Experian Regulatory News (EXPN)

news release

Half-yearly financial report

7am, 17 November 2020 ─ Experian plc, the global information services company, today issues its half-yearly financial report for the six months ended 30 September 2020.

Brian Cassin, Chief Executive Officer, commented:

"Against the backdrop of the global pandemic we delivered a resilient performance in H1, with organic revenue growth of 2% and modest progress in constant currency EBIT. Q2 organic revenue growth was 5%, at the top end of our guidance range. The drivers of growth stemmed largely from North America and Brazil which offset COVID-19 related declines in other territories. The stand out performance across the Group was Consumer Services, where we now have nearly 100m free consumer memberships. For Q3 we expect organic revenue growth in the range of 3% to 5%.

"While COVID-19 has significantly impacted the macroeconomic environment, it has also catalysed trends which play to Experian's strengths. Innovation is our bedrock and has driven success for us in the marketplace. Once the crisis abates, we believe we will be strongly positioned to take advantage of the secular growth trends and we are excited by the opportunities we see ahead."

1 See Appendix 3 (page 14) and note 5 to the interim financial statements (pages 23-25) for definitions of non-GAAP measures.

2 Organic revenue growth at constant currency.

3 See page 14 for reconciliation of Benchmark EBIT to Profit before tax.

Resilient first-half financial performance

Contacts

Experian

Nadia Ridout-Jamieson Investor queries +44 (0)20 3042 4278

Gerry Tschopp Media queries

Finsbury

Rollo Head +44 (0)7768 994 987 

Jenny Davey +44 (0)7901 513 610

There will be a presentation today at 9.30am (UK time) to analysts and investors via conference call. To view the slides and listen in online please go to www.experianplc.com for the link.

Experian will update on third quarter trading for FY21 on 19 January 2021.

Roundings

Certain financial data has been rounded within this announcement. As a result of this rounding, the totals of data presented may vary slightly from the actual arithmetic totals of such data.

Forward looking statements

Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements. See page 13 for further information on risks and uncertainties facing Experian.

Company website

Neither the content of the Company's website, nor the content of any website accessible from hyperlinks on the Company's website (or any other website), is incorporated into, or forms part of, this announcement.

About Experian

Experian is the world's leading global information services company. During life's big moments - from buying a home or a car, to sending a child to college, to growing a business by connecting with new customers - we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organisations to prevent identity fraud and crime.

We have 17,800 people operating across 45 countries and every day we're investing in new technologies, talented people and innovation to help all our clients maximise every opportunity. We are listed on the London Stock Exchange (EXPN) and are a constituent of the FTSE 100 Index.

Learn more at www.experianplc.com or visit our global content hub at our global news blog for the latest news and insights from the Group. 

Part 1 - Chief Executive Officer's review

Experian made positive progress in the first half even as the COVID-19 pandemic posed significant challenges to people, clients and the world economy. We delivered organic revenue growth of 2% for the half, which included a (2)% decline in Q1 and a rebound to growth of 5% in Q2. Q2 growth was at the top end of our guidance range. Positive drivers of performance stemmed largely from North America and Brazil while our other regions remained in negative territory. We also benefitted from growth in revenues from countercyclical activities and as the strategic decisions and investments we have made over the years pay-off, notably those in Consumer Services.

Half year financial highlights

· Revenue growth of 3% at constant currency and organic revenue growth of 2%. At actual exchange rates revenue growth was flat.

· Organic revenue growth in North America was 7% and 5% in Latin America, including very strong contributions from Consumer Services. The UK and Ireland and EMEA/Asia Pacific regions were impacted negatively, down (12)% and (18)% respectively.

· B2B organic revenue decline of (2)% as strength in North America Data and Decisioning was offset by declines elsewhere.

· Growth in Consumer Services was very strong, with organic revenue up 13%, driven by North America and Brazil.

· Growth in Benchmark EBIT was 1% at constant exchange rates, down (3)% at actual exchange rates after significant currency translation headwinds.

· Organic cost growth was 2%, in line with our guidance range. This reflected higher volume-variable costs, marketing investment and ongoing investment in labour and other costs to support innovation and technology modernisation.

· Our Benchmark EBIT margin was 26.1%, down 70bps at constant currency and down 80bps at actual exchange rates.

· We delivered growth in Benchmark earnings per share of 2% at constant exchange rates and (2)% at actual exchange rates.

· EBIT conversion into cash was strong, with a conversion rate of Benchmark EBIT into Benchmark operating cash flow of 89%.

· We ended the first half in the lower half of our leverage range at 2.2x, compared to our target of 2.0-2.5x for Net debt to Benchmark EBITDA.

B2B declined modestly overall, recovering as the half progressed:

· Organic revenue for Data was flat in the first half, as growth in North America offset declines in other regions. Strength in US mortgage volumes, Experian Ascend and relative resilience in automotive helped to offset weaker conditions for unsecured credit origination and marketing expenditure by clients.

· We signed new Ascend clients around the world. Ascend is now live in nine countries and the cumulative total contract value for Ascend has reached US$347m.

· We made progress towards rolling out positive data products in Brazil. We have launched 15 positive data products and attributes, with plans to launch 29 more by calendar year end.

