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| Name | Symbol | Market | Type |
|---|---|---|---|
| Experian Fin 20 | LSE:93RV | London | Medium Term Loan |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 110.628 | 0 | 01:00:00 |
From May 2019 to May 2024
TIDM93RV
RNS Number : 5631W
Experian Finance Plc
15 November 2017
news release
Half-yearly financial report
7am, 15 November 2017 -- Experian plc, the global information services company, today issues its half-yearly financial report for the six months ended 30 September 2017.
General highlights
-- A good start to the year, with strong B2B* growth and good progress in Consumer Services.
o 5% total revenue growth, 5% total Benchmark EBIT growth, 6% Benchmark EPS growth.
o 4% organic revenue growth, 7% B2B organic revenue growth.
o Benchmark EBIT margin of 26.5%(1) , in line with prior year at actual rates and down 10 basis points at constant currency.
-- Investment in innovation is driving momentum in our business and is providing new opportunities.
o Strong client reception for new product introductions such as Experian Ascend, Text For Credit, PowerCurve Collections, CrossCore, with many more initiatives in development.
o Additional investments made in new sources of data and analytics, such as income and asset verification, mobile phone and low income lending data.
o Progress in diversifying Consumer Services; strong start for IdentityWorks and encouraging developments in LendingWorks.
-- Continuing commitment to shareholder returns and disciplined capital allocation:
o Four bolt-on acquisitions and investments completed, including post-balance date events.
o US$397m returned to shareholders in the half year via share repurchases.
o First interim dividend up 4% to 13.5 US cents per ordinary share.
Hot Features
Premium
Statutory financial Benchmark financial highlights(1)(,)
highlights (2)
----------------------------------------- ----------------------------------------------------
Total Actual Constant
2017 2016 Growth 2017 2016 rates rates
US$m US$m % US$m US$m growth growth
% %
Revenue 2,190 2,086 5 Revenue(2) 2,190 2,086 5 5
Operating Benchmark
profit 518 490 6 EBIT(3) 581 553 5 5
Profit
before Benchmark
tax 467 500 (7) PBT 541 518 4
Basic Benchmark
EPS(4) US34.5c US40.6c (15) EPS US43.0c US40.7c 6
----------- -------- -------- -------- ----------- -------- -------- -------- ---------
1 Benchmark metrics exclude the discontinued operations of email/cross-channel marketing (CCM) and prior year comparatives have been restated to reflect the transaction.
2 Revenue from ongoing activities. See Appendix 1 on page 15 and note 6 to the condensed half-yearly financial statements on pages 24-26 for definitions of non-GAAP measures.
3 See page 7 for reconciliation of Benchmark EBIT from ongoing activities to Profit before tax. * B2B = business-to-business activities consists of Credit Services (5% organic revenue growth), Decision Analytics (12%) and Marketing Services (9%) business lines.
4 Basic EPS has reduced to 34.5 US cents from 40.6 US cents in 2016. The decrease reflects higher non-cash costs for financing fair value remeasurements (see Note 10c) and a loss from discontinued operations (see Note 12a).
Brian Cassin, Chief Executive Officer, commented:
"We have started the year well and are on course to deliver stronger organic revenue growth as we move through the year. We are now consistently delivering strong growth in our B2B activities and anticipate a further moderation in the decline of Consumer Services as new product launches take root. The benefits of investments in our technology transformation, our One Experian approach and exciting new product innovations are visible in our results and we are laying foundations for strengthening performance as we move forward.
"Looking ahead, we continue to expect good levels of growth for the year, with organic revenue growth in the mid-single digit range and stable margins as we invest in our operations and growth initiatives. We also continue to expect further progress in Benchmark earnings per share."
Contacts
Experian
Nadia Ridout-Jamieson Investor queries +44 (0)20 3042 4215
Gerry Tschopp Media queries
Finsbury
Rollo Head +44 (0)20 7251 3801
Jenny Davey
There will be a presentation today at 9.30am (UK time) to analysts and investors at the Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ. The presentation can be viewed live via the link from the Experian website at www.experianplc.com and can also be accessed live via a telephone dial-in facility: 0800 783 0906 (UK primary) or 01296 480 100 (UK direct) or +44 1296 480 100 (International direct), using access code 165 053 46. The supporting slides and an indexed replay will be available on the website later in the day.
Experian will update on third quarter trading for FY18 on 18 January 2018.
Roundings
Certain financial data have been rounded within this announcement. As a result of this rounding, the totals of data presented may vary slightly from the actual arithmetic totals of such data.
Forward looking statements
Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements. See page 14 for further information on risks and uncertainties facing Experian.
Company website
Neither the content of the Company's website, nor the content of any website accessible from hyperlinks on the Company's website (or any other website), is incorporated into, or forms part of, this announcement.
About Experian
Experian is the world's leading global information services company. During life's big moments - from buying a home or a car, to sending a child to college, to growing a business by connecting with new customers - we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organisations to prevent identity fraud and crime.
We have 16,000 people operating across 37 countries and every day we're investing in new technologies, talented people and innovation to help all our clients maximise every opportunity. We are listed on the London Stock Exchange (EXPN) and are a constituent of the FTSE 100 Index.
Learn more at www.experianplc.com or visit our global content hub at our global news blog for the latest news and insights from the Group.
Chief Executive Officer's review
We have started the year well, with strong growth across our business-to-business (B2B) activities and have made further progress in Consumer Services. We delivered total revenue growth of 5% at constant currency, organic revenue growth of 4%, consistent with our mid single-digit target range. We are making good progress as we attack material new opportunities, introduce new sources of data and as we accelerate the rate at which we bring innovative new services to market.
Highlights in the first half include:
-- We delivered strong B2B performance, with organic revenue growth of 7%, as we introduce new superior sources of data, extend our lead in analytical tools and decisioning software, and extend our footprint in new verticals such as healthcare.
-- We have made further progress in Consumer Services following the launch in May of identity protection services and our credit comparison platform. Strong enrolments in IdentityWorks are helping to mitigate declines in traditional credit monitoring products.
-- Regionally, we delivered good growth across three of our four regions, with particular highlights in Latin America and EMEA/Asia Pacific. This offset a modest decline in the UK and Ireland.
-- We continue to invest in innovative companies in the fintech sector to broaden our access to new sources of data and emerging technologies. We have now completed four bolt-on acquisitions and investments for a total of US$202m, of which US$170m was after the period end.
-- We repurchased US$397m of shares and have raised the first interim dividend by 4%.
-- Our actions resulted in further good progress during the half, with total revenue growth of 5% at constant currency, organic revenue growth of 4% (Q1 4%; Q2 4%), Benchmark EBIT growth of 5% and Benchmark earnings per share growth of 6%.
The results demonstrate further progress on our strategy to serve the needs of our clients who want to grow their business, deliver better digital customer experiences, manage risks as effectively as possible and protect against fraud. Our strategy is also directed towards helping consumers to protect their identities and manage their financial lives. We are meeting these needs through our strategy which emphasises extending our lead in data and analytics and transforming our engagement with consumers.
We also place significant emphasis on protecting sensitive data and maintaining strong defences. We are committed to providing a safe and secure environment for data. We invest heavily in information security, deploying a multi-layered approach in order to maintain strong systems. This has always been of the highest priority for Experian and we will continue to direct significant investment in this area.
Regional highlights
North America
We delivered a solid performance in North America, with total revenue growth of 6% and organic revenue growth of 4%, reflecting a strong performance across B2B partially offset by Consumer Services.
Our B2B business is on a strong trajectory as we bring new technology and product innovations to market. We have introduced several new capabilities to sustain strong rates of growth, including our new full-file analytical sandbox called Experian Ascend, a consumer debt resolution service, new sources of data to verify income and assets and our text-for-credit service, and we expect these to gain in momentum as we move through the year. We were also delighted to be accepted by Fannie Mae to provide trended data services to the mortgage industry, commencing in January 2018. These innovations further our aim to simplify and modernise the lending process and to bring greater convenience to consumers at the point of lending, both major drivers of our industry today. Our strategy to expand in newer market segments also continues to produce results, with strong growth in health fuelled by wins with new clients in the healthcare sector and as we expand our position with existing clients.
We are transforming Consumer Services by diversifying our revenue streams and reducing our dependence on credit subscription services. Since launching in May 2017, IdentityWorks, our new identity monitoring service, has performed strongly. Paying members reached 120,000 by the end of October and we expect to generate a meaningful revenue contribution from this product during this financial year. We witnessed a spike in enrolments in the immediate aftermath of the Equifax data breach. Normalising for this event, take-up rates have been strong and, over the balance of the year, we will introduce new features to build on and sustain this momentum. Growth in IdentityWorks helped to offset ongoing moderation in our credit subscription product. Here we are enhancing the value of our offer by introducing new features to help consumers enhance their credit scores and become eligible for more credit products at better rates. We are also pleased with progress in Partner Solutions (which includes our affinity channel, data breach and CS Identity (CSID) partner relationships), where we have won several new client contracts which we expect to benefit performance as we move through the year.
Latin America
Latin America performed strongly in the half, with organic revenue growth of 7%, including growth in Brazil of 7%. We have made significant investments in our business through the recent economic downturn and we are well positioned to fully realise our potential as Brazil starts to recover economically. We have reorganised our service and delivery functions in Decision Analytics and Marketing Services to create greater value for clients through integrated products, we have invested in new innovations for small and medium enterprise clients and we have signed new long term agreements with major Brazilian banks to deliver a broad range of services and satisfy the demand to transform and enhance digital experiences for their customers. These steps are feeding into our results today and position us extremely well for the future.
We have also made considerable progress towards gaining scale in the services we offer to consumers. By the end of October 2017 over 16m people were enrolled at Serasa Consumidor. Our goal, as in our other markets, is to generate large quantities of traffic and then to engage consumers with a variety of offers. We are building on our strong brand reputation with debt resolution services (Limpa Nome) and we have seen considerable interest from consumers to better understand their Serasa Score. Over the coming months we will launch new offers at a rapid rate and will build scale in this part of the business.
We also have the potential to realise significant opportunities across the Latin America region, where we are relatively underpenetrated. And while our growth in the half was held back by reduced revenue outside Brazil, we see significant growth potential as we introduce new services and as the broader region trends towards a macroeconomic recovery.
UK and Ireland
In the UK and Ireland, organic revenue decreased by 3%, as growth in B2B was offset by a decline in Consumer Services.
Our business in the UK has unique advantages stemming from the strength of our brand, our market-leading capabilities, the breadth of our offer to clients and the scale of our distribution network. These advantages contributed to further progress across our B2B segments, which collectively grew by 3%. This included particular strength in Credit Services, where we have strengthened our market position and as we continue to secure new opportunities in the price comparison sector and in the fintech segment. We are investing in a series of growth moves to secure new sources of data, to introduce new services in the mortgage sector, and to support major financial institutions as they upgrade their underwriting infrastructure.
We have taken a number of important steps to reposition Consumer Services. We are generating scale in our free score offer, having now attracted nearly 3 million free members since launch. Our strategy to engage consumers in a variety of new offers is making good progress, and we plan to introduce additional new services to help consumers manage credit and monitor the status of their financial lives. Today, the main revenue trends show strong growth in CreditMatcher, which matches consumers to card and loan offers, offset by attrition in subscription-based credit monitoring offers. The full benefit of new services will materialise over the next several quarters and we continue to expect the rate of decline in this part of our business to moderate somewhat in the second half.
EMEA/Asia Pacific
EMEA/Asia Pacific performed strongly, with organic growth of 11%.
We are pleased with progress in EMEA/Asia Pacific which delivered high rates of growth, largely driven by wins across our Decision Analytics portfolio where we have a clear leadership position. Last year, we rationalised this part of our business to focus our efforts on a more concentrated set of large opportunities. We see a lot of white space potential, particularly in emerging markets.
Benchmark EBIT margin
We continue to deliver growth in profitability alongside organic investment and our Benchmark EBIT margin from ongoing activities was 26.5%, flat for the first half, of which 10 basis points was accounted by a positive foreign exchange translation.
Cash generation and uses of cash
Benchmark EBIT conversion into Benchmark operating cash flow was 68% (2016: 88%), principally due to the increase in organic investment on strategic initiatives and the phasing of cash flows. Our cash flows are typically second-half weighted and we therefore expect conversion of Benchmark EBIT into Benchmark operating cash flow to be around 90% for the full-year (2016: 96%). Consistent with our capital allocation strategy, use of cash was balanced between organic investment, acquisitions and returns to shareholders. Benchmark operating cash flow was US$393m, with US$187m allocated to net organic capital investment. Acquisitions and investments represented US$32m, net share repurchases amounted to US$389m and equity dividends were US$264m.
We ended the first half with net debt of US$3,403m, up US$230m, placing us at 2.2 times EBITDA by the end of the half-year and within our target leverage range of 2 to 2.5 times net debt to EBITDA.
After the half-year end, we completed a number of bolt-on acquisitions and investments totalling US$170m. These included Runpath, a UK-based fintech company which enhances our ability to aggregate Experian data with external sources of data and Clarity Inc, a leading specialised consumer credit bureau in the USA focused on providing credit histories about consumers who rely on alternative financial services products. We also secured a minority stake in BankBazaar.com, India's leading online financial marketplace.
Dividend and share repurchases
We are announcing a first interim dividend of 13.5 US cents per share, up 4% on the prior year. This dividend will be paid on 2 February 2018 to shareholders on the register at the close of business on 5 January 2018. In May, we announced an expectation to make share repurchases of US$600m during FY18. We have completed US$397m of the share repurchase programme (of which US$8m was not settled until 3 October 2017) and we expect to complete the programme over the course of the financial year.
