REG - Experian plc - Preliminary Results for year ended 31st March 2015 <Origin Href="QuoteRef">EXPN.L</Origin> - Part 4
15/07/2015 17:06
- Part 4: For the preceding part double click ID:nRSL8460Mc
145 208
17. Reconciliation of Cash generated from operations to Operating cash flow (non-GAAP measure)
Notes 2015 2014
US$m US$m
Cash generated from operations 16(a) 1,720 1,641
Acquisition expenses paid 1 8
Purchase of other intangible assets (316) (319)
Purchase of property, plant and equipment (64) (83)
Sale of property, plant and equipment 2 8
Dividends received from associates 4 1
Cash outflow in respect of restructuring programme 16(c) 12 65
Operating cash flow (non-GAAP measure) 1,359 1,321
1,321
Free cash flow for the year ended 31 March 2015 was US$1,135m (2014: US$1,067m). Cash flow conversion for the year ended 31
March 2015 was 104% (2014: 101%).
Notes to the financial statements (continued)
for the year ended 31 March 2015
18. Net debt (non-GAAP measure)
(a) Analysis by nature
2015 2014
US$m US$m
Cash and cash equivalents (net of overdrafts) 145 208
Debt due within one year - bank loans (100) -
Debt due within one year - commercial paper (40) (576)
Debt due within one year - finance lease obligations (4) (4)
Debt due after more than one year - bonds and notes (2,456) (2,743)
Debt due after more than one year - bank loans and finance lease obligations (673) (823)
Derivatives hedging loans and borrowings (89) 129
(3,217) (3,809)
(b) Analysis by balance sheet caption
2015 2014
US$m US$m
Cash and cash equivalents 147 212
Current borrowings (146) (584)
Non-current borrowings (3,146) (3,576)
Total reported in the Group balance sheet (3,145) (3,948)
Accrued interest reported within borrowings above but excluded from Net debt 17 10
Derivatives reported within financial assets 16 135
Derivatives reported within financial liabilities (105) (6)
(3,217) (3,809)
(c) Analysis of movements in Net debt
1 April 2014 Movements in the year ended 31 March 2015 31 March 2015
Net cash inflow Net share purchases Fair value gains/(losses) Exchange and other
US$m US$m US$m US$m US$m US$m
Cash and cash equivalents 212 183 (192) - (56) 147
Borrowings (4,160) 534 - (44) 378 (3,292)
Total reported in the Group balance sheet (3,948) 717 (192) (44) 322 (3,145)
Accrued interest 10 7 - - - 17
Derivatives hedging loans and borrowings 129 - - 53 (271) (89)
(3,809) 724 (192) 9 51 (3,217)
51
(3,217)
19. Undrawn committed bank borrowing facilities
2015 2014
US$m US$m
Facilities expiring in:
Less than one year 60 -
One to two years - 2,216
Four to five years 2,025 -
2,085 2,216
Notes to the financial statements (continued)
for the year ended 31 March 2015
20. Called up share capital and share premium account
Number of shares Called up sharecapital Share premiumaccount
million US$m US$m
At 1 April 2013 1,030.1 102 1,480
Shares issued under employee share incentive plans 1.5 1 12
At 31 March 2014 1,031.6 103 1,492
Shares issued under employee share incentive plans 1.2 - 14
At 31 March 2015 1,032.8 103 1,506
103
1,506
21. Own shares held
Number of shares Cost of shares
million US$m
At 1 April 2013 42 565
Purchase of shares held as treasury shares 11 203
Purchase of shares by employee trusts 7 126
Exercise of share options and awards (6) (85)
At 31 March 2014 54 809
Purchase of shares held as treasury shares 10 170
Purchase of shares by employee trusts 2 38
Exercise of share options and awards (7) (112)
At 31 March 2015 59 905
At 31 March 2015
59
905
Own shares held at 31 March 2015 include 46 million shares held as treasury shares and 13 million shares held by employee
trusts. Own shares held at 31 March 2014 include 38 million shares held as treasury shares and 16 million shares held by
employee trusts. The total cost of own shares held at 31 March 2015 of US$905m (2014: US$809m) is deducted from other
reserves in the Group balance sheet.