· Decisioning organic revenue was down (6)% in the first half mainly as customers delayed decisions on large credit decisioning software implementations. Healthcare delivered modest growth in the half.

· Strategically we made good progress in cloud-based decisioning (Experian One), and fraud and identity management, with growth in pipeline and bookings.

We made significant progress in Consumer Services, with mid-teens organic revenue growth:

· We now have 96m consumer free memberships, up 26m year-on-year. We have 35.8m free members in the USA, 51.8m in Brazil and 8.5m in the UK.

· North America delivered organic revenue growth of 13% as we invest behind the success of Experian Boost, build our membership base and expand across new verticals. Experian Boost now has 4.9m unique account connections.

· Performance in Latin America has been outstanding, and revenue was up 156% organically, with strong growth in Limpa Nome and credit matching services.

· Consumer Services in the UK had a tough start due to reductions in lending volumes. We saw some stabilisation of performance of subscription revenues in Q2 and we launched Experian Boost in the UK in early November.

Environment, Social and Governance

· Transforming financial lives is at the core of our ESG strategy. From 2013 to 2020 we helped more than 14 million people renegotiate their debt using Limpa Nome, and in total we have reached 35 million people with our social innovation products specifically developed to deliver societal benefits. The recent Experian Boost launch in the UK is another example of our commitment to the expansion of access to credit and credit education.

· The COVID-19 crisis has highlighted the importance of data to business, consumers, charities, governments and our communities; and we have taken the lead in using data and analytical models to help governments in many geographies track the course of the pandemic and target financial support to the vulnerable.

· We have also launched United for Financial Health, a financial recovery programme to help communities significantly affected by COVID-19, which includes strategic partnerships with non-profit organisations like Operation HOPE which provides financial coaching. We aim to reach 15 million people and small businesses in FY21 through this programme.

· We were pleased to see our employee engagement score increase to 76%, and in North America we have been recertified as a Great Place to Work for the third year in a row.

· Following a recent appointment to our Board, it is now comprised of 40% women and 70% independent members (including the Chairman). Our Board meets the recommendations of the Hampton-Alexander Review on gender diversity and the Parker Review on ethnic diversity.

· We are committed to helping tackle climate change and reducing our impact on the environment. Last year we cut our absolute carbon emissions by a further 8% and reduced our carbon intensity by 14%. Building on this, we have committed to be carbon neutral in own operations by 2030, and to gradually carbon offset our scope 1 and 2 emissions over the next 5 years.

Operating efficiency

· One of our key operating principles has been to position ourselves to emerge strongly from this global crisis and we acted quickly to reduce discretionary costs while continuing to invest for the long term. We have not availed ourselves of any government furlough schemes.

· We cut back on discretionary spend, froze our headcount and delayed non-critical investment, while also taking a deliberate decision to increase investment in marketing expenditure.

· We previously announced that we have embarked on a transformation programme in the UK and Ireland. The objectives of this programme are to simplify our technology estate, enhance customer experience and to return to profitable growth. During the first half of FY21 we have commenced that programme and initiated a number of additional restructuring measures in other regions.

· These actions are expected to give rise to an exceptional restructuring charge of around US$50 million in FY21, of which US$22m was recorded in the first half. These activities are predominantly related to improving operating performance and are expected to deliver year over year run-rate savings of US$40m in the year ending 31 March 2022.

· For H2 we expect organic cost growth of 2% to 3%.

Funding and liquidity

· We further strengthened our funding position while also supporting investment activities.

· We continued to invest in data, technology and innovation through capital expenditure. Capital expenditure was US$187m, which represented 8% of total revenue.

· Total acquisition outflow was cash of US$19m and 7.2m Experian plc shares. We completed the acquisition of a majority stake in a German credit bureau, the Risk Management division of Arvato Financial Solutions (AFS), with the consideration paid in shares rather than cash.

· We have announced a first interim dividend of 14.5 US cents per share, unchanged year-on-year. This will be paid on 5 February 2021 to shareholders on the register at the close of business on 8 January 2021.

· At 30 September 2020, we had US$0.5bn of bank debt, all of which was repaid during October 2020. We held US$2.5bn of undrawn committed bank borrowing facilities which have an average remaining tenor of four years. These include our core US$1.95bn club facility which is undrawn and committed until December 2024.

· On 5 October 2020 we issued £400 million of 0.739% bonds due 2025. This provides funding to replace the bond maturing in October 2021. Including this, our bonds total US$3.9bn and have an average remaining tenor of seven years. The next maturity after October 2021 is not until September 2024.

· As at 30 September 2020 Net debt to Benchmark EBITDA was 2.2x (on a pre IFRS 16 basis), compared to our target leverage range of 2.0-2.5x.

Other financial developments

Benchmark PBT was US$588m, up 2% at constant currency and (3)% at actual rates, after lower Benchmark net interest expense of US$60m (2019: US$66m). The reduction reflects lower average global interest rates. For the full year, we expect net interest expense to be around US$120m.

The Benchmark tax rate was 26.2% unchanged from 2020. For the full year we expect a rate in the range of 26% to 27%, taking into account expected profits mix for the year.

