Experian plc, the global information services company, issues its financial report for the six months ended 30 September 2023.

Brian Cassin, Chief Executive Officer, commented:

“We delivered good growth in H1. We grew in every region and across both B2B and Consumer Services. Our growth is due to the breadth of our portfolio, contributions from new products and ongoing new customer wins. Overall, we are successfully executing our strategy for growth and this continues to help us to navigate the macroeconomic environment well. Revenue growth was in line with our expectations, up 6% at actual exchange rates from ongoing activities and 5% at constant exchange rates, with organic revenue growth of 5%. Benchmark EBIT margin expansion was up 20 basis points at constant currency, and we delivered Benchmark earnings per share up 8%.

“For FY24, we continue to expect organic revenue growth in the range of 4% to 6% and modest margin accretion, all at constant exchange rates and on an ongoing basis.”

Benchmark and Statutory financial highlights

1. See Appendix 1 (page 14) and note 6 to the condensed interim financial statements for definitions of non-GAAP measures.
2. Organic revenue growth is at constant currency.
3. Revenue and Benchmark EBIT for the six months ended 30 September 2022 have been re-presented for the reclassification to exited business activities of certain Business-to-Business (B2B) businesses, detail is provided in notes 7(a) and 8 to the condensed interim financial statements.
4. See page 15 for reconciliation of Benchmark EBIT from ongoing activities to Profit before tax.

Highlights

  • Good H1 progress. Q1 organic revenue growth was 5%, with Q2 organic revenue growth also at 5%, taking total revenue growth from ongoing activities to 5% at constant exchange rates and 6% at actual rates.
  • Consumer Services organic revenue up 6%. We now serve 178 million free members, up 21 million year-on-year.
  • B2B organic revenue growth of 4%. Superior data, new product performance and successful new business development drive growth.
  • All regions contribute positively. Double-digit growth in Latin America, a good performance in North America, improvement in EMEA and Asia Pacific, and resilient growth in UK and Ireland.
  • Benchmark EBIT from ongoing activities rose 6% to US$929m, with the Benchmark EBIT margin of 27.2%, up 20 basis points at constant currency and stable at actual exchange rates.
  • Strong financial position. Net debt to EBITDA of 1.8x and low average interest rates, c.3%, on our Net debt due to our forward rate fixing programme.
  • Good progress in EPS. Benchmark EPS up 8%, at constant and actual exchange rates. Basic EPS up 86%.
  • Benchmark operating cash flow conversion of 77% in our seasonally weaker half of the year for cashflow.
  • Statutory profit before tax of US$763m, up 48% (FY23: US$517m), due to revenue growth and reduced non-benchmark costs.
  • First interim dividend up 6% to USc 18.0 per ordinary share.

Strategic report

Part 1 – Chief Executive Officer’s review

We have started the year positively having delivered good growth in revenue and good progress in Benchmark earnings per share. Our business has been very resilient. This has been driven by our breadth and diversity and continued good progress in new business wins. It also reflects the strategic progress we have made over several years with new products and expansion into new verticals and new market segments. This has positioned us to overcome the unfavourable macroeconomic backdrop. Highlights include the progress we have made across credit risk and fraud prevention, very strong progress in diversifying our business in Brazil, successful expansions into markets such as health, identity and verifications and the exceptional progress we continue to make towards becoming the world’s largest, most inclusive financial services platform for consumers.

H1 organic revenue growth was 5%, composed of growth of 5% in each of Q1 and Q2. Consumer Services delivered organic revenue growth of 6% and B2B delivered 4%. All regions contributed positively, with double-digit progress in Latin America, a solid performance in North America, a much-improved picture in EMEA and Asia Pacific and modest growth in UK and Ireland (UK&I). We delivered on our EBIT margin expectations, helped by our productivity initiatives which has enabled us to sustain growth investment.

