Experian Group Ltd (LON:EXPN), the marketing and credit reference company, used to be part of Great Universal Stores (GUS) and is the first stock that ever made me real money. But it was demerged in 2006, and is now a FTSE 100 company - as is Home Retail Group, its renamed former owner. Though Home Retail Group Plc has higher revenues, Experian Group Ltd has higher profits - and nearly three times higher market capitalisation.
While Experian is best known for its credit reference business, it's a much broader based business than that makes it look. For instance in 2007, it bought Hitwise, one of the major internet measurement companies, and it has a huge position in marketing services, particularly online. It's also involved in decision analytics (which support companies' marketing efforts) and in interactive, for instance with the PriceGrabber website.
The interim results show that credit services, with USD 802m revenue, and a 33.8% margin, remain the major source of earnings [1] . Both decision analytics (USD 211m revenue, 27% ebit margin) and interactive (USD 503m revenue, 22.1% margin) also contribute strongly. Marketing services, on the other hand, looks underpowered - though it has USD 341m revenues, its ebit margin at 9.4% is by far the weakest in the group, as its traditional media markets have been extremely weak, though online is doing much better.
The first half results came in ahead of consensus estimates [2] , but this appears mainly to have been the result of management action to slash costs. Margins were maintained, though revenues were down 7 percent. A weak market for credit origination, with fewer loans being applied for, meant fewer credit checks were used, preventing any significant growth in the major business.
However, the company's free cash flow remains impressive, and borrowings were reduced in the period. The subsequent q3 trading update shows a return to revenue growth - albeit only 1% organic. Pricing has remained stable to a few percent down, rather than being savaged, and Latin America in particular has put in a strong performance.
Experian certainly has a number of good points. It's a strongly international business, with over half its revenues coming from North America, and only about 20% in the UK and Ireland…