Our Benchmark EPS was 47.9 US cents, an increase of 2% at constant currency and (2)% at actual exchange rates as the weighted average number of ordinary shares (WANOS) increased to 907m (2019: 903m), inclusive of the shares delivered in connection with the purchase of our stake in the Risk Management division of Arvato Financial Solutions. For the full year, we expect WANOS of circa 910m.

Benchmark operating cash flow increased 69% at actual rates and our Benchmark operating cash flow conversion was 89% (2019: 51%). The increase is due to the mix of growth, strong control of working capital, reduced infrastructure investment, and some phasing.

Foreign exchange translation was a 4% headwind to Benchmark EPS in the half year. This was predominantly due to the Brazilian real, which weakened by 36% relative to the US dollar versus the prior year. For the full year, we expect a headwind to Benchmark EBIT of 4-5%, assuming current foreign exchange rates prevail.

Part 2 - Regional highlights for the six months ended 30 September 2020

We delivered good organic revenue growth in North America and Latin America, particularly in Consumer Services, while the UK and Ireland and EMEA/Asia Pacific regions declined.

1 For the six months ended 30 September 2020.

2 B2B = Business-to-Business segment consists of Data and Decisioning business sub-divisions.

See note 5 to the interim financial statements on pages 23-25 for definition of organic revenue growth.

3 The results for the six months ended 30 September 2019 have been restated following the reclassification of our Consumer Services business in Latin America to the Consumer Services business segment; previously our Consumer Services business in this region was not sufficiently material to be disclosed separately.

North America

Revenue in North America was US$1,687m, with both total revenue and organic revenue growth of 7%. Organic revenue growth was 4% in Q1 and 9% in Q2.

North America B2B delivered organic revenue growth of 4%. Data grew 5%, with robust mortgage volumes generated by historically low interest rates and as consumers sought to reduce expenses through refinancing activity. This offset significantly lower volumes in relation to unsecured lending due to tighter bank lending standards as well as lower revenues from targeting as retailers reduced marketing expenditure. We secured new and expanded client relationships for Experian Ascend, including for our latest module Ascend Portfolio Loss Forecaster which helps clients with recession-relevant fraud and identity analysis. Sure Profile, a proposition which helps to tackle synthetic identity fraud, also had a good reception in the market following its launch in May. In addition, we introduced a range of offers to help our clients navigate the current environment, including recovery scores, forbearance triggers and other downturn attributes. Automotive revenue was down modestly, recovering as the half progressed in response to economic stimulus support.

Decisioning revenue was up 1% organically. Health delivered growth overall, with positive progress in patient access and collections. Authentication volumes were also strong as clients sought to verify patient identities in virtual settings as they turned to online healthcare provision during lockdowns. We were also successful in securing new client wins. Elsewhere, strength in data quality helped offset weakness in decisioning software.

Consumer Services performed strongly and delivered organic revenue growth of 13%. Consumers, who have become more concerned about their finances, have sought credit monitoring services and subscription revenues grew strongly. In addition, we saw growth in credit matching services, even as lenders tightened up credit criteria and restricted credit offers, as lenders choose to remain with platforms that send them the best quality leads. We also expanded into new verticals, with a strong start for our automotive insurance matching service. We have further enhanced Experian Boost and consumers can now add payments from streaming services (including Netflix) to their credit scores as an eligible tradeline. We also invested in marketing to drive awareness and consideration of the Experian brand. As a result, Experian Boost has now reached 4.9m connected accounts and our free membership base totalled 35.8m, up from 24m free members in the first half of FY20.

North America Benchmark EBIT increased by 12% to US$610m. The Benchmark EBIT margin increased by 160 basis points year-on-year to 36.2%. This reflected good operating leverage in B2B and strong cost control, even as we invested in customer acquisition in support of Consumer Services.

Latin America

Revenue in Latin America was US$278m, with both total and organic revenue growth of 5%. Organic revenue declined by (1)% in Q1 recovering to 10% growth in Q2.

B2B organic revenue declined (2)%. In Brazil, growth in positive data, Experian Ascend and the automotive vertical was offset by bureau volume reductions. Revenues recovered as the half progressed with some volume rebound and having introduced COVID-19 attributes to help clients analyse and understand the impact of the pandemic on their lending portfolios. We have also made good progress with new propositions as we roll out positive data scores, trend attributes and due to new implementations for Experian Ascend. So far we have launched 15 positive data products and attributes, with plans to launch 29 more by calendar year end. Spanish Latin America declined due to bureau volume reductions and delays in software implementations.

Consumer Services delivered a very strong performance, with organic revenue up 156%. This was supported by the strength of our brand in Brazil which has helped our consumer base to scale rapidly. We now have 51.8m free members in Brazil. We introduced Score Turbo, the Brazilian equivalent of Experian Boost, a service where consumers can improve their credit scores through more timely bill payments, and which will help to drive higher levels of consumer engagement. Revenue growth has been driven by higher usage of Limpa Nome Online, a consumer debt-resolution service, and growth of eCred, our credit-matching marketplace.

Benchmark EBIT in Latin America was US$65m, down (4)% at constant exchange rates. The Benchmark EBIT margin from ongoing activities at actual exchange rates was 23.4% (2019: 27.6%) mainly reflecting negative operating leverage due to the reduction in B2B revenues during the initial phase of the pandemic as well as revenue mix effects.