Group financial results
Revenue by region
Six months ended Growth %
30 September
---------------------------- ------ -------- -----------------------------------------
Total Total Organic
2017 2016(1) at actual at constant at constant
US$m US$m rates rates rates
---------------------------- ------ -------- ----------- ------------- -------------
North America
Credit Services 697 652 7 7
Decision Analytics 83 77 8 8
Marketing Services 104 93 12 12
Consumer Services 374 360 4 (4)
------ -------- ----------- ------------- -------------
Total ongoing activities 1,258 1,182 6 6 4
Exited business activities - -
------ -------- ----------- ------------- -------------
Total North America 1,258 1,182
---------------------------- ------ -------- ----------- ------------- -------------
Latin America
Credit Services 340 311 4 4
Decision Analytics 28 20 35 35
Marketing Services 13 9 30 30
------ -------- ----------- ------------- -------------
Total ongoing activities 381 340 12 7 7
Exited business activities - -
------ -------- ----------- ------------- -------------
Total Latin America 381 340
---------------------------- ------ -------- ----------- ------------- -------------
UK and Ireland
Credit Services 124 122 7 5
Decision Analytics 98 101 3 3
Marketing Services 70 75 - -
Consumer Services 86 112 (18) (18)
------ -------- ----------- ------------- -------------
Total ongoing activities 378 410 (8) (2) (3)
Exited business activities - -
------ -------- ----------- ------------- -------------
Total UK and Ireland 378 410
---------------------------- ------ -------- ----------- ------------- -------------
EMEA/Asia Pacific
Credit Services 73 73 (1) (1)
Decision Analytics 79 64 25 25
Marketing Services 21 17 13 13
------ -------- ----------- ------------- -------------
Total ongoing activities 173 154 12 11 11
Exited business activities - -
------ -------- ----------- ------------- -------------
Total EMEA/Asia Pacific 173 154
---------------------------- ------ -------- ----------- ------------- -------------
Total revenue - ongoing
activities 2,190 2,086 5 5 4
Total revenue - exited
business activities - -
---------------------------- ------ -------- ----------- ------------- -------------
Revenue 2,190 2,086
---------------------------- ------ -------- ----------- ------------- -------------
1. 2016 restated for the divestment of the email/cross-channel marketing business.
See Appendix 2 (page 15) for analyses of revenue, Benchmark EBIT and Benchmark EBIT margin from ongoing activities by business segment.
Income statement, earnings and EBIT margin analysis
Six months ended 30 September Growth %
------------------------------------- --------------------------
Total Total
2017 2016(1) at actual at constant
US$m US$m rates rates
------------------------------------- -------- -------- ----------- -------------
Benchmark EBIT by geography
North America 395 377 5
Latin America 118 107 5
UK and Ireland 112 122 (3)
EMEA/Asia Pacific (14) (17) 11
-------- -------- ----------- -------------
Benchmark EBIT before Central
Activities 611 589 4
Central Activities - central
corporate costs (30) (36)
-------- -------- ----------- -------------
Benchmark EBIT from ongoing
activities 581 553 5 5
EBIT - exited business - -
activities
-------- -------- ----------- -------------
Benchmark EBIT 581 553 5 5
Net interest (40) (35)
-------- -------- ----------- -------------
Benchmark PBT 541 518 4 4
Amortisation of acquisition
intangibles (53) (51)
Acquisition and disposal
expenses (9) (10)
Financing fair value remeasurements (12) 43
Profit before tax 467 500
Group tax charge (122) (118)
Profit after tax 345 382
------------------------------------- -------- -------- ----------- -------------
Benchmark earnings
Benchmark PBT 541 518 4 4
Benchmark tax charge (145) (134)
-------- -------- ----------- -------------
Total Benchmark earnings 396 384
------------------------------------- -------- -------- ----------- -------------
For owners of Experian
plc 397 385 3 3
For non-controlling interests (1) (1)
------------------------------------- -------- -------- ----------- -------------
Benchmark EPS US43.0c US40.7c 6 5
Basic EPS US34.5c US40.6c
Weighted average number
of ordinary shares 924m 945m
------------------------------------- -------- -------- ----------- -------------
Benchmark EBIT margin -
ongoing activities
North America 31.4% 31.9%
Latin America 31.0% 31.5%
UK and Ireland 29.6% 29.8%
EMEA/Asia Pacific (8.1%) (11.0%)
------------------------------------- -------- -------- ----------- -------------
Benchmark EBIT margin 26.5% 26.5%
------------------------------------- -------- -------- ----------- -------------
1. 2016 restated for the divestment of the email/cross-channel marketing business.
See Appendix 1 (page 15) and note 5 to the condensed half-yearly financial statements for definitions of non-GAAP measures.
See Appendix 2 (page 15) for analyses of revenue, Benchmark EBIT and Benchmark EBIT margin from ongoing activities by business segment.
Business review
North America
Total revenue from ongoing activities in North America was US$1,258m, with total revenue growth of 6% and organic revenue growth of 4%. The difference relates mainly to the contribution from the acquired CSIdentity business.
Credit Services
Total and organic revenue growth was 7% with strong growth across all business units. In consumer information, we saw good growth in volumes in credit pre-qualification, origination and account management, while mortgage represented a slight headwind. Business information also showed strong momentum as a result of new product introductions and new business wins, and automotive remained stable. In health, there was further growth in new client bookings and increased share of wallet within existing clients as we cross-sell services.
Decision Analytics
Total and organic revenue was up 8%, reflecting a significant One Experian win with a major US bank. Growth reflects good demand across decisioning software, fraud prevention tools and analytics, and pipelines are also strong.
Marketing Services
Total and organic revenue increased 12%, largely driven by strong growth in targeting as we secure new client wins and make further progress in digital accounts.
Consumer Services
Total revenue growth was 4%, reflecting the acquisition of CSID, with organic revenue of (4)%. We saw growth in identity protection subscriptions, affinity partnerships and price comparison services. This was offset by further decline in the revenue from subscription based credit monitoring services.
Benchmark EBIT and EBIT margin
North America Benchmark EBIT from ongoing activities was US$395m, up 5%. The Benchmark EBIT margin from ongoing activities was 31.4%, down 50 basis points year-on-year reflecting investment in Consumer Services to support the launch of new offers.
Latin America
Total revenue from ongoing activities in Latin America was US$381m, with total and organic revenue growth of 7% at constant exchange rates.
Credit Services
At constant exchange rates, total and organic revenue growth was 4%. In Brazil, continuing growth of 5% was driven by a number of factors, including, expansion of our position with a number of the largest Brazilian banks, growth across the telecommunications and insurance segments and the introduction of enhanced services for small and medium enterprises. We also launched free services to help consumers better manage their credit, including the Serasa Score which helps to educate consumers about the benefits of positive data and improve consumer access to credit. Growth in Brazil offset a modest decline in Spanish Latin America, which is consolidating its market position after a number of years of double digit growth.
Decision Analytics
Total and organic revenue growth was 35% at constant exchange rates reflecting new contract wins and strong demand across a variety of products, including decisioning software, analytics and scoring.
Marketing Services
Total and organic revenue at constant exchange rates increased 30%. We made good progress in Marketing Services with a strong contribution from data quality services.
Benchmark EBIT and EBIT margin
Latin America Benchmark EBIT from ongoing activities was US$118m, up 5% at constant exchange rates. Benchmark EBIT margin from ongoing activities was 31.0% (2016: 31.5%) reflecting investment in new consumer offers in Brazil and the mix effect of strong growth in Decision Analytics and Marketing Services.
UK and Ireland
In the UK and Ireland, total revenue from ongoing activities was US$378m, with total and organic revenue 2% and 3% lower respectively at constant exchange rates. The difference is due to the contribution from the acquired Runpath business.
Credit Services
Total revenue at constant exchange rates increased 7% and organic revenue growth was 5%. Growth reflected increases in credit reference and background checking volumes, as well as strong demand for credit pre-qualification services across the banking, telecoms, utilities and price comparison sectors.
Decision Analytics
At constant exchange rates, both total and organic revenue increased 3%. Growth was driven by strong demand for origination software and identity verification services, partially offset by the impact of a strong one-off prior year comparative.
Marketing Services
Total and organic revenue at constant exchange rates was flat. We continue to benefit from strong take up of new digital marketing tools which use data and analytics to help clients advertise more effectively across social media and other digital platforms. Overall growth was offset by moderation in data management services.
Consumer Services
At constant exchange rates, total and organic revenue declined by 18% as we continue to execute on our strategy to diversify our sources of revenue. Revenue declined by 19% in the first quarter, improving to 17% in the second quarter. There was good progress in the affinity channel, reflecting further take up of scores-on-statements, as well as continued growth in referral fees from CreditMatcher. This was offset by attrition in subscription-based credit monitoring revenues.
Benchmark EBIT and EBIT margin
Benchmark EBIT from ongoing activities was US$112m, down 3% at constant exchange rates. Benchmark EBIT margin from ongoing activities was 29.6% (2016: 29.8%), primarily reflecting organic growth investments and the transition of the Consumer Services business.
EMEA/Asia Pacific
Total revenue from ongoing activities in EMEA/Asia Pacific was US$173m, with total and organic revenue growth of 11% at constant exchange rates.
Credit Services
Total and organic revenue at constant exchange rates was down 1%, with growth across Spain, Italy, Southeast Asia and India offset by decline in China.
Decision Analytics
At constant exchange rates total and organic revenue growth was 25%, driven mainly by significant new wins for credit decisioning and fraud prevention software, as well as for analytics.
Marketing Services
Total and organic revenue growth at constant exchange rates was 13%, with strong growth across data quality and targeting services.
Benchmark EBIT and EBIT margin
Benchmark EBIT was a loss of US$(14)m (2016: US$(17)m). Benchmark EBIT margin from ongoing activities improved 290 basis points at (8.1)% as the business gains in scale.
Group financial review
Key financials
Six months ended 30 September
2017 2016(1)
----------------------------------------- ------------ ------------
Profitability performance measures:
Benchmark EBIT US$581m US$553m
Benchmark EBIT growth at constant
currency 5% 5%
Benchmark EBIT margin 26.5% 26.5%
Benchmark profit before tax US$541m US$518m
Benchmark EPS US43.0c US40.7c
Benchmark tax rate 26.8% 25.9%
Key statutory measures
Revenue US$2,190m US$2,086m
Operating profit US$518m US$490m
Profit before tax US$467m US$500m
Effective rate of tax based on
profit before tax 26.1% 23.6%
Basic EPS US34.5c US40.6c
Other performance measures:
Benchmark operating cash flow US$393m US$487m
Cash flow conversion 68% 88%
Total investment US$219m US$558m
Net share purchases US$397m US$79m
Net debt US$3,403m US$3,278m
----------------------------------------- ------------ ------------
1. 2016 results have been re-presented to exclude discontinued operations except for growth rates, which are as previously reported.
Profitability performance measures
We have identified and defined certain non-GAAP measures, as they are the key measures used within the business to assess performance. These measures are used within this Group financial review and, unless otherwise indicated, all discussion of Revenue, Benchmark EBIT and Benchmark EBIT margin relates to ongoing activities only.
Revenue and profit performance
Over the six months ended 30 September 2017, revenue increased by US$104m. At constant currency, total revenue growth was 5%.
Over the six months ended 30 September 2017, Benchmark EBIT increased by US$28m. At constant currency, Benchmark EBIT increased by 5%. Across the first half, foreign exchange increased Benchmark EBIT margin by 10 basis points.
Net interest expense
The net interest expense for the period was US$40m (2016: US$35m). Both our interest expense and the related cash flows continue to benefit from low interest rates globally and the mix of our funding.
Other adjustments made to derive Benchmark PBT
Six months ended 30 September 2017 2016(1)
US$m US$m
----------------------------------------- ----- --------
Other adjustments made to derive
Benchmark PBT:
Amortisation of acquisition intangibles 53 51
Acquisition and disposal expenses 9 10
----------------------------------------- ----- --------
Within total operating expenses 62 61
----------------------------------------- ----- --------
Financing fair value remeasurements 12 (43)
----------------------------------------- ----- --------
Within net finance costs 12 (43)
----------------------------------------- ----- --------
Net charge for Other adjustments
made to derive Benchmark PBT 74 18
----------------------------------------- ----- --------
1. The results for the six months ended 30 September 2016 have been re-presented in respect of the email/cross-channel marketing business which has been treated as a discontinued operation.
An explanation of the reasons for the exclusion of such items from our definition of Benchmark PBT is given in note 6(a) to the condensed half-yearly financial statements.
Further information in respect of these items is given in note 9 to the condensed half-yearly financial statements.
Tax
The Benchmark tax rate was 26.8% (2016: 25.9%) reflecting our current profit and funding profile.
The total tax charge for the six months ended 30 September 2017 was US$122m and the effective tax rate was 26.1%. This is lower than the Benchmark tax rate due to the effect of tax relating to Other adjustments made to derive Benchmark PBT as set out above.
The total tax charge for the six months ended 30 September 2016 was US$118m and the effective tax rate was 23.6%. The difference to the Benchmark tax rate was also attributable to the effect of tax relating to Other adjustments made to derive Benchmark PBT.
Earnings per share ('EPS')
Basic EPS from continuing operations was 37.5 US cents (2016: 40.5 US cents). Benchmark EPS was 43.0 US cents (2016: 40.7 US cents). Further information is given in note 13 to the condensed half-yearly financial statements.
At 30 September 2017, we had 988 million ordinary shares in issue of which 74 million shares were held by employee trusts or in treasury. Accordingly, the number of shares to be used for the purposes of calculating EPS from 30 September 2017 is 914 million. Issues and purchases of shares after 30 September 2017 will result in amendments to this figure.
Seasonality
In recent years, our Benchmark EBIT performance has tended to be weighted towards the second half of the year reflecting revenue seasonality. This pattern is expected to continue during the year ending 31 March 2018.
Other performance measures
Total investment
An analysis of total investment of US$219m (2016: US$558m) is given in Appendix 5 on page 16. Investments in the half included acquisition cash flows of US$32m. In the period to 30 September 2016 we acquired CSIdentity Corporation (US$355m) and two small minority business investments (US$29m).
Net share purchases
Net share purchases were US$397m (2016: US$79m), of which $8m was not settled until 3 October 2017.
Cash flow and net debt
We generated a Benchmark operating cash flow of US$393m (2016: US$487m). Note 18 to the condensed half-yearly financial statements reconciles Cash generated from operations, as reported in the Group cash flow statement on page 21, to Benchmark operating cash flow as reported in the Cash flow and net debt summary table in Appendix 4 on page 16.
