ahead of plan.
Key trends
As we move forward, we see a number of trends which will influence our performance over the coming year.
· Within financial services, we see gradual recovery across many of the developed markets in which we operate. In key territories such as North America, unemployment rates have started to level off, delinquency rates are starting to fall, lenders are beginning to solicit new customers and small businesses are starting to look for funding to expand. Experian has a key role to play in this recovery process, helping to restore confidence in the global retail banking system with our world-class data, analytics and software tools.
· Across the retail sector, we see consumer spending driving improvement among retailers. We also see a steady shift to more targeted digital advertising channels and we are increasing our efforts to benefit from this trend as client marketing budgets return.
· And at Consumer Direct in North America, the new marketing strategy for freecreditscore.com implemented from 1 April 2010 is progressing in line with expectations. We have had recent dialogue with the Federal Trade Commission regarding our site, freecreditreport.com, and we have made further changes to this site through the addition of consumer disclosures. We remain vigilant regarding any regulatory changes that may affect our business and will adapt as needed.
Strategic priorities
While global economic recovery will help our business, our goal is to accelerate growth by creating new market opportunities, building greater scale and further cementing our global leadership position. Each year, we develop specific plans which set our priorities and allow us to concentrate our resources. These plans are executed within our strategic framework to focus on data and analytics, drive profitable growth and optimise capital efficiency. Our action plan is centred on taking control of growth through a series of defined initiatives:
Expanding our global reach
· Geographic expansion - we see significant scope to take our existing credit and marketing products into fast-growing markets, for example Brazil, India, China, South Africa and Eastern Europe.
· Vertical expansion - we are further repurposing our data and platforms to build scale positions in new verticals such as the public sector, telecoms, utilities and US healthcare payments.
· New market channels - we see opportunity to further expand in underpenetrated segments, such as small and medium enterprises.
Delivering innovative data and analytics
We are investing in our data sources, our platforms and our products across the globe to bring the fresh insights and innovation that our customers need. For example, we are benefiting from recent addition of income data in our US consumer credit bureau; we are enhancing our products and platforms in business information; we are developing new analytics which will extend our fraud prevention capabilities; we are introducing new digital advertising services within our marketing business and we are investing further behind the launch of ProtectMyID, our identity monitoring tool for consumers.
Executing superior sales and operations
Growth in our business will be delivered by our people and we are investing in our business to sustain our high performance sales culture and to maximise efficiency across our operations.
These initiatives, along with targeted, infill acquisitions that are tightly coupled to the core, are central to our goal of delivering strong, sustainable returns for our shareholders.
Net debt
Net debt was reduced by US$483m to US$1,627m at 31 March 2010, after funding capital expenditure of US$314m, and net share purchases of US$114m by employee trusts and in respect of employee share incentive plans. In addition, there was a net inflow of US$66m from disposals net of acquisitions. As at 31 March 2010, the net debt to EBITDA gearing ratio was 1.8x, which is at the lower end of our 1.75-2.0x adjusted target debt range. The gearing ratio is adjusted to include the put option over the 30% minority stake in Serasa, valued at US$661m at 31 March 2010.
Debt funding
During the year, we started an 18 month programme to refinance our bank and bond facilities with an issuance in February 2010 of €500m Guaranteed notes at 4.75% due 2020, which was swapped into US dollars. This programme will continue in the year ending 31 March 2011, as we aim to spread debt maturities and diversify our sources of funding. The marginal cost of new funding sources is higher than the funds being replaced and, as a result, for the year ending 31 March 2011, our current expectation is that net interest expense will be in the range of US$90-100m.
Capital strategy
We have recently undertaken a re-evaluation of our capital policy and payout ratios in light of the investment needs of the business, the reduction in total net debt and ongoing strength in cash generation. We remain committed to a prudent but efficient balance sheet consistent with our desire to retain a strong investment grade credit rating. Our target gearing ratio, net debt adjusted for the current value of the put option over the minority shares in Serasa, divided by EBITDA, will remain unchanged at 1.75-2.0x.
We anticipate that continuing strength in our cash generation, as well as receipts from the FARES disposal, will result in net debt being below our gearing targets. Accordingly, it is our current intention to adjust our distribution policies to shareholders as follows:
· We intend to increase our dividend payout ratio over the next twelve months. By the time of the second interim dividend next year, we expect to have dividend cover based on Benchmark EPS of around 2.5 times on an annual basis; our previous policy was to have cover on this basis of at least three times.
