Experian profits leap thanks to strong North American market performance but shares dip on underwhelming forward guidance
- Pre-tax earnings rose by around a third to $1.45bn in the 12 months to 31 March
- Both the company’s B2B and consumer services divisions saw demand increase
- Despite the very positive trading update, Experian shares declined this morning
Experian has hailed a year of ‘significant progress’ as annual profits surged following strong growth across all three of its largest markets.
The FTSE 100-listeed credit reporting company reported pre-tax earnings jumped by around a third to $1.45billion in the year to 31 March, from $1.1billion in the previous 12 months.
Statutory revenues climbed 13 per cent to $6.3billion, with both the group’s B2B and consumer services divisions seeing demand increase substantially, especially in North America, where it derives about two-thirds of overall sales.
Profitable: The credit reporting company reported pre-tax earnings jumped by around a third to $1.45billion in the year to 31 March, from $1.08billion in the previous 12 months
Organic revenue from this market grew 13 per cent to $4.1billion, with consumer services seeing the greatest expansion in revenue, thanks to the number of free memberships shooting up by 11 million to 52 million.
Trade was further boosted by a recovery in automotive-related offers as looser travel restrictions led to Americans using their cars regularly again, and more robust demand for fraud and identity management products.
Meanwhile, total revenue rose 17 per cent on the back of recent acquisitions, including marketing tech startup Tapad, insurance aggregator Gabi and various verification service websites.
Experian also credited its strong performance in Latin America to acquisitions, such as Brazilian firms PagueVeloz and BrScan, and through adding another 12 million consumers to its consumer services platform.
Alongside these results, the business noted ‘very good’ progress in the British Isles, with revenue climbing 11 per cent at constant exchange rates to $847million and the number of free members on its platform growing by 1.5 million.
Organic B2B revenues were buoyed by client mandates being gained across sectors like fintech, insurance and, Buy Now, Pay Later, as well as new credit prospecting and loan origination activity.
Domestic growth: In the British Isles, organic B2B revenues were buoyed by client mandates being gained across sectors like fintech, insurance and, Buy Now, Pay Later
Chief executive Brian Cassin said: ‘Experian’s mission to help people improve their financial health is more important now than ever, with many households facing the challenge of rising inflation.
‘We take great pride in our ability to make a positive difference to people’s lives by making it easier, cheaper and faster for people and organisations to access financial services.’
Experian has announced a second interim dividend of 35.75 cents per share, which it intends to pay on 22 July, meaning shareholders would get a total of $444million for the fiscal year.
Experian shares declined by 3.2 per cent to £25.85 this morning, making it the second-biggest faller on the FTSE 100 Index, as some analysts were disappointed by the group’s outlook.
Further organic revenue expansion of between 7 and 9 per cent is expected by the group for the 2023 financial year, with another 1 per cent revenue increase set to come from acquisitions.
Commenting on these forecasts, Steve Clayton, a fund manager at Hargreaves Lansdown, remarked: ‘Everyone can see that the outlook is getting weaker, with inflation gnawing away at consumers spending power.
‘Chinese growth is being held back by its ongoing fight against Covid, and Russia has thrown a particularly ugly cat amongst the pigeons in Europe.
‘So why would a management offer guidance that could prove challenging to achieve, given the uncertain backdrop? Any business that can deliver the sort of growth outcome that Experian is forecasting in the current environment is doing particularly well.
‘The market may be a touch underwhelmed this morning, but we suspect that as more companies update on trading, the sort of outlook Experian is projecting will come to look like a very strong performance indeed.’