EXPERIAN (LON:EXPN) Preliminary results 2018

Transparency directive : regulatory news

17/05/2018 07:00
Experian plc  -  EXPN   

Preliminary results 2018


Released 07:00 17-May-2018

 


Preliminary results for the year ended 31 March 2018


 


7am, 17 May 2018 ─ Experian plc, the global information services company, today issues its financial report for the year ended 31 March 2018.


 


 


·      A strong finish to the year.


Q4 total revenue growth of 12% and Q4 organic revenue growth of 8%.


North America Consumer Services returned to growth in Q4 and UK trends continued to improve.


·      FY18: good progress, with momentum in B2B* and improving trends in Consumer Services.


8% total revenue growth, 8% total Benchmark EBIT growth, 11% Benchmark EPS growth.


5% organic revenue growth, 8% B2B organic revenue growth.


Benchmark EBIT margin of 27.7%, in line with prior year at constant rates, up 10 basis points at actual rates.


Strong cash conversion of 93% and Return on Capital Employed of 15.7%.


·      Significant progress on our strategy.


Key investments to add new sources of data, e.g. low income lending, mobile phone, affordability.


Strong client reception for product introductions such as Experian Ascend, PowerCurve Collections, CrossCore, and a strong pipeline of future initiatives underway.


Good initial market reception for consumer identity protection offers and significant steps taken to advance position in consumer credit comparison.


Proposed acquisition of ClearScore will extend services to UK consumers.


·      Continuing commitment to shareholder returns and disciplined capital allocation:


$305m acquisitions and investments completed.


Over US$950m returned to shareholders in the year, by dividends and share repurchases.


Second interim dividend up 10% to 31.25 US cents per ordinary share; total dividend for FY18 up 8% to 44.75 US cents per share.


New net share repurchase programme of up to US$400m.


 





























































































Statutory financial highlights






Benchmark financial highlights¹






 


2018

US$m



 


2017 US$m



Total Growth %









 


2018

US$m



 


2017²

US$m



Actual rates growth %



Constant rates growth %



Revenue



4,662



4,335



8






Revenue¹



4,657



4,330



8



7



Operating profit



1,095



1,075



2






Benchmark EBIT3



1,290



1,197



8



7



Profit before tax



994



1,071



(7)






Benchmark PBT



1,206



1,124



7



6



Profit after tax from cont. operations



845



812



4






Benchmark Earnings



897



831



8



7



Basic EPS (Continuing)



US92.1c



US86.5c



6






Benchmark EPS



US97.8c



US88.4c



11



10



Basic EPS4



US88.9c



US92.1c



(3)






Total dividend



US44.75c



US41.5c



8



n/a



1 Revenue from ongoing activities. See Appendix 1 on page 15 and note 4 to the financial statements on pages 26-27 for definitions of non-GAAP measures.


2 Results for 2017 are restated for exited business activities, comprised of our Experian Public Records business, divested in March 2018.
3 See page 7 for reconciliation of Benchmark EBIT from ongoing activities to Profit before tax.


4 Basic EPS has reduced to 88.9 US cents from 92.1 US cents (2017). The decrease reflects higher non-cash costs for financing fair value remeasurements (see Note 7a) and a loss from discontinued operations (see Note 10a).


* B2B = business-to-business activities consists of Credit Services (7% organic revenue growth), Decision Analytics (12%) and Marketing Services (7%) business lines.


 


Brian Cassin, Chief Executive Officer, commented:


"We delivered a strong performance in FY18 as we execute on our innovation agenda and our One Experian approach. Growth was particularly strong across B2B and we have made significant progress in Consumer Services, which returned to growth in North America in the fourth quarter.


 


"The investments we have made will continue to power our performance. We begin the year with momentum in the business, and we expect another year of strong performance, with EBIT growth at or above revenue growth and further strong progress in Benchmark earnings per share."


 


Contacts


































Experian


 









Nadia Ridout-Jamieson



Investor queries                         



+44 (0)20 3042 4215



Gerry Tschopp              


 



Media queries






Finsbury


 









Rollo Head






+44 (0)20 7251 3801



Jenny Davey


 









 


 


There will be a presentation today at 9.30am (UK time) to analysts and investors at the Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ. The presentation can be viewed live via the link from the Experian website at www.experianplc.com and can also be accessed live via a telephone dial-in facility: 0800 783 0906 (UK primary) or 01296 480 100 (UK direct) or +44 1296 480 100 (International direct), using access code 774 306 59. The supporting slides and an indexed replay will be available on the website later in the day.


 


Experian will update on first quarter trading for FY19 on 13 July 2018.


 


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 Note 26 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 16,500 people operating across 39 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.


 


 


Chief Executive Officer's review


 


We made great progress over the course of this year, financially, operationally and strategically. The pace and range of new product innovation has increased dramatically across the business. This, plus the investments we have made in technology and our One Experian approach, position us strongly for the future.


 


We delivered a strong financial performance, with:


 


Total revenue growth of 8%, total revenue growth at constant currency of 7%, organic revenue growth of 5%. B2B delivered organic revenue up 8% for the year and in Consumer Services the rate of organic revenue decline moderated to (5%) overall and was flat in the fourth quarter.


 


Growth accelerated as the year progressed, with organic revenue growth of 4% in H1 and of 6% in H2.


 


Benchmark EBIT growth was 8%, with EBIT margins of 27.7%.


 


Double-digit growth in Benchmark earnings per share, which grew 11%.


 


Cash conversion of 93% of Benchmark EBIT into operating cash flow.


 


We are executing well against our strategy, and have invested in a series of initiatives to sustain growth in the future. These include:


 


New sources of data. We acquired Clarity Services, Inc. ('Clarity'), which adds non-traditional credit data assets in the US, improving visibility of over 60m consumers with traditional lenders, and extending the superiority of our datasets.


 


New products. We launched Experian Ascend, our next-generation analytical sandbox, which has had a very strong reception since launch in the US.