· We will commence a share buyback programme of around US$300m, to be implemented over the next twelve months, subject to free cash flow and acquisition expenditure. It is planned to repurchase an additional US$50m to satisfy employee share incentive plans. The total share repurchase over the next twelve months is therefore expected to be approximately US$350m.
Dividend
For the year ended 31 March 2010, we have announced a second interim dividend of 16.00 US cents per share. This gives a full-year dividend of 23.00 US cents per share, 2.9 times covered by Benchmark EPS, and up 15%as we transition to our increased dividend payout. The second interim dividend will be paid on 23 July 2010 to shareholders on the register at the close of business on 25 June 2010.
Changes to external reporting calendar
We have undertaken a review of financial reporting frequency in order to bring greater efficiency to our external reporting. Henceforth, we will issue financial updates on a quarterly basis only. This brings us into line with reporting frequencies across our peer group. Going forward, our financial calendar will include the Q1 Interim Management Statement (in July), the half-yearly report (in November), the Q3 Interim Management Statement (in January) and the preliminary results (in May). We aim to accelerate the reporting of our half-yearly and preliminary results starting in the year ending 31 March 2012.
Our people
The strength of our performance is down to the outstanding achievements of our people. It is reflective of a terrific effort by our employees, in the face of some tough market conditions. I salute their dedication and commitment and I would like to take this opportunity to thank all our employees for their single-mindedness and strength of purpose over the past year.
Group financial highlights
Revenue and EBIT by geography
|
Year ended 31 March |
Revenue |
EBIT |
||||
|
|
2010 US$m |
2009 US$m |
Growth1 % |
2010 US$m |
2009 US$m |
Growth1 % |
|
North America |
2,060 |
2,059 |
- |
628 |
623 |
1 |
|
Latin America |
559 |
462 |
16 |
166 |
118 |
34 |
|
UK and Ireland |
779 |
843 |
(1) |
212 |
211 |
7 |
|
EMEA/Asia Pacific |
461 |
426 |
6 |
52 |
49 |
1 |
|
Sub total |
3,859 |
3,790 |
2 |
1,058 |
1,001 |
6 |
|
Central Activities2 |
- |
- |
- |
(62) |
(57) |
|
|
Continuing activities |
3,859 |
3,790 |
2 |
996 |
944 |
6 |
|
Discontinuing activities3 |
21 |
83 |
n/a |
(5) |
(5) |
n/a |
|
Total |
3,880 |
3,873 |
1 |
991 |
939 |
6 |
|
|
|
|
|
|||
|
EBIT margin4 |
24.4% |
23.6% |
|
|||
|
|
|
|
|
|||
1 Total growth at constant exchange rates
2 Central Activities comprise costs of central corporate functions
3 Discontinuing activities include UK account processing and other smaller discontinuing activities
4 EBIT margin is for continuing business only, excluding FARES. Further analysis can be found in Appendix 1
Reconciliation of EBIT - continuing operations
|
Year ended 31 March |
|
EBIT |
||
|
|
|
|
2010 US$m |
2009 US$m |
|
EBIT from continuing operations |
991 |
939 |
||
|
Net interest |
(81) |
(96) |
||
Benchmark PBT |
910 |
843 |
||
|
Exceptional items |
(72) |
(117) |
||
|
Amortisation of acquisition intangibles |
(140) |
(132) |
||
|
Goodwill adjustment Charges for demerger-related equity incentive plans |
- (28) |
(1) (32) |
||
|
Financing fair value remeasurements |
(9) |
19 |
||
|
Tax expense on share of profits of associates |
- |
(2) |
||
Profit before tax |
661 |
578 |
||
|
Group tax expense |
(17) |
(84) |
||
Profit after tax for continuing operations |
644 |
494 |
||
Benchmark EPS (US cents) |
67.1 |
62.3 |
||
|
Basic EPS for continuing operations (US cents) |
59.8 |
46.8 |
||
|
Weighted average number of ordinary shares (million) |
1,015 |
1,013 |
||
See Appendix 1 for analysis of revenue and EBIT by business segment and Appendix 3 for reconciliation of revenue and EBIT by geography
See Appendix 2 for definition of non-GAAP measures
North America
North America delivered a robust performance, notwithstanding recessionary market conditions. Growth in Interactive offset weakness elsewhere and cost efficiencies enabled margins to be broadly maintained.
