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Experian plc EXPN Experian half-yearly financial report


Attachment:

  Experian plc (EXPN) - Experian half-yearly financial report

RNS Number : 6061Q
Experian plc
08 November 2012
 



 

                                                                  news release

                                                                              

                                       

                         Half-yearly financial report

 

8 November 2012 ─ Experian, the global information services company, today
issues its half-yearly financial report for the six months ended 30 September
2012.

 

Highlights

·     Strong H1 performance, with good progress towards our strategic and
financial objectives.

·     Revenue growth across all regions and from all global business lines,
with double-digit growth across Latin America and Consumer Services.

·     Total Group revenue of US$2.3bn. Revenue from continuing activities up
12% at constant exchange rates and 6% at actual rates, principally due to the
depreciation of the Brazilian real against the US dollar. Organic revenue
growth of 8% at constant exchange rates.

·     Total EBIT from continuing operations of US$590m, up 14% at constant
exchange rates and up 6% at actual rates.

·     EBIT margin from continuing activities up 10 basis points to 25.8%.

·     Profit before tax from continuing operations of US$76m (2011: US$351m),
after an IFRS non-cash charge of US$403m from the movement in the Serasa put
option liability.

·     Benchmark profit before tax of US$563m, up 6% (and up 13% at constant
exchange rates).

·     Benchmark EPS of 39.0 US cents, up 3%. Basic loss per share from
continuing operations of 7.4 US cents (2011: earnings per share of 26.2 US
cents).

·     Net debt of US$1,920m at 30 September 2012. 

·     First interim dividend of 10.75 US cents per ordinary share, up 5%.

 

Don Robert, Chief Executive Officer, commented:

"We delivered strong revenue and EBIT growth in the first half of this
financial year (at constant currency), with growth across all regions and
business lines. This is the result of consistent execution on our strategy and
global growth programme, helping us to withstand pressures in the global
economy. While we face a tough comparable in Q3, for the full year, we expect
high-single digit organic revenue growth, modest margin improvement (at
constant currency) and to convert at least 90% of EBIT into operating cash.

 

"We are now in the fourth year of our global growth programme and it is
gaining momentum. We continue to see significant opportunities and in order to
maximise our growth potential we are today launching a new efficiency
programme to drive operational improvements and to sustain premium growth into
the future."  

 

 

Contacts

 

Experian

Don Robert                            Chief Executive
Officer                           +44 (0)20 3042 4215

Brian Cassin                          Chief Financial Officer

Nadia Ridout-Jamieson         Director of Investor Relations

James Russell                       Communications Director, UK&I and EMEA

 

RLM 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.

 

Experian will update on third quarter trading on 16 January 2013, when it will
issue an Interim Management Statement.

 

See Appendix 7 for definition of non-GAAP measures used throughout this
announcement.

 

    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.

 

Company website

Neither the content of the Company's website, nor the content of any website
accessible from hyperlinks on the Company's website (or any other website), is
incorporated into, or forms part of, this announcement.

 

About Experian 

Experian is the leading global information services company, providing data
and analytical tools to clients around the world. The Group 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. Total revenue for the year ended 31 March
2012 was US$4.5 billion. Experian employs approximately 17,000 people in 44
countries and has its corporate headquarters in Dublin, Ireland, with
operational headquarters in Nottingham, UK; California, US; and São Paulo,
Brazil.

For more information, visit http://www.experianplc.com.

 

Chief Executive Officer's review

 

We delivered strong growth in the first half, making good progress towards our
strategic and financial objectives for the year. Revenue growth from
continuing activities was 12% at constant currency and organic revenue growth
was 8% (Q1 9%, Q2 8%). We delivered an increase in EBIT from continuing
activities of 14% at constant currency and further enhanced our EBIT margin,
up 10 basis points to 25.8%. Actual revenue and total EBIT growth were both
6%, with the difference mainly relating to the depreciation of the Brazilian
real relative to the US dollar. At actual exchange rates, Benchmark EPS
increased to 39.0 US cents per share, up 3%, and we have raised the first
interim dividend by 5% to 10.75 US cents per share.

 

·     We delivered growth across all regions, with organic revenue growth of
17% in Latin America, 7% in North America, 5% in EMEA/Asia Pacific and 3% in
the UK and Ireland.