Notes to the financial statements (continued)
for the year ended 31 March 2015
22. Acquisitions
(a) Acquisitions in the year
The Group made three individually immaterial acquisitions, in connection with which provisional goodwill of US$53m was
recognised, based on the fair value of the net assets acquired of US$23m. Net assets acquired, goodwill and acquisition
consideration are analysed below.
US$m
Intangible assets:
Customer and other relationships 13
Software development 12
Marketing related assets 1
Intangible assets 26
Trade and other receivables 3
Cash and cash equivalents 3
Trade and other payables (4)
Deferred tax liabilities (5)
Total identifiable net assets 23
Goodwill 53
Total 76
Satisfied by:
Cash 61
Fair value of equity interest held prior to business combination 12
Recognition of non-controlling interest 1
Deferred and contingent consideration 2
Total 76
These provisional fair values contain amounts which will be finalised no later than one year after the dates of
acquisition. Provisional amounts have been included at 31 March 2015, as a consequence of the timing and complexity of the
acquisitions. Goodwill represents the synergies, assembled workforces and future growth potential of the businesses. The
goodwill arising of US$53m is not currently deductible for tax purposes.
The contingent consideration arrangement requires payments to the former owners of an acquired company based on the
achievement of revenue targets. Payments are due at the end of each of the first three years following acquisition and the
potential amount that the Group could be required to make under this arrangement is between US$nil and US$13m. The fair
value of this consideration has been estimated by applying the income approach and during the year an increase of US$7m has
been recognised in the Group income statement based on latest forecasts of business performance. This is a Level 3 fair
value measurement as defined under IFRS. There have been no other material gains, losses, error corrections or other
adjustments recognised in the year that relate to current year acquisitions.
(b) Additional information
(i) Current year acquisitions
US$m
Increase in book value from fair value adjustments:
Intangible assets 26
Other assets and liabilities (5)
Increase in book value from fair value adjustments 21
Gross contractual amounts receivable in respect of trade and other receivables 3
Revenue from 1 April 2014 to dates of acquisition 2
Revenue from dates of acquisition to 31 March 2015 11
Loss before tax from dates of acquisition to 31 March 2015 6
At the dates of acquisition, the gross contractual amounts receivable in respect of trade and other receivables of US$3m
were expected to be collected in full.
It has been impracticable to estimate the impact on Group profit before tax had the acquired entities been owned from 1
April 2014, as their accounting policies and period end dates did not accord with those of the Group prior to their
acquisition.
Notes to the financial statements (continued)
for the year ended 31 March 2015
22. Acquisitions (continued)
(ii) For prior year acquisitions
There was a cash outflow of US$1,223m reported in the Group cash flow statement in the year ended 31 March 2014, after a
deduction of US$13m for net cash acquired with subsidiaries. There was deferred consideration of US$1m settled in that
year. These cash flows principally related to the acquisitions of Passport Health Communications, Inc. and The 41st
Parameter, Inc.
Other than a reduction to goodwill of US$14m on the determination of a deferred tax balance, there have been no material
gains, losses, error corrections or other adjustments recognised in the year ended 31 March 2015 that relate to
acquisitions in prior years.
23. Contingencies
(a) Brazilian credit scores
As indicated in our 2014 annual report and 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.
(b) Tax
As previously indicated, Serasa 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. 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 and other factors in
respect of the claim.
In addition, in the normal course of business, the Group has a number of open tax returns with various tax authorities with
whom we are in active dialogue. Liabilities relating to these open and judgmental matters are based on an assessment as to
whether additional taxes will be due, after taking into account external advice where appropriate.
(c) 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.
24. Events occurring after the end of the reporting period
Details of the second interim dividend announced since the end of the reporting period are given in note 13(a).
25. 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 auditors does not involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the preliminary announcement since it was initially presented on
the website. Jersey legislation and UK regulation governing the preparation and dissemination of financial information may
differ from requirements in other jurisdictions.
