Experian, the global credit rating group, is feeling the benefit of economic recovery. The FTSE 100 company expects organic revenue growth of 15 to 20 per cent in the three months to the end of June as its new financial year gets off to a “strong start”.
Dublin-based Experian also showed its resilience in the year to the end of March, with revenue increasing 7 per cent to $5.37 billion and pre-tax profit climbing 14 per cent to $1.08 billion. The company kept its full-year dividend unchanged from last year at 47 cents per share and said it would buy back $150 million of shares.
Amid the financial uncertainty caused by the pandemic, US consumers signed up to Experian’s free and subscription credit score services to improve their standing with lenders.
The company’s consumer services include Experian Boost, which broadens the range of information taken into account to calculate a customer’s creditworthiness, to include regular payments such as council tax and subscription services. Boost, which was introduced to the UK in March this year, has 6.7 million users worldwide. Experian’s business services division in North America grew too, as interest rate cuts spurred homeowners to refinance mortgages.
Growing revenues in the Americas, which combined to account for 77 per cent of revenue, offset declines in the UK and Ireland, where organic revenue shrank by 6 per cent during the year, although the division returned to growth in the final quarter. In Experian’s smallest division, covering the rest of Europe plus the Middle East, Africa and Asia Pacific, organic revenue fell by 14 per cent.
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Tempus recommended buying Experian shares in July last year, when it became clear that the company had not been hit as hard by the pandemic as expected, despite fewer consumers seeking loans and the freeze in the UK housing market during the first lockdown. The shares were trading at £28.35 at that time, and rallied to £31.71 in November, higher than their pre-pandemic peak.
However, since then, the shares have been through a series of falls, declining to £22.73 in March over concern that they looked expensive, particularly while uncertainty about the lending market remains as central bank and government support for economies is phased out.
Tempus still believes in Experian. It is the world’s biggest credit data company, with 17,800 staff across 44 countries. It calculates consumer credit scores and sells the information to banks, credit card companies, and retailers. It also sells software and data analytics.
To keep hold of its customers, Experian has to continually invest in its data and technology to ensure it is helping lenders and consumers. This puts it in a strong position as more companies capture the data generated by an increasing number of digital transactions and seek to use it for profit.
Technology is also changing the way banks and other lenders do business with customers — products such as Boost, for example, are made possible by the Open Banking regime, which lets bank customers give permission to outside companies to access their banking records.
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Analysts at UBS said the full-year results and outlook “should reassure after a slight pullback”. They rate the shares a “buy” and have a 12-month price target on the shares of £34.
Tempus rates the shares a “hold” rather than a “buy”, because even the positive outlook for the first quarter, and Experian’s forecast of 7 to 9 per cent organic revenue growth for the full year, failed to warm up investor sentiment towards the shares yesterday. They fell 50p, or 1.9 per cent, to £25.80.
ADVICE Hold
BUY The market for credit data is solid but good news is priced in
Mitchells & Butlers
Mitchells & Butlers, the owner of more than 1,700 pubs including the All Bar One, Harvester and Vintage Inns chains, reported results for the half-year covering Britain’s second and third lockdowns. With pubs open for only 14 weeks of the period, M&B shows just how tough it has been for the industry.
Revenue in the 28 weeks to April 10 fell 79 per cent to £219 million and the company reported a pre-tax loss of £200 million.
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With uncertainty hanging over the planned full reopening of pubs and restaurants on June 21 as a result of the new Indian variant, the company said it was “not meaningful to provide any forward guidance”. However, it expects to return to profitable trading and cash generation once all restrictions are lifted. In the five weeks of outdoor-only opening in England after April 12, sales were 37 per cent lower than their total sales pre-pandemic.
Analysts at Jefferies welcomed the numbers, saying M&B had the potential to “gain material market share on reopening, with a well-invested, well-located, food-oriented pub estate”. The analysts have a 400p price target on the shares. However, the pandemic is not the only uncertainty facing M&B shareholders. In February, with pubs closed and the company still spending £35 million to £40 million a month, M&B had to shore up its balance sheet by raising £351 million from shareholders. The cash call was underwritten by the company’s three largest shareholders, who, at the same time, consolidated their stakes to create a new entity, Odyzean, with a 55 per cent stake in the company.
The move was approved by the Takeover Panel, yet under normal circumstances, a group acquiring control of a company with more than 30 per cent of its voting rights would be required to make a takeover offer to other shareholders. This led analysts at Peel Hunt to comment at the time that the move left M&B “vulnerable to going private under a ‘low-ball offer’ in the future.”
In December, Tempus rated the shares “avoid”. They have had a strong run since then, climbing 41 per cent since the start of 2021, but it’s not the time to start buying.
ADVICE Avoid
WHY Full pub reopening is in doubt and ownership structure is unusual