|
Year ended 31 March |
2010
US$m |
2009
US$m |
Total growth1 % |
Organic growth1 % |
Revenue |
|
|
|
|
|
Credit Services |
693 |
730 |
(5) |
(6) |
|
Decision Analytics |
116 |
119 |
(3) |
(3) |
|
Marketing Services |
329 |
358 |
(8) |
(8) |
|
Interactive |
922 |
852 |
8 |
8 |
|
Total - continuing activities |
2,060 |
2,059 |
- |
- |
|
Discontinuing activities2 |
8 |
24 |
n/a |
|
Total North America |
2,068 |
2,083 |
(1) |
|
|
|
|
|
|
|
EBIT |
|
|
|
|
|
Direct business |
572 |
575 |
(1) |
|
|
FARES |
56 |
48 |
16 |
|
|
Total - continuing activities |
628 |
623 |
1 |
|
|
Discontinuing activities2 |
(5) |
(7) |
n/a |
|
|
Total North America |
623 |
616 |
1 |
|
|
|
|
|
|
|
|
EBIT margin3 |
27.8% |
27.9% |
|
|
1 Growth at constant exchange rates
2 Discontinuing activities include an online data survey business and the National Business Database
3 EBIT margin is for continuing business only, excluding FARES
Credit Services
Total revenue at Credit Services declined by 5%, with organic revenue down 6%. Within consumer information, the depressed environment for consumer lending gave rise to declines in the prospecting and credit origination categories. This was partially offset by solid growth in portfolio management, as lenders focused on risk mitigation. Business information performed well, reflecting investment in data and product innovation, as well as strong sales execution during the year. There was a resilient performance at automotive, which benefited as the year progressed from the addition of new accident data. The SearchAmerica acquisition (healthcare payments) annualised in the period, and delivered good growth, with deeper penetration of both existing and new hospitals.
Decision Analytics
Total and organic revenue declined by 3% in the year, reflecting client hesitancy to spend on major software installations. This was partially mitigated by growth in analytics and fraud prevention tools, with client focus largely directed towards risk management tools, such as loan loss forecasting, credit criteria evaluation and risk-based pricing. There was good progress in the start-up public sector vertical, where both the pipeline and conversions have grown.
Marketing Services
Total and organic revenue at Marketing Services declined by 8%. In the early part of the year, contraction in retail spending impacted the traditional activities of list processing, data and database, although there were signs of stabilisation as the year progressed. Digital media activities delivered good growth, reflecting the ongoing shift to more cost-effective and more targeted channels. During the year, Experian has invested in new capabilities and innovative new products to strengthen its market position and provide new growth opportunities as the economy recovers.
Interactive
Total and organic revenue growth was 8% at Interactive. There was strong growth in lead generation, driven by an excellent performance in the education vertical, reflecting client gains, and an improving trend in the year within the lending vertical. Comparison shopping revenues benefited from a number of new partnerships with co-branded partners. Increased membership revenue and affinity channel penetration drove growth at Consumer Direct, offsetting a lower contribution from databreach revenue. Product and user experience enhancements contributed to improved retention rates, while the new identity monitoring product ProtectMyID performed in line with expectations, with good order volume growth since launch.
On 23 February 2010, Experian received final rules from the Federal Trade Commission (FTC) governing the marketing of free credit reports to US consumers. These regulations require specific disclosures and links to the FTC-sponsored website. With effect from 1 April 2010, Experian adapted its marketing strategy and switched all broadcast and internet advertising placements to a new consumer brand, freecreditscore.com. Based on recent dialogue with the Federal Trade Commission, further changes to the freecreditreport.com site were implemented to resolve lingering concerns about disclosures in advertising.
Financial review
Total revenue for the year from continuing activities was US$2,060m (2009: US$2,059m).
EBIT from direct businesses was US$572m (2009: US$575m), a decrease of 1% in the year, giving an EBIT margin of 27.8% (2009: 27.9%).
The margin performance reflected strong delivery on cost reductions, including some one-off benefits, which helped to offset negative operating leverage in Credit Services and Marketing Services.
EBIT from FARES, the 20%-owned real estate information associate, increased to US$56m (2009: US$48m), driven by higher mortgage refinancing activity.
Latin America
Latin America delivered an excellent performance, driven by double-digit growth in Credit Services. There was significant margin progression, up 420 basis points, reflecting strong positive operating leverage.
|
Year ended 31 March |
2010
US$m |
2009
US$m |
Total growth1 % |
Organic growth1 % |
Revenue |
|
|
|
|
|
Credit Services |
538 |
437 |
17 |
17 |
|
Decision Analytics |
7 |
10 |
(26) |
(26) |
|
Marketing Services |
14 |
15 |
(13) |
(13) |
|
Total Latin America |
559 |
462 |
16 |
16 |
|
|
|
|
|
|
|
EBIT |
|
|
|
|
|
Total Latin America |
166 |
118 |
34 |
|
|
|
|
|
|
|
|
EBIT margin |
29.7% |
25.5% |
|
|
1 Growth at constant exchange rates
Credit Services
There was strong growth in Credit Services, with total revenue at constant exchange rates and organic revenue up 17%. Market conditions in Brazil improved as the year progressed, with a rebound in credit demand. Experian continued to deliver good growth across both consumer and business information activities, helped by demand for higher value-added products and new client acquisition across the small and medium enterprise channel. There was also a significant contribution from authentication products, as new tax filing regulations in Brazil drove increased volumes.
