Experian- Sales up 14% and profit up 20% for
continuing activities at constant
exchange rates
- Fourth consecutive six-month
period of double-digit sales and
profit growth
- Excellent cash generation, with more
than 100% of operating profit again
converted into operating cash flow
- Further improvement in portfolio
of businesses, with acquisitions in
high growth areas and divestment
of low growth, low margin
outsourcing activities
- Strong sales growth from new
initiatives by product, geography
and market
- Investing for growth in 2005 in new
products and infrastructure
| 
|
Experian is a global leader in providing
information solutions to organisations and
consumers. It helps organisations find,
develop and manage profitable customer
relationships by providing information,
decision-making solutions and processing
services. It has over 40,000 clients in more
than 60 countries.
Experian has a clear strategy for growth:
– build on core businesses;
– sell new value-added solutions; and
– grow by targeted acquisitions,
against which further progress was made
in 2004.
Experian has continued to win major
contracts during the year across its
businesses. It has built on its strong global
position, with success in both its largest
markets (the US and UK) and elsewhere,
including in:
– France (www.jedeclare.com), for online
submission of statutory company returns;
– Italy (Iveco, part of FIAT), a database
contract;
– Spain (Amena), a database contract for
this mobile phone operator; and in
– Korea (Kookmin Bank), Malaysia
(AmBank), Australia (Westpac) and Turkey
(Kredi Kayit Burosu), all decision
solutions via Experian-Scorex.
| |
| 12 months to 31 March |
2004
£m | 2003
£m | 2004
£m | 2003
£m |
|---|
| Experian North America |
665 |
662 |
181.2 |
168.7 |
|---|
| Experian International |
550 |
446 |
108.8 |
86.6 |
|---|
| Total continuing activities |
1,215 |
1,108 |
290.0 |
255.3 |
|---|
| % growth at constant FX |
14% |
14% |
20% |
24% |
|---|
| |
|
|
|
|
| Discontinued activities |
71 |
93 |
– |
1.1 |
|---|
| Closure costs |
– |
– |
(7.8) |
– |
|---|
| Total reported |
1,286 |
1,201 |
282.2 |
256.4 |
|---|
| Operating margin |
|
|
|
|
|---|
| – excluding FARES |
|
|
20.8% |
20.1% |
|---|
| – including FARES |
|
|
23.9% |
23.0% |
|---|
| Operating cash flow |
|
|
298 |
270 |
|---|
Experian is also building considerable
momentum in non-traditional vertical
markets, such as government.
Product innovation remains key to
Experian. Significant new product launches
during 2004 include the direct-to-consumer
service in the UK (CreditExpert), building on
the US model; the international business
information reports service now covering
companies all over the world; and a new
database management tool (Totalvue) to
help US retail and catalogue companies
improve their marketing capabilities.
Experian’s portfolio of businesses has been
further strengthened. Including the ongoing
programme to buy its US affiliate bureaux,
Experian spent £162m during the year on
acquisitions of complementary businesses.
These acquisitions bring new data or
products; take Experian into new
geographical or vertical markets; or
strengthen core operations by improving
efficiencies. All acquisitions are performing
in line with plan and are expected to achieve
double-digit post-tax returns. Certain
outsourcing activities, with below average
sales growth and operating margins, have
been sold or closed during the year.
| Experian North America
The year under review has seen good
growth in Experian North America, driven
by its balanced portfolio of established
businesses and by new growth initiatives.
Sales from continuing activities increased to
$1,128m (£665m), up by 10% in dollars. Of
this, 2% came from corporate acquisitions
made in the second half of the year. These
were CheetahMail (e-mail delivery),
Marketswitch (decision solutions) and
MetaReward (Internet loyalty marketing to
complement Consumer Direct).
Credit Information and Solutions together
grew sales by 12%, 9% excluding corporate
acquisitions, with good growth from
Consumer Direct, from the successful
integration of affiliate acquisitions and from
new products such as online notification
services and collections solutions.
Sales to the mortgage sector accounted for
about 8% of continuing North America
revenue during 2004, having peaked at
10% in the April to June 2003 quarter.
Following a strong first half, the anticipated
slowdown in the mortgage refinancing
market reduced sales growth by 2% in the
second half.
Consumer Direct grew by over 40% during
the year. With over 1.7m subscribers, it
remains the clear leader in this fast
growing market. This position is being
reinforced by its exclusive integration
agreements with leading Internet portals,
including Yahoo, AOL and MSN; by its new
product developments, such as the launch
of monthly membership billing; and by
higher transaction volumes from the up-sell
of services such as credit scores and tri-bureaux
reports.
A further 10 affiliate bureaux were
purchased during the year, bringing the
total to 21 at a combined cost of $166m.
Integration is progressing smoothly, with
expected returns being exceeded.
Marketing Information and Solutions
together grew sales by 6%, with Marketing
Information improving throughout the year.
Although consumer marketing information
sales remained flat, Experian has significant
momentum in sales of business and
automotive marketing information.
Marketing Solutions saw strong sales
growth, with the successful delivery of over
20 database projects. Experian continues to
invest in transforming its marketing
business to a more solutions-based model.
