Experian hit by goodwill impairment

Whatever the economy is doing, credit checking never seems to go away. The performance of Experian (EXPN) attests to this: the group achieved organic revenue growth of 8 per cent between April and September, and adjusted earnings before interest and tax (Ebit) increased at the same rate. 

The consumer services division – which allows people to view their own credit reports – is still growing the fastest. It now has 145mn free consumer memberships, up from 122mn this time last year, and reported organic revenue growth of 12 per cent. Experian’s business-to-business arm – which generates about three-quarters of group sales – grew at a more leisurely 7 per cent, but management said demand was still strong, driven by expanded data assets, enhanced analytics, and wider adoption of its new platforms.

Geographically, the picture is more mixed. Experian is doing an excellent job of growing its presence in Latin America, with adjusted Ebit jumping by 38 per cent to $122mn (£102mn) at constant exchange rates. By contrast, growth in the more mature UK market seems to be stalling, with adjusted Ebit down by 3 per cent, despite margin improvement last financial year. 

However, Europe caused the most trouble in the first half. As seen in the table below, statutory profit before tax was hit by a $152mn goodwill impairment, which management blamed on higher interest rates and macroeconomic weakness in European markets. The group is currently restructuring in Europe, the Middle East and Africa (Emea) and Asia Pacific to “reduce regional overheads and exit sub-scale activities”. It is on track to close or dispose of operations in “a number of countries”, accounting for revenue of $67mn and an adjusted loss of $7mn in the ended 31 March 2022.

This isn’t hugely encouraging. However, Experian’s defensive position and excellent growth on the other side of the world remain attractive. Buy. 

Last IC View: Buy, 2,589p, 18 May 2022