 


New agreements across multiple territories for major Experian platforms, including for PowerCurve, our decisioning platform, and for CrossCore our fraud prevention platform which signed 51 client agreements in the year, and we have a pipeline of new product introductions which will launch during the forthcoming year.


 


New and extended client engagements which exploit the breadth of our capabilities as One Experian. These included major new data and decisioning contracts in the US, the UK and Brazil with large financial institutions.


 


We launched the new identity protection proposition in the US, we substantially developed our credit comparison services and we have agreed the acquisition of ClearScore, subject to UK regulatory approval, which will add a complementary credit comparison brand in the UK.


 


We have made significant additional investments in information security in order to maintain strong defences and continue to provide a secure environment for data.


 


With regards to capital allocation and uses of cash:


We invested organically across a broad range of initiatives during the year in support of our strategy. We also made inorganic investments through acquisitions, minority investments and venture investments totalling US$305m.


 


We are announcing a second interim dividend of 31.25 US cents per share, up 10% on the prior year to bring the total for FY18 to 44.75 US cents per share, up 8% on the prior year. This dividend will be paid on 20 July 2018 to shareholders on the register at the close of business on 22 June 2018.


 


We completed a US$566m share repurchase programme. We also expect to execute a new net share repurchase programme of up to US$400m.


 


We maintained tight discipline on capital allocation, ending the year with net debt of US$3,408m, which places us at 2.1 times EBITDA by the end of the year, compared to our target leverage range of 2 to 2.5 times net debt to EBITDA.


 


Return on capital continues to be strong at 15.7%, up 20 basis points on the prior year (2017: 15.5%).


 


Regional highlights


Organic revenue growth was strong across three of our four regions, with double-digit growth in EMEA/Asia Pacific. Organic revenue was flat in the UK and Ireland.


 


North America


 


Total revenue growth in North America was 8% and organic revenue growth was 6%, reflecting a strong performance across B2B of 9%, partially offset by Consumer Services decline of 2%.


 


Our B2B business is performing very well driven by successful new product introductions and major One Experian client wins. The Experian Ascend Sandbox tool, which gives clients access to current and historic credit data for the development of analytical models and strategies, has grown quickly, and since launch we have signed contracts with 11 of the top financial institutions, with a strong pipeline of future prospects. We have seen early momentum in our strategy to introduce new sources of data to the credit bureau, and the Clarity Services acquisition has exceeded our expectations. Since completion of the acquisition in October, synergies realised include the roll out of Clarity Services products to our traditional bureau clients with the introduction of our first new product which will combine data from both Clarity and our credit bureau to enhance credit risk decisions. Credit Services' performance also benefited from the new Fannie Mae trended data agreement, which was implemented in Q4. There was also strength in business information, health and Decision Analytics which each delivered double-digit organic revenue growth.


 


Consumer Services returned to growth during Q4. We have diversified our revenue streams in this business towards high growth market segments, helping to offset an overall decline for the year. Our identity protection offer is growing rapidly, and we have now enrolled approximately 200,000 paying members. We are extending the product offer with good take-up rates for premium plans and new free services such as triple dark web scan. We are developing our credit comparison service which, while still at a relatively early stage, is growing strongly. We are also highly focused on enhancing the experience for both consumers and lenders by using our capabilities to drive relevance and approval rates. Partner Solutions, which accounts for c. 40% of North America Consumer Services revenue, is also well positioned as we secure new clients, provide new products for existing client programmes and as we fully benefit from the client wins secured this year.


 


Latin America


 


Latin America delivered a good performance, with 6% organic revenue growth, reflecting strength across Credit Services, Decision Analytics and Marketing Services.


 


In Brazil, we have placed significant strategic emphasis on expanding the services we provide to our larger clients and on developing more extensive services for smaller businesses and for consumers. We see significant potential as the macroeconomic environment in Brazil improves and as we grow our presence across the Latin American region.


 


We are expanding our position with larger clients in Brazil, moving beyond pure credit data services to offer alternative data sources, analytics, software, consultancy services and client access to our data labs. We see good prospects for Experian software platforms such as PowerCurve and CrossCore, as well as for new product innovations such as mobile credit-prequalification services, recently launched with major Brazilian retailers and where we are establishing a decent pipeline. We are also developing new services for smaller businesses in Brazil, to help them better manage and gain access to relevant credit offers.


 


This was an important year for the development of services to consumers in Brazil. By the end of the year we had enrolled over 22m people into Serasa Consumidor. We have introduced a new credit comparison service (eCred), which we will seek to expand over the coming year. Our debt resolution service Limpa Nome is also expanding rapidly. We have converted this into a digital service which helps millions of consumers to negotiate and settle debts with lenders. We see significant potential for Serasa Consumidor in Brazil, and are investing to extend our product range and to scale our existing offers over the coming year.


 


UK and Ireland


 


In the UK and Ireland, organic revenue was flat as growth in B2B of 5% was offset by a decline in Consumer Services of 16%.


 


We saw good momentum across our B2B portfolio in the UK and Ireland. Across our core, we have secured new client wins driven by demand for unique Experian capabilities such as ExPIN (our proprietary data pinning technology), PowerCurve and CrossCore. Regulatory changes such as the Open Banking directive are also opening up new opportunities, with both existing and new clients. Our strategy is to automate key processes to enable better consumer experiences in areas such as affordability assessment, which is mandatory for mortgage and in debt management services. We have developed new capabilities built on Runpath and Experian technology to address this opportunity. We also continue to expand our position in new market segments such as the price comparison sector, background checking and within industry verticals such as telecommunications.


 


In Consumer Services, we now address an audience of nearly 4m consumers through our free services. We made considerable progress in credit comparison, and CreditMatcher saw a big step up in both traffic and revenue over the year. We are enabling lenders to be more precise in which offers they make to which individuals, leading to greater use of data and analytics in the credit comparison process. The proposed acquisition of ClearScore will allow us to address more of this growing market through two complementary brands and to generate significant synergies. Subscription-based credit monitoring services have continued to contract, a trend which we expect to persist, although we have seen the rate of decline start to ease as we have introduced new product features and as we drive greater engagement with our paying membership base.