Decision Analytics and Marketing Services
While organic revenue declined at Decision Analytics and Marketing Services, this was off a small base in each case. Experian launched a number of new products during the year, including account management and fraud prevention products in Decision Analytics and competitive intelligence (Hitwise) and consumer segmentation (Mosaic) tools in Marketing Services.
Financial review
Total revenue was US$559m for Latin America, up 16% at constant exchange rates. Organic revenue growth was also 16%.
EBIT in the year was US$166m, up 34% at constant exchange rates. The EBIT margin expanded by 420 basis points to 29.7%. The margin improvement reflects strong positive operating leverage in Credit Services, arising from volume growth and the migration towards higher value-added services.
UK and Ireland
There was a resilient performance within continuing activities in the UK and Ireland. Interactive delivered strong growth, which enabled the region to largely withstand challenges in the financial services and retail sectors. There was significant margin progress, up 220 basis points, reflecting strong execution on cost efficiencies.
|
Year ended 31 March |
2010
US$m |
2009
US$m |
Total growth1 % |
Organic growth1 % |
Revenue |
|
|
|
|
|
Credit Services |
234 |
265 |
(6) |
(6) |
|
Decision Analytics |
193 |
226 |
(8) |
(8) |
|
Marketing Services |
243 |
268 |
(4) |
(2) |
|
Interactive |
109 |
84 |
38 |
38 |
Total - continuing activities |
779 |
843 |
(1) |
(1) |
|
Discontinuing activities2 |
13 |
59 |
n/a |
|
|
Total UK and Ireland |
792 |
902 |
(6) |
|
|
|
|
|
|
|
EBIT |
|
|
|
|
Continuing activities |
212 |
211 |
7 |
|
|
Discontinuing activities2 |
- |
2 |
n/a |
|
|
Total UK and Ireland |
212 |
213 |
6 |
|
|
|
|
|
|
|
|
EBIT margin3 |
27.2% |
25.0% |
|
|
1 Growth at constant exchange rates
2 Discontinuing activities include UK account processing and other smaller activities. The closure of UK account processing completed in the year ended 31 March 2010
3 EBIT margin is for continuing activities only
Credit Services
Total revenue at constant exchange rates and organic revenue at Credit Services declined by 6%. The economic environment during the year was challenging as the tight supply of credit, coupled with weak consumer demand, gave rise to reductions in origination volumes. Revenue weakness also reflected ongoing headwinds relating to financial services consolidation and market exits. There was continued progress in vertical market diversification, with growth in public sector, utilities and telecoms revenues.
Decision Analytics
Total revenue at constant exchange rates and organic revenue declined by 8%. Market conditions during the year were challenging, reflecting capital expenditure constraints within the financial services sector, which reduced appetite for large software installations. Performance was also impacted by lower transaction volumes. This was partially mitigated by growth in analytics and fraud prevention tools.
Marketing Services
Total revenue in Marketing Services declined by 4% at constant exchange rates. Organic revenue declined by 2%. The variance is due to transactional foreign exchange differences.
Notwithstanding challenging market conditions, new media activities performed well, with good performances in email marketing and contact data management. These partially offset declines in more traditional activities. There was good strategic progress during the year, with further penetration of the government, utilities and telecoms sectors. During the year, Experian invested in product enhancements in order to further position the business in the digital media space.
Interactive
Interactive performed strongly, delivering total revenue growth at constant exchange rates and organic revenue growth of 38%. Growth was driven by increased membership revenue. New strategic initiatives in the year included the launch of ProtectMyID, the identity fraud prevention service.
Financial review
Total revenue from continuing activities was US$779m (2009: US$843m). At constant exchange rates, revenue from continuing activities was down 1% on the prior year; organic revenue also declined 1%.
EBIT from continuing activities was US$212m, up 7% at constant exchange rates. The EBIT margin expanded by 220 basis points to 27.2%, principally reflecting the delivery of cost efficiency initiatives.