·     We also delivered growth across our four global business lines, with
organic revenue growth of 10% in Consumer Services, 9% in Credit Services, 6%
in Marketing Services and 5% in Decision Analytics.

 

First half highlights

North America performed well, reflecting good progress on our growth
investments. In Credit Services and Decision Analytics, we are driving growth
as we add new sources of data, expand fraud prevention and identity management
and as we extend further into strategic customer verticals. We have seen
particular success recently in healthcare payments, as appetite grows among
hospitals and physician practices for more sophisticated billings system
management and as we expand our product suite to meet demand. There has also
been a notable step forward in our public sector business, where we have
secured several new contracts for authentication and eligibility services.
Elsewhere, while Marketing Services had a slow start to the year, we continue
to narrow the scope of our residual traditional marketing activities and we
are building our presence in the cross-channel targeted marketing space, a
market segment which is growing rapidly. Finally, Consumer Services delivered
solid growth, as we evolve our product suite towards identity management and
as we have on-boarded a new affinity (white label) partner.

 

We delivered strong growth in Latin America. The pace of lending has slowed
from the exceptionally strong levels last year, but the government in Brazil
is undertaking stimulus actions, and credit delinquencies appear to be
stabilising. Despite economic headwinds, our business has delivered good
growth, as we have introduced new sources of data and as we extend into new
sectors such as telecommunications, automotive, insurance and utilities. We
are also highly focused on introducing the full Experian product suite into
Brazil, and have made good progress in Decision Analytics and Marketing
Services in the half. There has also been progress towards the introduction of
positive data in Brazil, with the enactment in October of the law regarding
the implementation of positive data. We currently anticipate an elapse of
between 18 and 24 months for clients to begin using positive data products.
Computec performed strongly in underlying terms, delivering good growth in
Colombia and Peru, and performing in line with the acquisition buy-plan.

 

We recently announced a conditional agreement to acquire a further 29.6%
interest in Serasa, bringing our holding to 99.6%. In addition to the agreed
cash consideration of US$1.5bn (plus a cash adjustment to the date of
completion), Experian and the shareholder banks have agreed to extend data
supply agreements, covering both negative and positive data, and minimum
purchase guarantees. We believe these agreements further strengthen our
working relationships with the banks and provide a strong foundation for
future growth in Brazil.

  

We are pleased to have delivered growth in the UK and Ireland, even though
economic conditions were tough. We are investing in order to sustain future
growth, with the launch of new products like BusinessIQ and new sources of
data such as a national property database, and we continue to focus on
expansion in new customer segments. While Decision Analytics dipped, as
expected, our pipeline is good and we continue to win new contracts for
software and anti-fraud products. Weak external conditions affected Marketing
Services, where revenues declined. The stand out performer was Consumer
Services, which grew by more than 20%, as it continues to benefit from the
enhanced consumer proposition. We continue to anticipate good growth in
Consumer Services as we further integrate new consumer identity protection
features from the recent acquisition of Garlik.

 

In EMEA/Asia Pacific, revenues have generally held up well in the face of
difficult trading conditions in Continental Europe. Growth in Credit Services
largely reflects our spread of businesses, since the majority of our bureaux
are in markets outside the Eurozone. Marketing Services also performed
exceptionally well, due to adoption of digital platforms across Europe and
Asia Pacific. Decision Analytics, which has higher exposure to financial
services, declined. We have taken action to refocus the business and, as a
result, the rate of decline moderated as the half progressed.

 

Cash flow and net debt

Net debt in the half increased by US$102m to US$1,920m at 30 September 2012,
in the seasonally weaker half for cash flow. The increase is after funding
capital expenditure of US$218m, net acquisition expenditure of US$42m, equity
dividend payments of US$215m and net share purchases of US$157m. At 30
September 2012, net debt was 2.2 times EBITDA, adjusting for the agreed
consideration for Serasa.

 

Growth and efficiency

We are now in the fourth year of our global growth programme. The programme
has been highly successful, and is on course to collectively contribute over 4
percentage points to organic revenue growth in the year ending 31 March 2013,
ahead of our previous guidance.

