Experian PLC

Dublin, Ireland-based Experian PLC (LON: EXPN) is a world's leading global information services company, which gathers, analyse, combines and processes data to help consumers and companies to understand and transform data into something meaningful. The company segregates its geographic operations into Latin America, North America, UK and Ireland, and EMEA/Asia Pacific. The company is a constituent of the FTSE 100 Index and is also listed on the London Stock Exchange.

On 20^th May 2020, the company will release its results for the year ending 31 March 2020.

Q3 Trading Update (for the three months ended 31^st December 2019)
The company provides a trading update for the three months ended 31^st December 2019. On a constant exchange rates basis, the total revenue growth for the third quarter of 2020 was 9%, and organic revenue growth was 7% in Q3 FY20.

Region-wise, for the continuing activities only, the total revenue growth of North America at constant and actual exchange rate both was stated at 11 per cent. Latin America showed growth of 10 per cent on actual basis and 19 per cent on constant exchange rates (CER) basis. On both AER and CER basis, UK and Ireland reported a negative increase of 3 per cent, while EMEA/Asia Pacific had negative revenue growth of 1 per cent on CER basis and negative growth of 4 per cent on AER basis.

In North America, the company reported decent growth. In spite of the impact of one-off third-party breach support revenue in the prior year. On a segment-wise basis, the Consumer Services segment reported organic revenue growth of 7 per cent, while B2B performed well with organic growth of 11 per cent.

From the Latin America market, the company has delivered a decent performance, where the total revenue growth was 19 per cent at the constant exchange rate, and the company reported that it is well-positioned to launch positive data in Brazil and is expecting commercial offers with positive data by the end of the month.

From the UK and Ireland markets, there was some disappointment, where the organic revenue at CER basis decreased by 3 per cent,though the company has made decent progress in digital services. Also, the organic revenue growth stood at 1 per cent in Consumer Services. In EMEA/Asia Pacific region, there was some disappointment, but here too Data performed decently, with an organic revenue increase of 10 per cent.

Share Price Performance

Daily Chart as at February-14-20, before the market closed (Source: Thomson Reuters)

Experian PLC shares were trading at GBX 2,821 the time of writing before the market close (at 1:23 PM GMT) on 14^th February 2020 and were up by 0.391% versus the previous day closing price. Stock 52 weeks High and Low are GBX 2,838.00/GBX 1,937.00. The group’s stock is reflecting the lower volatility as against the benchmark index based on the company’s beta of 0.94.

Conclusion
On a constant currency basis, the company continue to anticipate EBIT growth and robust progress in Benchmark EPS. For the full year 2020, the company anticipate operating cash conversion of approximately 90 per cent. The US, Brazilian and UK markets are significant contributors to the company’s revenue and a substantial change in the credit markets for these regions could reduce its financial performance and growth potential. The company might suffer increased costs or decreased revenue resulting from the modified business practices, adopting new procedures or regulatory actions resulting in liability or fines, as future regulatory changes could affect how the company collects and use consumer information for marketing, risk management and fraud detection.

From the liquidity standpoint in terms of the current ratio, the group's current ratio for the H1 FY20 period stood at 0.43, which was considerably below the industry margin of 1.36 and Debt-Equity ratio of the company stood at 1.86, whereas industry median stood at 1.01, which indicates the group is significantly highly leveraged against its peer group. Presently, the company is trading near the 52-week High, raising doubts at its upside potential at the current price level.

Based on the headwinds faced by the company, we have given a "WATCH" recommendation at the current price of GBX 2,827 (as on 14^th February 2020, before the market close at 11:35 AM GMT), while any correction with support from few catalysts needs to be evaluated at a later stage.

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