Business review
Experian: progress in 2006
- Sales up 27% and profit up 29% for continuing activities at constant exchange rates
- Fourth consecutive year of double-digit sales and profit growth
- Further EBIT margin advance even after increased investment in new products, markets and infrastructure
- Fourth consecutive year of excellent cash generation, with about 100% of EBIT converted into operating cash flow
In 2006, sales were up 27% at constant exchange rates and EBIT was up 29%, demonstrating the benefits of Experian’s portfolio of businesses by product, by region and by market. There was also a balance between organic growth (which contributed 10% of the 27% sales increase) and acquisitions (which contributed 17%).
Experian was highly cash generative in 2006, converting all of its EBIT to operating cash flow. Acquisition spend in the year was about £775m, well above the average spend in the three previous years. Together, acquisitions made in the last three financial years are performing ahead of plan.
Experian continued to invest organically in its businesses during the year, in areas such as new products, establishing a stronger presence in selected regions and in its infrastructure. For example, new products, which contributed significantly to organic growth, include Triple Advantage in Consumer Direct and Hunter II, the anti-fraud system which recently won the Queen’s Award for Innovation. Experian also recently launched Vantage Score in the US, a new credit score jointly developed by it and the two other US national credit reporting companies, which delivers for clients and consumers more consistent and predictive credit scores. In Asia Pacific, Experian now employs nearly 200 people – an increase of more than 50% over a year ago. This enables it to serve better both local and multi-national clients looking to expand into this fast-growing region.
Experian also continued to evolve its portfolio of businesses by further acquisitions and some closures. Experian made two large acquisitions during the year, both in the Interactive business. LowerMyBills.com, a leading US online generator of mortgage leads, was acquired for $330m plus earn-out in May 2005 and PriceGrabber.com, a leading US provider of online comparison shopping services, was purchased for $485m in December 2005. Both will benefit from the rapid growth in Internet usage by consumers and clients, as well as from the synergies available to them from being part of Experian in areas such as access to data, analytical tools and clients. Experian also invested via acquisition in other areas such as database marketing solutions (ClarityBlue), purchasing more US credit affiliate bureaux, enabling lending to small businesses (Baker Hill) and in the retail and property sectors (Footfall). In addition, Experian has recently announced its withdrawal from two markets which have become increasingly unattractive - incentive marketing websites in the US (via MetaReward) and large scale account processing in the UK.
In 2006, Experian continued to win contracts across the business. Some of these are from longestablished major clients where Experian is extending the services it sells. One example is the recently announced multi-year, multi-million pound contract with HSBC, which will use Experian’s decision analytics to support lending decisions around the world. In the US, Limited Brands, a top ten specialty retailer, extended its relationship with Experian, awarding it a multi-year, multi-million dollar contract for an integrated customer and prospect database across all sales channels. Other wins are in recently acquired companies such as ClarityBlue’s three year, multi-million pound contract to support customer acquisition at BSkyB. Finally, Experian is gaining clients in new regions, such as Japan (JCB and Nicos) and Thailand (Bank of Siam).
Experian |
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| Sales | EBIT | |||
| 12 months to 31 March | 2006 £m |
2005 £m |
2006 £m |
2005 |
| Experian North America | 1,000 | 712 | 265.3 | 189.0 |
| Experian International | 722 | 620 | 151.3 | 126.6 |
| Total continuing activities | 1,722 | 1,332 | 416.6 | 315.6 |
| % growth at constant FX | 27% | 18% | 29% | 16% |
| Discontinued activities | 3 | 30 | 0.1 | 1.4 |
| Total reported | 1,725 | 1,362 | 416.7 | 317.0 |
| EBIT margin - excluding FARES | 22.2% | 21.1% | ||
| EBIT margin - including FARES | 24.2% | 23.7% | ||
Notes (relevant to all Experian tables):
EBIT margin is for continuing activities only. For FARES, the 20%-owned
real estate information associate, Experian reports its share of
FARES profits but not sales. FARES is an integral part of Experian’s
business