EMEA/Asia Pacific
There was a solid performance in EMEA/Asia Pacific, notwithstanding tough market conditions, particularly across more developed markets. Strategically, Experian expanded its presence with significant advancement in India, a series of new product launches and acquisitions in Germany and Japan.
|
Year ended 31 March |
2010
US$m |
2009
US$m |
Total growth1 % |
Organic growth1 % |
Revenue |
|
|
|
|
|
Credit Services |
191 |
172 |
8 |
- |
|
Decision Analytics |
125 |
131 |
(5) |
(5) |
|
Marketing Services |
145 |
123 |
16 |
8 |
Total EMEA/Asia Pacific |
461 |
426 |
6 |
1 |
|
|
|
|
|
|
|
EBIT |
|
|
|
|
Total EMEA/Asia Pacific |
52 |
49 |
1 |
|
|
|
|
|
|
|
|
EBIT margin |
11.3% |
11.5% |
|
|
1 Growth at constant exchange rates
Credit Services
Total revenue for Credit Services grew 8% at constant exchange rates, while organic revenue growth was flat. The difference relates to the acquisition of KreditInform in South Africa (acquired December 2008). Emerging markets, including South Africa and China, performed strongly, offsetting tougher market conditions in more established markets. Growth was also impacted by a strong prior-year comparative, which included one-off items. Strategically, there was good progress in India, as Experian was granted a full licence by the Reserve Bank of India to operate a credit bureau in a joint venture with seven of India's leading financial institutions.
Decision Analytics
Total revenue at constant exchange rates and organic revenue declined 5%. While conditions were tough in the early part of the year, trends improved significantly as the period progressed. There was a resilient performance across established markets and strong growth in emerging markets.
Marketing Services
Total revenue for Marketing Services grew 16% at constant exchange rates, with organic revenue growth of 8%. The acquisition contribution relates primarily to United MailSolutions in Germany (acquired October 2009) and A-Care Systems in Japan (acquired December 2009). Progress was particularly strong in the Asia Pacific region, reflecting deeper market penetration and new product introductions in markets such as Australia, China and South East Asia.
Financial review
Revenue from continuing activities was US$461m, up 6% at constant exchange rates. Organic revenue growth was 1%.
EBIT from continuing activities was US$52m, up 1% at constant exchange rates. EBIT margin was 11.3% (2009: 11.5%).
Other items
Balance sheet
Net assets amounted to US$2,437m (2009: US$1,899m), equivalent to US$2.40 per share (2009: US$1.87).
Cash flow and net debt
Experian continued to be strongly cash generative in the year with operating cash flow of US$976m (2009: US$927m) and a cash flow conversion of 98% (2009: 99%). Free cash flow was US$818m (2009: US$736m) and funded acquisitions of US$41m (2009: US$179m) and equity dividends of US$206m (2009: US$189m).
At 31 March 2010, net debt was US$1,627m (2009: US$2,110m) and undrawn committed borrowing facilities totalled US$1,932m (2009: US$1,050m). The related net interest expense was US$81m (2009: US$96m), after charging US$1m (2009: crediting US$17m) in respect of the differential between the expected return on pension assets and interest on pension liabilities.
During the year, Eurobonds with a par value of £203m were redeemed and a new US$3,000m Euro medium term note programme was launched. Under this programme, €500m 4.75% Guaranteed notes 2020 were issued and the proceeds swapped into US dollars. Existing committed bank facilities run to July 2012 and the £334m 5.625% Euronotes 2013 are due for redemption at par in December 2013.
Exceptional items - continuing operations
|
Year ended 31 March |
2010 |
2009 |
|
|
US$m |
US$m |
|
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 |
Expenditure of US$41m arose in the year in connection with the strategic programme of cost efficiency measures. Of this, US$21m related to redundancy, US$17m related to offshoring activities, other restructuring and infrastructure consolidation costs and US$3m 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. Further details of the arrangements and transactions in respect of FARES are given in note 22 to the financial statements.
During the year, and as previously announced, Experian completed the closure of its Canadian credit bureau and terminated its joint venture bureau in Japan.
The loss on disposal of businesses in the year primarily 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.
Tax
The effective rate of tax for the year based on Benchmark PBT was 20.2% (2009: 21.8%). This rate is defined as the total tax expense, adjusted for the tax impact of non-Benchmark items, divided by Benchmark PBT. A one-off deferred tax credit of US$105m is excluded from the calculation of this rate in the year ended 31 March 2010 in view of the size and the non-recurring nature of this benefit. A one-off corporation tax credit of US$20m was excluded from the calculation of this rate in the year ended 31 March 2009 as it related to arrangements involving entities no longer part of the Group.