UK and Ireland

Revenue in the UK and Ireland was US$331m. Total and organic revenue declined (12)%. B2B organic revenue declined (11)% and Consumer Services declined (14)%. Organic revenue declined by (15)% in Q1 and by (8%) in Q2.

B2B revenue declined (11)%, impacted by the contraction in UK bank consumer lending and as advertisers reduced marketing expenditure. This led to lower consumer credit reference volumes, delays to software implementations and reduced revenues in marketing services. Business credit volumes were robust, driven by government loan schemes. The new business pipeline is encouraging and we are supporting clients as they seek process efficiency opportunities and greater customer insights.

Consumer Services declined (14)% as CreditMatcher comparison revenues were heavily impacted by the contraction in credit supply, especially during the early stages of the health crisis. We have however continued to grow our free membership base, which reached 8.5m consumers, and our paid membership base also expanded in Q2, which will support future financial performance. In early November, we were delighted to launch Experian Boost which will help consumers to permission new data sources which could help their credit score.

Benchmark EBIT performance at constant exchange rates in the UK and Ireland was US$34m, down from US$75m the year before. The Benchmark EBIT margin from ongoing activities at actual exchange rates was 10.3% (2019: 20.2%), reflecting the impact of the pandemic on revenues during the half.

EMEA/Asia Pacific

In EMEA/Asia Pacific, revenue was US$191m, with total revenue decline at constant rates of (2)% and an organic decline of (18)%. The difference relates to the contribution from Compuscan, the Risk Management division of Arvato Financial Solutions and other smaller acquisitions. Organic revenue declined by (20)% in Q1 and by (17)% in Q2.

Bureaux volumes in EMEA/Asia Pacific were severely impacted during the initial phases of lockdown, with the trajectory improving as lockdowns eased over the summer months. Italy, Spain, South Africa and India were heavily impacted, while the Netherlands, Norway, Denmark, Singapore and Malaysia were generally more robust. Our newly acquired credit bureau in Germany has performed well since we completed the acquisition in June and has delivered good growth on a like for like basis.

Decisioning revenues were also impacted as clients delayed investment decisions and cancelled software implementations. There has been a pick-up in client activity levels in recent months with new business wins for collections software, Experian One use cases and X-Score (a score based on alternative data), and we expect to realise the benefits of these wins during FY22.

Benchmark EBIT was US$(33)m (2019: US$(5)m). Benchmark EBIT margin from ongoing activities at actual exchange rates was (17.3)% (2019 (2.5)%, mainly reflective of the reduction in revenue.

Group financial results

Business mix including % change in organic revenue year-on-year for the six months ended 30 September 2020

1 Percentage of group revenue calculated based on H1 FY21 revenue at actual exchange rates.

2 Ongoing activities only, at constant exchange rates.

CI = Consumer Information, BI = Business Information, DA = Decision Analytics.

Revenue by region

1 The results for the six months ended 30 September 2019 have been restated following the reclassification of our Consumer Services business in Latin America to the Consumer Services business segment; previously our Consumer Services business in this region was not sufficiently material to be disclosed separately.

See Appendix 1 (page 14) and note 5 to the interim financial statements (pages 23-25) for definitions of non-GAAP measures.

See Appendix 2 (page 14) for analyses of revenue, Benchmark EBIT and Benchmark EBIT margin from ongoing activities by business segment.

Income statement, earnings and Benchmark EBIT margin analysis

See Appendix 1 (page 14) and note 5 to the interim financial statements (pages 23-25) for definitions of non-GAAP measures.

See Appendix 2 (page 14) for analyses of revenue, Benchmark EBIT and Benchmark EBIT margin from ongoing activities by business segment

Group financial review

Key statutory measures

Statutory revenue

Performance in the period was resilient, revenue was stable at US$2,487m (2019: US$2,495m) notwithstanding the effects of the COVID-19 pandemic.

Statutory operating profit and profit before tax

Operating profit for the six months ended 30 September 2020 was down marginally to US$546m (2019: US$556m). The movements in Benchmark EBIT at constant currency are discussed in the Chief Executive Officer's review and Regional highlights on pages three to eight. In addition to these movements we observed exchange headwinds particularly in Brazil. Profit before tax reduced to US$458m (2019: US$480m).

Statutory Basic EPS

Basic EPS reduced to 36.7 US cents (2019: 39.0 US cents). The decrease reflects a mix of factors including a lower profit before tax, a higher tax charge and a higher number of shares in issue.

Statutory cash flow

Cash generated from operations was US$736m (2019: US$552m) reflecting improvements in working capital. Net borrowing outflows were US$196m (2019 inflows: US$839m). Reduced funding was required for acquisition activity and there were no share repurchases in the period following the suspension of our share repurchase programme (2019: US$150m). Undrawn committed bank borrowing facilities were US$2.5bn at 30 September 2020, an increase of US$325m from 31 March 2020.

Tax

The effective rate of tax based on profit before tax was 27.5%, an increase of 1.5 percentage points from the comparative period in which we benefitted from a significant non-taxable gain from an associate.

