Experian plc

Hello, everybody, and welcome to our first half presentation. I'm joined as usual by Lloyd, who will run you through the financials after my initial overview. Also on the call today is Craig Boundy, our Chief Operating Officer, and Craig will join us for the Q&A segment of the call. So let's kick off with the financial highlights from H1. We started the year well with good growth in revenue and benchmark earnings per share. Q2 organic growth was 5%, which took us to 5% for the half. and this compared to the 4% to 5% range we expected for Q2. Total revenue growth at constant exchange rates was also 5%. We've continued to grow well despite the market backdrop. This is due to the strength of our competitive position, the diversity of our portfolio, growth contributions from new products, new verticals, new business wins, and favored client and sector exposures. All regions delivered positively, with B2B growth at 4% and consumer services growth at 6%. North America has been resilient. Latin America, again, performed very well, up double digits and a half. The UK delivered growth overall, but had a good performance in B2B Bureau, and we're pleased with the EMEA and Asia Pacific performance, which is on a much improved trajectory. EBIT progression and a half was 6%, both at constant and actual FX. and constant currency margin was up 20 basis points. When FX is factored in, it was stable. The external environment has developed much as we anticipated at the start of the year. Our full year guidance was set with the current market context in mind. We expect the second half of the year to look much like the first and to land the year in line with our previous expectations. If we turn to the first half highlights, In the U.S., credit conditions are tight, but we haven't seen any material change. Some parts of the market are doing better than others. Tier 1 lenders remain very resilient. We have a strong presence in this segment, and our revenues in this segment grew overall during the half. Other clients, FinTech, for example, are seeing tougher conditions, although this is a broad category, and even within that, we see a wide divergence in activity. The balance of our exposure with excellent clients and product diversity combined with products that continue to see strong growth has meant that our performance has been stable, notwithstanding overall tightening credit conditions and softness in origination volumes. Ascend continues to drive growth across our product portfolio. We've expanded our position in employer services and verifications, and we've seen growth due to the shift to digital in areas like auto, targeting, and health. Consumer services also delivered growth in the back of strong membership and partner solutions performance, which offset marketplace. UK credit trends have been pressured, and overall credit issuance is down. Despite this, our UK B2B business has performed very well, and in particular, our credit business, where we continue our strong run of client wins. In Brazil, we saw strong growth against a fairly modest economic backdrop, New client wins, strong growth in positive data scores and attributes, expansion of our position analytics, and strong growth in power curve all contributed to growth, and we also delivered a very strong performance in consumer services. And we've made a lot of progress in EMEA Asia Pacific with both revenue and margin trajectory showing significant improvement. We continue to make important strategic improvements. We've added to our data assets in most jurisdictions, and this has made a material difference in markets like the UK, for example. We continue to make good progress across decisioning and analytics. PowerCurve has been a strong contributor this half, and the Ascend platform now has over 500 clients globally and with close to half a billion dollars of total contract value. We'll build on this with the continued expansion of our product suite, and this year we've introduced Ascend Fraud and Ascend Model Builder. Work continues to integrate all of our major product platforms, and this will lead to expanded opportunities with clients looking to streamline operations, save costs, and improve decision making. Verifications in the US added to its record count, and we had many new employer services client wins, and we've also started to include consumer permissioned data sets. We continue to make great progress in consumer services, and while growth in the house was driven by subscriptions in North America in particular, We've taken additional important steps to evolve our business and leverage synergies between our B2B and B2C businesses. In this half, we introduced Experian Spark Money, a unique new checking account. Experian Activate you've heard us talk about before. It's linked directly to the Ascend platform. It exposes deeper analytics so that lenders can perform better on our credit marketplace and target audiences more effectively. And its adoption is one of the reasons that Marketplace has outperformed relatively in this credit environment. Insurance has also made very good progress and we've growing confidence that a digital aggregator model will emerge in the US. We continue to invest towards the achievement of our strategic goals and it stands us very well in times like these. It all builds towards the strategic vision we've outlined before. On the B2B side, we aim to bring products to market that are unmatched in our industry, built on