The cash tax rate for continuing operations (based on tax paid in the year and Benchmark PBT for continuing operations) was 5.3% (2009: 4.6%).
Earnings per share
Basic earnings per share were 59.0 US cents (2009: 48.0 US cents), after a loss of 0.8 US cents (2009: earnings of 1.2 US cents) in respect of discontinued operations. Benchmark earnings per share increased to 67.1 US cents from 62.3 US cents last year.
At 31 March 2010, Experian had some 1,026m shares in issue of which 11m were held by employee trusts. Accordingly the number of shares to be used for the purposes of calculating basic earnings per share from 31 March 2010 is 1,015m. Any issues and purchases of shares after 31 March 2010 will result in an amendment to that figure.
Foreign exchange
The principal exchange rates used to translate revenue and EBIT in the year are:
|
|
2010 |
2009 |
Change against the US$ |
|
Sterling : US$ |
1.58 |
1.69 |
(6.5%) |
|
US$ : Brazilian real |
1.88 |
1.96 |
4.1% |
|
Euro : US$ |
1.41 |
1.41 |
n/a |
The effect of these exchange rate changes on the results for the year is to reduce reported revenue by US$21m and EBIT by US$1m.
The principal exchange rates used to translate assets and liabilities at the year end are:
|
|
2010 |
2009 |
|
Sterling : US$ |
1.52 |
1.43 |
|
US$ : Brazilian real |
1.79 |
2.30 |
|
Euro : US $ |
1.35 |
1.33 |
FARES
As indicated in note 22 to the financial statements, Experian received notice from The First American Corporation ('FAC') in respect of the exercise by FAC of its buy-out option over Experian's 20% interest in FARES on 22 April 2010 and cash consideration of some US$314m will be payable to Experian by 31 December 2010.
Format of financial information - Group income statement
As the Group further develops cost management globally, a new format is to be adopted in the Group income statement to report costs by nature rather than by function in the year ending 31 March 2011. This will more appropriately reflect the nature of the cost base.
The only other significant change anticipated in the 2011 Group income statement is that the results of FARES will be shown as a discontinued operation in view of the forthcoming disposal of Experian's interest during the year.
Appendices
|
1. Revenue and EBIT by business segment
|
||||
|
Year ended 31 March |
2010 |
2009 |
Growth1 |
Organic growth1 |
|
|
US$m |
US$m |
% |
% |
Revenue |
|
|
|
|
|
Credit Services |
1,656 |
1,604 |
2 |
1 |
|
Decision Analytics |
441 |
486 |
(7) |
(7) |
|
Marketing Services |
731 |
764 |
(3) |
(4) |
|
Interactive |
1,031 |
936 |
11 |
11 |
Total - continuing activities |
3,859 |
3,790 |
2 |
2 |
|
Discontinuing activities2 |
21 |
83 |
n/a |
|
Total |
3,880 |
3,873 |
1 |
|
|
|
|
|
|
|
EBIT |
|
|
|
|
|
Credit Services - direct business |
555 |
513 |
7 |
|
|
FARES |
56 |
48 |
16 |
|
|
Total Credit Services |
611 |
561 |
8 |
|
|
Decision Analytics |
119 |
140 |
(11) |
|
|
Marketing Services |
86 |
88 |
- |
|
|
Interactive |
242 |
212 |
15 |
|
|
Central Activities |
(62) |
(57) |
n/a |
|
Total - continuing activities |
996 |
944 |
6 |
|
|
Discontinuing activities2 |
(5) |
(5) |
n/a |
|
|
Total |
991 |
939 |
6 |
|
|
|
|
|
|
|
|
EBIT margin3 |
|
|
|
|
|
Credit Services - direct business |
33.5% |
32.0% |
|
|
|
Decision Analytics |
27.0% |
28.8% |
|
|
|
Marketing Services |
11.8% |
11.5% |
|
|
|
Interactive |
23.5% |
22.6% |
|
|
|
Total EBIT margin3 |
24.4% |
23.6% |
|
|
1 Growth at constant exchange rates
2 Discontinuing activities include UK account processing and other smaller discontinuing activities
3 EBIT margin is for continuing direct business only, excluding FARES
2. Use of non-GAAP financial information
Experian has identified certain measures that it believes will assist understanding of the performance of the Group. As these measures are not defined under IFRS, 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 these are considered to be important comparables and key measures used within the business for assessing performance. Such non-GAAP measures that are included within the financial statements are detailed in note 4 to those statements. Further non-GAAP measures and reconciliations of those measures are set out below.