 


EMEA/Asia Pacific


 


EMEA/Asia Pacific performed strongly, with organic growth of 11%, with positive contributions across Credit Services, Decision Analytics and Marketing Services.


 


Our operations in EMEA/Asia Pacific are growing well. Our business is shifting from providing point solutions to providing more One Experian, integrated solutions. This is leading to a change in perceptions of Experian as we become more of a strategic partner to our clients. It also improves the size and scale of our client engagements and builds recurring revenue streams. We are also making significant investments to access the considerable opportunities we see in these markets, driven by the growth of population and wealth, and the need for new sources of data to assess credit risk. For example, we are developing propositions which use mobile data to conduct credit risk assessment, we are investing in a new innovation hub in Singapore and we are assessing opportunities to expand services to consumers in key bureau markets.


 


Update to financial reporting format


 


Change to segmental reporting


Experian has maintained the same segmental reporting structure since the demerger from GUS plc in 2006. During that time the shape of the business has evolved and a significant proportion of Experian's business-to-business products and services are now bundled. Following a review, we plan to change our business segments. Our regional operating segments, which are our statutory segments for reporting purposes, will remain the same.


 


For the financial year ending 31 March 2019, the three business segments of Credit Services, Decision Analytics and Marketing Services will be consolidated into a single 'Business-to-Business' segment. Consumer Services will remain as a separate segment. In total, there will be two business segments. A reconciliation of revenue reporting under the new reporting structure for the year ended 31 March 2018 is provided on page 14.


 


IFRS-15 reporting


As previously noted, we will be restating our results for the introduction of IFRS 15 'Revenue from contracts with customers'. From the first quarter of the year ending 31 March 2019 we will restate for the new IFRS 15 reporting standard. For further information please see Note 3 to the financial statements.


 


 


Group financial results


 


Revenue by region


 























































































































































































































































































Year ended 31 March



2018


 US$m



2017¹


US$m



Growth %



Total at actual rates



Total at constant rates



Organic at constant rates



North America


















Credit Services



1,484



1,336






11



9



Decision Analytics



178



162






10



10



Marketing Services



229



215






6



6



Consumer Services



755



739






2



(2)



Total ongoing activities



2,646



2,452



8



8



6



Exited business activities¹



5



5












Total North America



2,651



2,457












Latin America


















Credit Services



696



658






4



4



Decision Analytics



61



48






25



25



Marketing Services



31



24






29



29



Total ongoing activities



788



730



8



6



6



Exited business activities



-



-












Total Latin America



788



730












UK and Ireland


















Credit Services



270



246






7



4



Decision Analytics



234



214






6



6



Marketing Services



155



145






4



4



Consumer Services



171



202






(16)



(16)



Total ongoing activities



830



807



3



1



-



Exited business activities



-



-












Total UK and Ireland



830



807












EMEA/Asia Pacific


















Credit Services



156



144






3



3



Decision Analytics



195



160






18



18



Marketing Services



42



37






12



12



Total ongoing activities



393



341



16



11



11



Exited business activities



-



-












Total EMEA/Asia Pacific



393



341












Total revenue - ongoing activities



4,657



4,330



8



7



5



Total revenue - exited business activities



5



5












Revenue



4,662



4,335



8



7






1 Results for 2017 are restated for exited business activities which comprise our Experian Public Records business, divested in March 2018.


See Appendix 2 (page 15) for analyses of revenue, Benchmark EBIT and Benchmark EBIT margin from ongoing activities by business segment.


 


 


Income statement, earnings and EBIT margin analysis


 








































































































































































































































































































Year ended 31 March



2018


 US$m



2017¹


 US$m



Growth %



Total at actual rates



Total at constant rates



Benchmark EBIT by geography















North America



833



779






7



Latin America



267



251






5



UK and Ireland



260



246






2



EMEA/Asia Pacific



9



(3)






n/a



Benchmark EBIT before Central Activities



1,369



1,273






6



Central Activities - central corporate costs



(79)



(76)









Benchmark EBIT from ongoing activities



1,290



1,197



8



7



EBIT - exited business activities¹



1



2









Benchmark EBIT



1,291



1,199



8



7



Net interest



(85)



(75)









Benchmark PBT



1,206



1,124



7



6



Amortisation of acquisition intangibles



(112)



(104)









Acquisition and disposal expenses



(20)



(16)









Adjustment to fair value of contingent consideration



(3)



-









Fair value gain on step acquisition



4



-









Non-Benchmark financing remeasurements



(24)



67









Exceptional items



(57)



-









Profit before tax



994



1,071









Group tax charge



(149)



(259)









Profit after tax



845



812









 















Benchmark earnings















Benchmark PBT



1,206



1,124



7



6



Benchmark tax charge



(309)



(294)









Total Benchmark earnings



897



830









For owners of Experian plc



897



831



8



7



For non-controlling interests



-



(1)









 















Benchmark EPS



US97.8c



US88.4c



11



10



Basic EPS



US92.1c



US86.5c









Weighted average number of ordinary shares



917m



940m
























Benchmark EBIT margin - ongoing activities















North America



31.5%



31.8%









Latin America



33.9%



34.4%









UK and Ireland



31.3%



30.5%









EMEA/Asia Pacific



2.3%



(0.9%)









Benchmark EBIT margin



27.7%



27.6%









1 Results for 2017 are restated for exited business activities which comprise our Experian Public Records business, divested in March 2018.


See Appendix 1 (page 15) and note 4 to the financial statements for definitions of non-GAAP measures.


See Appendix 2 (page 15) for analyses of revenue, Benchmark EBIT and Benchmark EBIT margin from ongoing activities by business segment.