Net assets

At 30 September 2020, net assets amounted to US$2,585m (2019: US$2,317m). Capital employed, as defined in note 5(q) to the interim financial statements, was US$6,758m (2019: US$6,657m).

Equity

There was an increase in equity of US$304m from US$2,281m at 31 March 2020 with movements detailed in the Group statement of changes in total equity on page 19.

Key movements in equity during the half include:

· Profit for the period of US$332m.

· Remeasurement losses of US$13m in respect of defined benefit pension plans.

· Ordinary dividends paid of US$294m.

· Shares issued on vesting of share awards of US$17m, together with shares delivered as acquisition consideration of US$253m.

· Recognition of liability for put option over non-controlling interests of US$94m.

· Non-controlling interests of US$52m arising on business combinations.

SeasonalityIn recent years, our Benchmark EBIT performance has tended to be weighted towards the second half of the year reflecting revenue seasonality; however this year revenue and profit forecasts are shorter term due to the uncertainty from the economic disruption of the COVID-19 pandemic. We are therefore only providing revenue guidance to the third quarter of the financial year.

Foreign currency

Foreign exchange - average rates

The principal exchange rates used to translate revenue and Benchmark EBIT into the US dollar are shown in the table below.

The impact of currency movements on revenue from ongoing activities is set out in note 6(c).

Foreign exchange - closing rates

The principal exchange rates used to translate assets and liabilities into the US dollar at the period end dates are shown in the table below.

Risks

We continue to see heightened legislative and regulatory activity, particularly as it relates to privacy and information security matters. Except for these matters, the principal risks and uncertainties we face in the remaining six months of the year remain largely unchanged from those explained in detail on pages 63 to 70 of our Annual Report for the year ended 31 March 2020:

• Loss or inappropriate use of data and systems;

• Adverse and unpredictable financial markets or fiscal developments;

• New legislation or changes in regulatory enforcement;

• Failure to comply with laws and regulations;

• Non-resilient IT/business environment;

• Business conduct risk;

• Dependence on highly skilled personnel;

• Increasing competition; and

• Undesirable investment outcomes.

In the first half of the financial year, we note that new laws, new interpretations of existing laws, changes to existing regulations and regulatory scrutiny continue to increase. Recent examples include the California Consumer Privacy Act, the Brazilian General Data Protection Law and the interpretation of EU General Data Protection Regulation.

We continue to see increasing consumer litigation, particularly in the USA and Brazil.

We note continued uncertainty in the development of tax legislation in our key regions.

We continue to closely monitor the impact of COVID-19 on our business and the global economy. Our priority remains the health, safety and well-being of our employees, clients and consumers. Most of our employees are continuing to work remotely.

We are also still closely monitoring trends in geopolitical risks including market volatility, regulatory and tax policy uncertainty resulting from the US election. There is continued uncertainty related to Brexit following the UK's departure from the EU and the outcome of trading and legislative arrangements negotiated during the transition period to 31 December 2020.

Further information on financial risk management is given in note 24 to the interim financial statements.

The Chief Executive Officer's, Business and Group financial reviews on pages 3 to 12 include consideration of key uncertainties affecting us for the remainder of the current financial year. There may however be additional risks unknown to us and other risks, currently believed to be immaterial, which could turn out to be material. These risks, whether they materialise individually or simultaneously, could significantly affect our business and financial results.

Going concern

The principal risks and uncertainties and viability assessment we face in the remaining six months of the year remain largely unchanged from those explained in detail on pages 63 to 72 of our Annual Report for the year ended 31 March 2020.

The Group has a robust balance sheet with access to considerable funding and continues to adopt the going concern basis in preparing these interim financial statements. Cash flow in the period was strong with cash flow conversion of 89%. Our undrawn committed bank borrowing facilities at 30 September were US$2.5bn and have an average remaining tenor of four years. On 5 October 2020 we issued a £400m bond which matures in 2025, providing funding to replace the bond maturing in October 2021.

The directors believe that the Group is well placed to manage its financing and other business risks satisfactorily, and have a reasonable expectation that the Group will have adequate resources to continue in operational existence.

See note 2 to the interim financial statements for further detail.

Appendices

1. Non-GAAP financial information

We have identified and defined certain measures that we believe assist understanding of our performance. These measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted performance measures. These non-GAAP measures are not intended to be a substitute for any IFRS measures of performance but we have included them as these are considered to be key measures used within the business for assessing the underlying performance of our ongoing businesses. Information on certain of our non-GAAP measures is set out below in the further appendices. Definitions of all our non-GAAP measures are given in note 5 to the interim financial statements.

The reconciliation of revenue from ongoing activities is set out in note 6(c) on page 27, Benchmark EBIT and Benchmark PBT in Appendix 3 below and Benchmark EPS in note 12 on page 31.

2. Revenue, Benchmark EBIT and Benchmark EBIT margin by business segment

1. The results for the six months ended 30 September 2019 have been restated following the reclassification of our Consumer Services business in Latin America to the Consumer Services business segment; previously our Consumer Services business in this region was not sufficiently material to be disclosed separately.

