Consumer business shines in H1
In Q2 FY19/20, Experian progressed well on the top-line front – both the B2B and Consumer Services were healthy. Although profitability and cash conversion was poor, management remains confident in bridging the gap in H2 FY19/20. For the full-year, organic revenue growth guidance has been moved towards the higher-end of the previous range. Other targets have been maintained.
14 Nov 19
Death, Taxes… and Experian…
…few things are certain in life, observed Benjamin Franklin, and this remains true. We observe that the social fabric of society and commerce are now increasingly data dependent. Indeed, much of our lives and commerce are so intertwined in data services that we exist, perhaps, in the digital ether as much as physically – increasingly we have a data persona: Experian. In our view, we are only at the beginning of this emerging world, it is difficult to predict the twists and turns yet to come in necessary regulation and compliance of our data, but we feel certain that the data trend is well established and that we will all, in effect, have a digital ‘avatar’ that describes us in our inter-relationships with the rest of the world. This powerful reality underpins Experian’s strategy and investment case. Few very large companies are compounding at a 7% organic rate in the developed world – this is one. BUY.
14 Nov 19
Interim preview – data wave
The data services specialist, supporting clients globally, is set to show robust ongoing organic growth in its forthcoming interim (12th Nov) results to end September – continuing the trend witnessed over the past few years. Our core investment thesis on Experian remains unchanged: a continuing data services-based revolution permeating commerce demanding expertise in a regulated environment. With the payments eco-system shifting evermore to electronic means, social media driving citizens technological expectations and on the eve of a ‘5G’ data revolution, it is difficult to envisage a slow-down in the compounding growth being delivered in the ‘data’ industry. We view Experian as a leader, driving new product and service expectations and acting as a consolidator through underlying prodigious and growing cash generation, investing in growth.
07 Nov 19
Despite a soft start, the full-year guidance remains unchanged
Experian’s top-line growth moderated in Q1, largely due to the tough comparable in the‘Decisioning’ segment. Despite this soft start, management remains confident about the business prospects, maintaining its full-year guidance. We will tweak our estimates slightly, but do not expect a material change in the target price.
17 Jul 19
Q1 trading, the value is in the data!
The data services specialist has confirmed a strong start to its year to March 2020 in a scheduled Q1 update published on 16 July. Organic revenue growth trends are tracking our expectations, we have thus made no changes to our forecast assumptions at this juncture, other than tweaking for continuing currency volatility – our earnings estimates remain unchanged. We expect Experian to continue to deliver good organic growth with strong cash generation reflecting stable margin performance, leveraging growing demand for its data capability across geographic regions and vertical segments.
17 Jul 19
Good finish to the year
Experian maintained its strong organic revenue growth momentum in FY18/19. FX headwinds, however, impacted both the reported top-line and profitability. We expect the strong demand of the company’s recently launched products to last, at least in the near term. Positive data regulation in Brazil should also lend some support, in our opinion. We will revise our target price upwards.
21 May 19
Robust Q3 FY18/19 performance
The Q3 results came in ahead of our expectations, gaining strength from the robust US performance. Also, the UK provided much-needed support to its topline, led by positive B2B growth and moderating B2C losses. LatAm and EMEA/Asia also remained positive. Moving forward, regulatory risk (dealing with data privacy laws) seems to be the only risk in the US, whereas in the UK, we maintain our cautious stance given Brexit-led uncertainty stretching further. We have revised our estimates upwards. No change in the stock recommendation.
18 Jan 19
H1 FY18/19 – story of robust product offerings and a supportive operating environment
The company’s H1 FY18/19 results were ahead of our estimates. The robust performance of B2B got the much necessary support from B2C. Region-wise – North America grew in double-digits, whereas Brazil and the UK reported a mid single-digit growth. In the upcoming quarters, we expect North America to remain strong, Brazil to improve and Brexit-related winds playing a crucial role in shaping the UK’s performance. We have revised our estimates upwards. No change in the stock recommendation.
22 Nov 18
Positive Q1 FY17/18
The company reported its Q1 FY18/19 results which came in ahead of our estimates. Both North America and EMEA/Asia continued to grow robustly, gaining additional support from Latin America. Despite the uncertain macro-economic environment, the company’s UK and Ireland operations improved further. Furthermore, the permission to operate under an open banking licence opened new pastures for growth. Considering the continuous strength in the US operations and the recovery in the UK region, we have raised our estimates. No change in our stock recommendation.