Key benchmark cash flow and net debt trends during the half included:
-- Conversion of Benchmark EBIT into Benchmark operating cash flow was 68%, lower than the prior period principally due to increased capital expenditure and the phasing of payments.
-- Net outflow for capital expenditure was US$28m (2016: US$4m) as net capital expenditure was US$187m (2016: US$166m), 9% (2016: 8%) of revenue, while amortisation and depreciation, excluding the amortisation of acquisition intangibles, were US$159m (2016: US$162m). Investment included strategic technology investments, our Experian Consumer Services' platform, new product innovations in our PowerCurve product suite and CrossCore and call centre technology.
-- An increase in working capital of US$194m (2016: US$88m). There was a US$193m (2016: US$155m) decrease in payables and a US$1m increase in (2016: US$67m decrease in) receivables. A significant proportion of our receivables are due for payment on the last day of each month, as 30 September 2017 was a Saturday, some collections fell into the second half of the year.
-- Benchmark free cash flow in the period was US$289m (2016: US$427m), with the decrease reflecting the reduction in Benchmark operating cash flow and increased tax payments of US$66m (2016: US$32m).
-- Net cash outflow from continuing operations in the period was US$20m (2016: US$229m) after acquisition and investment spend of US$32m (2016: US$392m) and Ordinary dividend payments of US$264m (2016: US$260m).
-- Cash inflow from discontinued operations was US$229m (2016: US$9m) primarily from the divestment of the email/cross-channel marketing business ('CCM').
-- Net debt was US$3,403m at 30 September 2017, an increase of US$230m from 31 March 2017.
Key statutory measures
Statutory revenue
We continued to make good progress during the period and revenue increased by 5% to US$2,190m (2016: US$2,086m). The improvement in statutory revenue reflects an improved underlying performance.
Statutory operating profit
Operating profit for the six months ended 30 September 2017 was US$518m (2016: US$490m).
Statutory Basic EPS
Basic EPS was 34.5 US cents (2016: 40.6 US cents). Basic EPS from continuing operations was 37.5 US cents (2016: 40.5 US cents) excluding the effect of the loss from discontinued operations in the six months ended 30 September 2017. The decrease in these statutory measures reflects a mix of factors with a higher tax charge, higher finance costs and a lower number of shares in issue as a consequence of our continuing share repurchase programme.
Statutory cash flow
Cash generated from operations was US$542m (2016: US$637m) reflecting movements in working capital. Undrawn committed borrowing facilities were US$2,325m at 30 September 2017, a reduction of US$50m from 31 March 2017.
Tax
The effective rate of tax based on profit before tax has increased from 23.6% in the period ended 30 September 2016 to 26.1% in the current period, driven by the profit and funding mix and an increase in expenses not deductible for tax purposes.
Balance sheet commentary
Net assets
At 30 September 2017, net assets amounted to US$2,378m (2016: US$2,490m). Capital employed, as defined in note 6(q) to the condensed half-yearly financial statements, was US$6,210m (2016: US$6,119m).
Equity
There was a decrease in equity of US$273m from US$2,651m at 31 March 2017 with movements detailed in the Group statement of changes in equity on page 20.
Key movements in equity during the half included:
-- Profit for the period of US$318m. -- Currency translation gains of US$27m. -- Remeasurement gains of US$22m in respect of defined benefit pension plans.
-- Ordinary dividends of US$264m and a movement of US$397m in connection with net share purchases.
Foreign exchange rates and sensitivity
Foreign exchange - average rates
The principal exchange rates used to translate revenue and Benchmark EBIT into the US dollar are shown in the table below.
Period ended Period ended Year ended
30 September 30 September 31 March
2017 2016 2017
----------------------- -------------- -------------- -----------
US dollar : Brazilian
real 3.19 3.38 3.30
Sterling : US dollar 1.29 1.37 1.30
Euro : US dollar 1.14 1.12 1.10
US dollar : Colombian
peso 2,949 2,970 2,969
----------------------- -------------- -------------- -----------
The impact of currency movements on revenue from ongoing activities is set out in note 7(c).
Foreign exchange - closing rates
The principal exchange rates used to translate assets and liabilities into the US dollar at the period end dates are shown are shown in the table below.
30 September 30 September 31 March
2017 2016 2017
----------------------- ------------- ------------- ---------
US dollar : Brazilian
real 3.17 3.25 3.17
Sterling : US dollar 1.34 1.30 1.25
Euro : US dollar 1.18 1.12 1.07
US dollar : Colombian
peso 2,935 2,871 2,894
----------------------- ------------- ------------- ---------
Risks
The recent Equifax data breach will increase the external risks associated with information security and has heightened legislative and regulatory activity, particularly as it relates to information security matters. Except for these matters, the principal risks and uncertainties we face in the remaining six months of the year remain largely unchanged from those explained in detail on pages 12 to 21 of our Annual Report and Group financial statements for the year ended 31 March 2017:
-- Loss or inappropriate use of data and systems; -- Failure to comply with laws and regulations; -- Non-resilient IT/business environment; -- Business conduct risk; -- Dependence on highly skilled personnel; -- Adverse and unpredictable financial markets or fiscal developments; -- New legislation or changes in regulatory environment; -- Increasing competition; -- Data ownership, access and integrity; and -- Undesirable investment outcomes.
In our most recent Annual Report, we highlighted the current status of each of the above risks, which also remain largely unchanged.
In the first half of the financial year, we note that the Equifax data breach has resulted in increased legislative and regulatory activity, and may result in increased oversight of security matters. The notoriety of the breach has also increased in the near term the external risks associated with information security. We continue to see increased consumer protection focused legislative and regulatory activity in our key markets. We are experiencing an increasing number of consumer and class actions in the US unrelated to the Equifax data breach issue. We also note uncertainty in the development of tax legislation in our key regions and the longer-term impact from the result of the European Union referendum on our UK business.
Further information on financial risk management is given in note 25 to the condensed half-yearly financial statements.
The Chief Executive Officer's, Business and Group financial reviews on pages 3 to 13 include consideration of key uncertainties affecting us for the remainder of the current financial year. There may however be additional risks unknown to us and other risks, currently believed to be immaterial, which could turn out to be material. These risks, whether they materialise individually or simultaneously, could significantly affect our business and financial results.
Going concern
Having reassessed the principal risks at the time of approving these condensed half-yearly financial statements, the directors considered it appropriate to adopt the going concern basis of accounting.
Appendices
1. Non-GAAP financial information
We have identified and defined certain measures that we believe assist understanding of our performance. These measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but we have included them as these are considered to be key measures used within the business for assessing the underlying performance of our ongoing businesses. Information on certain of our non-GAAP measures is set out below in the further appendices. Definitions of all our non-GAAP measures are given in note 6 to the condensed half-yearly financial statements.
The reconciliation of revenue from ongoing activities is set out in note 7(c) on page 27, Benchmark EBIT and Benchmark PBT in Appendix 3 on page 16 and Benchmark EPS in note 13 on page 32.
2. Revenue, Benchmark EBIT and Benchmark EBIT margin by business segment
Six months ended 30 September Growth
------------------------------
2017 2016(1) Total Organic
at constant at constant
rates rates
US$m US$m % %
------------------------------- ------ -------- ------------- -------------
Revenue
Credit Services 1,234 1,158 6 5
Decision Analytics 288 262 12 12
Marketing Services 208 194 9 9
Consumer Services 460 472 (1) (8)
------------------------------- ------ -------- ------------- -------------
Total - ongoing activities 2,190 2,086 5 4
------------------------------- ------ -------- ------------- -------------
Benchmark EBIT
Credit Services 415 387 6
Decision Analytics 39 34 20
Marketing Services 54 34 59
Consumer Services 103 134 (22)
------------------------------- ------ -------- ------------- -------------
Total business segments 611 589 4
Central Activities -
central corporate costs (30) (36)
-------------------------------
Total - ongoing activities 581 553 5
------------------------------- ------ -------- ------------- -------------
Benchmark EBIT margin
- ongoing activities
Credit Services 33.6% 33.4%
Decision Analytics 13.5% 13.0%
Marketing Services 26.0% 17.5%
Consumer Services 22.4% 28.4%
------------------------------- ------ -------- ------------- -------------
Total Benchmark EBIT
margin 26.5% 26.5%
------------------------------- ------ -------- ------------- -------------
1. The results for the six months ended 30 September 2016 have been re-presented in respect of the email/cross-channel marketing business which has been treated as a discontinued operation.
Appendices (continued)
3. Summary reconciliation of Benchmark EBIT to statutory profit before tax
Six months ended 30 September 2017 2016(1)
----------------------------------
US$m US$m
---------------------------------- ----- --------
Benchmark EBIT 581 553
Net interest expense (40) (35)
---------------------------------- ----- --------
Benchmark PBT 541 518
Other adjustments made to derive
Benchmark PBT (74) (18)
---------------------------------- -----
Profit before tax 467 500
---------------------------------- ----- --------
4. Cash flow and net debt summary
Six months ended 30 September 2017 2016(1)
---------------------------------------------
US$m US$m
--------------------------------------------- -------- --------
Benchmark EBIT 581 553
Amortisation and depreciation charged
to Benchmark EBIT 159 162
--------------------------------------------- -------- --------
Benchmark EBITDA 740 715
Net capital expenditure (187) (166)
Increase in working capital (194) (88)
Profit retained in associates 1 -
Charge for share incentive plans 33 26
--------------------------------------------- -------- --------
Benchmark operating cash flow 393 487
Net interest paid (37) (28)
Tax paid - continuing operations (66) (32)
Dividends paid to non-controlling interests (1) -
--------------------------------------------- -------- --------
Benchmark free cash flow 289 427
Acquisitions (32) (363)
Purchase of investments - (29)
Disposal of businesses - ongoing activities - (3)
Movement in other non-benchmark items (13) (1)
Ordinary dividends paid (264) (260)
--------------------------------------------- -------- --------
Net cash outflow - continuing operations (20) (229)
Net cash inflow - discontinued operations 229 9
Net debt at 1 April (3,173) (3,023)
Net share purchases (389) (79)
Foreign exchange and other movements (50) 44
--------------------------------------------- -------- --------
Net debt at 30 September (3,403) (3,278)
--------------------------------------------- -------- --------
5. Total investment
Six months ended 30 September 2017 2016(1)
-------------------------------------------
US$m US$m
------------------------------------------- ----- --------
Capital expenditure 191 171
Disposal of property, plant and equipment (4) (5)
------------------------------------------- ----- --------
Net capital expenditure 187 166
Acquisitions 32 363
Purchase of investments - 29
------------------------------------------- ----- --------
Total investment 219 558
------------------------------------------- ----- --------
1. The results for the six months ended 30 September 2016 have been re-presented in respect of the email/cross-channel marketing business which has been treated as a discontinued operation.
Condensed half-yearly financial statements
Group income statement
for the six months ended 30 September 2017
Six months ended 30 Six months ended
September 2017 30 September 2016
(Re-presented) (Note
3)
Benchmark(1) Non-benchmark(2) Statutory Benchmark(1) Non-benchmark(2) Statutory
Total Total
US$m US$m US$m US$m US$m US$m
Revenue (note
7(a)) 2,190 - 2,190 2,086 - 2,086
Total operating
expenses (note
9) (1,610) (62) (1,672) (1,535) (61) (1,596)
Operating profit/(loss) 580 (62) 518 551 (61) 490
Interest income 8 - 8 10 - 10
Finance (expense)/credit (48) (12) (60) (45) 43 (2)
------------ ---------------- --------- ------------ ---------------- ---------
Net finance (costs)/income
(note 10(a)) (40) (12) (52) (35) 43 8
Share of post-tax
profit of associates 1 - 1 2 - 2
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
Profit/(loss)
before tax (note
7(a)) 541 (74) 467 518 (18) 500
Group tax (charge)/credit
(note 11(a)) (145) 23 (122) (134) 16 (118)
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
Profit/(loss)
for the period
from continuing
operations 396 (51) 345 384 (2) 382
(Loss)/profit
for the period
from discontinued
operations (note
12) - (27) (27) - 1 1
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
Profit/(loss)
for the period 396 (78) 318 384 (1) 383
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
Attributable to:
Owners of Experian
plc 397 (78) 319 385 (1) 384
Non-controlling
interests (1) - (1) (1) - (1)
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
Profit/(loss)
for the period 396 (78) 318 384 (1) 383
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
Total Benchmark
EBIT(1) 581 - 581 553 - 553
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
US cents US cents US cents US cents US cents US cents
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
Earnings/(loss)
per share (note
13(a))
Basic 43.0 (8.5) 34.5 40.7 (0.1) 40.6
Diluted 42.6 (8.4) 34.2 40.4 (0.1) 40.3
Earnings/(loss)
per share from
continuing operations
Basic 43.0 (5.5) 37.5 40.7 (0.2) 40.5
Diluted 42.6 (5.5) 37.1 40.4 (0.2) 40.2
-------------------------- ------------ ---------------- --------- ------------ ---------------- ---------
1. Total Benchmark EBIT is a non-GAAP measure, defined in note 6 to the condensed half-yearly financial statements.
2. The loss before tax for non-benchmark items of US$74m (2016: US$18m) is analysed in note 9 to the condensed half-yearly financial statements.
The segmental disclosures in note 7 and 8 indicate the impact of business disposals on comparative revenue and Total Benchmark EBIT.