3. Summary reconciliation of Benchmark EBIT to statutory profit before tax

2. See note 8 to the interim financial statements.

Appendices (continued)

4. Cash flow and Net debt summary

5. Total investment

1. The consideration for our investment in the Risk Management division of Arvato Financial Solutions (AFS) was satisfied by the delivery of 7.2m Experian plc treasury shares.

Interim financial statements

Group income statement

for the six months ended 30 September 2020

1. Total Benchmark EBIT and other Benchmark items are non-GAAP measures, defined in note 5 to the interim financial statements.

2. The loss before tax for non-benchmark items of US$130m (2019: US$124m) is analysed in note 8 to the interim financial statements.

3. In the prior period the non-benchmark share of post-tax profit of associates of US$36m included a gain of US$38m which related to a business disposal by an associate.

Interim financial statements

Group statement of comprehensive income

for the six months ended 30 September 2020

1. Amounts reported within Other comprehensive income (OCI) are in respect of continuing operations and, except as reported for post-employment benefit assets and obligations, there is no associated tax. Currency translation items are recognised in the translation reserve within other reserves and in non-controlling interests. Other items within Other comprehensive income are recognised in retained earnings.

Interim financial statements

Group balance sheet

at 30 September 2020

Interim financial statements

Group statement of changes in total equity

for the six months ended 30 September 2020

Group statement of changes in total equity

for the six months ended 30 September 2019

Interim financial statements

Group cash flow statement

for the six months ended 30 September 2020

Notes to the interim financial statements

for the six months ended 30 September 2020

1. Corporate information

Experian plc (the Company) is the ultimate parent company of the Experian group of companies (Experian or the Group). Experian is a leading global information services group.

The Company is incorporated and registered in Jersey as a public company limited by shares and is resident in Ireland. The Company's registered office is at 22 Grenville Street, St Helier, Jersey JE4 8PX, Channel Islands.

The Company's ordinary shares are traded on the London Stock Exchange's Regulated Market and have a Premium Listing.

There has been no change in this information since the Annual Report for the year ended 31 March 2020.

2. Basis of preparation

The condensed consolidated interim financial statements (the interim financial statements) are prepared on the going concern basis and in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting' (IAS 34) as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (the EU).

The interim financial statements:

· comprise the consolidated results of the Group for the six months ended 30 September 2020 and 30 September 2019;

· were approved for issue on 16 November 2020;

· have not been audited but have been reviewed by the Company's auditor with their report set out on page 45; and

· do not constitute the Group's statutory financial statements but should be read in conjunction with the Group's statutory financial statements for the year ended 31 March 2020.

The Group's statutory financial statements comprise the Annual Report and audited financial statements which are prepared in accordance with International Financial Reporting Standards (IFRS or IFRSs) as adopted by the EU (EU-IFRS). The Group's statutory financial statements also comply with IFRS as issued by the IASB. EU-IFRS differs in certain respects from IFRS as issued by the IASB, however, the differences have no material impact for the periods presented.

The most recent such financial statements, for the year ended 31 March 2020, were approved by the directors on 19 May 2020 and subsequently delivered to the Jersey Registrar of Companies. The auditor's report was unqualified and did not contain a statement under Article 111(2) or Article 111(5) of the Companies (Jersey) Law 1991. Copies of these financial statements are available on the Company's website, at www.experianplc.com, and from the Company Secretary at Newenham House, Northern Cross, Malahide Road, Dublin 17, D17 AY61, Ireland.

The financial information for the year ended 31 March 2020 included in the interim financial statements is not the Company's statutory accounts for that financial year, but has been extracted from the Group's statutory financial statements.

As required by the UK Financial Conduct Authority Disclosure Guidance and Transparency Rules Sourcebook, these interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's statutory financial statements for the year ended 31 March 2020.

No significant events impacting the Group, other than those disclosed in this document, have occurred between 30 September 2020 and 16 November 2020.

Going concern

In adopting the going concern basis for preparing these interim financial statements, the directors have considered the business activities, the principal risks and uncertainties and the other matters discussed in connection with the Viability statement included in our Annual Report for the year ended 31 March 2020. This includes the potential ongoing impact of the COVID-19 pandemic on future financial performance and cash flows and the modelling of our most significant 'severe but plausible' test of a significant data breach, in addition to a cautious scenario for economic recovery.

Notes to the interim financial statements

for the six months ended 30 September 2020

2. Basis of preparation (continued)

At 30 September 2020 the Group had undrawn committed bank borrowing facilities of US$2.5bn which have an average remaining tenor of four years. Under the modelled scenarios we comfortably maintain sufficient undrawn capacity and satisfy all borrowing facility covenants.

The directors are therefore satisfied that there are no material uncertainties over going concern, and therefore the going concern basis of preparation continues to be appropriate.

In reaching this conclusion, the directors noted the Group's strong cash performance in the period and the substantial committed bank borrowing facilities which extend to December 2024.

3. Accounting policies, estimates and judgments

(a) Introduction

The preparation of the interim financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets, liabilities and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are based on management's best judgment at the date of these interim financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. There have been no significant changes in the bases upon which estimates have been determined, compared to those applied at 31 March 2020, and no change in estimate has had a material effect on the current period.

The accounting policies applied in the interim financial statements are the same as those applied in the Annual Report and Group financial statements for the year ended 31 March 2020.