Earnings before interest, tax, depreciation and amortisation ('EBITDA'): EBITDA is defined as profit before amortisation of acquisition intangibles, goodwill impairments, charges in respect of the demerger-related equity incentive plans, exceptional items, net financing costs, tax, depreciation and other amortisation. It includes the Group's share of associates' pre-tax profit.
Discontinuing activities: Experian defines discontinuing activities as businesses sold, closed or identified for closure during a financial year. These are treated as discontinuing activities for both revenue and EBIT purposes. Prior periods, where shown, are restated to disclose separately the results of discontinuing activities. This financial measure differs from the definition of discontinued operations set out in IFRS 5 'Non-current assets held for sale and discontinued operations'. Under IFRS 5, a discontinued operation is a component of an entity that has either been disposed of, or is classified as held for sale, and is: (i) a separate major line of business or geographical area of operations; (ii) part of a single plan to dispose of a major line of business or geographical area of operations; or (iii) a subsidiary acquired exclusively with a view to resale.
Continuing activities: Businesses trading at 31 March 2010 that have not been disclosed as discontinuing activities are treated as continuing activities.
Total growth: This is the year-on-year change in the performance of Experian's activities. Total growth at constant exchange rates removes the translational foreign exchange effects arising on the consolidation of Experian's activities.
Organic growth: This is the year-on-year change in continuing activities revenue, at constant transactional and translation exchange rates, excluding acquisitions (other than affiliate credit bureaux) until the first anniversary date of consolidation.
Direct business: Direct business refers to Experian's business excluding the financial results of associates (including FARES).
Constant exchange rates: In order to illustrate its organic performance, Experian discusses its results in terms of constant exchange rate growth, unless otherwise stated. This represents growth calculated as if the exchange rates used to determine the results had remained unchanged from those used in the previous year.
Free cash flow: Free cash flow is derived from operating cash flow by excluding net interest and tax paid together with dividends paid to minority shareholders.
|
3. Revenue and EBIT by operating segment
|
||||||
|
Year ended 31 March |
2010 |
2009 |
||||
|
|
Continuing activities |
Discontinuing activities1 |
Total |
Continuing activities |
Discontinuing activities1 |
Total |
|
|
US$m |
US$m |
US$m |
US$m |
US$m |
US$m |
Revenue |
|
|
|
|
|
|
|
North America |
2,060 |
8 |
2,068 |
2,059 |
24 |
2,083 |
|
Latin America |
559 |
- |
559 |
462 |
- |
462 |
|
UK and Ireland |
779 |
13 |
792 |
843 |
59 |
902 |
|
EMEA/ Asia Pacific2 |
461 |
- |
461 |
426 |
- |
426 |
Total revenue |
3,859 |
21 |
3,880 |
3,790 |
83 |
3,873 |
|
|
|
|
|
|
|
|
EBIT |
|
|
|
|
|
|
|
North America - direct business |
572 |
(5) |
567 |
575 |
(7) |
568 |
FARES |
56 |
- |
56 |
48 |
- |
48 |
|
Total North America |
628 |
(5) |
623 |
623 |
(7) |
616 |
|
Latin America |
166 |
- |
166 |
118 |
- |
118 |
|
UK and Ireland |
212 |
- |
212 |
211 |
2 |
213 |
|
EMEA/Asia Pacific2 |
52 |
- |
52 |
49 |
- |
49 |
|
Total operating segments |
1,058 |
(5) |
1,053 |
1,001 |
(5) |
996 |
|
Central Activities |
(62) |
- |
(62) |
(57) |
- |
(57) |
Total EBIT |
996 |
(5) |
991 |
944 |
(5) |
939 |
1 Discontinuing activities include UK account processing and other smaller discontinuing activities
2 EMEA/Asia Pacific represent all other operating segments
|
4. Income statement analysis - continuing operations
|
||||||
|
Year ended 31 March |
2010 |
2009 |
||||
|
|
Benchmark |
Non-benchmark1 |
Total |