20 Jul 18
Robust FY17/18 performance
Experian reported FY17/18 preliminary results in line with our estimates. Although, B2C remained negative on a yoy basis, the quarterly trend showed signs of initial relief (in UK and Ireland, decline moderated on qoq basis, whereas North America turned positive in Q4), providing much needed support for the ongoing positive B2B momentum. Discounting for the higher than expected performance in B2C segment and a robust B2B performance, we have revised our estimates upwards but no change in our recommendation.
25 May 18
Tug of war continues - B2B vs B2C
Organic growth came in above our estimates but below market consensus. B2B continued to march forward, whereas B2C remained the drag. Geographically, the US was the kernel of company’s growth, gaining support from improving Brazilian economic situation. We maintain our conservative view on US, whereas Brazil remains the strongest pillar in Latin America. In the UK (Consumer Services), Experian’s strategy to monetize its increasing clientele through additional offerings seems to yield favourable initial results. No change in our stock recommendation.
25 Jan 18
*Data Breach and Compensation Act*
Since Equifax announced a data breach in September 2017, legislators have been trying hard to penalize the lax attitude of data managers (including credit scoring companies). Recently, a bill was tabled in the Senate (Data Breach and Compensation Act), which proposes significant fines in the event of a data breach. Looking into the fine print, the bill recommends a fine of $100 per customer whose personal information gets compromised (with an additional $50 for each piece of data put at risk per person). The total sanctions are capped at 50% of the company’s total gross revenue. Also, if a company fails to disclose the breach to regulators in a timely manner, or has insufficient cyber security in place, the cap will increase to 75%. If this legislation had been in place during the Equifax fiasco, the company would have incurred a fine of at least $1.5bn.
13 Jan 18
Strong B2B performance; B2C remains a problem child
B2B was strong (c.80% of group revenue) but B2C business remained weak. We reiterate our earlier position of a gradual softness in the US economy. We also do not see any long-term benefits from the Equifax fiasco considering a history of customer stickiness (lack of substitutes/limited number of reputed players in the credit scoring business). Although the B2C business is estimated to benefit from a series of small but key steps, it will not return to the black anytime soon. No change in stock recommendation.
27 Dec 17
Decent results; innovation is the key
Experian reported FY16/17 results in line with our estimates. The lfl revenue growth came in at 4.0% (the same as our estimate; +5% lfl excluding the CCM business), driven by strong momentum in the B2B businesses (+7.0% yoy) – Credit Services (+6% yoy, c.55% of group revenue), Decision Analytics (+9.0%, c.14% of group revenue) and Marketing Services (+8.0%; c.10% of group revenue). However, the B2C business, Consumer Services, witnessed a 4% lfl decline (c.22% of group revenue), largely due to the ongoing transition over the past few quarters. Geographically, North America clocked 5% organic growth (vs our estimate: 4.3%), on the back of positive demand in both Credit and Marketing Services (+8.0% yoy in each segment). The Decision Analytics business remained flat as new-business wins and the strength in scoring and analytics was offset by the non-renewal of a customer contract earlier in the year. Consumer Services ended the year in the red with a 2% lfl decline. UK & Ireland (+1% lfl, c.19% of group revenue) performed in line with our estimates. Growth in B2B businesses (Credit: +3%, Decision Analytics: +5% and Marketing: +5%) was largely offset by the 9% decline in the Consumer business (currently undergoing a transitioning phase), the company has built a free membership base of over 1.7 million members. In the LatAm region (17% of group revenue), the lfl revenue increased by 9.0% (vs our estimate: 7.6%), on account of continued strength from countercyclical products in Credit Services (+6.0% yoy). Marketing and Decision Analytics businesses also registered a positive momentum during the year (+39.0% and +34.0% respectively). Asia Pacific/EMEA (c.8% of group revenue) grew by 9.0% during the year (vs our estimate: 7.4%), driven by the strong performance in Decision Analytics and Marketing services (+21% and +16%, respectively). While Decision Analytics capitalised on new client wins and the strong demand for decisioning and fraud-prevention software, Marketing Services leapt due to good growth in Data Quality and Targeting services. Credit Services declined by 3% due to headwinds in the Nordics and South Africa, partially offset by positive growth in APAC and Southern Europe. The adjusted EBIT margin (excluding the Cross-Channel Marketing business) was 27.7%, up 60bp for the year, reflecting the phasing of investment in strategic growth initiatives and FX tailwinds. The company repurchased shares worth $353m during FY16/17 and announced an interim dividend of $0.415 per share (+4% yoy). Management’s guidance for FY17/18 is for mid single-digit organic revenue growth, capex at 8-9% of revenue and share repurchases of $600m.