Condensed half-yearly financial statements
Group statement of comprehensive income
for the six months ended 30 September 2017
Six months ended
30 September
---------------------
2017 2016
US$m US$m
--------------------------------------- ---------- ---------
Profit for the period 318 383
---------------------------------------- ---------- ---------
Other comprehensive income:
Items that will not be reclassified
to profit or loss:
Remeasurement of post-employment
benefit assets and obligations 22 (67)
Deferred tax credit - 11
---------------------------------------- ---------- ---------
Items that will not be reclassified
to profit or loss 22 (56)
---------------------------------------- ---------- ---------
Items that may be reclassified
subsequently to profit or loss:
Fair value gain on available-for-sale
financial assets 3 1
Currency translation gains 27 32
---------------------------------------- ---------- ---------
Items that may be reclassified
subsequently to profit or loss 30 33
---------------------------------------- ---------- ---------
Items reclassified to profit or
loss:
Reclassification of cumulative 1 -
currency translation gain in respect
of divestments
--------------------------------------- ---------- ---------
Items reclassified to profit or 1 -
loss
Other comprehensive income for
the period(1) 53 (23)
Total comprehensive income for
the period 371 360
Attributable to:
Continuing operations 398 360
Discontinued operations (27) 1
---------------------------------------- ---------- ---------
Owners of Experian plc 371 361
Non-controlling interests - (1)
---------------------------------------- ---------- ---------
Total comprehensive income for
the period 371 360
---------------------------------------- ---------- ---------
1. Amounts reported within Other comprehensive income are in respect of continuing operations and, except as reported for post-employment benefit assets and obligations, there is no associated tax. Currency translation items are recognised in the translation reserve within other reserves. Other items within Other comprehensive income are recognised in retained earnings.
Condensed half-yearly financial statements
Group balance sheet
at 30 September 2017
Notes 30 September 31 March
--------------------
2017 2016 2017
US$m US$m US$m
------------------------------- ------ --------- --------- ---------
Non-current assets
Goodwill 4,305 4,501 4,245
Other intangible assets 1,467 1,518 1,461
Property, plant and equipment 323 332 329
Investments in associates 68 22 42
Deferred tax assets 57 136 83
Post-employment benefit
assets 16(a) 41 - 14
Trade and other receivables 5 6 6
Available-for-sale financial
assets 61 58 57
Other financial assets 157 71 57
------------------------------- ------ --------- --------- ---------
6,484 6,644 6,294
------------------------------- ------ --------- --------- ---------
Current assets
Inventories - 1 -
Trade and other receivables 947 853 910
Current tax assets 28 27 26
Other financial assets 8 22 20
Cash and cash equivalents 19(b) 114 144 83
------------------------------- ------ --------- --------- ---------
1,097 1,047 1,039
Assets classified as held
for sale - - 358
------------------------------- ------ --------- --------- ---------
1,097 1,047 1,397
------------------------------- ------ --------- --------- ---------
Current liabilities
Trade and other payables (957) (968) (1,109)
Borrowings 19(b) (373) (910) (759)
Current tax liabilities (166) (165) (150)
Provisions (46) (89) (50)
Other financial liabilities (19) (3) (15)
------------------------------- ------ --------- --------- ---------
(1,561) (2,135) (2,083)
Liabilities classified
as held for sale - - (58)
------------------------------- ------ --------- --------- ---------
(1,561) (2,135) (2,141)
------------------------------- ------ --------- --------- ---------
Net current liabilities (464) (1,088) (744)
------------------------------- ------ --------- --------- ---------
Total assets less current
liabilities 6,020 5,556 5,550
------------------------------- ------ --------- --------- ---------
Non-current liabilities
Trade and other payables (14) (15) (15)
Borrowings 19(b) (3,075) (2,417) (2,285)
Deferred tax liabilities (358) (363) (296)
Post-employment benefit
obligations 16(a) (56) (90) (54)
Other financial liabilities (139) (181) (249)
------------------------------- ------ --------- --------- ---------
(3,642) (3,066) (2,899)
------------------------------- ------ --------- --------- ---------
Net assets 2,378 2,490 2,651
------------------------------- ------ --------- --------- ---------
Equity
Called up share capital
Share capital 21 98 101 100
Share premium account 21 1,543 1,529 1,530
Retained earnings 18,503 18,641 18,813
Other reserves (17,776) (17,795) (17,804)
------------------------------- ------ --------- --------- ---------
Attributable to owners
of Experian plc 2,368 2,476 2,639
Non-controlling interests 10 14 12
------------------------------- ------ --------- --------- ---------
Total equity 2,378 2,490 2,651
------------------------------- ------ --------- --------- ---------
Condensed half-yearly financial statements
Group statement of changes in equity
for the six months ended 30 September 2017
Called Share Retained Other Attributable Total
up premium earnings reserves to owners equity
share account of Experian Non-controlling
capital plc interests
US$m US$m US$m US$m US$m US$m US$m
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
At 1 April 2017 100 1,530 18,813 (17,804) 2,639 12 2,651
Comprehensive
income:
Total profit/(loss)
for the period - - 319 - 319 (1) 318
Other comprehensive
income - - 25 27 52 1 53
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
Total comprehensive
income - - 344 27 371 - 371
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
Transactions
with owners:
Employee share
incentive plans:
- value of employee
services - - 33 - 33 - 33
- shares issued
on vesting - 13 - - 13 - 13
- other exercises
of share awards
and options - - (28) 38 10 - 10
- related tax
charge - - (4) - (4) - (4)
- purchase of
shares by employee
trusts - - - (37) (37) - (37)
- other payments - - (2) - (2) - (2)
Purchase and
cancellation
of own shares (2) - (372) - (374) - (374)
Transactions
in respect of
non-controlling
interests - - (17) - (17) (1) (18)
Dividends paid - - (264) - (264) (1) (265)
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
Transactions
with owners (2) 13 (654) 1 (642) (2) (644)
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
At 30 September
2017 98 1,543 18,503 (17,776) 2,368 10 2,378
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
Group statement of changes in equity
for the six months ended 30 September 2016
Called Share Retained Other Attributable Total
up premium earnings reserves to owners equity
share account of Experian Non-controlling
capital plc interests
US$m US$m US$m US$m US$m US$m US$m
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
At 1 April 2016 102 1,519 18,633 (17,830) 2,424 14 2,438
Comprehensive
income:
Total profit/(loss)
for the period - - 384 - 384 (1) 383
Other comprehensive
income - - (55) 32 (23) - (23)
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
Total comprehensive
income - - 329 32 361 (1) 360
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
Transactions
with owners:
Employee share
incentive plans:
- value of employee
services - - 26 - 26 - 26
- shares issued
on vesting - 10 - - 10 - 10
- other exercises
of share awards
and options - - (25) 31 6 - 6
- purchase of
shares by employee
trusts - - - (28) (28) - (28)
- other payments - - (2) - (2) - (2)
Purchase of
shares held
as treasury
shares (1) - (60) - (61) - (61)
Transactions
in respect of
non-controlling
interests - - - - - 1 1
Dividends paid - - (260) - (260) - (260)
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
Transactions
with owners (1) 10 (321) 3 (309) 1 (308)
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
At 30 September
2016 101 1,529 18,641 (17,795) 2,476 14 2,490
--------------------- --------- --------- ---------- ---------- ------------- ---------------- --------
Condensed half-yearly financial statements
Group cash flow statement
for the six months ended 30 September 2017
Notes Six months ended
30 September
-----------------------
2017 2016
(Re-presented)
(Note
3)
US$m US$m
------------------------------------- ------ ------ ---------------
Cash flows from operating
activities
Cash generated from operations 17(a) 542 637
Interest paid (45) (37)
Interest received 8 9
Dividends received from associates 2 2
Tax paid (66) (32)
------------------------------------- ------ ------ ---------------
Net cash inflow from operating
activities - continuing operations 441 579
Net cash (outflow)/inflow
from operating activities
- discontinued operations 12(b) (48) 17
------------------------------------- ------ ------ ---------------
Net cash inflow from operating
activities 393 596
------------------------------------- ------ ------ ---------------
Cash flows from investing
activities
Purchase of other intangible
assets 17(c) (167) (142)
Purchase of property, plant
and equipment (24) (29)
Sale of property, plant and
equipment 18 14
Acquisition of subsidiaries,
net of cash acquired 17(d) (15) (360)
Purchase of investment in
associates - (14)
Purchase of other investments - (15)
Disposal of subsidiaries -
continuing operations 23(b) - (3)
------------------------------------- ------ ------
Net cash flows used in investing
activities - continuing operations (188) (549)
Net cash flows from/(used
in) investing activities -
discontinued operations 12(b) 277 (8)
------------------------------------- ------ ------ ---------------
Net cash flows from/(used
in) investing activities 89 (557)
------------------------------------- ------ ------ ---------------
Cash flows from financing
activities
Cash inflow in respect of
shares issued 17(e) 14 10
Cash outflow in respect of
net share purchases 17(e) (403) (89)
Other payments on vesting
of share awards (2) (2)
(Payments to acquire)/receipts
for transactions with non-controlling
interests (8) 1
New borrowings 881 307
Repayment of borrowings (651) (2)
Net payments for cross currency
swaps and foreign exchange
contracts (11) (24)
Net receipts from equity swaps 1 2
Dividends paid (265) (260)
------------------------------------- ------ ------ ---------------
Net cash flows used in financing
activities (444) (57)
------------------------------------- ------ ------ ---------------
Net increase/(decrease) in
cash and cash equivalents 38 (18)
Cash and cash equivalents
at 1 April 81 151
Exchange movements on cash
and cash equivalents (6) 8
------
Cash and cash equivalents
at 30 September 17(f) 113 141
------------------------------------- ------ ------ ---------------
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
1. Corporate information
Experian plc (the 'Company'), the ultimate parent company of the Experian group of companies ('Experian' or the 'Group'), is incorporated and registered in Jersey as a public company limited by shares and is resident in Ireland. The Company's registered office is at 22 Grenville Street, St Helier, Jersey JE4 8PX. The Company's ordinary shares are traded on the London Stock Exchange's Regulated Market (Premium Listing). Experian is the leading global information services group.
2. Basis of preparation
The condensed half-yearly financial statements are prepared in accordance with International Accounting Standard ('IAS') 34 'Interim financial reporting' ('IAS 34') as adopted by the European Union (the 'EU').
The condensed half-yearly financial statements:
-- comprise the consolidated results of the Group for the six months ended 30 September 2017 and 30 September 2016;
-- were approved for issue on 14 November 2017;
-- have not been audited but have been reviewed by the Company's auditor with their report set out on page 45; and
-- do not constitute the Group's statutory financial statements but should be read in conjunction with the Group's statutory financial statements for the year ended 31 March 2017.
No significant events impacting the Group, other than those disclosed in this document, have occurred between 30 September 2017 and 14 November 2017.
The Group's statutory financial statements comprise the Annual Report and audited financial statements which are prepared in accordance with International Financial Reporting Standards ('IFRS' or 'IFRSs') as adopted by the EU. The most recent such financial statements, for the year ended 31 March 2017, were approved by the directors on 17 May 2017 and subsequently delivered to the Jersey Registrar of Companies. The auditor's report was unqualified and did not contain a statement under Article 111(2) or Article 111(5) of the Companies (Jersey) Law 1991. Copies of these financial statements are available on the Company's website, at www.experianplc.com/annualreport, and from the Company Secretary at Newenham House, Northern Cross, Malahide Road, Dublin 17, D17 AY61, Ireland.
The financial information for the year ended 31 March 2017 included in the condensed half-yearly financial statements is not the Company's statutory accounts for that financial year, but has been extracted from the Group's statutory financial statements.
As required by the UK Financial Conduct Authority Disclosure Guidance and Transparency Rules Sourcebook, these condensed financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's statutory financial statements for the year ended 31 March 2017, except for the presentation of discontinued operations as set out in note 3.
3. Comparative information
On 31 March 2017, the Group signed a definitive agreement to sell a 75% interest in the Group's email/cross-channel marketing business ('CCM') to Vector Capital, subject to customary closing conditions. This transaction completed on 31 May 2017. In accordance with IFRS 5 'Non-current assets held for sale and discontinued operations', the results and cash flows of the business for the six months ended 30 September 2016 have been reclassified as discontinued. The results of the Group's operating segments (shown within note 7(a)) and the information on business segments (shown within note 8) have been re-presented accordingly.
Except as indicated above, the financial statements have been prepared on a basis consistent with that reported for the six months ended 30 September 2016.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
4. Accounting policies, estimates and judgments
(a) Introduction
The preparation of the condensed half-yearly financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are based on management's best judgment at the date of these condensed half-yearly financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. There have been no significant changes in the bases upon which estimates have been determined, compared to those applied at 31 March 2017, and no change in estimate has had a material effect on the current period.
(b) Tax (note 11)
The tax charge recognised in the period is derived from the estimated tax rate for the full year, taking account of one-off tax charges and credits arising in the period and expected to arise in the full year and the tax effect of exceptional items and other adjustments made to derive Benchmark PBT.
(c) Goodwill
Goodwill held in the Group's balance sheet is tested annually for impairment and details of the methodology used are set out in the Group's statutory financial statements for the year ended 31 March 2017.
During the six months ended 30 September 2017 the annual tests were performed and no impairment identified.
(d) Post-employment benefits (note 16)
The Group has updated the accounting valuation of its principal defined benefit pension plan in light of changes in the key actuarial assumptions, and this is recognised in the condensed half-yearly financial statements. The actuarial assumption with the most significant impact at 30 September 2017 is the discount rate of 2.6% (2016:
2.2%). The discount rate used in the year ended 31 March 2017 was 2.5%.
5. Accounting developments
There have been no accounting standards, amendments and interpretations that are effective for the first time in respect of the Group condensed half-yearly financial statements for the six months ended 30 September 2017 and which have had a material impact on those financial statements.
At 30 September 2017 there are a number of new standards and amendments to existing standards in issue but not yet effective, including three significant standards:
-- IFRS 9 'Financial instruments'; -- IFRS 15 'Revenue from contracts with customers'; and -- IFRS 16 'Leases'.
IFRS 9 and IFRS 15 are endorsed and expected to be effective for Experian for the year ending 31 March 2019 with IFRS 16 (which is also subject to EU endorsement) expected to be effective for the year ending 31 March 2020. It is not currently practicable to quantify the effect of IFRS9 or IFRS16. The effect of IFRS15 is expected to be immaterial to Experian's balance sheet at the date of transition and for individual reporting periods.