 

We continue to see significant opportunities to drive growth at Experian. Our
goal is to maximise our growth potential by investing in a range of
initiatives, through the global growth programme. As we evolve and expand our
programme we are increasing our investment in:

 

·     New customer segments such as the US public sector, healthcare payments,
the small and medium enterprise channel and telecommunications, where we are
seeing good payback on previous investments;

·     Geographic expansion in high growth markets including Russia, Turkey and
Colombia;

·     Fraud and identity management, cross-channel marketing campaign
management and consumer services, where the opportunity exists to create new
products to meet escalating client demand.

 

We have looked strategically at our cost base in light of these growth
opportunities. Over the next 18 to 24 months, we will drive a series of
operational improvements designed at making us more nimble and which will
provide a better platform for growth.

 

Examples of efficiencies that we expect to realise include:

·     Increasing the scale of near and off-shoring facilities;

·     Re-balancing resources, for example by reducing exposure to lower growth
activities;

·     Re-engineering fixed costs, for example facilities, technology and
infrastructure optimisation;

·     Rationalisation of lower growth legacy products.

 

 

We expect the efficiency programme to secure gross annualised savings of
approximately US$75m. Approximately two-thirds of these savings will be
reinvested to drive growth. We expect to realise a

proportion of the savings in the year ending 31 March 2014, reaching the full
run rate in the year ending 31 March 2015.

 

One-off restructuring costs associated with achieving these savings will be in
the region of US$110m, of which the majority will be cash. We have recognised
US$9m of this charge in this first half.

 

With this programme, we are looking ahead to the future and laying the
foundations for sustained, premium growth.

 

Dividend

We have announced a first interim dividend of 10.75 US cents per share, up 5%.
This is consistent with our policy to have dividend cover based on Benchmark
EPS of around 2.5 times on an annual basis. The first interim dividend will be
paid on 1 February 2013 to shareholders on the register at the close of
business on 4 January 2013.

 

 

 

Group financial results

 

Revenue by geography

 

Six months ended 30 September                               Growth %
                                        2012 2011¹ Total at Total at Organic^3
                                                     actual constant
                                        US$m  US$m   rates²  rates^3
  North America
Credit Services                          418   377                11         8
Decision Analytics                        70    59                18        18
Marketing Services                       198   191                 4         3
Consumer Services                        410   383                 7         7
Total continuing activities            1,096 1,010        9        9         7
Discontinuing activities                   -     -
Total North America                    1,096 1,010
Latin America
Credit Services                          438   429                24        14
Decision Analytics                        19    17                41        41
Marketing Services                        42    14               227        62
Total continuing activities              499   460        8       31        17
Discontinuing activities                   -     -
Total Latin America                      499   460
UK and Ireland
Credit Services                          118   116                 5         1
Decision Analytics                        98    96                 4       (2)
Marketing Services                       109   115               (3)       (3)
Consumer Services                         90    72                28        26
Total continuing activities              415   399        4        6         3
Discontinuing activities                   -     1
Total UK and Ireland                     415   400
EMEA/Asia Pacific
Credit Services                           98   107                 1         1
Decision Analytics                        50    57               (6)       (6)
Marketing Services                       131   118                16        13
Total continuing activities              279   282      (1)        6         5
Discontinuing activities                   -     3
Total EMEA/Asia Pacific                  279   285
Total revenue - continuing
activities                             2,289 2,151        6       12         8
Total revenue - discontinuing
activities                                 -     4
Total revenue - continuing                        
operations
                                       2,289 2,155

1. 2011 restated to exclude comparison shopping and lead generation businesses
in North America which have been classified as discontinued operations, and
for the reclassification of some products from Credit Services to Decision
Analytics within Latin America.

2. Actual exchange rates.

3. Constant exchange rates.

See Appendix 2 (page 15) for analyses of revenue and EBIT by business segment.