16 Jun 17
Strong fundamentals; limited upside in the near-term
Experian reported Q3 FY16/17 results slightly below our estimates. The lfl revenue increased by 4.0% (vs Q2: +5.0%, Q1: +5.0%; our estimate: +5.0%), largely driven by strong growth in credit services (+6.0% yoy; c.50% of group revenue) and the decision analytics business (+10.0% yoy; c.13% of group revenue). North America’s organic revenue growth slowed to 3.0% (vs Q2: +5.2%, Q1: +5.0%; our estimate: +5.5%) due to tougher Q3 FY15/16 comparables in the consumer services business (Q3: -5.0%, Q2: -1.0%). However, this softness was more than offset by good demand for credit services and new contract wins in the marketing services business. Despite ongoing macro headwinds in Brazil, the Latin America region delivered another strong performance during the quarter (Q3: +8.0%, Q2: +5.7%, Q1: +8.0%; vs our estimate: +7.4%). The growth largely emanated from counter-cyclical credit bureau products and increased demand for data and analytics services from large banks and retailers. In the UK & Ireland, organic revenue advanced by 2.0% (vs Q2: +0.6%, Q1: +1.0%; our estimate: +0.1%) as the growth in the services (+5.0% yoy) and decision analytics businesses (+12.0% yoy) was partially offset by a decline in the consumer services business (-12.0% yoy). EMEA/Asia Pacific region clocked lfl revenue growth of 6.0% (vs Q2: +6.7%, Q1: +9.0%; our estimate: +9.0%) on the back of sustained demand for credit decisioning software and fraud prevention services. Fx headwinds (-2% yoy; largely due to weaker GBP vs USD) eclipsed the 2.0% positive scope impact, resulting in total reported revenue growth of 4.0%. On a YTD basis, the company spent $324m on net share repurchases (vs a full year target of $400m). For FY16/17, management guided for mid-single-digit organic revenue growth, stable margins and further progress in the benchmark EPS.
03 May 17
Fundamentals remain strong; limited upside in the near term
Experian reported H1 FY17 results in line with our estimates. Lfl sales increased by 5% (Q2 FY17: +5%, Q1 FY17: +5%, FY16: +5%; our estimate: +5.2%), largely driven by credit services (+7% yoy; new client wins in US hospitals) and the decision analytics business (+8% yoy; higher demand of fraud and identity management software). North America’s organic revenue was up 5% (vs Q1 FY17: +5%, FY16: +3%; our estimate: +5.8%), once again driven by strong credit services demand from the health vertical. The decision analytics business improved sequentially (Q2 FY17: +7%, Q1 FY17: -1%, Q4 FY16: -8.6%), on the back of new business wins in the financial services and public sector. Despite ongoing macro-economic headwinds, Latin America clocked 5% lfl revenue growth (vs Q1 FY17: +8%, FY16: +7%; our estimate: +6.8%). The demand for counter-cyclical products (particularly delinquency notifications) once again led to resilient growth in credit services (+5%; contributes c.91% of the regional revenue). In the UK, organic revenue growth came in at +1% (vs Q1 FY17: +1%, FY16: +5%; our estimate: +1.5%), largely due to depressed growth in both credit (Q2 FY17: 0%, Q1 FY17: +6%) and consumer services business (Q2 FY17: -9%, Q1 FY17: -1%). EMEA/Asia Pacific delivered another strong performance with lfl revenue growth of 8% (vs Q1 FY17: +9%, FY16: +7%; our estimate: +8.9%), driven by significant new client wins for credit-decisioning software and fraud prevention products. Strong FX headwinds (-2% impact on the top-line; due to weak GBP and BRL vs USD) resulted in the total group’s revenue growth of 3% (vs Q1 FY17: +1%, FY 16: -4%, our estimate: +2.9%). Even with better operating leverage in North America, the group’s EBIT margin came in at 25.7%, -10bp yoy due to higher sales mix of counter-cyclical products (lower margin vs other core products) and investment in growth initiatives across the businesses. The company repurchased shares worth US$79m during H1 FY17 (has plans for further US$321m share buy-back in the H2 FY17) and announced an interim dividend of 13c per share (+4% yoy; payable in January 2017). For FY17, management has guided mid-single digit organic revenue growth and currency headwinds of 2% and 1% on top-line and EBIT, respectively.