Our assessment of the transitional impact of IFRS 15 on the Group financial statements remains ongoing. Where Experian does have accounting changes under IFRS15, we see a mix of revenue acceleration on some contracts and revenue deferral on other contracts. In combination, we expect these movements to offset each other over a full year, though on a quarterly basis the timing of delivery patterns means this may not always be the case. Experian does not expect a significant growth impact on a full year basis.
It is estimated that the total revenue recognised in any financial year would not materially change under IFRS15, compared to current accounting standards. Experian intends to adopt IFRS 15 on a partial retrospective basis and restate its results for the year ending 31 March 2018 as a prior year comparative. Experian are still evaluating the additional disclosure requirements that IFRS 15 introduces.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
5. Accounting developments (continued)
IFRS 15 is based on the principle that revenue is recognised when control of goods or services is transferred to the customer and provides a single, principles-based five-step revenue recognition model to be applied to all sales contracts. In implementing IFRS15, the anticipated effect will be in relation to certain contracts predominantly related to the Decision Analytics business segment. The contracts affected represent less than 15% of Group revenue; with the period in which in which multi-year revenue is recognised changing.
The key change for the Group under IFRS15 is the introduction of the concept of 'performance obligations' and recognising revenue when these have been met and the customer takes control. It will therefore result in fewer of our services being separated/unbundled. Experian sees the largest impacts in the following areas:
-- Software licence and delivery services will primarily be accounted for as a single performance obligation, with revenue recognised when the combined offering is delivered to the customer. Experian will see a new distinction in treatment between Experian-hosted solutions (revenue spread over the contract term) and on-premise software licence arrangements (revenue recognised on delivery completion). For these contracts we will generally see a delay in when delivery revenue is recognised compared to current accounting.
-- Batch data arrangements which include an ongoing update service will be apportioned across each delivery to the customer, rather than apportioned on Experian delivery hours.
-- Platform set-up fees across a range of business units will be recognised over the contractual life of the wider service provided to the customer, compared to the current approach of recognition as the set-up is delivered.
-- Certain costs will be deferred as Contract Assets and expensed over the period that the related revenue stream is recognised. These costs include sales commissions and labour costs directly relating to an implementation service.
There are no other new standards, amendments to existing standards or interpretations that are not yet effective that would be expected to have a material impact on the Group. The Group routinely reviews such developments and adapts its financial reporting systems as appropriate.
6. Use of non-GAAP measures in the condensed half-yearly financial statements
As detailed below, the Group has identified and defined certain measures that it believes assist understanding of Experian's performance. The measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but management has included them as they consider them to be key measures used within the business to assess the underlying performance of the Group's ongoing businesses.
(a) Benchmark profit before tax ('Benchmark PBT') (note 7(a))
Benchmark PBT is disclosed to indicate the underlying profitability of the Group's ongoing businesses. It is defined as profit before amortisation and impairment of acquisition intangibles, impairment of goodwill, acquisition and disposal expenses, adjustments to contingent consideration, exceptional items, financing fair value remeasurements, tax and discontinued operations. It includes the Group's share of continuing associates' post-tax results.
An explanation of the basis on which Experian reports exceptional items is provided below. Other adjustments made to derive Benchmark PBT are explained as follows:
-- Charges for the amortisation and impairment of acquisition intangibles are excluded from the calculation of Benchmark PBT because these charges are based on judgments about their value and economic life and bear no relation to the Group's underlying ongoing performance. Impairment of goodwill is similarly excluded.
-- Acquisition and disposal expenses (representing the incidental costs of acquisitions and disposals, one-time integration costs and other corporate transaction expenses) relating to successful, active or aborted acquisitions are excluded from the definition of Benchmark PBT as they bear no relation to the Group's underlying ongoing performance or to the performance of any acquired businesses. Adjustments to contingent consideration are similarly excluded from the calculation of Benchmark PBT.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
6. Use of non-GAAP measures in the condensed half-yearly financial statements (continued)
(a) Benchmark profit before tax ('Benchmark PBT') (continued) (note 7(a) and note 8)
-- Charges and credits for financing fair value remeasurements within finance expense in the Group income statement are excluded from the definition of Benchmark PBT. These include retranslation of intragroup funding, that element of the Group's derivatives that is ineligible for hedge accounting, together with gains and losses on put options in respect of acquisitions. Amounts recognised generally arise from market movements and accordingly bear no direct relation to the Group's underlying performance.
(b) Benchmark earnings before interest and tax ('Benchmark EBIT') and margin ('Benchmark EBIT margin') (note 7(a))
Benchmark EBIT is defined as Benchmark PBT before the net interest expense charged therein and accordingly excludes exceptional items as defined below. Benchmark EBIT margin is Benchmark EBIT from ongoing activities expressed as a percentage of revenue from ongoing activities.
(c) Benchmark earnings before interest, tax, depreciation and amortisation ('Benchmark EBITDA')
Benchmark EBITDA is defined as Benchmark EBIT before the depreciation and amortisation charged therein.
(d) Exited business activities
Exited business activities are businesses sold, closed or identified for closure during a financial year. These are treated as exited business activities for both revenue and Benchmark EBIT purposes. The results of exited business activities are disclosed separately with the results of the prior period re-presented in the segmental analyses as appropriate. This measure differs from the definition of discontinued operations set out in IFRS 5.
(e) Ongoing activities
The results of businesses trading at 30 September 2017, which are not disclosed as exited business activities, are reported as ongoing activities.
(f) Constant exchange rates
To highlight its organic performance, Experian discusses its results in terms of growth at constant exchange rates, unless otherwise stated. This represents growth calculated after translating both years' performance at the prior year's average exchange rates.
(g) Total growth (note 7(c))
This is the year-on-year change in the performance of Experian's activities at actual exchange rates. Total growth at constant exchange rates removes the translational foreign exchange effects arising on the consolidation of Experian's activities and comprises Experian's measure of performance at constant exchange rates.
(h) Organic revenue growth (note 7(c))
This is the year-on-year change in the revenue of ongoing activities, translated at constant exchange rates, excluding acquisitions until the first anniversary of their consolidation.
(i) Benchmark earnings and Total Benchmark earnings (note 13)
Benchmark earnings comprise Benchmark PBT less attributable tax and non-controlling interests. The attributable tax for this purpose excludes significant tax credits and charges arising in the year which, in view of their size or nature, are not comparable with previous years, together with tax arising on exceptional items and on other adjustments made to derive Benchmark PBT. Benchmark PBT less attributable tax is designated as Total Benchmark earnings.
(j) Benchmark earnings per share ('Benchmark EPS') (note 13(a))
Benchmark EPS comprises Benchmark earnings divided by the weighted average number of issued ordinary shares, as adjusted for own shares held.
(k) Benchmark PBT per share
Benchmark PBT per share comprises Benchmark PBT divided by the weighted average number of issued ordinary shares, as adjusted for own shares held.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
6. Use of non-GAAP measures in the condensed half-yearly financial statements (continued)
(l) Benchmark tax charge and rate (note 11(b))
The Benchmark tax charge is the tax charge applicable to Benchmark PBT. It differs from the Group tax charge by tax attributable to exceptional items and other adjustments made to derive Benchmark PBT, and exceptional tax charges. A reconciliation is provided in note 11(b) to these condensed half-yearly financial statements. The Benchmark effective rate of tax is calculated by dividing the Benchmark tax charge by Benchmark PBT.
(m) Exceptional items
The separate reporting of non-recurring exceptional items gives an indication of the Group's underlying performance. Exceptional items include those arising from the profit or loss on disposal of businesses, closure costs of major business units, costs of significant restructuring programmes and other financially significant one-off items. All other restructuring costs are charged against Benchmark EBIT, in the segments in which they are incurred.
(n) Benchmark operating and Benchmark free cash flow
Benchmark operating cash flow is Benchmark EBIT, plus amortisation, depreciation and charges in respect of share-based incentive plans, less capital expenditure net of disposal proceeds and adjusted for changes in working capital and the profit or loss retained in continuing associates. Benchmark free cash flow is derived from Benchmark operating cash flow by excluding net interest, tax paid in respect of continuing operations and dividends paid to non-controlling interests.
(o) Cash flow conversion
Cash flow conversion is Benchmark operating cash flow expressed as a percentage of Benchmark EBIT.
(p) Net debt and Net funding (note 19)
Net debt is borrowings (and the fair value of derivatives hedging borrowings) excluding accrued interest, less cash and cash equivalents and other highly liquid bank deposits with original maturities greater than three months. Net funding is borrowings (and the fair value of the effective portion of derivatives hedging borrowings) excluding accrued interest, less cash held in Group Treasury.
(q) Return on capital employed ('ROCE')
ROCE is defined as Benchmark EBIT less tax at the Benchmark rate divided by a three-point average of capital employed over the year. Capital employed is net assets less non-controlling interests, further adjusted to add or deduct the net tax liability or asset and the average capital employed in discontinued operations, and to add Net debt.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
7. Segment information
(a) Income statement
Six months ended North Latin UK EMEA/ Total Central Total
30 September 2017 America America and Asia operating Activities continuing
Ireland Pacific segments operations
US$m US$m US$m US$m US$m US$m US$m
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Revenue from external
customers 1,258 381 378 173 2,190 - 2,190
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Reconciliation
from Benchmark
EBIT to profit/
(loss) before tax
Benchmark EBIT 395 118 112 (14) 611 (30) 581
Net interest (note
10(b)) - - - - - (40) (40)
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Benchmark PBT 395 118 112 (14) 611 (70) 541
Amortisation of
acquisition intangibles (38) (10) (3) (2) (53) - (53)
Acquisition and
disposal expenses (7) - - (2) (9) - (9)
Financing fair
value remeasurements
(note 10(c)) - - - - - (12) (12)
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Profit/(loss) before
tax 350 108 109 (18) 549 (82) 467
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Six months ended North Latin UK EMEA/ Total Central Total
30 September 2016 America America and Asia operating Activities continuing
(Re-presented) Ireland Pacific segments operations
(Note 3)
US$m US$m US$m US$m US$m US$m US$m
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Revenue from external
customers 1,182 340 410 154 2,086 - 2,086
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Reconciliation
from Benchmark
EBIT to profit/
(loss) before tax
Benchmark EBIT 377 107 122 (17) 589 (36) 553
Net interest (note
10(b)) - - - - - (35) (35)
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Benchmark PBT 377 107 122 (17) 589 (71) 518
Amortisation of
acquisition intangibles (33) (12) (4) (2) (51) - (51)
Acquisition and
disposal expenses (2) - (1) (1) (4) (6) (10)
Financing fair
value remeasurements
(note 10(c)) - - - - - 43 43
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
Profit/(loss) before
tax 342 95 117 (20) 534 (34) 500
--------------------------- --------- --------- --------- --------- ----------- ------------ ------------
The results for the six months ended 30 September 2016 have been re-presented in respect of the disposal of the email/cross-channel marketing business.
A profit before tax of US$22m (2016: loss before tax of US$2m) arose in the period in respect of discontinued operations. Further information on such operations which comprise the Group's email/cross-channel marketing business in the current and prior periods and the Group's comparison shopping and lead generation businesses in the prior period is given in note 12.
Additional information by operating segment, including that on total and organic growth at constant exchange rates, is provided within pages 3 to 9.
(b) Revenue by business segment
The additional analysis of revenue from external customers provided to the chief operating decision-maker and accordingly reportable under IFRS 8 'Operating segments' is given within note 8. This is supplemented by voluntary disclosure of the profitability of groups of service lines. For ease of reference, Experian continues to use the term 'business segments' when discussing the results of groups of service lines.
(c) Reconciliation of revenue from ongoing activities
North Latin UK EMEA/ Total
America America and Asia ongoing
Ireland Pacific activities
US$m US$m US$m US$m US$m
------------------------------------ --------- --------- --------- --------- ------------
Revenue for the six months
ended 30 September 2016 1,182 340 410 154 2,086
Adjustment to constant exchange
rates - 6 (22) (2) (18)
------------------------------------- --------- --------- --------- --------- ------------
Revenue at constant rates for
the six months ended 30 September
2016 1,182 346 388 152 2,068
Organic revenue growth 45 24 (12) 17 74
Revenue from acquisitions 31 - 3 - 34
------------------------------------- --------- --------- --------- --------- ------------
Revenue at constant rates for
the six months ended 30 September
2017 1,258 370 379 169 2,176
Adjustment to actual exchange
rates - 11 (1) 4 14
Revenue for the six months
ended 30 September 2017 1,258 381 378 173 2,190
------------------------------------- --------- --------- --------- --------- ------------
Organic revenue growth at constant
rates 4% 7% (3)% 11% 4%
Revenue growth at constant
rates 6% 7% (2)% 11% 5%
------------------------------------- --------- --------- --------- --------- ------------
The above table demonstrates the application of the methodology set out in note 6 in determining organic and total revenue growth at constant exchange rates.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
8. Information on business segments (including non-GAAP disclosures)
Six months ended Credit Decision Marketing Consumer Total Central Total
30 September 2017 Services Analytics Services Services business Activities continuing
segments operations
US$m US$m US$m US$m US$m US$m US$m
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
Revenue from external
customers 1,234 288 208 460 2,190 - 2,190
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
Reconciliation from Benchmark
EBIT to
profit/(loss) before tax
Benchmark EBIT 415 39 54 103 611 (30) 581
Net interest (note
10(b)) - - - - - (40) (40)
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
Benchmark PBT 415 39 54 103 611 (70) 541
Amortisation of
acquisition
intangibles (37) (4) (2) (10) (53) - (53)
Acquisition and
disposal expenses (5) - - (4) (9) - (9)
Financing fair
value remeasurements
(note 10(c)) - - - - - (12) (12)
Profit/(loss) before
tax 373 35 52 89 549 (82) 467
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
Credit Decision Marketing Consumer Central Total
Six months ended Services Analytics Services Services Activities continuing
30 September 2016 Total operations
(Re-presented) business
(Note 3) segments
US$m US$m US$m US$m US$m US$m US$m
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
Revenue from external
customers 1,158 262 194 472 2,086 - 2,086
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
Reconciliation from Benchmark EBIT to
profit/(loss)before tax
Benchmark EBIT 387 34 34 134 589 (36) 553
Net interest (note
10(b)) - - - - - (35) (35)
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
Benchmark PBT 387 34 34 134 589 (71) 518
Amortisation of
acquisition
intangibles (38) (5) (3) (5) (51) - (51)
Acquisition and
disposal expenses (1) - - (3) (4) (6) (10)
Financing fair
value remeasurements
(note 10(c)) - - - - - 43 43
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
Profit/(loss) before
tax 348 29 31 126 534 (34) 500
----------------------- ---------- ----------- ---------- ---------- ---------- ------------ ------------
The results for the six months ended 30 September 2016 have been re-presented in respect of the email/cross-channel marketing business.