 

 

Income statement, earnings and margin analysis

 

Six months ended 30 September        2012   2011^1
                                                   Total growth % Total growth
                                     US$m     US$m     constant^2  %  actual^3
EBIT by geography
North America                         327      296             10
Latin America                         172      157             33
UK and Ireland                        118      113              6
EMEA/Asia Pacific                       6       15           (41)
EBIT before Central Activities        623      581             14
Central Activities - central         (33)     (28)
corporate costs
EBIT - continuing activities          590      553             14
EMEA/Asia Pacific discontinuing         -        1
activities
Total discontinuing activities          -        1
Total EBIT from continuing            590      554             14            6
operations
Net interest                         (27)     (21)
  Benchmark PBT                       563      533                           6
Exceptional items                    (12)       12
Amortisation of acquisition          (64)     (57)
intangibles
Acquisition expenses                  (3)      (3)
Adjustment to the fair value of       (1)        -
contingent consideration
Charges for demerger-related
equity incentive plans                  -      (5)
Financing fair value                (407)    (129)
remeasurements
  Profit before tax                    76      351
Group tax charge                    (116)     (59)
  (Loss)/profit after tax from       (40)      292
  continuing operations
   
  Benchmark earnings
  Benchmark PBT                       563      533                           6
  Benchmark tax charge              (141)    (120)
  Overall benchmark earnings          422      413
  For owners of Experian plc          385      375                           3
  For non-controlling interests        37       38
   
  Benchmark EPS                   US39.0c  US37.9c                           3
Basic EPS from continuing
operations                       US(7.4)c  US26.2c
Weighted average number of
ordinary shares                      988m     989m
EBIT margin^4
North America                            29.8%       29.3%
Latin America                            34.5%       34.1%
UK and Ireland                           28.4%       28.3%
EMEA/Asia Pacific                         2.2%        5.3%
Total EBIT margin                        25.8%       25.7%

1. 2011 restated to exclude comparison shopping and lead generation businesses
in North America which have been classified as discontinued operations.

2. EBIT growth is at constant exchange rates.

3. Growth below EBIT is at actual exchange rates.

4. EBIT margin is for continuing activities only.

See Appendix 2 (page 15) for analyses of revenue and EBIT by business segment.

See Appendix 7 (page 18) for definitions of non-GAAP measures.

 

Business review

 

North America

 

Total revenue from continuing activities in North America was US$1,096m, up
9%, with organic revenue growth of 7%. The difference relates primarily to the
acquisitions of Medical Present Value (acquired June 2011) and Conversen
(acquired May 2012).

 

  Credit Services

Total revenue growth was 11% and organic revenue growth was 8%. In consumer
information, we have benefited from further modest recovery in lending
conditions and from the introduction of new sources of data such as rental
information and public records. Our flagship business information product,
BusinessIQ, continues to expand its customer base and we have recently
launched a new version aimed at smaller customers. We saw strong growth in
automotive, following the introduction of new scoring and monitoring products
and there was good progress in healthcare payments driven by new, higher-value
contract wins across hospitals and physician practices.  

 

  Decision Analytics

Growth in Decision Analytics was strong, with total and organic revenue growth
of 18%. Our fraud and identity management operations are expanding rapidly,
helped by significant progress in the public sector segment, with several new
contract wins for authentication services. We saw strong growth in analytics,
as we build on the success of our 'Data Lab' concept, where we create new
products by combining our data with client data, and there was good growth too
in software, as we start to convert the pipeline for our next-generation
products (PowerCurve).   

   

  Marketing Services

Total revenue growth was 4% and organic revenue growth was 3%. While there was
good growth in contact data and data quality management, growth in email
marketing moderated as a number of clients undertook a one-off exercise to
cleanse inactive email addresses from their customer lists. Market conditions
in our more traditional data management business were also fairly challenging,
as the market has continued to shrink. We continue to allocate resources to
digital marketing while narrowing the focus of our traditional businesses to
concentrate on those areas that enable digital marketing. As such, we continue
to reduce costs in traditional marketing through further use of near-shore
operations for back-office functions.

 

  Consumer Services

Consumer Services delivered total and organic revenue growth of 7%. Our
progress reflected increased membership revenue across newer retail brands,
such as CreditReport.com, freecreditscore.com and ProtectMyID, as we invest in
branding to drive consumer awareness and introduce enhanced features to
improve retention rates. There was also significant progress in the affinity
(white label) channel, including a first time contribution from a new client
win.  

 

  For continuing activities, North America EBIT was US$327m, up 10%. EBIT
  margin was 29.8%, an increase of 50 basis points year-on-year, which
  reflected positive operating leverage, net of investment in our growth
  initiatives.

  

Latin America

 

Total revenue in Latin America was US$499m, up 31% at constant exchange rates,
with organic revenue growth of 17%. The difference relates to the acquisitions
of Virid Interatividade Digital (acquired July 2011) and Computec (completed
November 2011).

