Experian Plc (EXPN) Ordinary USD0.10

Experian has reported first quarter organic revenue growth of 7%, in line with expectations. North America led the way with consumer products delivering double digit growth. In business-to-business lines it was mortgage, identity and fraud that were key growth drivers. The credit environment remains stable in the US, but the UK is still a little weak.

Latin America saw slightly soft business-to-business growth of 1%, with deal timing and flooding impacting results. Management expects stronger growth to return over the coming quarters as conditions normalise.

Full-year guidance continues to look for organic revenue growth of 6-8%, with margins improving 0.3-0.5 percentage points.

The shares fell 2.0% in early trading.

Our view

Experian is a global information services company specialising in data analytics, credit reporting, and identity verification.

It’s started the new financial year as it ended the last, with strong and dependable top line growth. Experian's broad range of products and services continues to position it well across various market conditions.

The US credit bureau market is the core of operations, where Experian helps match borrowers and lenders. It’s a market dominated by three players: Experian, Equifax and TransUnion. This concentration gives pricing power and cash from core operations can be funnelled into new growth areas.

The Consumer Services division differentiates Experian from peers and has shown impressive growth, driven by recent investments and strategic initiatives. It’s further bolstered by a significant rise in free members, now totalling over 180mn. With financial literacy becoming more widespread, Experian is well-positioned to capitalise on this trend, offering tools that empower consumers to manage their credit and financial health more effectively.

As the world continues to digitise, we think Experian's data-led solutions for businesses and consumers are likely to see increasing demand. Identity verification, credit assessments, and fraud prevention are critical services that businesses cannot easily forego, adding a layer of resilience to revenue streams.

In Latin America, Experian is experiencing significant growth, particularly in Brazil, where the company dominates the market. The region's financial services sector is undergoing substantial upgrades, presenting opportunities to expand the consumer base and service offerings. First quarter results were softer than we’re used to seeing, impacted by some one-off events like flooding. Management expects to see strong growth return in the coming quarters, but it’s something to watch.

Artificial Intelligence (AI) remains a focal point for innovation. Experian's vast and unique data sets provide a robust foundation for AI applications, enhancing product offerings and creating new opportunities to add value. AI integration is already underway, and we see substantial potential for future advancements in this area.

Strong cash generation and a healthy balance sheet are attractive qualities. Net debt relative to underlying cash profit is below the target range, this provides stability and helps support the ongoing dividend payments and share buybacks. No shareholder returns are guaranteed.

Experian's robust market position, strategic investments in technology, and diversified growth opportunities all indicate to a strong future. This optimism is somewhat reflected in Experian's valuation, which is above its longer-term average. We think that’s justified and still has upside potential, but nothing is certain.

Environmental, Social and governance (ESG) risk

The commercial services industry is low/medium risk in terms of ESG. Social and governance risks are the most acute - like product governance, data privacy & security, and labour relations - as exposure to environmental risks is minimal. Companies operating within facilities maintenance are also exposed to community relations and emissions risks.

Experian’s overall management of material ESG issues is strong.

Responsibility to oversee ESG issues is assigned to a management committee, but ESG reporting does not follow Global Reporting Initiative standards. Experian has a very strong environmental policy and a strong whistleblower programme. ESG targets are linked to executive performance but aren’t specifically linked to pay. There is a strong data privacy and security policy in place, alongside a very strong cybersecurity programme.

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