 


 


Business review


 


North America


 


Total revenue from ongoing activities in North America was US$2,646m, with total revenue growth of 8% and organic revenue growth of 6%. The difference relates mainly to the contribution from the acquired CSIdentity Corp (CSIdentity) and Clarity Services businesses.


 


Credit Services


Total revenue growth was 11%, reflecting the acquisition of Clarity Services, with organic revenue growth of 9%. We delivered positive organic revenue growth across all business units. In consumer information, we saw good growth in credit marketing, origination and account management volumes. Mortgage performed strongly following the implementation of the new Fannie Mae trended data contract, and there was a first-time contribution from licence fees related to the Experian Ascend platform. Business information performed well as we expand our API hub. In health, there was further growth in new client bookings and we continue to extend our position with existing clients as we cross-sell our services such as the Universal Patient Identifier.


 


Decision Analytics


Total and organic revenue was up 10%, reflecting a series of new client wins, with good demand across decisioning software, fraud prevention tools and analytics.


 


Marketing Services


Total and organic revenue increased 6%, as we continue to gain traction with digital advertisers.


 


Consumer Services


Total revenue growth was 2%, reflecting the acquisition of CSIdentity, with organic revenue of (2)%. Across our direct-to-consumer activities, we delivered growth in identity protection subscriptions and price comparison services, offset by a decline in the revenue from subscription based credit monitoring services. Partner solutions benefited from new client wins and as we expand our position with existing clients.


 


Benchmark EBIT and EBIT margin


North America Benchmark EBIT from ongoing activities was US$833m, up 7%. The Benchmark EBIT margin from ongoing activities was 31.5%, down 30 basis points year-on-year reflecting strong operating leverage in B2B, offset by investment to support the launch of new consumer offers.


 


Latin America


 


Total revenue from ongoing activities in Latin America was US$788m, with total and organic revenue growth of 6% at constant exchange rates.


 


Credit Services


At constant exchange rates, total and organic revenue growth was 4%. There was strong growth in Brazil reflecting higher core volumes and new contract wins secured with the major Brazilian banks. This was slightly offset by a headwind from countercyclical products and a softer performance in Spanish Latin America.


 


Decision Analytics


Total and organic revenue growth was 25% at constant exchange rates reflecting strong demand across the region for decisioning software, analytics and scoring. 


 


Marketing Services


Total and organic revenue at constant exchange rates increased 29%. We made good progress in Marketing Services with a strong contribution from digital marketing and data insights.


 


Benchmark EBIT and EBIT margin


Latin America Benchmark EBIT from ongoing activities was US$267m, up 5% at constant exchange rates. Benchmark EBIT margin from ongoing activities was 33.9% (2017: 34.4%) as operating leverage and productivity enhancements were offset by adverse mix effects and margin contraction in Spanish Latin America.


 


 


UK and Ireland


 


In the UK and Ireland, total revenue from ongoing activities was US$830m, with total revenue growth of 1% and flat organic revenue at constant exchange rates. The difference is due to the contribution from the acquired Runpath business.


 


Credit Services


Total revenue at constant exchange rates increased 7% and organic revenue growth was 4%. There was good growth in credit reference and background checking volumes, as well as across credit pre-qualification services. We also expanded our position with clients across the banking, telecommunications and price comparison sectors and secured new agreements for Verdus, our new affordability Open Banking platform.


 


Decision Analytics


At constant exchange rates, both total and organic revenue increased 6%. Growth was driven by strong demand for origination and customer management. We also secured new agreements for fraud prevention and identity verification services.


 


Marketing Services


Total and organic revenue growth at constant exchange rates was 4%, driven by strong growth across digital marketing tools. 


 


Consumer Services


At constant exchange rates, total and organic revenue declined by 16%. Revenue declined by 18% in the first half, and by 14% in the second half. There was very strong growth in referral fees through CreditMatcher, offset by attrition in subscription-based credit monitoring revenues.


 


Benchmark EBIT and EBIT margin


Benchmark EBIT from ongoing activities was US$260m, up 2% at constant exchange rates. Benchmark EBIT margin from ongoing activities was 31.3% (2017: 30.5%). The improvement reflected operating leverage across B2B which offset ongoing investment in Consumer Services.


 


 


EMEA/Asia Pacific


 


Total revenue from ongoing activities in EMEA/Asia Pacific was US$393m, with total and organic revenue growth of 11% at constant exchange rates.


 


Credit Services


Total and organic revenue at constant exchange rates was up 3%. Declines in the Nordics were offset by strong volumes in Italy and Spain, and we saw good growth in Southeast Asia and India.


 


Decision Analytics


At constant exchange rates total and organic revenue growth was 18%, as we secured multiple new agreements for PowerCurve decisioning software and for our fraud and identity management solutions.


 


Marketing Services


Total and organic revenue growth at constant exchange rates was 12%, with strong growth across data quality and targeting services.


 


Benchmark EBIT and EBIT margin


Benchmark EBIT was US$9m (2017: US$(3)m). Benchmark EBIT margin from ongoing activities improved 320 basis points at 2.3% as the business gains in scale.


 


Group financial review


Key financials


 




















































































































































Year ended 31 March















2018



2017






Profitability performance measures:












Benchmark EBIT



US$1,291m



US$1,199m






Benchmark EBIT growth at constant currency



7%



6%






Benchmark EBIT margin from ongoing activities



27.7%



27.6%






Benchmark PBT



US$1,206



US$1,124m






Benchmark PBT growth at constant currency



6%



6%






Benchmark EPS



97.8 USc



88.4 USc






Benchmark EPS growth at constant currency



10%



5%






Benchmark tax rate



25.6%



26.2%






Key statutory measures:












Revenue



US$4,662m



US$4,335m






Operating profit



US$1,095m



US$1,075m






Profit before tax



US$994m



US$1,071m






Effective rate of tax based on profit before tax



15.0%



24.2%






Net cash inflow from operating activities - continuing operations



US$1,255m



US$1,314m






Basic EPS



88.9USc



92.1USc






Other performance measures:












Benchmark operating cash flow



US$1,196 m



US$1,149m






Cash flow conversion



93%



96%






Total investment (see Appendix 6)



US$678m



US$825m






Net share repurchases



US$566m



US$353m






Net debt



US$3,408m



US$3,173m






 


The Group has identified and defined certain non-GAAP measures, as they are the key measures used within the business to assess performance. These measures are used within this Group financial review and, unless otherwise indicated, all discussion of Revenue and Benchmark EBIT margin relates to ongoing activities only.