 

  Credit Services

At constant exchange rates, total revenue growth in Credit Services was 24%.
As expected, organic revenue growth slowed from the exceptionally strong
growth in previous periods to 14%. Growth reflected the introduction of richer
consumer credit products, which incorporate new sources of negative data.
There was also good growth across newer customer segments as we continue to
diversify across telecommunications, automotive, utilities and insurance. We
also saw further expansion in the small and medium enterprise channel, which
performed well in the half.

 

  Decision Analytics

  Growth in Decision Analytics was strong. Total and organic revenue growth
  was 41%. As previously indicated, we now recognise some Latin American
  revenues from scores and value-added products in Decision Analytics rather
  than in Credit Services. There was good growth in scoring, analytics and
  modelling revenue, reflecting increased penetration in the financial
  services sector and a growing contribution within telecommunications.  

   

  Marketing Services

There was strong growth in Marketing Services as we continue to expand our
client base and build our digital marketing activities in Brazil. Total
revenue growth at constant exchange rates was 227% and organic revenue growth
was 62%.  

 

For Latin America, EBIT grew 33% at constant exchange rates to US$172m.
Margins increased by 40 basis points to 34.5%, reflecting positive operating
leverage in Brazil offset by adverse acquisition mix due to the first time
inclusion in the half of Computec.  

 

UK and Ireland

 

In the UK and Ireland, revenue was US$415m, up 6% at constant exchange rates.
Organic revenue growth was 3%. The acquisition contribution relates to LM
Group (acquired July 2011), Garlik (acquired December 2011) and 192business
(completed February 2012).

 

Credit Services

Total revenue growth was 5% at constant exchange rates, with organic revenue
growth of 1%. We benefited from some stabilisation in Credit Services, which
returned to growth during the half. There was some recovery in the financial
services segment and good progress across other areas, such as
telecommunications and utilities. We are also investing for growth through new
product introductions, such as BusinessIQ, which was launched in the UK in
October.

 

  Decision Analytics

Total revenue growth at constant exchange rates was 4%, while organic revenue
declined 2%. As expected, performance in the half was affected by a strong
prior year comparative for software-related activity. This offset good
progress in fraud and identity management activities.

 

Marketing Services

Total and organic revenue declined by 3%. While there was further progress in
email marketing, market conditions were fairly soft and demand for data
services remained relatively weak.

   

  Consumer Services

There was strong growth across Consumer Services, where total revenue growth
was 28% at constant exchange rates. Organic revenue growth was 26%. The
performance reflects further progress at our primary consumer brand
CreditExpert, as membership grows, as consumers take more services and as we
drive further improvements in retention rates.  

 

For the UK and Ireland, EBIT from continuing activities was US$118m, up 6% at
constant exchange rates. The EBIT margin was 28.4% (2011: 28.3%), affected by
the low revenue growth environment generally and adverse acquisition mix.

 

EMEA/Asia Pacific

Total revenue from continuing activities in EMEA/Asia Pacific was US$279m, up
6% at constant exchange rates, with organic revenue growth of 5%. The
difference relates to the acquisition of Altovision (March 2012).

 

      Credit Services

Total and organic revenue growth was 1%. While external conditions have been
fairly challenging, our credit bureaux activities in Europe have remained
fairly resilient, reflecting new client wins and successful new product
introductions in key markets. We also continue to see good progress in our
business information bureaux in Asia Pacific.

 

  Decision Analytics

Total and organic revenue, at constant exchange rates, was down 6%. Growth in
non-Eurozone markets was offset by exceptionally tough conditions in the
Eurozone and some other markets. Having taken appropriate action, the rate of
decline moderated as the half progressed.  

 

  Marketing Services

There was strong growth in Marketing Services, with total revenue growth at
constant exchange rates of 16%, and organic revenue growth of 13%. Growth
reflected new client wins for targeted digital marketing products, and
exceptionally strong growth in email marketing volumes.

 

For EMEA/Asia Pacific, EBIT from continuing activities was US$6m, down 41% at
constant exchange rates. EBIT margin was 2.2% (2011: 5.3%). The decline in
EBIT was due to negative operating leverage in Decision Analytics and
increased investment in the Australian bureau development.

