Experian Plc (EXPN) Ordinary USD0.10

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Experian reported a 7% rise in first-half underlying revenue to $3.6bn, with broad-based growth across geographies and business divisions. Underlying operating profit rose 10% to $1.0bn, driven by the top-line growth and improving margins.

Underlying free cash flow rose 13.3% to $426mn. Net debt rose 15% to $5.0bn, driven mainly by the $818mn spent on acquisitions.

An interim dividend of $0.1925 was announced, up 7%.

Full-year underlying revenue growth is still expected between 6-8% and operating margins are now expected to rise by the upper end of the 0.3-0.5% range.

The shares fell 1.9% in early trading.

Our view

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

The higher rate environment means lending conditions are a little weak, but Experian's broad range of products and services position it well across various market conditions. The proofs in the pudding, and strong, dependable, top line growth and margin expansion despite softer conditions is impressive.

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 190mn. 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.

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.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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