 


Summary


We made good strategic and financial progress during the year, with 7% revenue growth from ongoing activities and a 10% increase in Benchmark EPS, both at constant currency. Benchmark EBIT margin from ongoing activities was 27.7%, up ten basis points.


 


We report our financial results in US dollars and therefore the strengthening of our other trading currencies, primarily the pound sterling, against the US dollar during the year increased total revenue by US$50m and Benchmark EBIT by US$14m, and improved our Benchmark EBIT margin from ongoing activities by ten basis points. Details of the principal exchange rates used are given on page 13.


 


Our Benchmark PBT was US$1,206m (2017: US$1,124m). Benchmark EPS of 97.8 US cents (2017: 88.4 US cents) increased by 11 % at actual exchange rates and 10% at constant currency. There has been upward pressure on interest rates over the year increasing the net interest expense included in Benchmark PBT to US$85m (2017: US$75m). The Benchmark tax rate was 25.6% (2017: 26.2%).


 


We continued to generate strong cash flows, with a 93% conversion of Benchmark EBIT to Benchmark operating cash flow (2017: 96%). Cash conversion reflects the changing mix of our business, as our B2B revenue has a longer cash cycle than that observed in our Consumer Services business. Investment activity in the year has been undertaken within the capital allocation framework previously outlined and includes the acquisition of Clarity Services, Inc. for US$113m and Runpath Group Limited for US$66m.


 


Cash inflow from discontinued operations was US$215m (2017: US$20m) primarily from the divestment of our email/cross-channel marketing business ('CCM').


 


Shareholder returns


For the year ended 31 March 2018 net share repurchases totalled US$566m, of which US$1m was settled in April 2018, (2017: US$353m).


 


The second interim dividend is 31.25 (2017: 28.5) US cents per share giving a total dividend for the year of 44.75 (2017: 41.50) US cents per share, an increase of 8% on the prior year reflecting the underlying strength of the business.


 


Ordinary dividends paid in the year amounted to US$388m (2017: US$381m). The Group has significant distributable reserves of US$3.49bn in the UK entity responsible for distributing the Group's dividend.


 


Taking the total dividend and share repurchases together, during the year we returned a total of US$954m to shareholders.


 


Growing the business


We continued to deliver good growth during the year, with organic revenue growth within our mid-single-digit target range.


 


Total revenue growth in the year from ongoing activities was 7% at constant exchange rates and 8% at actual rates. This year, Benchmark EBIT from ongoing activities was US$1,290m, growing at 8% at actual exchange rates and 7% at constant currency.


 


Investment in innovation is providing new growth opportunities as we increase our product offering. Performance across our B2B operations was very strong as clients engage with us to access new superior sources of data and there is an improving outlook in our Consumer Services business. 


 


Generating value


The table at Appendix 3 on page 16 provides a reconciliation of our underlying profitability, as measured by Benchmark EBIT, to our statutory profit before tax.


 


Our net interest expense and the related cash flows have benefited from the strong cash generation and from low interest rates globally, though there has been upward pressure on rates over the year. At 31 March 2018, the interest on 60% of our net funding was at fixed rates (2017: 63%).


 


Our effective tax rate on Benchmark PBT was 25.6%, reflecting the mix of profits and prevailing tax rates by territory.


 


Our total tax charge for the year was impacted by some one-time movements. In particular, we recognised a credit of US$116m as our US net deferred tax liabilities were revalued following the US Tax Cuts and Jobs Act in December 2017, which reduced the US federal corporate tax rate from 35% to 21% from 1 January 2018.


 


We believe the Group's effective tax rate in the year ending 31 March 2019 will be broadly unchanged, notwithstanding US tax reform impacts.


 


The equivalent cash tax rate remains below our Benchmark tax rate and a reconciliation is provided in the table at Appendix 7. It is currently anticipated that our cash tax rate will increase and move closer to our Benchmark tax rate over time, as tax amortisation of goodwill on earlier acquisitions and prior tax losses are utilised.


 


Basic EPS was 88.9 US cents (2017: 92.1 US cents). Basic EPS for the year ended 31 March 2018 is reduced by 8.9 (2017: increased by 3.7) US cents in respect of discontinued operations and other adjustments made to derive Benchmark EPS. Benchmark EPS was 97.8 US cents (2017: 88.4 US cents), an increase of 11% at actual exchange rates 10% constant exchange rates. Further information is given in note 11 to the financial statements.


 


At 31 March 2018, we had 980 million shares in issue of which some 74 million were held by employee trusts and as treasury shares. Accordingly, the number of shares to be used for the purposes of calculating basic EPS from 31 March 2018 is 906 million. Issues and purchases of shares after 31 March 2018 will result in amendments to this figure.


 


The total dividend per share for the year is covered 2.2 times by Benchmark EPS (2017: 2.1 times) in accordance with our previously declared policy. Ordinary dividends paid in the year amounted to US$388m (2017: US$381m).


 


Cash and liquidity management


As shown in the Cash flow and net debt summary table at Appendix 5 on page 17, we generated good Benchmark operating and free cash flows in the year. The continued strength of our operating cash flow performance reflects the nature of our business and financial model and our focus on working capital management.


 


Net debt at 31 March 2018 was US$3,408m (2017: US$3,173m), with undrawn committed borrowing facilities of US$2,325m (2017: US$2,375m). Our net debt at 31 March 2018 was 2.1 times Benchmark EBITDA (2017: 2.1 times), compared to our target range of 2.0 to 2.5 times.