A profit before tax of US$22m (2016: loss before tax of US$2m) arose in the period in respect of discontinued operations. Further information on such operations which comprise the Group's email/cross-channel marketing business in the current and prior periods and the Group's comparison shopping and lead generation businesses in the prior period is given in note 12.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
9. Other adjustments made to derive Benchmark PBT
Six months ended
30 September
----------------------
2017 2016
(Re-presented)
(Note 3)
US$m US$m
----------------------------------------- ----- ---------------
Other adjustments made to derive
Benchmark PBT:
Amortisation of acquisition intangibles 53 51
Acquisition and disposal expenses(1) 9 10
Financing fair value remeasurements
(note 10(c)) 12 (43)
----------------------------------------- ----- ---------------
Charge for other adjustments made
to derive Benchmark PBT 74 18
----------------------------------------- ----- ---------------
Net charge for Other adjustments
made to derive Benchmark PBT 74 18
----------------------------------------- ----- ---------------
By income statement caption:
Within total operating expenses 62 61
Within operating profit 62 61
Within net finance costs 12 (43)
----------------------------------------- ----- ---------------
Net charge for Other adjustments
made to derive Benchmark PBT 74 18
----------------------------------------- ----- ---------------
1. Acquisition and disposal expenses comprise US$9m (2016: US$4m) for the incidental cost of acquisitions and US$nil (2016: US$6m) for disposals.
10. Net finance costs
(a) Net finance costs included
in Profit before tax
Six months ended
30 September
-------------------
2017 2016
US$m US$m
--------------------------------------- --------- --------
Interest income:
Bank deposits, short-term investments
and loan notes (8) (10)
Finance expense:
Interest expense 48 45
Charge/(credit) in respect of
financing fair value remeasurements
(note 10(c)) 12 (43)
---------------------------------------- --------- --------
Finance expense 60 2
---------------------------------------- --------- --------
Net finance costs/(income) included
in Profit before tax 52 (8)
---------------------------------------- --------- --------
(b) Net interest expense included
in Benchmark PBT
Six months ended
30 September
-------------------
2017 2016
US$m US$m
--------------------------------------- --------- --------
Interest income (8) (10)
Interest expense 48 45
---------------------------------------- --------- --------
Net interest expense included
in Benchmark PBT 40 35
---------------------------------------- --------- --------
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
10. Net finance costs (continued)
(c) Analysis of charge/(credit)
in respect of financing fair value
remeasurements
Six months ended
30 September
------------------------
2017 2016
US$m US$m
------------------------------------------- ----------------- -----
Foreign exchange losses/(gains)
on Brazilian real intra-Group
funding 1 (28)
Increase in the fair value of
put options 3 2
Other financing fair value losses/(gains) 8 (17)
-------------------------------------------- ----------------- -----
Charge/(credit) in respect of
financing fair value remeasurements 12 (43)
-------------------------------------------- ----------------- -----
In 2012, Brazilian real intra-Group funding was provided to Serasa in Brazil from a Group company whose functional currency was not the Brazilian real. As the funding was considered to be permanent, no foreign exchange volatility was recognised within financing fair value remeasurements in the Group income statement. In November 2014, the funding was partially repaid. The Group exchanged the repayment into US dollars and used it to repay debt. Following the partial repayment of the debt, the remaining funding was no longer regarded as permanent for the purposes of EU-IFRS and foreign exchange gains or losses on this intra group funding are recognised in the Group income statement.
11. Tax - ongoing activities
(a) Group tax charge and effective rate of tax
Six months ended 30
September
-----------------------
2017 2016
(Re-presented)
(Note 3)
US$m US$m
----------------------------- ------ ---------------
Group tax charge 122 118
Profit before tax 467 500
----------------------------- ------ ---------------
Effective rate of tax based
on Profit before tax 26.1% 23.6%
----------------------------- ------ ---------------
(b) Reconciliation of the Group tax charge to the Benchmark tax charge
Six months ended 30
September
-----------------------
2017 2016
(Re-presented)
(Note 3)
US$m US$m
--------------------------------- ------ ---------------
Group tax charge 122 118
Tax relief on other adjustments
made to derive Benchmark PBT 23 16
Benchmark tax charge 145 134
--------------------------------- ------ ---------------
Benchmark PBT 541 518
--------------------------------- ------ ---------------
Benchmark tax rate 26.8% 25.9%
--------------------------------- ------ ---------------
(c) Tax recognised in other comprehensive income
In the six months ended 30 September 2017, a deferred tax credit of US$nil (2016: US$11m) has been recognised in other comprehensive income, principally relating to remeasurement losses on defined benefit pension plans of US$67m in the prior period.
12. Discontinued operations
On 31 May 2017 Experian completed the divestment of the Group's email/cross-channel marketing business, and the results and cash flows of this business are accordingly classified as discontinued with comparative figures re-presented. Experian completed a transaction to divest its comparison shopping and historic lead generation businesses in October 2012, and their results and cash flows are classified as discontinued.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
12. Discontinued operations (continued)
(a) Results for discontinued operations
The loss for the financial year from discontinued operations of US$27m (2016: profit of US$1m) comprises a loss of US$27m (2016: profit of US$14m) in respect of the email/cross-channel marketing business. In the prior period a loss of US$13m was recognised in respect of the comparison shopping and lead generation businesses. This disposal has now been finalised with receipt of US$15m in respect of the loan note outstanding.
2017 2016
The results of the email/cross-channel
marketing business were: (Re-presented)
(Note
3)
US$m US$m
---------------------------------------------- ----- --------------
Revenue 46 150
----- --------------
Labour costs (34) (77)
Data and information technology costs (7) (13)
Depreciation and amortisation charges - (11)
Marketing and customer acquisition costs (1) (2)
Other operating charges (16) (27)
----- --------------
Total operating expenses (58) (130)
(Loss)/profit before tax (12) 20
Tax credit/(charge) 2 (6)
----------------------------------------------- ----- --------------
(Loss)/profit after tax of discontinued
operations (10) 14
Profit on disposal of discontinued operations
(note 23(a)) 34 -
Tax charge in respect of disposal (51) -
----------------------------------------------- ----- --------------
(Loss)/profit for the six months ended
30 September from discontinued operations (27) 14
----------------------------------------------- ----- --------------
Depreciation and amortisation include amortisation of acquisition intangibles of US$nil (2016: US$1m). The operating loss for the six months ended September 2017 includes certain restructuring costs and one-off costs of separation. A deferred tax credit on the disposal of US$45m was recognised in the year ended 31 March 2017.
The results of the comparison shopping
and lead generation businesses were: 2017 2016
US$m US$m
-------------------------------------------- ----- ----
Loss on disposal of discontinued operations - (22)
Tax credit in respect of disposal - 9
--------------------------------------------- ----- ----
Loss for the six months ended 30 September
from discontinued operations - (13)
--------------------------------------------- ----- ----
The loss on disposal in the prior period arose from the reduction in the carrying value of the loan note receivable issued as part of the disposal. The carrying value of US$15m was received by Experian in the six months ended 30 September 2017.
(b) Cash flows for discontinued operations 2017 2016
US$m US$m
---------------------------------------------- ----- ----
Cash (outflow)/inflow from operating
activities (48) 17
Cash flow from/(used in) investing activities 277 (8)
----------------------------------------------- ----- ----
Net cash inflow from discontinued operations 229 9
----------------------------------------------- ----- ----
The cash outflow from operating activities of US$48m (2016: inflow of US$17m) all relates to the email/cross-channel marketing business and is stated after tax paid on the income of that business of US$4m (2016: US$nil).
Cash flow from investing activities of US$277m (2016: used in investing activities US$8m) comprises an inflow of US$262m (2016: outflow of US$8m) relating to the email/cross-channel marketing business, and a cash inflow of US$15m (2016: US$nil) on the redemption of the loan note which arose on the disposal of the comparison shopping and lead generation businesses.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
13. Earnings per share disclosures
(a) Earnings per share ('EPS')
Six months ended 30 September
Basic Diluted
-------------------------- ----------------------
2017 2016 2017 2016
(Re-presented) (Re-presented)
(Note (Note
3) 3)
US cents US cents US cents US cents
--------------------------------- --------------- --------- ---------- ----------
Continuing and discontinued
operations 34.5 40.6 34.2 40.3
Add/(less): discontinued
operations loss/(profit) 3.0 (0.1) 2.9 (0.1)
--------------------------------- --------------- --------- ---------- ----------
Continuing operations 37.5 40.5 37.1 40.2
Add: other adjustments made
to derive Benchmark PBT,
net of related tax 5.5 0.2 5.5 0.2
--------------------------------- --------------- --------- ---------- ----------
Benchmark EPS (non-GAAP
measure) 43.0 40.7 42.6 40.4
--------------------------------- --------------- --------- ---------- ----------
(b) Analysis of earnings
Six months
ended 30 September
----------------------
2017 2016
(Re-presented)
(Note
3)
US$m US$m
----------
Continuing and discontinued operations
attributable to owners of Experian
plc 319 384
Add/(less): discontinued
operations loss/(profit) 27 (1)
--------------------------------- --------------- --------- ---------- ----------
Continuing operations 346 383
Add: other adjustments made to
derive Benchmark PBT, net of
related tax 51 2
-------------------------------------------------- --------- ---------- ----------
Benchmark earnings attributable
to owners of Experian plc
(non-GAAP measure) 397 385
Benchmark earnings attributable
to non-controlling interests
(non-GAAP measure) (1) (1)
--------------------------------- --------------- --------- ---------- ----------
Total benchmark earnings
(non-GAAP measure) 396 384
--------------------------------- --------------- --------- ---------- ----------
(c) Reconciliation of Total benchmark
earnings to Profit for the period
Six months
ended 30 September
----------------------
2017 2016
(Re-presented)
(Note
3)
US$m US$m
--------------------------------- --------------- --------- ---------- ----------
Total benchmark earnings
(non-GAAP measure) 396 384
(Loss)/profit from discontinued
operations (27) 1
Loss from other adjustments made to
derive Benchmark PBT, net of related
tax (51) (2)
------------------------------------------------------------- ---------- ----------
Profit for the period 318 383
--------------------------------- --------------- --------- ---------- ----------
(d) Weighted average number of
ordinary shares used
Six months
ended 30
September
---------------------
2017 2016
million million
------------------------------------- ----------- --------
Weighted average number of ordinary
shares 924 945
Add: dilutive effect of share
incentive awards, options and
share purchases 9 7
-------------------------------------- ----------- --------
Diluted weighted average number
of ordinary shares 933 952
-------------------------------------- ----------- --------
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
14. Dividends
Six months ended 30 September
----------------------------------------------
2017 2017 2016 2016
US cents US cents
per share US$m per share US$m
---------------------------- ------------ -------- ------------ --------
Amounts recognised
and paid:
Second interim - paid
in July 2017 (2016:
July) 28.50 264 27.50 260
---------------------------- ------------ -------- ------------ --------
First interim - announced 13.50 123 13.00 121
---------------------------- ------------ -------- ------------ --------
A first interim dividend of 13.50 US cents per ordinary share will be paid on 2 February 2018 to shareholders on the register at the close of business on 5 January 2018 and is not included as a liability in these condensed half-yearly financial statements. The first interim dividend for the six months ended 30 September 2016 was 13.00 US cents per ordinary share and the total dividend per ordinary share for the year ended 31 March 2017 was 41.50 US cents with a total full year cost of US$385m.
15. Capital expenditure, disposals and capital commitments
(a) Additions
During the six months ended 30 September 2017, the Group made fixed asset additions of US$191m (2016: US$179m).
(b) Disposals
Excluding any amounts in connection with the disposal of businesses, the book value of other intangible fixed assets and property, plant and equipment disposed of in the six months ended 30 September 2017 was US$4m (2016: US$5m) and the profit on disposal was US$14m (2016: US$9m).
(c) Capital commitments
At 30 September 2017, the Group had capital commitments in respect of intangible assets and property, plant and equipment for which contracts had been placed of US$32m (2016: US$30m). Capital commitments at 30 September 2017 include commitments of US$8m not expected to be incurred before 30 September 2018. Capital commitments at 30 September 2016 included commitments of US$13m not then expected to be incurred before 30 September 2017.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
16. Post-employment benefit assets and obligations - defined benefit plans
(a) Amounts recognised in the Group balance sheet
30 September
2017 2016
US$m US$m
------------------------------------------------------------------------------- ----------
Retirement benefit assets/(obligations) - funded plans:
Fair value of funded plans' assets 1,117 1,053
Present value of funded plans' obligations (1,076) (1,092)
Retirement benefit assets/(obligations) - surplus/(deficit) in funded plans 41 (39)
Retirement benefit obligations - unfunded plans:
Present value of unfunded pension obligations (51) (45)
Present value of post-retirement healthcare obligations (5) (6)
Retirement benefit obligations - unfunded plans (56) (51)
Net retirement benefit obligations (15) (90)
The net retirement benefit obligations of US$40m at 1 April 2017 comprised assets of US$14m
in respect of funded plans and obligations of US$54m in respect of unfunded plans. The retirement
benefit assets and obligations are denominated primarily in sterling.