superior data, and combining the breadth of our capabilities with advanced technology to solve more customer needs. And this has extended our commercial position and expanded our revenue opportunities. We are investing to integrate all of our major product platforms into one integrated solution. And this will enhance our opportunities in credit, fraud, and identity by taking a more holistic, integrated view of operational processes underpinning client decisions. Ascend Ops, shown at the center of this graphic, is a new capability and it's a critical component of this. It connects the analytical environment and the production environment. The successful execution of this strategy will expand our relationships and embed our capabilities further so the clients are able to consume multiple services easier, faster, and at lower cost. Data flows through all of our platforms so that as demand grows, so too does the demand for data. It also means that clients can consolidate the number of vendors that they have to cover the entire model life cycles. And while it's early days for send-ups, we've seen good traction so far. In consumer services, 178 million free members means we now have distribution platforms at scale. We've started to widen the range of services we offer and address substantial new adjacent markets, like insurance in the US and payments in Brazil. We also expect to aggregate and scale new data sets through a value exchange, which helps our members to save time and money. And there are many ways we can help both our B2B clients and consumers, and this interplay is a central feature of our strategy. So let's now turn to the H1 regional performance, starting with North America, where organic revenue growth was 4%. Core CI and BI grew by 2% when mortgage was excluded. This is a resilient performance, and we continue to navigate the environment well. Credit tightening has happened, as we expect it to, but performance across market segments is not uniform. Ascend performed well and is a great example of how we have built products that continue to grow, notwithstanding the underlying credit market conditions. For example, in H1, we implemented Ascend marketing with a major client. The revenues for this have started to flow and should build in H2. It's been a great win for us, enabled by the combination of capabilities across multiple business units, particularly our credit business units and our targeting business units. Areas like clarity are another example. It also delivered well on the half. Customers in this segment continue to lend and have started to adopt machine learning and AI-based solutions, and we've introduced new analytics and model-building products to support them. Added to this is the progress we've made in income and employment verifications. where we are on track to deliver US revenues in the region of over $190 million this financial year. The expanded record count has led to client wins for Experian Verify. Taken together, these investments across our CI, BI, and decisioning activities have mitigated the effects of current credit conditions. Targeting, auto, and health all delivered strong rates of growth. In auto, new vehicle sales have continued to rise Consumers continue to spend and there is inventory oversupply. Clients have returned to active marketing as they look for buyers as inventory is building. And our growth has come from both the marketing and credit product lines. Newer products like Experian Marketing Engine have seen good growth as a result. At the heart of our targeting business is digital identity, which is central to audience targeting and campaign measurement in connected TV. We've made very good progress in digital, which has offset ongoing weakness in retail channels, some of which is linked to the current environment. Health has continued to perform well. Our growth was broad-based across the portfolio, reflecting mostly new business wins and volume expansion across patient access, collections, and digital front door. We continue to see strong industry trends around reducing costs, enhancing revenue capture, and improving patient experiences. And this is what continues to drive growth in our product seat. And we're excited about the potential to continue to scale our investments in these areas. Consumer services in North America delivered organic revenue growth of 4%, and our free member base is now at 67 million. We've added new value into premium through features like Bill Fixer, which helps people to save money on their household bills, and is built into the premium offer. Adding value in this way has helped sustain strong growth and premium revenues, and we have a healthy new product roadmap to sustain this. Partner Solutions also had a very good first half. We've had good client wins, and for example, a large tier one financial institution will soon move their embedded program over to Experian. Credit marketplace was soft, but we've outperformed relatively, and more lenders have adopted Experian Activate, because it helps consumers to improve their approval odds for credit, drives up conversion rates, and improves our share of available credit supply. We also reached a key milestone for our insurance marketplace where we recently launched the first direct carrier to our agency model. This will substantially increase insurance offer availability and enhance the consumer experience. And we're very excited to have launched Experian Smart Money. It's a new Experian