23 Dec 16
Robust organic growth despite sluggish consumer business
Experian reported Q1 FY17 results (three months ending 30 June 2016) broadly in line with our estimates. The lfl sales increased by 5% (vs Q4 16: +6%, Q3 16: +6%; our estimate: +4.8%), largely driven by robust growth in credit services (+8% yoy) and the decision analytics business (+6% yoy). In North America (Q1 17: +5% vs Q4 16: +6%, Q3 16: +6%; our estimates: +4.7%), robust demand from automotive and healthcare clients underpinned the growth in credit services business (Q1 17: +11% vs Q4 16: +12%; Q3 16: +11%, our estimate: +8%). The consumer services business clocked organic growth of 1% (vs Q4 16: +1%; Q3 16: +3%, our estimate: +3%) as the company monetised free traffic (accumulated 4.5 million members since the launch of the free site a year ago) through the cross-selling of membership products and lead generation. Despite ongoing macro-economic headwinds, the LatAm business delivered another strong performance (Q1 17: 8% vs Q4 16: 7.8%, Q3 16: +7%; our estimate: +4.9%) on the back of growth in delinquency notification products and deeper client penetration. Additionally, the company launched the consumer services business in Brazil in July 2016. Organic growth slumped to 1% in the UK (vs Q4 16: +6.5%, Q3 16: +4%; our estimate: +3.9%), pulled down by the sequential slowdown in the consumer services business (-1% yoy; undergoing business transition) and a strong comparative in the decision analytics business (Q1 17: -2% vs Q1 16: +15%). In EMEA/ Asia Pacific, new business wins in decision analytics (+27% yoy) and good demand for cross-channel marketing and data quality services in the marketing business (+11% yoy) resulted in revenue growth of 9% on a lfl basis (Q4 16: +10%, Q3 16: +7%; our estimate: +6.7%). Strong FX headwinds (weak GBP and Brazilian real vs the USD) led the total revenue up 1% (FY 16: -4%, Q3 16: -3%, H1 16: -6%, our estimate: 2.3%). Furthermore, Experian announced the acquisition of CSIdentity Corp., a consumer identity management and fraud detection services provider in the US for $360m (annualised revenue of $103m and $21m EBIT in the year ending March 2016). The acquired entity will be aligned to Experian’s ‘Consumer Services’ business. The company plans to spend $400m on a share repurchase programme in FY17 (vs $592m in FY16). Lastly, management reiterated FY17 guidance of mid-single-digit organic revenue growth and stable margins at constant rates (c. 1% headwind to EBIT, if current exchange rates prevail).
28 Jul 16
The Cybersecurity Rebellion: “No, I’m Spartacus!”
Steve “Woz” Wozniak, infamous co-founder of Apple, was the latest culprit to send shivers across the tech world by claiming Cybersecurity is the greatest threat the world has faced since the atom bomb. Mr Wozniak was alluding to the heightened sense of fear that recent high profile breaches have caused Cybersecurity to be put at the forefront of political, corporate and now it would appear, investor agendas. As the topic gains increasing awareness, it gives rise to a number of companies claiming to be a “thought leader” in the Cybersecurity space, holding the best IP and the best routes to market. With many companies singing from the same loss making hymn sheet it is making it ever difficult to spot the true “Spartacus” from the crowd.