(b) Movements in net amount recognised in the Group balance sheet
Six months
ended 30 September
2017 2016
US$m US$m
------------------------------------------------------------------------------- ----------
At 1 April (40) (29)
Charge to Group income statement within total operating expenses (5) (5)
Remeasurements recognised within other comprehensive income 22 (67)
Differences on exchange (1) 6
Contributions paid by the Group 9 5
At 30 September (15) (90)
There was a small funding deficit at the date of the 2016 full actuarial valuation of the
Experian Pension Scheme. As previously announced, the employer has agreed to pay deficit contributions
of US$4m per annum over five years from 1 April 2017. The first of these payments was made
in the six months ended 30 September 2017.
(c) Actuarial assumptions
30 September
2017 2016
% %
------------------------------------------------------------------------------- ----------
Discount rate 2.6 2.2
Inflation rate - based on the UK
Retail Prices Index (the 'RPI') 3.2 3.0
Inflation rate - based on the UK
Consumer Prices Index (the 'CPI') 2.2 2.0
Increase in salaries 3.7 3.5
Increase for pensions in payment
- element based on the RPI (where
cap is 5%) 3.0 2.8
Increase for pensions in payment
- element based on the CPI (where
cap is 3%) 1.9 1.8
Increase for pensions in payment
- element based on the CPI (where
cap is 2.5%) 1.7 1.6
Increase for pensions in deferment 2.2 2.0
Inflation in medical costs 6.2 5.9
The mortality and other demographic assumptions used at 30 September 2017 remain unchanged from those used at 31 March 2017 and disclosed in the Group's statutory financial statements for the year then ended.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
17. Notes to the Group cash flow statement
(a) Cash generated from
operations
Six months ended 30 September
2017 2016
(Re-presented)
(Note 3)
US$m US$m
------ -----------------------------
Profit before tax 467 500
Share of post-tax profit
of associates (1) (2)
Net finance costs/(income) 52 (8)
-----------------------------------------------------------------------
Operating profit 518 490
Profit on disposal of fixed
assets (14) (9)
Amortisation and depreciation(1) 212 213
Charge in respect of share
incentive plans 33 26
Increase in working capital
(note 17(b)) (194) (88)
Movement in other non-benchmark items included in working capital (13) 5
Cash generated from operations 542 637
1. Amortisation and depreciation includes amortisation of acquisition intangibles of US$53m
(2016: US$51m) which is excluded from Benchmark EBIT.
(b) Increase in working capital
Six months ended 30 September
2017 2016
(Re-presented)
(Note 3)
US$m US$m
-------------------------------------------------------------
Trade and other receivables (1) 67
Trade and other payables (193) (155)
-----------------------------------------------------------------------
Increase in working capital (194) (88)
(c) Purchase of other intangible
assets
Six months ended 30 September
2017 2016
(Re-presented)
(Note 3)
US$m US$m
-------------------------------------------------------------
Databases 95 94
Internally generated software 54 33
Internal use software 18 15
-----------------------------------------------------------------------
Purchase of other intangible
assets 167 142
-----------------------------------------------------------------------
(d) Cash outflow on acquisitions (non-GAAP measure)
Six months ended 30 September
2017 2016
US$m US$m
----------------
Purchase of subsidiaries
(note 24) 10 377
Net cash acquired with subsidiaries - (22)
Deferred consideration settled 5 5
As reported in the Group cash flow statement 15 360
Acquisition expenses paid 9 4
Payments to acquire/(receipts
for transactions with) non-controlling
interests 8 (1)
Cash outflow for acquisitions (non-GAAP measure) 32 363
----------------
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
17. Notes to the Group cash flow statement (continued)
(e) Cash outflows in respect of net share purchases (non-GAAP measure)
Notes Six months ended 30 September
2017 2016
US$m US$m
-----------------
Issue of ordinary shares (14) (10)
Purchase of shares by employee trusts 22 37 28
Purchase and cancellation of own shares 366 61
Cash outflow in respect of net share purchases (non-GAAP measure) 389 79
-----------------
As reported in the Group cash flow statement:
Cash inflow in respect of shares issued (14) (10)
Cash outflow in respect of net share purchases 403 89
389 79
-----------------
(f) Analysis of cash and cash equivalents
30 September
2017 2016
US$m US$m
Cash and cash equivalents in the Group balance sheet 114 144
Bank overdrafts (1) (3)
-------
Cash and cash equivalents - as reported in the Group cash flow statement 113 141
Cash and cash equivalents at 1 April 2017 of US$81m in the Group cash flow statement were reported net of overdrafts of US$2m. Cash and cash equivalents at 1 April 2016 of US$151m in the Group cash flow statement were reported net of overdrafts of US$5m.
18. Reconciliation of Cash generated from operations
to Benchmark operating cash flow (non-GAAP measure)
Notes Six months ended 30 September
2017 2016
(Re-presented)
(Note 3)
US$m US$m
-----------------
Cash generated from operations 17(a) 542 637
Purchase of other intangible
assets 17(c) (167) (142)
Purchase of property, plant
and equipment (24) (29)
Sale of property, plant and
equipment 18 14
Acquisition expenses paid 9 -
Cash flows in respect of other
non-benchmark items 13 5
Dividends received from associates 2 2
Benchmark operating cash flow (non-GAAP measure) 393 487
Benchmark free cash flow for the six months ended 30 September 2017 was US$289m (2016: US$427m). Cash flow conversion for the six months ended 30 September 2017 was 68% (2016: 88%).
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
19. Net debt (non-GAAP measure)
(a) Analysis by nature
30 September
2017 2016
US$m US$m
--------
Cash and cash equivalents (net of overdrafts) 113 141
Debt due within one year - bonds and notes - (599)
Debt due within one year - commercial paper (371) (302)
Debt due within one year - bank loans and finance lease obligations (1) (2)
Debt due after more than one year - bonds and notes (2,320) (1,717)
Debt due after more than one year - bank loans and finance lease obligations (701) (650)
Derivatives hedging loans and borrowings (123) (149)
(3,403) (3,278)
--------
(b) Analysis by balance sheet caption
30 September
2017 2016
US$m US$m
-------- --------
Cash and cash equivalents 114 144
Current borrowings (373) (910)
Non-current borrowings (3,075) (2,417)
Borrowings (3,448) (3,327)
Total reported in the Group balance sheet (3,334) (3,183)
Accrued interest reported within borrowings above but excluded from net debt 54 54
Derivatives reported within other financial assets included in net debt 39 21
Derivatives reported within other financial liabilities included in net debt (162) (170)
(3,403) (3,278)
--------
At 30 September 2017 the fair value of borrowings was US$3,400m (2016: US$3,421m).
(c) Movements in net debt
1 April 2017 Movements in the period ended 30 September 2017 30 September
2017
Cash flow Net share Fair value Exchange and
purchases gains/(losses) other
US$m US$m US$m US$m US$m US$m
Cash and cash
equivalents 83 425 (389) - (5) 114
Borrowings (3,044) (227) - 23 (200) (3,448)
Total reported
in the Group
balance sheet (2,961) 198 (389) 23 (205) (3,334)
Accrued interest
excluded from
net debt 20 - - - 34 54
Derivatives
hedging loans
and borrowings (232) 11 - (34) 132 (123)
(3,173) 209 (389) (11) (39) (3,403)
20. Undrawn committed bank borrowing facilities
30 September
2017 2016
US$m US$m
-------
Facilities expiring in:
One to two years 300 350
Two to three years 225 -
Three to four years 1,800 225
Four to five years - 1,800
2,325 2,375
-------
At 31 March 2017, there were undrawn committed borrowing facilities of US$2,375m.
The financial covenants in connection with the borrowing facilities generally provide that the underlying profitability of the Group must exceed three times net interest expense before financing fair value remeasurements. The Group has complied with its covenants throughout the period.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
21. Called up share capital and share premium account
Number Called up share Share premium account
of capital
shares
million US$m US$m
--------
At 1 April 2016 1,023.0 102 1,519
Shares issued under employee share incentive plans 0.7 - 10
Purchase and cancellation of own shares (3.4) (1)
---------------
At 30 September 2016 1,020.3 101 1,529
Shares issued under employee share incentive plans 0.1 - 1
Purchase and cancellation of own shares (14.8) (1) -
---------------
At 31 March 2017 1,005.6 100 1,530
Shares issued under employee share incentive plans 1.0 - 13
Purchase and cancellation of own shares (18.5) (2) -
---------------
At 30 September 2017 988.1 98 1,543
---------------
22. Own shares held
Number of Cost of shares
shares
million US$m
---------------
At 1 April 2016 77 1,240
Purchase of shares by employee trusts 1 28
Exercise of share awards and options (2) (31)
At 30 September 2016 76 1,237
Exercise of share awards and options (1) (5)
At 31 March 2017 75 1,232
Purchase of shares by employee trusts 2 37
Exercise of share awards and options (3) (38)
At 30 September 2017 74 1,231
Own shares held at 30 September 2017 include 62 million (2016: 63 million) shares held as treasury shares and 12 million (2016: 13 million) shares held in employee trusts. Own shares held at 31 March 2017 included 62 million shares held as treasury shares (1 April 2016: 63 million shares) and 13 million shares (1 April 2016: 14 million shares) held in employee trusts.
The total cost of own shares held at each balance sheet date is deducted from other reserves in the Group balance sheet.
23. Disposals
(a) Profit on disposal Disposal of the email/cross-channel marketing business: US$m Net assets disposed of - book value at date of disposal: Goodwill 216 Other intangible assets 48 Property, plant and equipment 17 Trade and other receivables 70 Deferred tax assets 2 Trade and other payables (10) Accruals and deferred income (13)
Current tax liabilities (3) Deferred tax liabilities (17) Net assets disposed of 310 Disposal proceeds: Net cash proceeds after consideration of working capital adjustments and mutual transaction costs 267 Promissory Note 75 Share of divested business 27 Transaction costs and provisions (25) Total net proceeds 344 Profit on disposal 34
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
23. Disposals (continued)
(b) Cash inflow from disposals
Disposal of the email/cross-channel marketing business:
US$m
Proceeds received in cash 267 Transaction costs (5) Net cash inflow 262
As indicated in note 12, on 31 May 2017 Experian completed the divestment of the Group's email/cross-channel marketing business.
Disposal of the comparison shopping and lead generation businesses:
US$m
Proceeds from loan note 15
As indicated in note 12, in the six months ended 30 September 2017, Experian received the remaining value of the loan note receivable in relation to the disposal of the comparison shopping and lead generation businesses.
US$m
Total Cash Inflow from Disposals 277
The cash outflow on disposal of businesses in the six months ended 30 September 2016 of US$3m relates to the disposal of the Consumer Insights business, completed in the second half of the year ended 31 March 2016.
24. Acquisitions
The Group completed a small acquisition on 4 May 2017, in connection with which provisional goodwill of US$9m was recognised based on the provisional fair value of the net assets acquired of US$3m.
25. Financial risk management
(a) Financial risk factors
The Group's activities expose it to a variety of financial risks. These are market risk, including foreign exchange risk and interest rate risk, credit risk and liquidity risk. The nature of these risks and the policies adopted by way of mitigation are unchanged from those reported in the Annual Report and Group financial statements for the year ended 31 March 2017. Full information and disclosures were contained in that document.
(b) Analysis by valuation method for items measured at fair value
(i) As at 30 September 2017
Level 1 Level 2 Level 3 Total
US$m US$m US$m US$m
Financial assets:
Derivatives used for hedging - 41 - 41
Financial assets at fair value through profit and loss - 46 - 46
Amounts reported as other financial assets - 87 - 87
Available-for-sale 40 - 21 61
40 87 21 148
Financial liabilities:
Derivatives used for hedging - 125 - 125
Financial liabilities at fair value through profit and loss - 17 15 32
- 142 15 157
Net financial assets/(liabilities) 40 (55) 6 (9)
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
25. Financial risk management (continued)
(b) Analysis by valuation method for items measured at fair value (continued)
(ii) As at 30 September 2016
Level 1 Level 2 Level 3 Total
US$m US$m US$m US$m
Financial assets:
Derivatives used for hedging - 27 - 27
Financial assets at fair value through profit and loss assets - 47 - 47
Amounts reported as other financial assets - 74 - 74
Available-for-sale 33 - 25 58
33 74 25 132
Financial liabilities:
Derivatives used for hedging - 134 - 134
Financial liabilities at fair value through profit and loss - 38 17 55
- 172 17 189
Net financial assets/(liabilities) 33 (98) 8 (57)
In accounting for items measured at fair value, Experian follows EU-IFRS including IFRS 13 'Fair value measurement'. The fair values of derivative financial instruments and other financial assets and liabilities are determined by using market data and established estimation techniques such as discounted cash flow and option valuation models. The fair value of foreign exchange contracts is based on a comparison of the contractual and period end exchange rates. The fair values of other derivative financial instruments are estimated by discounting the future cash flows to net present values using appropriate market rates prevailing at the period end. There have been no changes in valuation techniques during the period under review.
The levels used in the above tables are defined in IFRS 13 and are summarised here for completeness:
-- assets and liabilities whose valuations are based on unadjusted quoted prices in active markets for identical assets and liabilities are classified as Level 1;
-- assets and liabilities which are not traded in an active market and whose valuations are derived from available market data that is observable for the asset or liability are classified as Level 2; and
-- assets and liabilities whose valuations are derived from inputs not based on observable market data are classified as Level 3.
Level 3 items principally comprise minority shareholdings in unlisted businesses, trade investments, contingent consideration and put and call options associated with corporate transactions. The inputs used in determining valuations are a mix of earnings and asset valuations reflecting different contractual arrangements. There would be no material effect on the amounts stated from any reasonably possible change in such inputs at 30 September 2017.
There have been no transfers between levels during the current or prior period.