Benchmark |
Non-benchmark1 |
Total |
|
|
US$m |
US$m |
US$m |
US$m |
US$m |
US$m |
Revenue |
3,880 |
- |
3,880 |
3,873 |
- |
3,873 |
|
Cost of sales |
(1,889) |
- |
(1,889) |
(1,824) |
- |
(1,824) |
|
Gross profit |
1,991 |
- |
1,991 |
2,049 |
- |
2,049 |
|
|
|
|
|
|
|
|
|
Distribution costs |
(419) |
- |
(419) |
(387) |
- |
(387) |
|
Administrative expenses |
(639) |
(240) |
(879) |
(767) |
(282) |
(1,049) |
|
|
|
|
|
|
|
|
|
Operating expenses |
(1,058) |
(240) |
(1,298) |
(1,154) |
(282) |
(1,436) |
|
Operating profit/(loss) |
933 |
(240) |
693 |
895 |
(282) |
613 |
|
Share of profits of associates |
58 |
- |
58 |
44 |
(2) |
42 |
|
EBIT from continuing operations |
991 |
(240)
|
751 |
939 |
(284) |
655 |
|
Net finance cost |
(81) |
(9) |
(90) |
(96) |
19 |
(77) |
|
Profit/(loss) before tax |
910 |
(249) |
661 |
843 |
(265) |
578 |
Tax |
(184) |
167 |
(17) |
(184) |
100 |
(84) |
Profit/(loss) after tax for the year from continuing operations |
726
|
(82) |
644 |
659 |
(165) |
494 |
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
Owners of Experian plc |
681 |
(73) |
608 |
631 |
(157) |
474 |
Minority interests |
45 |
(9) |
36 |
28 |
(8) |
20 |
Profit/(loss) after tax for the year from continuing operations |
726
|
(82)
|
644
|
659 |
(165) |
494 |
|
|
|
|
|
|
|
|
|
|
US cents |
US cents |
US cents |
US cents |
US cents |
US cents |
Earnings/(loss) per share - basic |
67.1 |
(7.3) |
59.8 |
62.3 |
(15.5) |
46.8 |
|
|
|
|
|
|
|
|
|
|
% |
% |
% |
% |
% |
% |
Effective rate of tax |
20.2 |
67.1 |
2.6 |
21.8 |
37.7 |
14.5 |
1 These include charges for exceptional items of US$72m (2009: US$117m) and other non-GAAP measures of US$177m (2009: US$146m), full details of which are included in note 8 to the financial statements
|
5. Cash flow summary
|
|
|
|
|
Year ended 31 March |
2010 |
|
2009 |
|
|
US$m |
|
US$m |
|
EBIT from continuing operations |
991 |
|
939 |
|
Depreciation and amortisation |
274 |
|
273 |
|
Loss on sale of fixed assets |
1 |
|
9 |
|
Capital expenditure |
(314) |
|
(305) |
|
Sale of property, plant and equipment |
30 |
|
- |
|
Change in working capital |
(22) |
|
7 |
|
Profit retained in associate |
(17) |
|
(16) |
|
Charge in respect of equity incentive plans within Benchmark PBT |
33 |
|
20 |
|
Operating cash flow1 |
976 |
|
927 |
|
Net interest paid |
(68) |
|
(128) |
|
Tax paid |
(48) |
|
(39) |
|
Dividends paid to minority shareholders |
(42) |
|
(24) |
|
Free cash flow |
818 |
|
736 |
|
Net cash outflow from exceptional items |
(62) |
|
(102) |
|
Acquisitions |
(41) |
|
(179) |
|
Purchase of investments |
(7) |
|
(29) |
|
Disposal of other financial assets and investments in associates |
118 |
|
- |
|
Disposal of transaction processing activities in France |
(17) |
|
191 |
|
Disposal of other businesses |
6 |
|
- |
|
Equity dividends paid |
(206) |
|
(189) |
|
Net cash flow |
609 |
|
428 |
|
Foreign exchange movements |
35 |
|
(37) |
|
Other financing related cash flows |
(608) |
|
(394) |
|
Movement in cash and cash equivalents - continuing operations |
36 |
|
(3) |
|
Movement in cash equivalents - discontinued operations |
- |
|
(17) |
|
Movement in cash and cash equivalents |
36 |
|
(20) |
1 A reconciliation of cash generated from operations as reported in the Group cash flow statement on page 25 to operating cash flow as reported above is given in note 16 to the financial statements
Cash conversion is defined as operating cash flow expressed as a percentage of EBIT from continuing operations.
|
6. Reconciliation of depreciation and amortisation
|
|
|
|
|
Year ended 31 March |
2010 |
|
2009 |
|
|
US$m |
|
US$m |
|
As reported in the notes to the Group cash flow statement |
417 |
|
420 |
|
Less: amortisation of acquisition intangibles |
(140) |
|
(132) |
|
Less: exceptional asset write-off |
(3) |
|
(15) |
|
As reported above |
274 |
|
273 |
This information is provided by RNS
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