Notes to the financial statements (continued)
for the year ended 31 March 2015
26. Risks and uncertainties
Experian is an innovation-driven, global business. Risk management is central to how we operate, enabling us to create
value and deliver returns to shareholders. It operates at all levels throughout our organisation, across regions, global
businesses and operational support functions. Our approach to risk management encourages clear decision making about which
risks we take and how we manage them, based on an understanding of their potential strategic, commercial, financial,
compliance, legal and reputational implications.
Our risk management framework provides a structured and consistent process for identifying, assessing, responding to and
reporting risks. It enables management to demonstrate a responsible and proactive embedded approach to risk management. In
doing so, the Board's main functions are supported by identifying and managing risk, in line with our strategic objectives,
risk appetite, corporate responsibility strategy and the long-term drivers of our business.
2015 risk assessment
Our businesses and strategy expose the Group to a number of inherent risks. The Board has carefully considered the type and
extent of the significant risks it is willing to take, so the Group can achieve its strategic objectives and deliver a
satisfactory return to shareholders.
Over time, the Group's risk profile evolves. As a result, we have updated the principal risks to reflect the Board's view
of the most important risks currently facing the Group. We have added a new risk in respect of business conduct risk and
expanded our discussion of risks associated with ineffective business execution and adverse and unpredictable financial
markets. We have also updated the descriptions for other risks.
Long-term performance risks
Throughout the year, we have critically reviewed and evaluated the risks Experian faces. This section outlines our
assessment of the most significant risks and uncertainties that could affect our long-term performance. The list is not
exhaustive and it is likely to change during the year, as some risks assume greater importance and others become less
significant.
(a) Risk area - loss or inappropriate use of data
What is the risk?
· We may experience cyber attacks on us, our partners or third-party contractors
· We may suffer other breaches of security or lost, misappropriated or misused data
How would the risk impact our business?
· Losing or misusing data could result in material loss of business, substantial legal liability, regulatory
enforcement actions or significant harm to our reputation
How do we manage the risk?
· We have a number of defensive and proactive practices across the Group, based on our global security policies
· A programme of continuous measurement and alerting helps ensure that we quickly highlight areas of risk in our
business practices and manage them accordingly
· Our enterprise risk management framework works to create transparency across layers of management and seeks to
ensure we have appropriate oversight of data security, privacy and protection
Notes to the financial statements (continued)
for the year ended 31 March 2015
26. Risks and uncertainties (continued)
(b) Risk area - new legislation or regulatory and enforcement changes
What is the risk?
· New laws, changes to existing regulations or heightened regulatory scrutiny could affect how we operate our
business, including how we collect and use consumer information for marketing, risk management and fraud detection, and for
serving Experian Consumer Services' clients, or how we are able to market or offer these services to clients or consumers
How would the risk impact our business?
· We may suffer increased costs or reduced revenue resulting from modified business practices, adopting new
procedures, self-regulation or paying fines
· We may face brand damage or an adverse market reaction as a result of non-compliance with privacy laws
How do we manage the risk?
· We educate lawmakers, regulators, consumer and privacy advocates, industry trade groups, our clients and other
stakeholders in the public policy debate
· Our global compliance team has region-specific regulatory expertise and works with our businesses to identify and
adopt balanced compliance strategies. This is complemented by executing our Seven Elements of Compliance Programme that
directs the structure, documentation, tools and training requirements to support manager compliance on an ongoing basis
(c) Risk area - material regulatory enforcement actions and adverse litigation claims
What is the risk?
· Litigation and regulatory actions may result from our business operations under privacy, permissible purpose,
consumer protection or other laws or regulations including in the form of class actions
How would the risk impact our business?
· An adverse outcome in a claim could result in civil or criminal penalties, as well as negative publicity that harms
our reputation
How do we manage the risk?
· We vigorously defend all pending and threatened claims, employing internal and external counsel to effectively
manage and dispose of proceedings
· We analyse the causes of claims, to identify any potential changes we need to make to our business processes and
policies
· We maintain insurance coverage, where feasible and appropriate, and following a review during the year increased our
coverage levels
Notes to the financial statements (continued)
for the year ended 31 March 2015
26. Risks and uncertainties (continued)
(d) Risk area - increasing competition
What is the risk?
