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 RobertChief Executive Officer +44 (0)20 3042 4215 Brian CassinChief Financial Officer Nadia Ridout-JamiesonDirector of Investor Relations James RussellCommunications 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 issuean 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, visithttp://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 AmericaEBIT 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]
Experian plc EXPN Experian half-yearly financial report
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