First-half financial highlights

  • Revenue growth was in line with our expected performance range. Revenue growth from ongoing activities was 6% at actual exchange rates and 5% at constant currency. Organic revenue growth is determined on a constant currency basis and for ongoing activities.
  • All four of our regions contributed positively to our performance. Organic revenue growth was 4% in North America, 11% in Latin America, 1% in UK&I and 8% in EMEA and Asia Pacific.
  • By quarter, organic revenue growth was 5% in Q1 and 5% in Q2.
  • Consumer Services organic revenue was up 6%. We expanded free memberships to 178m, up 21m year-on-year, delivered significant progress in Brazil and benefitted from elevated premium subscription revenue in the USA.
  • B2B organic revenue growth was 4%. Growth in revenue from our key strategic initiatives as well as portfolio and client mix have substantially offset weaker credit issuance conditions across some client categories in the USA and the UK.
  • We delivered good progress in Benchmark EBIT, up 6% at both constant and actual exchange rates. EBIT margin increased by 20 basis points at constant exchange rates and was stable at 27.2% at actual exchange rates.
  • We delivered strong growth in Benchmark earnings per share, which increased by 8% driven by revenue performance, margin expansion and a lower tax rate. Basic EPS was USc 62.3 (2022: USc 33.5), up 86%.
  • Cash flow conversion of Benchmark EBIT into Benchmark operating cash flow was 77%, in our seasonally weaker half of the year for cash flow. Benchmark operating cash flow at actual exchange rates was US$711m, compared to US$769m year-on-year.
  • We continued to invest in data, technology and new products through capital expenditure, which represented 9% of revenue, in line with our expectations for the full year ending 31 March 2024.
  • We invested US$206m in acquisitions to support our strategic initiatives and spent a net US$68m of our US$150m share repurchase programme (of which US$21m was settled after the period end).
  • We ended the period with Net debt to Benchmark EBITDA of 1.8x on a twelve-month basis, compared to our target range of 2.0-2.5x.
  • We have announced a first interim dividend of USc 18.0 per share, up 6%. This will be paid on 2 February 2024 to shareholders on the register at the close of business on 5 January 2024.

First-half strategic highlights

Our strategy has been to position Experian to take advantage of secular growth opportunities across our markets. We have invested to broaden our capabilities, unlock synergies across our business and expand into additional areas of clients spend. This strategy, enabled by our investments over many years, has provided us with new market opportunities which are driving our growth. It has extended our competitive position in many areas and reduced our cyclicality. As we look ahead, we are confident that the strategic choices we made position us well to accelerate growth as market conditions improve.

Strategic highlights this half include:

  • In Business-to-Business:
    • We have added to the depth and breadth of our datasets. Recent developments include the addition of further Experian Boost and Go records in the USA, the addition of c.40m Buy Now Pay Later records in the UK and, in Brazil, the inclusion of utilities positive data and open receivables records.
    • We have extended our platforms. PowerCurve delivered good growth. Ascend continues its growth trajectory. Ascend now has 511 clients globally and Total Contract Value of US$490m.
    • Verifications and Employer Services in North America is on track to achieve revenues of over US$190m in FY24. Record count has grown to 52 million (at 31 October 2023) and we have added new clients for both employment services and Experian Verify. We also have contracted access to over 80% of the UK PAYE workforce, with approximately 50% of records now live and we are trialling concepts with leading UK financial institutions. We are also launching early-stage propositions in Brazil.
    • In North America Automotive, we have delivered significant new revenue growth through our Experian Marketing Engine. We have introduced new digital audience categories and vehicle measurement capabilities, and we have added new statistics to track electric vehicle sales.
    • In North America Targeting, we now source the majority of our revenue from digital identity services and our audiences are now available on leading digital advertising platforms.
    • In North America Health, we have unlocked additional opportunities with clients by leveraging our new AI Advantage products, including our award-winning Claims module.
    • In Brazil, have started to scale a series of investments which unlock new growth opportunities and diversify our portfolio. These include the expansion of our Small and Medium Enterprise activities. We have added to our agribusiness capabilities and have extended our fraud prevention capabilities.
    • In the UK and Ireland, we continue to capitalise on successful new business performance. We continue to add data assets to extend our data superiority.
    • In EMEA and Asia Pacific, our focus on scaled markets has led to improved growth and profitability. We continue to enhance our analytics and scores, extend our cloud solutions, add new datasets and expand our fraud prevention capabilities.
  • In Consumer Services:
    • We have added to our free membership base. Globally, memberships grew to 178 million including 14 million members from Spanish Latin America. On a like-for-like basis, consumer memberships are up 13% year-on-year from 157 million.
    • We have added to the North America premium experience for our paid-for members. New features include BillFixer which has helped our members collectively save approximately US$5m since launch.
    • We launched Experian Smart Money in North America. This is a new no-fee Experian digital checking account to help individuals build their credit score, an important milestone in our financial inclusion strategy.
    • We see good client adoption for Experian Activate. Approximately 30% of our card and loan offers in our North America Consumer Services marketplace now run through this capability (as at 31 October 2023).
    • We launched Boost for Insurance. This has added 600,000 tradelines and helps us to build engagement. We also secured new contracts, including with a direct insurance carrier in the USA. This represents a further step in our strategy to scale our North America Consumer Services insurance marketplace.
    • In Brazil, we have broadened the range of services available through our app.

