Experian – Strong Growth, But Was It Strong Enough?

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By Anna Peel. Originally published at ValueWalk.

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  • Experian plc (LON:EXPN), the global information services group has released results for the financial year ending 31 Mar 2022.
  • Revenues grew by 17%, of which 12% was organic growth, the rest contributions from recently acquired businesses.
  • Earnings per share pushed ahead by 21% with margins expanding modestly.
  • Cash generation was a particular feature, with the group converting 109% of Benchmark Earnings before interest and tax (EBIT) into cash flow. The growth in cash flow versus the prior year was 22%.
  • Chief Executive Brian Cassin described the outcome as a very good year for the group and guided toward underlying revenue growth for the current year between 7% and 9% accompanied by modest margin improvements.  Some analysts had hoped for even stronger guidance, leading to a drop of 4.5% by the stock in early trading.

Q1 2022 hedge fund letters, conferences and more

Experian’s Earnings

Steve Clayton, HL Select fund manager, who holds Experian in his portfolio said:

“Experian has had a great year, pure and simple. The group stands in a position of strength and is making good progress in building its consumer-facing proposition into a more and more substantial enterprise. Their b2b operations are enjoying strong demand, helping corporates to make decisions about the best prospects for lending and how to structure their marketing campaigns. Going forward though, both consumers and corporates are likely to find the going get tougher.

Experian’s core credit bureau operations should enjoy some counter-cyclicality. Helping banks and other lenders to determine the financial health of their clients becomes more and more critical the worse economic conditions become. These services should see increased demand, even if demand for lending and marketing advisory services is suppressed.

Some may argue that the forward guidance from the company is a little lower than some analysts might have been hoping for. From where we sit this is more about the macro frame the company are operating in. 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 are 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 are projecting will come to look like a very strong performance indeed.

We hold Experian because of its ability to compound earnings over the long term, coupled with robust cash generation. Nothing that we see today suggests that those strengths are in any way impeded.”


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