EXPN BA/ BVC BLTG CHRT 9537 CNS DFX ECK GBG IGP MPAY NCC OSI SCH TERN
07 Jun 16
Stronger Fx headwinds continue to eat strong organic growth
Experian posted better-than-expected results in its Q3 FY16 trading update, generating an organic revenue growth of 6% (vs. 4% in H1 FY16), but currency headwinds totally wiped out this growth as reported sales declined by 3%. All the sales growth numbers are organic unless specified otherwise. Both Credit Services and Decision Analytics clocked 8% growth, while Marketing Services and Consumer Services grew at a meagre 2%. In North America (+6% vs +1% in H1), robust business in healthcare and automotive verticals, and consumer credit activity underpinned the growth in Credit Services (+11% vs +8% in H1), while a one-off on-boarding of a large client led to 3% (vs. -7% in H1) growth in the Consumer Services segment. Decision Analytics, however, declined by 2% (vs +2% in H1). Despite macro-economic headwinds in Latin America (+7% vs +6% in H1), all segments experienced strong upwards momentum. Credit Services (+7% vs. 7% in H1) was driven by an increased contribution from delinquency notifications linked to non-performing loans in Brazil. As the new software implementations across the region fuelled 5% growth in Decision Analytics (vs 9% in H1), an increase in cross-channel marketing led to 4% growth in Marketing Services (vs -19% in H1). The UK grew at a slower pace (+4% vs 5% in H1), pulled down by Decision Analytics (+8% vs +12% in H1) and Consumer Services (+2% vs 5% in H1). It is increasingly facing competition from Equifax (ClearScore) and Callcredit (Noddle). EMEA/Asia Pacific (c.10% of total revenue) was up by 7% (vs +6% in H1), driven by fraud and identity services in Decision Analytics (+23% vs +19% in H1), and new client wins and enhanced cross-channel marketing in Marketing Services (+10 vs +8% in H1 FY16). Management reaffirmed its full year guidance of mid-single-digit organic revenue growth and an 11% FX impact at EBIT level (if current rates prevail).
21 Jan 16
Strong organic growth and consumer services recovery cushions FX burden
Experian posted healthy H1 16 results with an acceleration in organic growth rate to 4% (vs. 1% in FY15); however at actual FX, revenue was down 6% to $2,239m. Organic growth was driven by strong momentum across Credit (+7% organically) and Decision analytics services (+10% organically), which benefited from a robust lending environment, strong performance of healthcare services and healthy take up of integrated DA offerings across geographies. The LatAm business also remained resilient and managed to grow 6% organically. Encouragingly, the decline rate in Consumer Services moderated further to 5% in Q2 (vs. -10% in Q1 and -13.7% in FY15) with the Experian brand continuing with its double-digit growth trajectory (+20% in H1 vs. +14% in Q4 15). The company has gathered disposal proceeds of $164m during the year and, given its sustained cash flow generation, has decided to increase its share repurchase plan by $200m to $740m for the year ($405m already done). However, given a 60bp decline in the underlying EBIT to 23%, primarily on account of forex headwinds with the dollar strengthening, management had to tame its margin forecast guiding for a 60bp impact at the EBIT level (10-11% of EBIT vs its previous estimate of 7%). Organic revenue growth guidance was maintained at mid single-digit for FY16.
19 Nov 15
Q1 on track
Experian released an ‘on track’ Q1 16 trading update and reiterated its guidance for FY16. While organic growth nudged above expectations at 3% (vs. 0% in Q1 15 and 3% in Q4 15), top-line at actual exchange rates was down 6% primarily impacted by the BRL depreciation. Organic growth came on the back of the strong performance of the Credit Services (+7% organically) and Decision Analytics (+9% organically) businesses, which continued to benefit from an improving lending environment, strong growth in newer verticals (auto and health) and a healthy uptake of the products launched (in LatAm and the UK). The declining rate in North America Consumer Services moderated to 10% (vs. -13.7% in FY15) as the Experian.com brand gained some more traction during the quarter (growth of 20% up from 14% in Q4 15). The company reiterated its FY16 guidance of organic growth progression to mid-high single-digit by year-end and margins to remain stable at constant FX (though a 7% FX impact at the EBIT level vs. 6% guided earlier).
21 Jul 15