(c) Analysis of movements in Level 3 net financial assets/(liabilities)
(i) Six months ended 30 September 2017
Available-for-sale Contingent consideration Other Total
US$m US$m US$m US$m
At 1 April 2017 21 (2) (12) 7
Fair value losses recognised in Group income statement
(note 10(c)) - - (3) (3)
Settlement of contingent consideration - 5 - 5
Other - (3) - (3)
At 30 September 2017 21 - (15) 6
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
25. Financial risk management (continued)
(c) Analysis of movements in Level 3 net financial assets/(liabilities) (continued)
(ii) Six months ended 30 September 2016
Available-for-sale Contingent consideration Other Total
US$m US$m US$m US$m
At 1 April 2016 10 (7) (10) (7)
Purchase of investment 15 - - 15
Fair value losses recognised in Group income statement
(note 10(c)) - - (2) (2)
Settlement of contingent consideration - 5 - 5
Other - (3) - (3)
At 30 September 2016 25 (5) (12) 8
(d) Other financial assets and liabilities
Information in respect of the carrying amounts and the fair value of borrowings is included in note 19(b). There are no material differences between the carrying value of the Group's other financial assets and liabilities and their estimated fair values. The following assumptions and methods are used to estimate the fair values of financial assets and liabilities not measured at fair value:
-- the fair values of receivables, payables and cash and cash equivalents are considered to approximate to the carrying amounts;
-- the fair values of short-term borrowings are considered to approximate to the carrying amounts due to the short maturity terms of such instruments;
-- the fair value of that portion of bonds carried at amortised cost is based on quoted market prices, employing a valuation methodology falling within Level 1 of the IFRS 13 fair value hierarchy;
-- the fair values of long-term floating rate bank loans and finance lease obligations are considered to approximate to the carrying amount; and
-- the fair values of other financial assets and liabilities are calculated based on a discounted cash flow analysis, using a valuation methodology falling within Level 2 of the IFRS 13 fair value hierarchy.
(e) Carrying value of financial assets and liabilities
There have been no unusual changes in economic or business circumstances that have affected the carrying value of the Group's financial assets and liabilities at 30 September 2017.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
26. Related party transactions
The Group's related parties were disclosed in the Group's statutory financial statements for the year ended 31 March 2017. The only material change during the six months ended 30 September 2017 is the creation of an additional associate undertaking following the divestment of the email/cross-channel marketing business disclosed in note 3. As a result of this transaction the Group now owns 25% of the issued share capital of Vector CM Holdings (Cayman), L.P. ('Vector'), a partnership incorporated in Cayman Islands.
During the six months ended 30 September 2017 the Group entered into the following transactions with Vector and its subsidiaries:
Transaction amount Balance owed to Experian
To 30 September 2017 To 30 September 2016 At 30 September 2017 At 30 September 2016
US$m US$m US$m US$m
Promissory Note 75 - 75 -
Interest on Promissory
Note 2 - 2 -
Transitional Services
Arrangement ('TSA') Fees 6 - 3 -
Net amounts exchanged and
due under the TSA 10 - 13 -
93 - 93 -
The Promissory Note is due and payable to Experian on 31 May 2024 with interest also payable on this date. A Transitional Services Arrangement ('TSA') is in place between the Group and Vector to provide services to the partnership for a period of 12 months unless terminated earlier or an agreement to extend is executed. During the six months ended 30 September 2017 and until the conclusion of the TSA, Experian processes transactions on behalf of Vector. Experian receives a pre-agreed fee for the execution of the TSA and does not receive any margin on individual transactions. Details of amounts arising from the TSA are shown in the table below.
Transaction amount Balance owed to Vector
To 30 September 2017 To 30 September 2016 At 30 September 2017 At 30 September 2016
US$m US$m US$m US$m
Cash received on behalf
of Vector 29 - 5 -
Transaction amount Balance owed to Experian
To 30 September 2017 To 30 September 2016 At 30 September 2017 At 30 September 2016
US$m US$m US$m US$m
Cash paid on behalf of
Vector 39 - 18 -
27. Contingencies
(a) North America security incident
In September 2015, Experian North America suffered an unauthorised intrusion to its Decision Analytics computing environment that allowed unauthorised acquisition of certain data belonging to a client, T-Mobile USA, Inc. Experian notified the individuals who may have been affected and offered free credit monitoring and identity theft resolution services. In addition, government agencies were notified as required by law. The one-off costs to Experian of directly responding to this incident were reflected in a US$20m income statement charge in the year ended 31 March 2016.
Experian has received a number of class actions, all of which have been consolidated, and continues to work with regulators and government bodies as part of their investigations. It is currently not possible to predict the scope and effect on the Group of these various regulatory and government investigations and legal actions, including their timing and scale. In the event of unfavourable outcomes, the Group may benefit from applicable insurance recoveries.
Notes to the condensed half-yearly financial statements
for the six months ended 30 September 2017
27. Contingencies (continued)
(b) Brazil credit scores
As indicated in our 2014 Annual Report and Group financial statements, the Group had received a significant number of claims in Brazil, primarily in three states, relating to the disclosure and use of credit scores. In November 2014, The Superior Tribunal of Justice, the highest court in Brazil for such cases, determined the principal legal issues involved and ruled that the cases had no merit under Brazilian law. Whilst elements of the legal process have yet to be exhausted, the directors do not believe that the outcome of any such claims will have a materially adverse effect on the Group's financial position. However, as is inherent in legal proceedings, there is a risk of outcomes that may be unfavourable to the Group.
(c) Brazil tax
As previously indicated, Serasa S.A. has been advised that the Brazilian tax authorities are challenging the deduction for tax purposes of goodwill amortisation arising from its acquisition by Experian in 2007. In October 2016 the First Chamber or the Tax Administrative Counsel ruled in favour of Serasa S.A.'s appeal in the proceedings in respect of the tax assessment for the years 2007 to 2010. The tax authority appealed this ruling to the Superior Chamber. In August 2017 the Superior Chamber ruled in favour of Serasa S.A. and cancelled the assessment with no further right to appeal. There remains a risk that subsequent deductions will be challenged. The possibility of this resulting in a liability to the Group is believed to be remote, on the basis of the advice of external legal counsel, the recent successful case and other factors in respect of the claim.
(d) North America contractual dispute
In March 2017 Experian received an adverse ruling on a 2010 contractual dispute in Canada in respect of a software product no longer offered by the Group and damages were awarded of approximately US$30m. Experian believes it has good grounds for a favourable ruling on appeal and is vigorously defending its position. However, as is inherent in legal proceedings, there remains a risk of an outcome that may be unfavourable to the Group.
(e) Other litigation and claims
There continue to be a number of pending and threatened litigation and other claims involving the Group across all its major geographies which are being vigorously defended. The directors do not believe that the outcome of any such claims will have a materially adverse effect on the Group's financial position. However, as is inherent in legal, regulatory and administrative proceedings, there is a risk of outcomes that may be unfavourable to the Group. In the case of unfavourable outcomes, the Group may benefit from applicable insurance recoveries.
28. Events occurring after the end of the reporting period
(a) First interim dividend
Details of the first interim dividend approved by the Board on 14 November 2017 are given in note 14.
(b) Acquisitions and divestments
Clarity Services, Inc
On 6 October 2017 the Group acquired 100% of the issued share capital of Clarity Services, Inc ('Clarity'), a leading credit bureau servicing the sub-prime market, based in the United States. Clarity's products are highly complementary to Experian's and include unique credit data and insights into over 60m individuals. The acquisition reinforces Experian's position as the leading national credit bureau, striving to support 100% of US consumers. The purchase consideration was US$100m, plus contingent consideration currently valued at $6m payable over three years, and was funded from the Group's cash resources.
29. Seasonality
The Group's results are subject to certain seasonal fluctuations and effects, as described in the commentary on page 11.
30. Company website
The Company has a website which contains up-to-date information on Group activities and published financial results. The directors are responsible for the maintenance and integrity of statutory and audited information on this website. The work carried out by the auditor does not involve consideration of these matters. Jersey legislation and UK regulation governing the preparation and dissemination of financial information may differ from requirements in other jurisdictions.
Statement of directors' responsibilities
The directors are responsible for preparing the half-yearly financial report for the six months ended 30 September 2017 in accordance with applicable law, regulations and accounting standards.
The directors confirm that these condensed half-yearly financial statements have been prepared in accordance with IAS 34 'Interim financial reporting' as adopted by the EU, and that, to the best of their knowledge, the interim management report herein includes a fair review of the information required by:
(a) DTR 4.2.7R of the UK Financial Conduct Authority Disclosure Guidance and Transparency Rules Sourcebook, being an indication of important events that have occurred during the first six months of the financial year and the impact on these condensed half-yearly financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
(b) DTR 4.2.8R of the UK Financial Conduct Authority Disclosure Guidance and Transparency Rules Sourcebook, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the enterprise during that period; and any changes in the related party transactions described in the last annual report that could do so.
The names and biographical details of the directors of Experian plc as at 17 May 2017 were listed in the Group's statutory financial statements for the year ended 31 March 2017. Mike Rogers was appointed as a new independent Non-Executive Director, and as Chairman-designate of the Experian plc Remuneration Committee, on 1 July 2017. Roger Davis has notified the Company of his intention to step down as a Director of Experian plc and Chairman of the Remuneration Committee with effect from the Annual General Meeting of the Company to be held in July 2018. A list of current directors is maintained on the Company website at www.experianplc.com.
By order of the Board
Charles Brown
Company Secretary
14 November 2017
Independent review report to Experian plc
Conclusion
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2017 of the Company and its subsidiaries (together the 'Group') which comprises the Group income statement, the Group statement of comprehensive income, the Group balance sheet, the Group statement of changes in equity, the Group cash flow statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2017 is not prepared, in all material respects, in accordance with IAS 34 'Interim financial reporting' as adopted by the EU and the Disclosure Guidance and Transparency Rules Sourcebook (the 'DTR') of the UK's Financial Conduct Authority (the 'UK FCA').
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Paul Korolkiewicz
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
United Kingdom
14 November 2017
Shareholder information
Company website
A full range of investor information is available at www.experianplc.com.
Electronic shareholder communication
Shareholders may register for Share Portal, an electronic communication service provided by Link Market Services (Jersey) Limited, via the Company website at www.experianplc.com/shares. The service is free and it facilitates the use of a comprehensive range of shareholder services online.
When registering for Share Portal, shareholders can select their preferred communication method - email or post. Shareholders will receive a written notification of the availability on the Company's website of shareholder documents unless they have elected to either (i) receive such notification via email or (ii) receive paper copies of shareholder documents where such documents are available in that format.
Dividend information
Dividends for the year ending 31 March 2018
A first interim dividend in respect of the year ending 31 March 2018 of 13.50 US cents per ordinary share will be paid on 2 February 2018 to shareholders on the register at the close of business on 5 January 2018. Unless shareholders elect by 5 January 2018 to receive US dollars, their dividends will be paid in sterling at a rate per share calculated on the basis of the exchange rate from US dollars to sterling on 12 January 2018.
Income access share ('IAS') arrangements
As its ordinary shares are listed on the London Stock Exchange, the Company has a large number of UK resident shareholders. In order that shareholders may receive Experian dividends from a UK source, should they wish, the IAS arrangements have been put in place. The purpose of the IAS arrangements is to preserve the tax treatment of dividends paid to Experian shareholders in the UK, in respect of dividends paid by the Company. Shareholders who elect, or are deemed to elect, to receive their dividends via the IAS arrangements will receive their dividends from a UK source (rather than directly from the Company) for UK tax purposes.
Shareholders who hold 50,000 or fewer Experian shares on the first dividend record date after they become shareholders, unless they elect otherwise, will be deemed to have elected to receive their dividends under the IAS arrangements.
Shareholders who hold more than 50,000 shares and who wish to receive their dividends from a UK source must make an election to receive dividends via the IAS arrangements. All elections remain in force indefinitely unless revoked.
Unless shareholders have made an election to receive dividends via the IAS arrangements, or are deemed to have made such an election, dividends will be received from an Irish source and will be taxed accordingly.
Dividend Reinvestment Plan ('DRIP')
The DRIP enables those shareholders who receive their dividends under the IAS arrangements to use their cash dividends to buy more shares in the Company. Eligible shareholders, who wish to participate in the DRIP in respect of the first interim dividend for the year ending 31 March 2018 to be paid on 2 February 2018, should return a completed and signed DRIP application form, to be received by the registrars by no later than 5 January 2018. Shareholders should contact the registrars for further details.
American Depositary Receipts ('ADR')
Experian has a sponsored Level 1 ADR programme, for which Bank of New York Mellon acts as depositary. This programme is not listed on a stock exchange in the US and trades in the over-the-counter market on the OTCQX platform under the symbol EXPGY. Each ADR represents one Experian plc ordinary share. Further information can be obtained by contacting:
Shareholder Relations BNY Mellon Depositary Receipts PO Box 505000 Louisville, KY 40233-5000 USA T +1 201 680 6825 (from the US: 1-888-BNY-ADRS) E shrrelations@cpushareownerservices.com W www.mybnymdr.com Shareholder information (continued) Financial calendar First interim ex-dividend date 4 January 2018 First interim dividend record date 5 January 2018 First interim dividend exchange rate determined 12 January 2018 Trading update, third quarter 18 January 2018 First interim dividend payment date 2 February 2018 Preliminary announcement of full year results 17 May 2018 Trading update, first quarter 13 July 2018 Annual General Meeting 18 July 2018
Contact information
Corporate headquarters Experian plc Newenham House Northern Cross Malahide Road Dublin 17 D17 AY61 Ireland T +353 (0) 1 846 9100 F +353 (0) 1 846 9150 Investor relations E investors@experian.com Registered office Experian plc 22 Grenville Street St Helier Jersey JE4 8PX Channel Islands Registered number 93905 Registrars Experian Shareholder Services Link Market Services (Jersey) Limited PO Box 532 St Helier Jersey JE4 5UW Channel Islands Shareholder helpline - 0371 664 9245 (+44 800 141 2952 for calls from outside the UK) E - experian@linkregistrars.com Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the UK are charged at the applicable international rate. Lines are open between 9.00am and 5.30pm (UK time), Monday to Friday excluding public holidays in England and Wales.
Stock exchange listing information
Exchange: London Stock Exchange, Premium Main Market
Index: FTSE 100
Symbol: EXPN
This announcement has been issued through the Companies Announcement Service of
The Irish Stock Exchange
This information is provided by RNS
The company news service from the London Stock Exchange
END
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