digital checking account which helps people to build credit without going into debt and so will bring new consumers into the financial system. It will also help to drive engagement and bring new consumer permission data assets to Experian. And while it's still early days, we're very encouraged with the initial adoption rate. So to summarize, we've progressed a lot in consumer services and we're very excited about the opportunities ahead of us. Moving to Latin America, which is going to have another very strong year, both in Brazil and Spanish Latin America. H1 organic revenue growth was 11%, and margins again moved forward, helped by margin expansion in consumer services. Brazil has significant structural growth potential, and the shape of our business is clearly evolving. On the B2B side, growth has come from several areas. Examples include new positive data scores and attributes, growth in software platforms and analytics, and new capabilities, for example, in our agri-finance vertical. Software platforms, particularly PowerCurve, was really strong in this house, in part because we increasingly sell these as part of an integrated data fraud and credit decision product. And we've seen great success with these integrated solutions on the back of our expansion of our fraud capabilities in recent years. The expanded breadth of our capabilities has opened up new spend pools with existing clients and expanded our addressable market. New to market products like Ascend and others will enhance this position further. And just as exciting is the development of consumer services, which delivered growth of 32% in the half, helped by a strong contribution from Limp Anomo. We've built our consumer platform primarily organically, but lately we've added inorganic investments, and we are already one of the biggest platforms for consumer financial needs in Brazil. eWallet brings together payment capabilities where our 84 million members can consolidate their monthly bills and pay them in one go, which drives greater engagement, and we have substantial room for further growth. Also worth noting is the early traction we have in consumer permission data. Over 1 million consumers have contributed data to SRASA to improve their scores, and we have significant potential to scale this further. We used this slide recently in a presentation that we gave at a Barclays conference, and it bears repeating here because it summarizes our position well. And it encapsulates how we have extended our market lead and the excellent progress we've made. So for example, we have a very broad product portfolio with high client recognition. We've successfully shifted the strategic position of the business from being primarily a supplier of data to a trusted partner supplying critical solutions across the customer lifecycle. We're recognized as one of the most innovative companies in Brazil and one of the best companies to work for. Our consumer app reaches an audience comparable to or ahead of leading consumer financial brands, and we are a top of mind brand significantly ahead of our industry peers. We built on these strong foundations strategically through the addition of world-class B2B products and massive consumer audience that we've established. The UK delivered organic revenue growth of 1% The picture here, particularly in B2B, is worth highlighting, as there is a big disconnect in the correlation between our revenue performance and credit volume trends in the market, particularly in our CI business line. And this is primarily driven by new business wins across financial services, public sector, and telco. It's a very good example of our strategy working. We also have a strong program of new product releases, and these, combined with the investments that we've made to add to our data superiority, provide us with the confidence that we can continue to outperform the market. Several leading UK banks are now in proof of concept with income verification, and we've seen good growth in areas like financial crime. These are either completely new or relatively new focus areas for us, so we expect these to add to our growth opportunities. In consumer services, credit supply is still constrained, which did affect our performance. Premium subscriptions have, however, started to stabilize, helped by the new credit lock feature. We will introduce a series of new features in coming months to enhance the consumer experience and add more personalized features, and we fully expect this part of the business to accrue to our growth in the future. Progress in EMEA Asia Pacific has been very good, with some very good performances across key geographies. Australia is one to call out. It's sustained strong performances over several years. Italy, India also delivered strong performance, but we really saw good results across the whole region. We have many new initiatives in the region which have helped, and new product contributions have started to increase as a proportion of revenues. Examples include new scores and attributes, improvements to our power growth suite, which helps to deliver a very good performance and decisioning in this half. We also intend to expand SEND products in key markets and coming ones, which will add to the opportunities that we have here. So it's been very good progress in EMEA Asia Pacific. We have more to do to sustain this, but we're very encouraged by the early signs. And with that, I'm going to hand over to Lloyd for the financials.