 


Investment activity in the year has been undertaken within the capital allocation framework previously outlined and includes the acquisition of Clarity Services, Inc. for US$113m. Total investment was US$678m (2017: US$825m) and comprised cash flows for net capital expenditure, acquisitions and investments. Our capital expenditure of US$431m (2017: US$399m) was 9% (2017: 9%) of total revenue.


 


 


Key statutory measures


 


Revenue for the year ended 31 March 2018 was US$4,662m (2017: US$4,335m) reflecting an improved underlying performance of ongoing activities offset by the impact of exited businesses. 


 


Operating profit for the year ended 31 March 2018 was US$1,095m (2017: US$1,075m).


 


Cash generated from continuing operations was US$1,255m (2017: US$1,314m) reflecting movements in working capital and higher tax payments of US$47m.


 


Basic EPS was 88.9 US cents (2017: 92.1 US cents). Earnings in the prior year benefited from a gain of US$67m in non-cash financing fair value remeasurements within net finance costs. This year there was a small charge of US$4m.


 


The effective rate of tax based on profit before tax has improved from 24.2% in the year ended 31 March 2017 to 15.0% in the current financial year. This is largely due to a credit arising on the restatement of deferred tax balances in North America following US tax reform and the recognition of previously unrecognised tax losses.


 


At 31 March 2018, net assets amounted to US$2,624m (2017: US$2,651m). Capital employed, as defined in note 4(r) to the financial statements, was US$6,342m (2017: US$6,149m).


 


There was a decrease in equity of US$27m from US$2,651m at 31 March 2017 with movements detailed in the Group statement of changes in equity on page 21.


 


Key movements in equity during the year included:


 


• Profit for the year of US$815m.


 


• Currency translation gains of US$28m.


 


• Remeasurement gains of US$28m in respect of defined benefit pension plans.


 


• Ordinary dividends of US$388m of which US$370m (2017:US$358m) was paid by a UK subsidiary undertaking which has distributable reserves of US$3,485.5m (2017: US$5,152.1m).


 


• A movement of US$566m in connection with net share purchases.


 


Foreign exchange rates


Foreign exchange - average rates


 


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


 










































2018



2017






Movement against the US dollar



US dollar : Brazilian real



3.22



3.30






2%



Pound sterling : US dollar



1.33



1.30






(2%)



Euro : US dollar



1.17



1.10






(6%)



US dollar : Colombian peso



2,935



2,969






1%



 


Foreign exchange - closing rates


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


 


































































2018






2017






US dollar : Brazilian real












3.31






3.17






Pound sterling : US dollar












1.41






1.25






Euro : US dollar












1.23






1.07






US dollar : Colombian peso












2,794






2,894






 


Risks and uncertainties


The ten principal risks and uncertainties faced by the Group are summarised in note 26 to the financial statements.


 


 


Change to business segments


 


Following a review, our regional operating segments (our statutory reporting segments) for reporting purposes will remain the same. We will continue to organise and group these into the four segments of North America, Latin America, UK and Ireland, and EMEA/Asia Pacific for reporting purposes.


 


Going forward, for the financial year ending 31 March 2019, the three business segments of Credit Services, Decision Analytics and Marketing Services will be consolidated into a single 'Business-to-Business' (B2B) segment. Consumer Services will remain as a separate segment. In total, there will be two business segments.


 


Within B2B there will be two sub-divisions: Data and Decisioning. Data will include: Credit Services; and Targeting (from Marketing Services). Decisioning will include: Decision Analytics; Data Quality (from Marketing Services); and Health (from Credit Services) given the nature of solutions it provides.


 


 



























































































































Year ended 31 March 2018 - Revenue reconciliation









US$m






Data















Old Credit Services









2,606






plus Targeting from old Marketing Services









296






less Health









(342)






less Other









(9)






Total Data









2,551





















Decisioning















Old Decision Analytics









668






plus Data Quality from old Marketing Services









161






plus Health









342






plus Other









9






Total Decisioning









1,180






Total Business-to-Business









3,731






Consumer Services









926






Total revenue - ongoing activities









4,657






 


1 Business-to-Business disclosures will be of revenue, Benchmark EBIT and Benchmark EBIT margin.


2 Disclosures for the Data and Decisioning sub-divisions will be on a revenue-only basis.


 


 


Appendices


 


1. Non-GAAP financial information


 


We have identified and defined certain measures that we believe assist in understanding the performance of the Group. These measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but management has included them as these are considered to be key measures used within the business for assessing performance. 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 4 to the financial statements.


 






































































































































































































































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


 






Year ended 31 March









Growth %



 



2018


 


US$m



2017


 


US$m



Total at constant rates



Organic at constant rates






Revenue


















Credit Services



2,606



2,384



8



7






Decision Analytics



668



584



12



12






Marketing Services



457



421



7



7






Consumer Services



926



941



(2)



(5)






Total - Ongoing activities



4,657



4,330



7



5






Exited business activities



5



5



-



-






Total



4,662



4,335



7



5






 


















Benchmark EBIT


















Credit Services



898



815



9









Decision Analytics



144



120



15









Marketing Services



133



95



39









Consumer Services



194



243



(20)









Total business segments



1,369



1,273



6









Central Activities - central corporate costs



(79)



(76)



3









Total - Ongoing activities



1,290



1,197



7









Exited business activities



1



2



n/a









Total



1,291



1,199



7



























Benchmark EBIT margin - ongoing activities


















Credit Services



34.5%



34.2%












Decision Analytics



21.6%



20.5%












Marketing Services



29.1%



22.6%












Consumer Services



21.0%



25.8%












EBIT margin



27.7%



27.6%












 


 


3. Reconciliation of Benchmark EBIT to statutory profit before tax


 































































Year ended 31 March



2018



2017






US$m



US$m






Benchmark EBIT from ongoing activities



1,290



1,197






Exited business activities



1



2






Benchmark EBIT



1,291



1,199






Net interest expense



(85)