Other financial developments

Benchmark profit before tax (PBT) was US$860m, up 6% at actual exchange rates, after a net interest expense of US$68m (2022: US$62m). Benchmark net finance expense increased only modestly despite the large increase in market interest rates thanks to the protection from our high proportion of fixed rate debt. This kept the average interest rate on our Net debt broadly stable at around 3%. For FY24, we continue to expect net interest expense to be in the range of US$125-130m.

The Benchmark tax rate was 25.1% (2022: 26.0%). For FY24, we continue to expect a rate of around 26-27%, taking into account expected profit mix for the year and an increase in the UK corporate tax rate.

Our Benchmark EPS was USc 70.4, an increase of 8% at both constant and actual exchange rates. For FY24, we continue to expect weighted average number of ordinary shares (WANOS) of c.914m.

Foreign exchange translation was neutral to Benchmark EPS in the half. For FY24, we continue to expect a foreign exchange translation effect of c. 0% to +1% impact on revenue and Benchmark EBIT, assuming recent foreign exchange rates prevail.

Non-benchmark items:

  • Statutory PBT was US$763m, up US$246m, as a result of growth, the charge for a goodwill impairment in the prior year and reduced non-benchmark costs.
  • We have incurred a charge of US$24m (2022: US$66m) for increased contingent consideration due to over-performance on prior acquisitions.

Reconciliation of statutory to Benchmark measures for the six months ended 30 September 2023

1.  Investment-related items include the Group’s share of continuing associates’ Benchmark post-tax results.
2. Exceptional items are analysed in note 9 to the condensed interim financial statements.

Environmental, Social and Governance (ESG)

  • We have continued to create innovative products that financially empower consumers, to help improve financial health for all. Experian Smart Money is a further step on this journey.
  • More than 14 million US consumers have now connected to Experian Boost, helping millions to improve their credit score.
  • In the UK we launched Support Hub, which gives disabled people and those with additional support needs an easy, one-stop portal to tell organisations what support they need to access essential services. It has been adopted by a growing number of financial institutions and utility companies.
  • We further advanced our ‘people first’ culture. We have been certified as a Great Place to Work in 24 countries, increasing our scores in key areas for another year. 94% of employees who participated agreed that people are treated fairly regardless of their sexual orientation, race, age and gender, 93% agreed that Experian’s flexible ways of working enable people to work productively, and 87% agreed that Experian is a great place to work.
  • We have continued to make progress towards reducing our Scope 1 and 2 emissions. To reduce our Scope 3 emissions, we are trialling a new initiative that requires suppliers to have Science Based targets aligned to the 1.5 degree scenario and disclose emissions data. This is in pilot with a small number of suppliers.

Part 2 – Regional highlights for the six months ended 30 September 2023

At constant exchange rates.
2. At actual exchange rates.
3. Percentage of Group revenue from ongoing activities calculated based on FY24 H1 revenue at actual exchange rates.