Thanks, Brian, and good morning, everyone. As you've seen from Brian, we achieved strong strategic progress in the first half, delivering financial results in line with our expectations. Organic revenue growth in Q2 was good and consistent with Q1 at 5%, taking us to 5% organic and total revenue growth for the half. With FX at 1% tailwind, growth at actual rates was 6%. We delivered good benchmark EBIT growth of 6% at both constant and actual rates. EBIT margins were up 20 basis points at constant FX rates and in line with the prior year at actual rates. EBIT growth translated to EPS growth of 8% at both constant and actual rates, thanks to strong discipline in managing our interest rate fixing program and some tax phasing. Operating cash flow conversion was 77%, whilst return on capital employed increased strongly to 16.8%, up from 15.8% for the same period last year. We ended the half in a strong financial position with net debt to EBITDA leveraged at 1.8 times. And we announced a first interim dividend of 18 cents per share, up 6% on the prior year. So turning now to the regional growths for the quarter, North America sustained 4% of revenue growth in the second quarter, taking growth to 4% for the half. Within the Bureau, excluding mortgage, growth was 2% in line with Q1. Underlying credit trends were consistent with the first quarter overall and remained tight, continuing the trends we've seen for the last year. The diversity of our client mix supported growth as broad-based relationships from our larger banking clients offset pockets of weakness in more subprime-focused lenders. Our low-income lending proposition, Clarity Services, continued to grow well in a period of tighter mainstream lending supply, and Verifications and Employer Services had another great quarter of progress, with new client wins and, as records hit, 52 million. With another great year of progress underway, we expect our verification and employer services business to deliver revenue this year of over $190 million, which is growth of around 20% for the year as a whole. Our market-leading Ascend suite continues to expand and achieve another quarter of double-digit growth, as Ascend Ops and additional modules gain traction in the market. Mortgage revenue was down 3% in Q2 on volume, down 30%. The difference between revenue and volume growth representing the FICO pricing benefit we've mentioned previously. And we expect mortgage revenue to remain modestly down in the second half. Q2 saw continued strong growth in automotive as new vehicle sales continued to rise and inventory supply recovery led to increasing marketing activity. In targeting, growth in Q2 of 5% reflected slow growth across our retail channels, and growth across other digital channels continued to perform well, particularly within digital activation and identity management. Health delivered another good quarter, with growth across all key product lines and against a relatively stronger quarter in the prior year. Decision analytics delivered consistent growth of 3% for the half, reflecting phasing of client activity in the current and prior years. North America consumer services delivered 5% growth in Q2, and our subscription business again demonstrated its strong counter-cyclical nature, strengthening to grow 9% in the quarter and 7% for the half. Marketplace reflected tighter credit supply, which reduced lending availability to consumers, and matching capabilities within Experian Activate helped navigate tighter lending availability as clients have been able to reach their target consumers more accurately. Latin America continues to grow well, up 10% for the quarter. Positive data continues to provide strong underlying structural growth trends. And within the quarter, as usual, there was some deal phasing within the Bureau, with a number of deals signed early in Q3. Consumer services in Latin America continue to scale very positively in Q2, with another great performance from Olympanomi debt renegotiation platform. a growing contribution from premium subscription services, and rapid growth across our Pagoblos payment platforms. The UK and Ireland region growth improved in Q2, up 2% organically. Growth in the Bureau improved to 6% in the second quarter, as we continued to win sizable new business deals, and there was strong demand for affordability products. Growth in decision analytics stepped up in Q2, following good growth within our identity and fraud propositions. Consumer services declined 5% in Q2. The tightening of lending criteria and reduction in product in market was reflected in marketplace, which declined 10% in the half. Our EMEA and Asia Pacific business again performed well, delivering another quarter of 8% organic growth. We made good progress through the year, particularly in the decisioning segment, where we grew 25% in the second quarter, following a number of deals across a number of markets. Our performance across the Bureau in Southern Europe and India also contributed to growth. Turning now to EBIT margin, as you can see from the chart, we delivered in line with our EBIT margin guidance with plus 20 basis points of expansion, a constant currency, and stable at actual rates. We continue to invest in our strategic priorities with the expansion and rollout