· New or existing competitors may develop products and services that are superior to ours, or achieve greater market
acceptance
· New or existing competitors may be able to sell products at lower prices than ours by accepting lower margins or
because they benefit from proprietary ownership of data, technological superiority or economies of scale
How would the risk impact our business?
· Price reductions may reduce our margins, market share and results of operations, and harm our ability to obtain new
clients or retain existing ones
· We might be unable to support changes in the way our businesses and clients use and purchase information, affecting
our operating results
How do we manage the risk?
· We are committed to continued research and investment in new data sources, people, technology and products, to
support our strategic plan
· We carry out detailed competitive and market analyses
· We continue to develop new products that leverage our scale and allow us to deploy capabilities into new and
existing markets and geographies
· We use rigorous processes to identify and select our development investments, so we can effectively introduce new
products and services to the market
(e) Risk area - data ownership, access and integrity
What is the risk?
· How we collect, aggregate, analyse and use consumer and client information could be changed or restricted, based on
consumer privacy and data accuracy concerns
· Our data providers could be unable to provide their data to us, withdraw the data or impose a different fee
structure for using the data
How would the risk impact our business?
· Our ability to provide products and services to our clients could be affected, leading to a materially adverse
effect on our business, reputation and operating results
How do we manage the risk?
· We monitor legislative and regulatory initiatives, and educate lawmakers, regulators, consumer and privacy
advocates, industry trade groups, clients and other stakeholders in the public policy debate
· We use standardised selection, negotiation and contracting of provider agreements, to address delivery assurance,
reliability and protections relating to critical service provider relationships
· Our legal contracts define how we can use data and provide services
· We analyse data to make sure we receive the best value and highest quality
Notes to the financial statements (continued)
for the year ended 31 March 2015
26. Risks and uncertainties (continued)
(f) Risk area - dependency on highly skilled personnel
What is the risk?
· We may be unable to attract, motivate or retain key talent, or to hire and retain personnel at reasonable
compensation levels
· Our competitors may offer more attractive employment terms and seek to hire our highly talented personnel
How would the risk impact our business?
· Not having the right people could materially affect our ability to service our clients and grow our business
How do we manage the risk?
· In every region, we have ongoing recruitment, personal and career development and talent identification and
development programmes
· We carry out our Global People Survey approximately every 18 to 24 months and act on the feedback
· We offer competitive compensation and benefits and review them regularly
· We actively monitor attrition rates, with a focus on individuals designated as high talent or in strategically
important roles
(g) Risk area - non-resilient or non-agile IT environment
What is the risk?
· Advances in technology may result in rapidly changing consumer and client preferences for products, services and
delivery formats that we may not be able to support
· Our systems, personnel and operations could be exposed to damage, interruption and pandemic outbreaks
How would the risk impact our business?
· If we cannot quickly adapt our products, services or delivery formats to the way our businesses and clients use and
purchase information, it could result in material loss of business or increased costs
· Any significant failure or interruption could have a materially adverse effect on our business, financial
performance, financial condition or reputation
How do we manage the risk?
· We identify and select technology investments that support enhancements to our existing products and services and
the introduction of new ones
· We maintain a sufficient level of redundant operations to cover a loss of personnel or a system failure
· We ensure strict standards, procedures and training programmes for physical security
· We have business continuity plans and incident management programmes, and seek to ensure these plans develop as the
business and technology environment change
· We duplicate information in our databases and run back-up data centres
Notes to the financial statements (continued)
for the year ended 31 March 2015
26. Risks and uncertainties (continued)
(h) Risk area - ineffective business execution
What is the risk?
· We may be unable to effectively execute our key business strategies, which are designed to maintain our leading
positions in most of our markets, or to improve performance in some areas where growth has moderated because of cyclical
headwinds or changing market dynamics
· Entering into new strategic partnerships or acquiring new businesses may not produce the desired financial or
operating results
How would the risk impact our business?
· Failure to successfully implement our key business strategies could have a materially adverse effect on our ability
to achieve our revenue or growth targets
· Poorly executed business acquisitions or partnerships could result in material loss of business, increased costs,
reduced revenue, substantial legal liability, regulatory enforcement actions or significant harm to our reputation
How do we manage the risk?