  

  

Group financial review

 

Key financials

 

Six months ended 30 September
                                   2012      2011
Revenue                       US$2,289m US$2,155m
Benchmark PBT                   US$563m   US$533m
Benchmark tax rate                25.1%     22.5%
Benchmark EPS                   US39.0c   US37.9c
Operating cash flow             US$433m   US$439m
Net debt                      US$1,920m US$1,708m

The comparison shopping and lead generation businesses are classified as
discontinued operations and the comparative information in this report has
been re-presented as appropriate.

 

Income statement commentary

 

Revenue and profit performance - continuing operations

An analysis of Group profit performance in the period and commentary on
revenue and EBIT performance by geography is given within pages 3 to 10. An
additional analysis of the income statement is given in Appendix 3 on page 16
with revenue and EBIT performance by business segment summarised in Appendix 2
on page 15.

 

Profit before tax from continuing operations of US$76m (2011: US$351m) is
after a charge of US$403m (2011: US$111m) arising from the increase in the
fair value of the Serasa put option liability.

 

Exceptional items - continuing operations

 

Six months ended 30 September                  2012 2011
                                               US$m US$m
Restructuring costs                               9    -
Loss/(gain) on disposal of businesses             3  (8)
Interest income arising on legacy tax balances    -  (4)
Total exceptional charge/(credit)                12 (12)

 

As indicated on pages 4 and 5, the Group has conducted a strategic review of
its cost base.   Examples of efficiencies that we expect to realise include
re-engineering fixed costs, reducing exposure to lower growth markets, further
near and off-shoring, and rationalisation of lower growth legacy products.
This significant programme is expected to deliver gross annualised savings of
approximately US$75m. One-off restructuring costs associated with achieving
these savings will be in the region of US$110m, the majority of which will be
cash. US$9m has been recognised in the six months ended 30 September 2012 in
connection with this programme with a related cash outflow of US$1m. Of this
charge, US$6m related to redundancy costs and US$3m related to asset
write-offs.

 

The loss on disposal of businesses in the six months ended 30 September 2012
related to a number of small disposals.

 

 

Other adjustments made to derive Benchmark PBT - continuing operations

 

Six months ended 30 September                                     2012 2011
                                                                  US$m US$m
Amortisation of acquisition intangibles                             64   57
Acquisition expenses                                                 3    3
Adjustment to the fair value of contingent consideration             1    -
Charges in respect of the demerger-related equity incentive plans    -    5
Financing fair value remeasurements                                407  129
Other adjustments made to derive Benchmark PBT                     475  194

 

Further information in respect of these items is given in note 10 to the
unaudited condensed Group half-yearly financial statements. Financing fair
value remeasurements include a charge of US$403m (2011: US$111m) in respect of
the increase in the fair value of the Serasa put option.

 

Tax

Based on Benchmark PBT, the effective rate of tax for the six months ended 30
September 2012 was 25.1% (2011: 22.5%).

 

In the six months ended 30 September 2011, a one-off tax credit of US$36m was
recognised in respect of the utilisation of tax losses and this amount was
excluded from the calculation of the effective rate of tax based on Benchmark
PBT for that period in view of its size and nature. The effective rate of tax
on profit before tax for the six months ended 30 September 2011 was
accordingly lower than the benchmark rate at 16.8%.

   

  (Loss)/earnings per share - basic

In the six months ended 30 September 2012, there was a loss per share from
continuing operations of 7.4 US cents (2011: earnings per share of 26.2 US
cents). Earnings per share from discontinued operations were 0.3 US cents
(2011: loss per share of 0.6 US cents). Benchmark earnings per share were 39.0
US cents (2011: 37.9 US cents), an increase of 3%.

 

At 30 September 2012, Experian had some 1,030m ordinary shares in issue, of
which 43m shares were held by employee trusts and in treasury. Accordingly,
the number of shares to be used for the purposes of calculating basic earnings
per share from 30 September 2012 is 987m. Any issues and purchases of shares
after 30 September 2012 will result in an amendment to this figure.

 

Foreign exchange

The principal exchange rates used to translate revenue and EBIT in the period
were:

 

                     2012 2011        Weakened

                               against the US$
Sterling : US$       1.58 1.62            2.5%
US$ : Brazilian real 1.99 1.61           23.6%
Euro : US$           1.27 1.43           11.2%

The effect of exchange rate changes on the results for the period is to
decrease reported revenue by US$132m and EBIT by US$42m.