(75)






Benchmark PBT



1,206



1,124






Exceptional items (Appendix 4)



(57)



-






Other adjustments made to derive Benchmark PBT (Appendix 4)



 


(155)



 


(53)






Profit before tax



994



1,071






 


 


4. Exceptional items and Other adjustments made to derive Benchmark PBT


 




















































































































Year ended 31 March



2018






2017









US$m






US$m






Exceptional items:















Canadian legal settlement



32






-






Legal provisions movements



25






-






Exceptional items



57






-





















Other adjustments made to derive Benchmark PBT:















Amortisation of acquisition intangibles



112






104






Acquisition expenses



20






16






Adjustment to the fair value of contingent consideration



3






-






Interest on uncertain tax provisions



20






-






Fair value gain on step acquisition



(4)






-






Financing fair value remeasurements



4






(67)






Other adjustments made to derive Benchmark PBT



155






53






Charge for Exceptional items and Other adjustments made to derive Benchmark PBT



 


212






 


53






 


An explanation of the reasons for the exclusion of such items from our definition of Benchmark PBT is given in note 4 to the financial statements.


 


 


5. Cash flow and net debt summary


 












































































































































































Year ended 31 March



2018






2017









US$m






US$m






Benchmark EBIT



1,291






1,199






Amortisation and depreciation charged to Benchmark PBT



326






322






Net capital expenditure (Appendix 6)



(422)






(393)






Increase in working capital



(70)






(39)






Profit retained in associates



(5)






(1)






Charge for share incentive plans



76






61






Benchmark operating cash flow



1,196






1,149






Net interest paid



(86)






(70)






Tax paid - continuing operations



(191)






(144)






Dividends paid to non-controlling interests



(4)






(2)






Benchmark free cash flow



915






933






Acquisitions



(169)






(385)






Purchase of investments



(87)






(47)






Disposal of businesses and investments



2






(4)






Exceptional items other than disposal of businesses



(54)






8






Ordinary dividends paid



(388)






(381)






Net cash inflow - continuing operations



219






124






Net debt at 1 April



(3,173)






(3,023)






Net share repurchases



(565)






(353)






Discontinued operations



215






20






Exchange and other movements



(104)






59






Net debt at 31 March



(3,408)






(3,173)






 


6. Reconciliation of total investment


 




























































Year ended 31 March



2018






2017









US$m






US$m






Capital expenditure as reported in the Group cash flow statement



431






399






Disposal of property, plant and equipment



(26)






(15)






Profit on disposal of fixed assets



17






9






Net capital expenditure as reported in the Cash flow and net debt summary



 


422






 


393






Acquisitions


Purchase of investments



169


87






385


47






Total investment



678






825






 


7. Cash tax reconciliation


 





















































Year ended 31 March



2018






2017









%






%






Tax charge on Benchmark PBT



25.6






26.2






Tax relief on intangible assets



(4.8)






(6.6)






Benefit of brought forward tax losses



(1.1)






(3.9)






Other



(3.8)






(2.9)






Tax paid as a percentage of Benchmark PBT



15.9






12.8






 


Group income statement


for the year ended 31 March 2018



















































































































































































































































































































































































































































































































































































2018









2017






 






Benchmark1



Non-benchmark2



Statutory


Total









Benchmark1



Non-benchmark2



Statutory


Total






 






US$m



US$m



US$m









US$m



US$m



US$m






 



Revenue (note 5(a))



4,662



-



4,662









4,335



-



4,335






 



Labour costs



(1,716)



(7)



(1,723)









(1,609)



(6)



(1,615)






Data and information technology costs



(608)



-



(608)









(521)



-



(521)






Amortisation and depreciation charges



(326)



(112)



(438)









(322)



(104)



(426)






Marketing and customer acquisition costs



(328)



-



(328)









(322)



-



(322)






Other operating charges



(401)



(69)



(470)









(366)



(10)



(376)






Total operating expenses



(3,379)



(188)



(3,567)









(3,140)



(120)



(3,260)






 



Operating profit/(loss)



1,283



(188)



1,095









1,195



(120)



1,075






 

































 



Interest income



15



-



15









14



-



14






 



Finance expense



(100)



(24)



(124)









(89)



67



(22)






 



Net finance (costs)/income (note 8(a))



(85)



(24)



(109)









(75)



67



(8)






 



Share of post-tax profit of associates



8



-



8









4



-



4






 



Profit/(loss) before tax (note 5(a))



1,206



(212)



994









1,124



(53)



1,071






 



Group tax (charge)/credit (note 9(a))



(309)



160



(149)









(294)



35



(259)






 



Profit/(loss) for the financial year from continuing operations



897



(52)



845









830



(18)



812






 



(Loss)/profit for the financial year from discontinued operations (note 10(a))



-



(30)



(30)









-



53



53






 



Profit/(loss) for the financial year



897



(82)



815









830



35



865






 



 






























 

































 



Attributable to:






























 



Owners of Experian plc



897



(82)



815









831



35



866






 



Non-controlling interests



-



-



-









(1)



-



(1)






 



Profit/(loss) for the financial year



897



(82)



815









830



35



865






 



 






























 



Total Benchmark EBIT1



1,291



-



1,291









1,199



-



1,199






 

































 






US cents



US cents



US cents









US cents



US cents



US cents






 



Earnings per share (note 11(a))






























 



Basic



97.8



(8.9)



88.9









88.4



3.7



92.1






 



Diluted



96.9



(8.9)



88.0









87.7



3.7



91.4






 

































 



Earnings per share from continuing operations (note 11(a))






























 



Basic



97.8



(5.7)



92.1









88.4



(1.9)



86.5






 



Diluted



96.9



(5.7)



91.2









87.7



(1.9)



85.8






 

































 



Benchmark PBT per share1,3



131.5















119.6












 

































 



Full year dividend per share1


 









44.75















41.50






 



 


1.      Total Benchmark EBIT, Benchmark PBT per share and Full year dividend per share are non-GAAP measures, defined where appropriate in note 4 to the financial statements.