(b) Goodwill

Goodwill held in the Group's balance sheet is tested at least annually for impairment and details of the methodology used are set out in the Group's statutory financial statements for the year ended 31 March 2020.

Typically the Group performs the annual impairment tests in the first half of the year but given the uncertainty surrounding COVID-19, the annual tests will be performed in the second half of the year.

Management has assessed goodwill held by the Group at 30 September 2020 to identify any indicators of impairment as a result of COVID-19. Based on this evaluation no impairments were identified to the carrying value of goodwill.

(c) Post-employment benefits (note 15)

We have updated the accounting valuation of our principal defined benefit pension plan in light of changes in the key actuarial assumptions, and this is recognised in the interim financial statements. The actuarial assumption with the most significant impact at 30 September 2020 is the discount rate of 1.6% (2019: 1.8%). The discount rate used in the year ended 31 March 2020 was 2.2%.

(d) Revenue recognition (note 6)

Revenue is stated net of any sales taxes, rebates and discounts.

Revenue is recognised to represent the transfer of promised services to customers in a way that reflects the consideration expected to be received in return. Total consideration from contracts with customers is allocated to the performance obligations identified based on their standalone selling price, and is recognised when those performance obligations are satisfied and the control of goods or services is transferred to the customer, either over time or at a point in time.

· Revenue in respect of the provision and processing of transactional data is recognised in the period in which the service is provided.

· Revenue from batch data arrangements which include an ongoing update service are apportioned across each delivery to the customer.

· Subscription and membership fees are recognised on a straight-line basis over the period to which they relate.

· Software licence and delivery services are primarily accounted for as a single performance obligation, with revenue recognised when the combined offering is delivered to the customer. These services are distinguished between Experian-hosted solutions, where revenue is spread over the period that the service is available to the customer, and on-premise software licence arrangements, where revenue is recognised on delivery completion.

Notes to the interim financial statements

for the six months ended 30 September 2020

3. Accounting policies, estimates and judgments (continued)

(d) Revenue recognition (note 6) (continued)

· The delivery of support and maintenance agreements is generally considered to be a separate performance obligation and revenue is recognised on a straight-line basis over the term of the maintenance period.

· Professional services revenues which form a separate performance obligation are recognised as the services are delivered.

Sales are typically invoiced in the geographic area in which the customer is located. As a result, the geographic location of the invoicing undertaking is used to attribute revenue to individual countries.

Accrued income balances, which represent the right to consideration in exchange for goods or services that we have transferred to a customer, are assessed as to whether they meet the definition of a contract asset:

· When the right to consideration is conditional on something other than the passage of time, a balance is classified as a contract asset. This arises where there are further performance obligations to be satisfied as part of the contract with the customer and typically includes balances relating to software licensing contracts;

· When the right to consideration is conditional only on the passage of time, the balance does not meet the definition of a contract asset and is classified as an unbilled receivable. This typically arises where the timing of the related billing cycle occurs in a period after the performance obligation is satisfied.

Costs incurred prior to the satisfaction or partial-satisfaction of a performance obligation are first assessed to see if they are within the scope of other standards. Where they are not, certain costs are recognised as an asset providing they relate directly to a contract (or an anticipated contract), generate or enhance resources that will be used in satisfying (or to continue to satisfy) performance obligations in the future and are expected to be recovered from the customer. Costs which meet this criteria are deferred as contract costs and these are amortised on a systematic basis consistent with the pattern of transfer of the related goods or services.

· Costs to obtain a contract predominantly comprise sales commissions costs.

· Costs to fulfil a contract predominantly comprise of labour costs directly relating to the implementation services provided.

Contract liabilities arise when we have an obligation to transfer future goods or services to a customer for which we have received consideration, or the amount is due, from the customer and include both deferred income balances and specific reserves.

(e) Tax (note 10)

The tax charge recognised in the period is derived from the estimated tax rate for the full year, taking account of one-off tax charges and credits arising in the period and expected to arise in the full year and the tax effect of Exceptional items and other adjustments made to derive Benchmark PBT.

4. Accounting developments

There are no new standards, amendments to existing standards or interpretations that are not yet effective that are expected to have a material impact on the Group. Such developments are routinely reviewed by the Group and its financial reporting systems are adapted as appropriate.

5. Use of non-GAAP measures in the interim financial statements

As detailed below, the Group has identified and defined certain measures that it uses to understand and manage its performance. The measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted performance measures. These non-GAAP measures are not intended to be a substitute for any IFRS measures of performance but management has included them as they consider them to be key measures used within the business for assessing the underlying performance of the Group's ongoing businesses.

(a) Benchmark profit before tax (Benchmark PBT) (note 6(a) and note 7)

Benchmark PBT is disclosed to indicate the Group's underlying profitability. It is defined as profit before amortisation and impairment of acquisition intangibles, impairment of goodwill, acquisition expenses, adjustments to contingent consideration, Exceptional items, financing fair value remeasurements, tax (and interest thereon) and discontinued operations. It includes the Group's share of continuing associates' Benchmark post-tax results. 

