Recently Experian published its preliminary financial results for the financial year 2010 (ending March 31st 2010).

A strong performance in Latin America offset weakness in other areas, helping revenue rise 2 per cent on an organic basis throughout the year. Pre-tax profits in the year to March 31 rose from $578m to $661m (£460m) as total revenue remained flat at $3.88bn. Net debt stood at $1.63bn at the end of the period, down from $2.11bn a year ago.  Experian shares dipped 3p to 606p after the announcement.

When growth is elusive and acquisitions are scarce, financial engineering will have to pacify shareholders.  The group plans to lift the dividend pay-out ratio from 33 per cent to 40 per cent. Experian paid a second interim dividend of 16 cents, lifting the full-year pay-out by 15 per cent to 23 cents.

Experian said its share buy-back program would be implemented over the next 12 months, subject to free cash flow and acquisition expenditure, and indicated it might consider returning more cash to shareholders in later years.  Experian has been hurt by banks’ unwillingness to lend and has sought to attract clients in other sectors, from insurers to telecoms. Don Robert, chief executive, said of the banking sector: “We do see lending picking up a bit in the US . . . But we don’t forecast a return to the go-go days.”  He added: “In the UK, we’re starting to have growth related conversations with our clients.”    Source: FT Comment

The Ft also commented on Experian’s share buy-back program.  “It represents a mere 3 per cent of its £6.2bn market capitalization and comes after the disposal of its interest in a property joint venture to First American, from which it is set to gain $314m. Still, the move was broadly welcomed. An 11 per cent rise in free cash flow has kept it well within its target gearing range of between 1.75 and 2 times net debt to earnings before interest, tax, depreciation and amortization.”

 BIIA Newsletter June II – 2010 Issue