North America

North America delivered good growth with revenue of US$2,288m, representing total and organic revenue growth of 4%.

B2B delivered organic revenue growth of 4%. Our expanded product offers have enabled us to secure competitive wins and deepen existing client relationships. We have achieved this through the introduction of new datasets and integrated solutions. These new revenue streams have helped us to offset the effects of tighter lending standards and lower lending origination volumes in some client categories. We benefitted in the half from expanded client relationships and new implementations for our unmatched Ascend platform. This platform enables clients to access a wide range of data, and build, test and seamlessly deploy models for credit risk, marketing, decisioning and fraud prevention. We benefitted from growth across Tier One financial institution clients who have expanded their positions with Experian. We saw strong growth in low-income credit data where we have introduced new analytics and model building solutions. We have also continued to expand our position in income and employment verification services where we have added to our record count, which now stands at 52 million US records. We have also secured new clients for verification services and Experian Verify.

Our Automotive, Targeting and Health verticals also performed well. In Automotive, new vehicle production and new vehicle sales have continued to rise over pandemic lows. Inventory increases have stimulated industry marketing activity and driven demand for our solutions, such as Experian Audience Engine. In Targeting, we have benefitted from growth across digital channels, and this has offset some moderation in activity across retail channels linked to the macroeconomic environment. Health delivered another half of good progress. Our healthcare clients seek to address administrative complexity, improve revenue capture and enhance patient experiences, and they continue to leverage Experian’s products in order to do so.

Consumer Services delivered organic revenue growth of 4%. Our goal is to deepen and grow our member relationships by helping consumers to manage their financial health. We have made good progress towards this ambition. Free memberships have been an important contributor to our growth and have risen to 67 million, up 10 million year-on-year. We have also benefitted from the diversity of our revenue sources. Strength in paid acquisition and partner solutions have offset contraction in card and loan marketplace revenue. We continue to invest in new propositions to bring new value to our members throughout the Experian ecosystem. Early indications for our recently introduced digital checking account, Experian Smart Money, have been encouraging. The launch of Experian Activate last year has led to competitive outperformance in the current environment. It enables lenders to target their offers more precisely and to secure higher conversion rates, and this has helped us to capture a larger share of eligible credit offers. Our nascent insurance vertical also delivered a positive contribution. We have secured new contracts, including one with a major insurance carrier which we are now in the process of onboarding. We also introduced Experian Boost for insurance to continue to drive member engagement in this category.

Benchmark EBIT rose 4% to US$775m. The Benchmark EBIT margin improved by 10 basis points to 33.9%.

Latin America

Latin America performed strongly. We delivered revenue of US$514m, with organic revenue growth of 11% and total revenue growth at constant currency of 13%. Acquisitions included the new bureau in Panama and three small acquisitions in Brazil, Agrosatélite, MOVA and Flexpag.

B2B organic revenue growth was 7%.

In Brazil, we continue to see many opportunities to expand access to affordable credit for consumers and small and medium enterprises (SMEs). Demand for positive data scores, attributes and models was strong, and we introduced more predictive analytics and sophisticated software platforms. We have benefitted from greater integration of credit and fraud solutions. This has led to expanded positions with existing clients and new client wins. We also continue to expand our position in the SME market, including an early-stage investment in a receivables marketplace which will help SMEs to use trade receivables as collateral to access credit.

Spanish Latin America performed well. We have expanded the extent of our footprint in the region which now includes bureau operations in Colombia, Peru, Chile and Panama. We have extended our data assets and have introduced Ascend into the region. We have benefitted from the combination of our superior data sources with our advanced analytical capabilities, and cloud-based decisioning and analytical platforms. We continue to invest to expand our position with SMEs and to further extend our position with larger clients through integrated solutions.

Consumer Services delivered organic revenue growth of 32%. We continue to build our brand in Brazil, where we have become one of the most recognised financial services brands. Our app now ranks at number two of Brazil’s top financial services apps (per data.ai). We added eight million consumer memberships year-on-year, to take our total free membership base in Brazil to 84 million. We continue to enhance our ecosystem of offers to drive engagement and add further value for our members. We also continue to develop services for consumers more widely across Latin America and our free membership count for Spanish Latin America has reached 14 million.