Notes to the interim financial statements

for the six months ended 30 September 2020

5. Use of non-GAAP measures in the interim financial statements (continued)

(a) Benchmark profit before tax (Benchmark PBT) (note 6(a) and note 7) (continued)

An explanation of the basis on which we report Exceptional items is provided below. Other adjustments made to derive Benchmark PBT are explained as follows:

· Charges for the amortisation and impairment of acquisition intangibles are excluded from the calculation of Benchmark PBT because these charges are based on judgments about their value and economic life and bear no relation to the Group's underlying ongoing performance. Impairment of goodwill is similarly excluded from the calculation of Benchmark PBT.

· Acquisition and disposal expenses (representing the incidental costs of acquisitions and disposals, one-time integration costs and other corporate transaction expenses) relating to successful, active or aborted acquisitions and disposals are excluded from the definition of Benchmark PBT as they bear no relation to the Group's underlying ongoing performance or to the performance of any acquired businesses. Adjustments to contingent consideration are similarly excluded from the definition of Benchmark PBT.

· Charges and credits for financing fair value remeasurements within finance expense in the Group income statement are excluded from the definition of Benchmark PBT. These include retranslation of intra-Group funding, and that element of the Group's derivatives that is ineligible for hedge accounting, together with gains and losses on put options in respect of acquisitions. Amounts recognised generally arise from market movements and accordingly bear no direct relation to the Group's underlying performance.

(b) Benchmark earnings before interest and tax (Benchmark EBIT) and margin (Benchmark EBIT margin) (note 6(a))

Benchmark EBIT is defined as Benchmark PBT before the net interest expense charged therein and accordingly excludes Exceptional items as defined below. Benchmark EBIT margin is Benchmark EBIT from ongoing activities expressed as a percentage of revenue from ongoing activities.

(c) Benchmark earnings before interest, tax, depreciation and amortisation (Benchmark EBITDA)

Benchmark EBITDA is defined as Benchmark EBIT before the depreciation and amortisation charged therein.

(d) Exited business activities

Exited business activities are businesses sold, closed or identified for closure during a financial year. These are treated as exited business activities for both revenue and Benchmark EBIT purposes. The results of exited business activities are disclosed separately with the results of the prior period re-presented in the segmental analyses as appropriate. This measure differs from the definition of discontinued operations in IFRS 5.

(e) Ongoing activities

The results of businesses trading at 30 September 2020, which are not disclosed as exited business activities, are reported as ongoing activities.

To highlight our organic performance, we discuss our results in terms of growth at constant exchange rates, unless otherwise stated. This represents growth calculated after translating both years' performance at the prior year's average exchange rates.

This is the year-on-year change in the performance of our activities at actual exchange rates. Total growth at constant exchange rates removes the translational foreign exchange effects arising on the consolidation of our activities and comprises one of our measures of performance at constant exchange rates.

This is the year-on-year change in the revenue of ongoing activities, translated at constant exchange rates, excluding acquisitions until the first anniversary of their consolidation.

Notes to the interim financial statements

for the six months ended 30 September 2020

5. Use of non-GAAP measures in the interim financial statements (continued)

Benchmark EPS comprises Benchmark earnings divided by the weighted average number of issued ordinary shares, as adjusted for own shares held.

(k) Benchmark PBT per share

Benchmark PBT per share comprises Benchmark PBT divided by the weighted average number of issued ordinary shares, as adjusted for own shares held.

The Benchmark tax charge is the tax charge applicable to Benchmark PBT. It differs from the Group tax charge by tax attributable to Exceptional items and other adjustments made to derive Benchmark PBT, and exceptional tax charges. A reconciliation is provided in note 10(b) to these interim financial statements. The Benchmark effective rate of tax is calculated by dividing the Benchmark tax charge by Benchmark PBT.

The separate reporting of Exceptional items gives an indication of the Group's underlying performance. Exceptional items include those arising from the profit or loss on disposal of businesses, closure costs of major business units, costs of significant restructuring programmes and other financially significant one-off items. All other restructuring costs are charged against Benchmark EBIT, in the segments in which they are incurred.

Benchmark operating cash flow is Benchmark EBIT plus amortisation, depreciation and charges in respect of share-based incentive plans, less capital expenditure net of disposal proceeds and adjusted for changes in working capital, principal lease payments and the Group's share of the Benchmark profit or loss retained in continuing associates. Benchmark free cash flow is derived from Benchmark operating cash flow by excluding net interest, tax paid in respect of continuing operations and dividends paid to non-controlling interests.

Cash flow conversion is Benchmark operating cash flow expressed as a percentage of Benchmark EBIT.

Net debt is borrowings (and the fair value of derivatives hedging borrowings) excluding lease liabilities and accrued interest, less cash and cash equivalents and other highly liquid bank deposits with original maturities greater than three months. Net funding is borrowings (and the fair value of the effective portion of derivatives hedging borrowings) excluding lease liabilities and accrued interest, less cash held in Group Treasury.

ROCE is defined as Benchmark EBIT less tax at the Benchmark rate divided by a three-point average of capital employed, in continuing operations, over the year. Capital employed is net assets less non-controlling interests, further adjusted to add or deduct the net tax liability or asset and to add Net debt.Notes to the interim financial statements

for the six months ended 30 September 2020

6. Segment information