· We comprehensively review our business activities and formulate strategic plans, including rationalisation where
necessary, that address both the opportunities and challenges of the next five years. As a result, we sometimes withdraw
from low-growth or low-return markets
· We rigorously assess all acquisitions and partnerships, using both in-house experts and professional advisers
· We conduct extensive post-acquisition and organic investment reviews, to ensure performance remains consistent with
the business plan
(i) Risk area - adverse and unpredictable business and financial markets
What is the risk?
· Exposure to adverse market conditions triggered by global, regional or country-level economic or social events
· The Group is subject to evolving and complex tax laws and interpretations which may be subject to significant
change. This may lead to increased effective tax rates in future and uncertainty in the application of these laws may also
result in different outcomes to the amounts provided
· We present our financial statements in US dollars. However, we transact business in a number of currencies. Changes
in the US dollar relative to our other currencies could impact our financial results
How would the risk impact our business?
· Economic slowdown in our markets could result in sluggish demand for our products and services, affecting our
operations and profitability
· Net income could be reduced and tax payments increased as a result of settlement of historic tax positions or
increases in our effective tax rates
· We benefit from the strengthening of currencies relative to the US dollar and are adversely affected by the
weakening of currencies relative to it
How do we manage the risk?
· We have a diverse portfolio by geography, product, sector and client
· We have counter-cyclical products and services
· We enter into forward foreign exchange contracts to protect the US dollar value of certain assets and for certain
future commercial transactions
· We convert cash balances which accumulate in foreign currencies into US dollars
· We retain internal and external tax professionals, who regularly monitor developments in international tax and
assess the impact of changes and differing outcomes
Notes to the financial statements (continued)
for the year ended 31 March 2015
26. Risks and uncertainties (continued)
(j) Risk area - business conduct risk
What is the risk?
· Inappropriate execution of our business strategies or activities could adversely affect our clients, consumers or
counterparties
How would the risk impact our business?
· Clients could receive the wrong products or not have access to the right products, resulting in material loss of
business, substantial legal liability, regulatory enforcement actions or significant harm to our reputation
How do we manage the risk?
· We have a Global Code of Conduct and Anti-Corruption and Gifts and Hospitality policies, which ensure our people
understand the behaviours we expect from them
· In the USA, we continue to update our operating standards to ensure we place consumers at the heart of what we do
· In the UK, we continue to develop our definition and standard of conduct risk, within the context of the Financial
Conduct Authority's ('FCA') definition. This involves building out and embedding a new framework for conduct risk
management in preparation for possible FCA examinations.
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the financial statements are prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit
or loss of the Company and the Group taken as a whole; and the management report includes a fair review of the development
and performance of the business and the position of the Company and the Group taken as a whole, and a description of the
principal risks and uncertainties that they face is included in note 26.
The names and functions of the directors in office as at 6 May 2014 were listed in the Experian annual report 2014. A
number of changes to the board had been announced by that date and these have now taken effect. Accordingly in the period
from 6 May 2014 to the date of this report:
· Sir John Peace stood down as Chairman and retired as a director after the conclusion of the 2014 Annual General
Meeting on 16 July 2014.
· Don Robert, formerly Chief Executive Officer, was appointed as Chairman with effect from 16 July 2014.
· Brian Cassin, formerly Chief Financial Officer, was appointed as Chief Executive Officer with effect from 16 July
2014.
· Chris Callero stood down as President and Chief Operating Officer and retired as a director after the conclusion of
the 2014 Annual General Meeting on 16 July 2014.
· Kerry Williams was appointed as Chief Operating Officer and as a director with effect from 16 July 2014.
· Sir Alan Rudge stood down as Deputy Chairman/Senior Independent Director and retired as a director after the
conclusion of the 2014 Annual General Meeting on 16 July 2014.
· George Rose, a non-executive director, was appointed Deputy Chairman/Senior Independent Director with effect from 16
July 2014.
· Lloyd Pitchford was appointed as Chief Financial Officer and as a director with effect from 1 October 2014.
A list of current directors is maintained on the Company website at www.experianplc.com.
By order of the Board
Charles Brown
Company Secretary
11 May 2015
This information is provided by RNS
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