  

Balance sheet commentary

At 30 September 2012, net assets and total equity amounted to US$2,417m
(September 2011: US$2,578m), equivalent to US$2.45 per share (2011: US$2.61).
There is a decrease in total equity of US$514m from US$2,931m at 31 March
2012. Dividends of US$250m and the purchase of own shares for employee share
incentive plans of US$181m are the key components in this movement. The
decrease also includes currency translation losses of US$40m, mainly
attributable to further weakening in the Brazilian real against the US dollar,
and actuarial losses of US$39m in respect of defined benefit pension plans.
These latter items are shown net of related tax in the Group statement of
comprehensive income.

 

Retirement benefit assets and obligations

There was a net retirement benefit asset at 30 September 2012 of US$44m (2011:
US$57m) with a surplus in the funded plans of US$98m (2011: US$108m) and other
pension obligations of US$54m (2011: US$51m). At 31 March 2012, there was a
net retirement benefit asset of US$77m with a surplus in the funded plans of
US$130m and other pension obligations of US$53m. Details of the movements in
the balance sheet position during the period and the actuarial assumptions
used are included in note 17 to the unaudited condensed Group half-yearly
financial statements.

 

Foreign exchange

The principal exchange rates used to translate assets and liabilities at the
period end were:

                     2012 2011
Sterling : US$       1.62 1.56
US$ : Brazilian real 2.03 1.86
Euro : US$           1.29 1.34

  

Cash flow, funding and net debt

Experian generated good cash flow in the half with operating cash flow of
US$433m (2011: US$439m) and a cash flow conversion of 73% (2011: 79%). A
reconciliation of cash generated from operations as reported in the Group cash
flow statement on page 23 to operating cash flow as reported in the cash flow
summary table at Appendix 4 on page 17 is given in note 19 to the unaudited
condensed Group half-yearly financial statements. Cash flow conversion is
defined as operating cash flow expressed as a percentage of EBIT from
continuing operations.

 

As indicated in the cash flow summary table, free cash flow in the half was
US$315m (2011: US$333m). The net cash inflow in the half of US$57m is after
acquisition spend of US$41m (2011: US$290m) and equity dividends of US$215m
(2011: US$189m).

 

At 30 September 2012, net debt was US$1,920m (31 March 2012: US$1,818m) and a
reconciliation is given in Appendix 5 on page 17. On 3 July 2012, Experian
issued US$600m 2.375% notes due 2017. At 30 September 2012, there were undrawn
committed borrowing facilities of US$2,315m (31 March 2012: US$2,147m) and
additional information is given in note 21 to the unaudited condensed Group
half-yearly financial statements.

Seasonality

Some activities at Experian exhibit seasonality. Marketing Services activities
in North America and in the UK and Ireland are seasonally weighted towards the
second half of the financial year, reflecting some exposure to the retail
sector.

 

Risks and uncertainties

The risks and uncertainties affecting Experian are unchanged from those for
the year ended 31 March 2012, which were explained in detail on pages 24 to 27
of the annual report and financial statements for that year. Such risks are
either specific to Experian's business model, such as information security, or
more general, such as the impact of competition.

 

The explanations given in the 2012 annual report and financial statements
highlighted the following principal risk factors for Experian:

 

·     Loss or inappropriate usage of data.

·     Dependence upon third parties to provide data and certain operational
services.

·     Exposure to legislation or regulatory reforms.

·     Regulatory compliance.

·     Product/service or technology obsolescence.

·     Interruptions in business processes or systems.

·     Dependence on recruitment and retention of highly skilled personnel.

 

In addition, other risk areas were highlighted in the 2012 annual report and
financial statements as follows:

 

·     Exposure to material adverse litigation.

·     Exposure to country and regional risk (political, financial, economic,
social) particularly in the United States and United Kingdom.

·     Strategic investments including acquisitions and other organic
initiatives may not meet expectations.

·     Exposure to the unpredictability of financial markets (foreign exchange,
interest rate and other financial risks).

·     Exposure to increasing competition.

·     Loss or infringement of intellectual property rights.