Benchmark EBIT in Latin America was US$137m, up 13% at constant exchange rates. The Benchmark EBIT margin from ongoing activities at actual exchange rates was 26.7%, up 20 basis points.

UK and Ireland

The UK and Ireland delivered modest growth. Revenue was US$397m, with both total and organic revenue growth at constant exchange rates of 1%. Organic revenue improved sequentially during the half, from 1% in Q1 to 2% in Q2.

B2B was resilient in H1. It delivered organic revenue growth of 3%, helped by strength in our core consumer bureau in Q2, which reflected good progress in new business performance. There was good demand for a wide range of propositions, including for affordability, originations and portfolio management. These factors outweighed the effects of weaker UK credit conditions. Fraud and identity management also performed well, with a positive trajectory in win rates and new business bookings. We continue to invest to extend and deepen our data assets, including in income verification. We have also invested further in our data quality suite, including an extension to the Experian Aperture Data Studio.

Organic revenue in Consumer Services was down (4)%. Premium subscription memberships declined modestly in the half, and tight credit conditions continued to affect volumes in the credit marketplace. We have enhanced the product offering to ensure we are well positioned for when credit conditions improve. We are encouraged by the performance of CreditLock, a new feature introduction, and will roll-out further enhancements to the user experience in the months to come. Free memberships were 13 million.

Benchmark EBIT from ongoing activities was US$77m, stable at constant exchange rates. The Benchmark EBIT margin from ongoing activities was 19.4%, stable at constant exchange rates and down by 20 basis points at actual exchange rates.

EMEA and Asia Pacific

In EMEA and Asia Pacific, revenue from ongoing activities was US$215m, with organic growth of 8% and total growth at constant exchange rates of 9%. The difference relates to the acquisition of a small cloud-based decisioning business. Data delivered organic revenue growth of 3% while Decisioning delivered strong growth, up 23%.

The transformation of our EMEA and Asia Pacific operations continues to progress well. Having largely executed our transformation plans, we have turned our attention to scaling our activities with innovation-led growth. We have begun to roll-out new scores and attributes and, new fraud prevention capabilities, and we plan new Ascend introductions across key markets.

By geography:

  • Australia and New Zealand – delivered very positive progress, attributable to strength in cloud-based decisioning capabilities and data quality.
  • DACH (Germany, Austria and Switzerland) – continued to experience weakness due to economic headwinds and lower volumes.
  • India – delivered strong growth, driven by credit volume expansion and fraud prevention expansion.
  • Italy – delivered strong growth driven by bureau volumes, decisioning and fraud prevention expansion.
  • South Africa – delivered good bureau growth.
  • Spain – delivered modest growth helped by new client wins.

Our actions have improved Benchmark EBIT performance, which for ongoing activities was US$4m, up year-on-year from US$(3)m. The Benchmark EBIT margin for ongoing activities improved to 1.9% from (1.5)% in FY23.

FY24 modelling considerations

1. At constant exchange rates.
2. Weighted average number of shares.
3. Benchmark operating cash flow.

Group financial results

Business mix including % change in organic revenue year-on-year for the six months ended 30 September 2023

1. Percentage of Group revenue from ongoing activities calculated based on FY24 H1 revenue at actual exchange rates.
2. Ongoing activities, at constant exchange rates.
CI = Consumer Information, BI = Business Information, DA = Decision Analytics.

Revenue by region

1.  The results for the six months ended 30 September 2022 have been re-presented for the reclassification to exited business activities of certain B2B businesses, detail is provided in notes 7(a) and 8 to the condensed interim financial statements.

See Appendix 1 (page 14) and note 6 to the condensed interim financial statements for definitions of non-GAAP measures.

See Appendix 3 (page 15) for analyses of revenue, Benchmark EBIT and Benchmark EBIT margin from ongoing activities by business segment.

Source:  Experian Earnings Release