Business review
Experian North America: progress in 2006
Operational review
Sales from continuing activities increased by 36% in dollars. Corporate acquisitions generated 23% of this growth, with 13% organic growth (H1: 18%; H2: 9%). In the current financial year, the contribution from acquisitions made to date is expected to increase sales growth by mid-single digits.
Credit Information and Solutions together grew sales by 14% excluding corporate acquisitions. The US consumer credit market was very strong during the year. For example, credit card solicitations were at an all time high in calendar year 2005, with 6 billion offers mailed – up 16% on 2004. This strong market, which is expected to moderate in the current year, benefited Experian’s core credit operations. Experian also saw good growth in value-added products such as triggers and prescreen. The FACT Act recovery charge, which anniversaried from 1 January 2006, contributed 3% to sales growth in Credit in the year.
There was double-digit organic growth in business credit, reflecting strength in the volume of business credit reports as well as growth in decision analytics in this market.
Marketing Information and Solutions together grew sales by 6% excluding acquisitions. There was renewed weakness across the direct marketing industry in the second half. This impacted Information sales at Experian, especially in the catalogue and reseller sectors. Marketing Solutions continued to trade well, especially in database solutions and email marketing. The success of CheetahMail, which sent nearly 11 billion email messages during the year, is a good example of how Experian repositions its portfolio of businesses to capitalise on high growth markets.
Experian Interactive contributed about 35% of sales in Experian North America in 2006, up from 22% in 2005. Sales in total more than doubled to $617m, with significant contributions from businesses acquired during the year. Excluding acquisitions, sales increased by 22%. Consumer Direct saw further strong growth of over 30%, driven by more new members, the success of new products such as Triple Advantage and increased revenue per member. Sales at MetaReward fell during the second half of the year. As previously announced, it has closed its incentive marketing websites, which operate in an increasingly unattractive market for both consumers and thus clients. These websites had sales of $70m and EBIT of $5m in the year to 31 March 2006.
Financial review
In dollars, sales from continuing activities were $1,789m, up 36% compared to last year. EBIT from direct businesses was $412m (2005: $286m), giving an improvement in EBIT margin of over one percentage point to 23.0%. This improvement reflects operational leverage from 13% organic sales growth and a favourable mix from strong Credit sales. These factors were stronger in the first half of the year than the second half. FACTArelated set-up costs which were incurred in the previous year were recovered during 2006. Experian North America also invested several million dollars in the latter part of the year in further improving its information infrastructure.
FARES, the 20%-owned real estate information associate, saw largely unchanged profits year-onyear at $63m (2005: $64m), reflecting the decline in the US mortgage refinancing market offset by continuing cost control.
The £/$ exchange rate moved from an average of $1.85 in the year to March 2005 to $1.79 in 2006. This increased reported sales by £33m in the year and EBIT by £9m.
Experian North America |
|||
| 12 months to 31 March | 2006 £m |
2005 £m |
Growth at constant FX |
| Sales | |||
| - Continuing activities | 1,000 | 712 | 36% |
| - Discontinued activities | 2 | 12 | na |
| - Total reported | 1,002 | 724 | 34% |
| EBIT | |||
| - Direct Business | 230.3 | 154.5 | 44% |
| - FARES | 35.0 | 34.5 | (2%) |
| - Continuing activities | 265.3 | 189.0 | 36% |
| - Discontinued activities | – | (0.1) | na |
| - Total reported | 265.3 | 188.9 | 36% |
| EBIT margin | |||
| - excluding FARES | 23.0% | 21.7% | |
| - including FARES | 26.5% | 26.5% | |