 

The mitigation of Experian's exposure to the unpredictability of financial
markets includes the application of currency hedging strategies to minimise
the impact of currency volatility. However Experian does not currently intend
to undertake borrowings in Brazilian real.

 

Going concern

The directors of Experian plc formed a judgment at the time of approving the
Group half-yearly financial statements that there was a reasonable expectation
that the Group had adequate resources to continue in operational existence for
the foreseeable future. In arriving at this conclusion the directors took
account of:

 

·     Current and anticipated trading performance which is the subject of
detailed comment in the Chief Executive Officer's review and the business
review;

·     Current and anticipated levels of net debt and the availability of the
committed borrowing facilities which are detailed above; and

·     Exposures to and management of financial risks.

 

For this reason, the going concern basis continues to be adopted in the
preparation of the Group half-yearly financial statements.

 

Appendices

 

1. Non-GAAP financial information

 

Experian has identified certain measures that it believes 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 they
consider them to be important comparables and key measures used within the
business for assessing performance.

 

Information on non-GAAP measures and definitions of those measures are set out
below in the further Appendices.

 

2. Revenue and EBIT by business segment

 

  Six months ended 30 September                Total growth^2 Organic growth^2

                                   2012 2011^1
                                   US$m   US$m              %                %
   
Revenue
Credit Services                   1,072  1,029             15                9
Decision Analytics                  237    229              8                5
Marketing Services                  480    438             12                6
Consumer Services                   500    455             10               10
Total - continuing activities     2,289  2,151             12                8
Discontinuing activities^3            -      4            n/a
Total                             2,289  2,155             12
   
EBIT
Credit Services                     368    345             18
Decision Analytics                   44     49           (10)
Marketing Services                   58     60            (1)
Consumer Services                   153    127             22
Total business segments             623    581             14
Central Activities - central       (33)   (28)            n/a
corporate costs
Total - continuing activities       590    553             14
Discontinuing activities^3            -      1            n/a
Total                               590    554             14
EBIT margin^4
Credit Services                   34.3%  33.5%
Decision Analytics                18.6%  21.4%
Marketing Services                12.1%  13.7%
Consumer Services                 30.6%  27.9%
Total EBIT margin                 25.8%  25.7%

1. 2011 restated to exclude comparison shopping and lead generation businesses
in Consumer Services which have been classified as discontinued operations,
and for the reclassification of some products from Credit Services to Decision
Analytics within Latin America.

2. Growth is at constant exchange rates.

3. Discontinuing activities comprise small discontinuing businesses in
Decision Analytics and Marketing Services.

4. EBIT margin is for continuing activities only.

 

3. Income statement analysis - continuing operations

 

  Six months                     2012                              2011
  ended 30
  September        Benchmark Non-benchmark^1   Total Benchmark Non-benchmark^1   Total

                        US$m            US$m    US$m      US$m            US$m    US$m
  Revenue              2,289               -   2,289     2,155               -   2,155
Total operating      (1,699)            (80) (1,779)   (1,600)            (57) (1,657)
expenses
Operating                590            (80)     510       555            (57)     498
profit/(loss)
Share of losses                                                                       
of associates
                           -               -       -       (1)               -     (1)
EBIT from                                                     
continuing
operations               590                               554
Non-benchmark                           (80)                              (57)
items
Profit/(loss)
before net               590            (80)     510       554            (57)     497
finance costs and
tax
Net finance costs       (27)           (407)   (434)      (21)           (125)   (146)
Profit/(loss)            563           (487)      76       533           (182)     351
before tax
  Tax                  (141)              25   (116)     (120)              61    (59)
  Profit/(loss)                                                                       
  after tax for
  the period from                                                                     
  continuing
  operations             422           (462)    (40)       413           (121)     292
   
  Attributable
  to:
  Owners of              385           (458)    (73)       375           (115)     260
  Experian plc
  Non-controlling         37             (4)      33        38             (6)      32
  interests
  Profit/(loss)                                                                       
  after tax for
  the period from                                                                     
  continuing
  operations             422           (462)    (40)       413           (121)     292
   
                    US cents        US cents      US  US cents        US cents      US
                                               cents                             cents
                  The story
                  has been
  Earnings/(loss) truncated,
  per share -    
[TRUNCATED]
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