of Ascend propositions and the development of Ascend Ops. as well as investing in our employee services and verification proposition in both North America and the UK&I. We also launched the experience Smart Money within North America Consumer Services and further developed our marketplace insurance proposition through the addition of new providers. As a reminder, we also continue to deliver our global technology transformation within our normal financial metrics. Turning now to EPS, where we delivered growth of 8% on an actual and constant FX basis. We delivered 6% benchmark EBIT growth from continuing operations. Our interest expense increased modestly to $68 million, despite the large increase in market rates, thanks to our forward rate fixing program, meaning that the average interest rate on net debt was broadly stable at around 3%. And the tax rate was 25.1%, lower than the prior year due to phasing, and we continue to expect the tax rate to be within the 26% to 27% range for the full year. Taking a look at our usual reconciliation to statutory results, our benchmark profit before tax grew 6% at constant rates and 6% at actual rates, driven by good revenue growth delivery and modest margin expansion. Acquisition-related expenses fell 8 million. The increase in fair value Contingent consideration payable on prior acquisitions was $24 million, and this was again driven by our employer services and verification business in North America, reflecting its continuing strong performance. We incurred no restriction-relating costs in the period. The prior year charge related to the restructuring activities in EMEA and Asia Pacific. Statute of PBT before non-cash items was up 18%. Amortization of acquisition intangibles was broadly flat at $95 million. And there were no impairment charges in the period, the prior year charge being related to the EMEA business. The credit on non-cash financing remeasurements was driven principally by further gains on interest rate hedging. And that all leads to statutory profit before tax of $763 million. As you've seen, we've continued to be disciplined with our capital allocation. And as you can see from the top chart, over the past five years, our net debt has been stable. And we ended the half with net debt to EBITDA of 1.8 times, which is below our long-term guidance of 2 to 2.5 times. We've tightly managed our interest costs, fixing large portions of our net debt at low interest rates, which has kept our average rate at around 3%. And over half our current debt is fixed for the next six years. And our interest guidance remains unchanged for the year at $125 to $130 million, broadly in line with FY23. Turning now to cash flow, nominal cash flow for the half was $711 million with conversion at 77%. As you can see from the top chart here, historically, if you exclude the pandemic periods, our cash flow is in line with our history and weighted to the second half due to the timing of payments related to employee incentives. Our guidance on cash flow for the full year remains unchanged, and we expect to be over 90% conversion. As we signal back in May, our return on capital employed is very strong, at 16.8%, the highest in the last five years, and reflecting our disciplined approach to capital management. So turning now to FY24 modeling considerations, which relate to our ongoing activities. We've again delivered on our financial guidance in the half despite a variable economic backdrop. And accordingly, all areas of our guidance remain unchanged. As a reminder, we expect 4% to 6% organic revenue growth for the full year. We expect to deliver modest margin progression at constant currency. We continue to expect FX to add between 0% and 1% to both revenue and EBIT growth. We expect net interest for the year to be between $125 and $130 million. Benchmark tax rate is expected to be between 26% and 27%, reflecting changes in the UK corporation tax rate. The weighted average number of shares is expected to be in the region of $914 million for the year. And CapEx is expected to be around 9% of revenue, with cash flow conversion to be over 90%. And we have a share buyback program of up to $150 million to be completed by June 2024. With that, I'll hand you back to Brian. Well, thanks, Lloyd.

So in closing, it's been a very positive start to H1 with good revenue and earnings progression. Over a number of years, we've invested to diversify and innovate in our business to position ourselves in higher value opportunities. This has strengthened our portfolio and mixed exposures. Even compared to previous downturns, we are less correlated with credit origination volumes than historically. Our strategy is working, and we have grown and grown shares as a result. And we'll continue to address the market opportunities through our mix of superior data, unique products, breadth of capability, and through extraction of synergies across B2B and B2C. And this, plus our balance sheet strength, puts us in a very strong position as we look ahead. So in spite of the testing environment, we expect to have a good year and a year in line with our previous guidance. Now with that, I'm gonna now hand you back to the operator and we'll move to your questions for which we will be joined by Craig Bandy. Operator, over to you.