Experian Reaches Record Price on Plans to Return CashPeter Woodifield
Experian Plc, the credit-reporting service with financial information on more than one-tenth of the people in the world, rose to a record after announcing plans to return more cash to investors than analysts expected.
The shares gained 6.4 percent, the biggest advance in four years, to 1,247 pence in London, the highest since the Dublin-based company became publicly traded in 2006. The stock was the best performer in the benchmark FTSE 100 Index.
Experian plans to buy back $500 million of shares over the next 12 months, including as much as $170 million to pay for employee share plans due to vest. It announced a final dividend of 24 cents, higher than the Bloomberg forecast of 23.25 cents.
“We will see higher dividends and an expansion of the share buyback program,” Robin Speakman, an analyst at Shore Capital, said in a telephone interview. “Experian will have $1.3 billion of free cash in 2014-2015.”
Graham Brown at Canaccord Genuity Ltd., the only analyst of 19 tracked by Bloomberg with a sell recommendation on the stock, hadn’t expected the buyback announcement, he said in a telephone interview.
The shares are “expensive and increasingly risky” because of the slowdown in the Brazilian economy, Brown said in a note. Brazil accounts for about 35 percent of Experian’s organic growth and about 23 percent of group profit, he said.
Latin America’s largest economy will expand by at least 3 percent in 2013, Finance Minister Guido Mantega said in March. That’s up from 0.9 percent last year and 2.7 percent in 2011.
Experian reported full-year earnings and sales for the year ended March 31 that were close to analysts’ estimates. Adjusted net income was $847 million compared with the average estimate of $843 million of eight analysts surveyed by Bloomberg. Revenue was $4.73 billion compared with the average estimate of $4.75 billion from 14 analysts.
Organic growth of 8 percent last year was led by North America and Latin America, Experian said in a statement. There was strong demand for its fraud and identity theft products, Chief Executive Officer Don Robert said on a conference call.
“Things are starting to look better in the U.K.,” Robert said. “We are seeing cautious optimism on the part of our clients.”
There aren’t many multibillion-dollar companies achieving 8 percent organic growth annually, said Speakman, who has a buy rating on the stock. Experian is now more concentrated on the use of data rather than credit and is a principal player in so-called big data, which helps customers mine vast amounts of information, he said.
Organic growth could moderate slightly in the first half to about 7 percent, Chief Financial Officer Brian Cassin said on the call.
The stock has more than doubled since the company split from GUS Plc in October 2006, giving the company a market value of about 12.6 billion pounds ($19.5 billion). The volume of shares traded was more than twice the three-month daily average.