FACT Act
The Fair and Accurate Credit Transactions
Act (FACTA) was signed into law on 4
December 2003, permanently extending
the national standards for consumer credit
reporting in the US. Among other things, it
requires national credit reporting agencies
to provide consumers, on request via a
centralised source, one free credit report
annually. Discussions continue with the
Federal Trade Commission to establish how
this will work in practice. Final rules are
expected in June 2004 regarding the
centralised source and later this year
regarding all other aspects of FACTA
compliance. If the free report requirement
results in an undue burden of costs on
Experian, we will seek to recover costs
from our clients. |  |
| 12 months to 31 March
|
2004
£m |
2003
£m | Growth at
constant FX | | Sales |
|
|
|
|---|
| – Continuing activities |
665 |
662 |
10% |
|---|
| – Discontinued activities |
38 |
56 |
n/a |
|---|
| – Total reported |
703 |
718 |
7% |
|---|
| Operating profit |
|
|
|
|---|
| – Direct business |
143.9 |
136.6 |
15% |
|---|
| – FARES |
37.3 |
32.1 |
27% |
|---|
| – Continuing activities |
181.2 |
168.7 |
18% |
|---|
| – Discontinued activities |
(1.6) |
2.8 |
n/a |
|---|
| – Total reported |
179.6 |
171.5 |
15% |
|---|
| Operating margin |
|
|
|
|---|
| – excluding FARES |
21.6% |
20.6% |
|
|---|
| – including FARES |
27.2% |
25.5% |
|
|---|
Financial review
The lettershop operations were sold in
December 2003 for $28m. Excluding these,
sales were up 10% to $1,128m and profits
up 18% to $307m (£181m).
Excluding FARES, the 20%-owned real estate
information associate, the operating margin
for continuing activities increased by 100
basis points. This reflects operational
leverage from growing sales and the
benefits of efficiency improvements.
Restructuring costs of about $6m, similar
to last year, were charged to operating
profit. These relate largely to further cost
improvement programmes in Marketing.
Operating profit from the 20% holding in
FARES was $63m (2003: $50m). FARES was
also affected by the slowdown in mortgage
refinancing in the second half of the year.
However, the acquisition by FARES of
Transamerica’s real estate tax service and
flood hazard certification businesses in
October 2003 has helped to offset this
impact. Integration of these businesses is
progressing well.
The £/$ exchange rate moved substantially
during the year from an average of $1.55
in the year to March 2003 to $1.70 in
2004. This reduced reported sales by £68m
and operating profit by £17.3m.
Experian International
Experian International, which accounts for
45% of total Experian sales, had another
excellent year, continuing its long record of
double-digit sales and profit growth.
Sales from continuing activities grew by
20% at constant exchange rates, of which
13% came from acquisitions. These include
Nordic Info Group (acquired in January
2003), Experian-Scorex (March 2003) and
DMS Atos, French cheque processing and
document management (September 2003).
The latter is expected to enhance total
sales growth by about 6% in the first half of
the current year.
Sales in the UK grew by over 10% again,
building on its market leadership position
in consumer credit information and
solutions and on its growing share in the
business credit and marketing area.
Credit Information and Solutions sales grew
by 11%, excluding corporate acquisitions
and at constant exchange rates. This was
driven by solid growth in UK consumer and
business information, by high demand for
value-added products and by strong
performances in continental European
credit information. In the current year,
Experian’s account processing operations
will be affected by one large client moving
its UK processing in-house, as previously
planned. However, Experian has won a
major contract with Marks & Spencer and
extended an existing contract with Morgan
Stanley in this area.
In its first year of full ownership, Experian-Scorex has delivered double-digit sales
growth by continuing to develop its leading
position in decision solutions. It has won a
number of significant contracts during the
year, including Barclaycard and CIT Group
(pan-European application processing for
this commercial finance client).
Marketing Information and Solutions sales
also grew by 11%. Despite a continuing
difficult background in the direct marketing
industry in the UK, Experian delivered
strong growth in business-to-business
marketing, in the UK insurance sector and
in Southern Europe, where the introduction
of global products is driving new business.
Outsourcing accounted for 24% of
continuing sales in 2004, with the
remaining businesses based predominantly
in France, where cheque processing makes
up almost half of sales. This is a mature
market where Experian is consolidating
capacity and reducing costs, while building
strong relationships with French financial
institutions. Experian is also offering some
innovative outsourcing services in France.
For example, it has won a multi-million
euro contract with the Paris Transport
Authority to provide back office, processing
and document handling services for season
tickets (Carte Integrale) and weekly and
monthly travel cards (Carte Orange).
|
|
| 12 months to 31 March
|
2004
£m | 2003
£m | Growth at
constant FX |
|---|
| Sales |
|
|
|
|---|
| – Continuing activities |
550 |
446 |
20% |
|---|
| – Discontinued activities |
33 |
37 |
n/a |
|---|
| – Total reported |
583 |
483 |
18% |
|---|
| Operating profit |
|
|
|
|---|
| – Continuing activities |
108.8 |
86.6 |
24% |
|---|
| – Discontinued activities |
1.6 |
(1.7) |
n/a |
|---|
| – Closure costs |
(7.8) |
– |
n/a |
|---|
| – Total reported |
102.6 |
84.9 |
19% |
|---|
| Operating margin |
19.8% |
19.4% |
|
|---|
Financial review
Excluding discontinued activities and at
constant exchange rates, sales increased
by 20% and operating profit by 24%. Of the
latter, just over half came from acquisitions
and the remainder from progress in the
underlying business. The closure costs
of £7.8m charged to operating profit
relate to the phased closure of Experian’s
call centres and remittance processing
activities in the UK by 2006, which was
announced recently.
During the current year, Experian
International will start to migrate its
operations to its new purpose-built
computer centre in Nottingham. Operating
costs will increase by several million
pounds, but the new centre will enable
Experian to offer its clients greater
resilience and provides additional capacity
for future growth.
|