 


2.      The loss before tax for non-benchmark items of US$212m (2017: US$53m) comprises a charge for exceptional items of US$57m (2017: US$nil) and charges for Other adjustments made to derive Benchmark PBT of US$155m (2017: US$53m). Further information is given in note 7 to the financial statements.


 


3.     Benchmark PBT per share is calculated by dividing Benchmark PBT of US$1,206m by the weighted average number of ordinary shares of 917 million. The amount is stated in US cents per share.


 


The segmental disclosures in notes 5 and 6 indicate the impact of business disposals on the comparative revenue and Total Benchmark EBIT figures.


 


 


Group statement of comprehensive income


for the year ended 31 March 2018





















































































































































































 


 


2018






2017












US$m






US$m



Profit for the financial year









815






865



Other comprehensive income


















Items that will not be reclassified to profit or loss:


















Remeasurement of post-employment benefit assets and obligations (note 14(b))









28






(13)



Deferred tax (charge)/credit









(6)






2



Items that will not be reclassified to profit or loss









22






(11)



Items that may be reclassified subsequently to profit or loss:


















Fair value gains recognised on available-for-sale financial assets









-






3



Currency translation gains









28






18



Items that may be reclassified subsequently to profit or loss









28






21



Other comprehensive income for the financial year1






 



50



 



10



Total comprehensive income for the financial year









865



 



875





















Attributable to:


















Continuing operations









895






823



Discontinued operations2









(30)






53



Owners of Experian plc









865






876



Non-controlling interests









-






(1)



Total comprehensive income for the financial year






 



865



 



875



 


1.     Amounts reported within Other comprehensive income 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. Other items within Other comprehensive income are recognised in retained earnings.


 


2.     The tax charge recognised in respect of discontinued operations in the year was US$53m (2017: credit of US$45m).


 


 


Group balance sheet


at 31 March 2018















































































































































































































































































































































































































Notes






 2018






 2017












US$m






US$m



Non-current assets


















Goodwill









4,452






4,245



Other intangible assets



13






1,538






1,461



Property, plant and equipment



13






335






329



Investments in associates









125






42



Deferred tax assets









140






83



Post-employment benefit assets



14(a)






47






14



Trade and other receivables









11






6



Available-for-sale financial assets









84






57



Other financial assets









194






57












6,926






6,294



Current assets


















Trade and other receivables









1,112






910



Current tax assets









27






26



Other financial assets









4






20



Cash and cash equivalents



15(e)






156






83












1,299






1,039



Assets classified as held-for-sale









-






358












1,299






1,397



Current liabilities


















Trade and other payables









(1,294)






(1,109)



Borrowings









(956)






(759)



Current tax liabilities









(278)






(150)



Provisions









(70)






(50)



Other financial liabilities









(86)






(15)












(2,684)






(2,083)



Liabilities classified as held-for-sale









-






(58)












(2,684)






(2,141)



Net current liabilities









(1,385)






(744)



Total assets less current liabilities









5,541






5,550



Non-current liabilities


















Trade and other payables









(44)






(15)



Borrowings









(2,558)






(2,285)



Deferred tax liabilities









(206)






(296)



Post-employment benefit obligations



14(a)






(58)






(54)



Other financial liabilities









(51)






(249)












(2,917)






(2,899)



Net assets









2,624






2,651





















Equity


















Called up share capital



18






97






100



Share premium account



18






1,546






1,530



Retained earnings









18,745






18,813



Other reserves









(17,771)






(17,804)



Attributable to owners of Experian plc









2,617






2,639



Non-controlling interests









7






12



Total equity









2,624






2,651



 


 


Group statement of changes in total equity


for the year ended 31 March 2018


 





























































































































































































Called up share capital


(Note 18)



Share premium account


(Note 18)



Retained earnings



Other reserves



Attributable to owners of Experian plc



Non-controlling interests



Total equity



 






US$m



US$m



US$m



US$m



US$m



US$m



US$m



 



At 1 April 2017



100



1,530



18,813



(17,804)



2,639



12



2,651



Profit for the financial year



-



-



815



-



815



-



815



Other comprehensive income for the financial year



-



-



22



28



50



-



50



Total comprehensive income for the financial year



-



-



837



28



865



-



865



Transactions with owners:
























Employee share incentive plans:
























- value of employee services



-



-



76



-



76



-



76



- shares issued on vesting



-



16



-



-



16



-



16



- other exercises of share awards and options



-



-



(32)



42



10



-



10



- purchase of shares by employee trusts



-



-



-



(37)



(37)



-



(37)



- other payments



-



-



(2)



-



(2)



-



(2)



Purchase and cancellation of own shares



(3)



-



(542)



-



(545)



-



(545)



Transactions in respect of non-controlling interests



-



-



(17)



-



(17)



(1)



(18)



Dividends paid



-



-



(388)



-



(388)



(4)



(392)



Transactions with owners



(3)



16



(905)



5



(887)



(5)



(892)



At 31 March 2018



97



1,546



18,745



(17,771)



2,617



7



2,624



 


for the year ended 31 March 2017





































































































































































































Called up share capital


(Note 18)



Share premium account


(Note 18)



Retained earnings



Other reserves



Attributable to owners of Experian plc



Non-controlling interests



Total equity






US$m



US$m



US$m



US$m



US$m



US$m



US$m



At 1 April 2016



102



1,519



18,633



(17,830)



2,424



14



2,438



Profit for the financial year



-



-



866



-



866



(1)



865



Other comprehensive income for the financial year



-



-



(8)



18



10



-



10



Total comprehensive income for the financial year



-



-



858



18



876



(1)



875



Transactions with owners:
























Employee share incentive plans:
























- value of employee services



-



-



61



-



61



-



61



- shares issued on vesting



-



11



-



-



11



-



11



- other exercises of share awards and options



-



-



(28)



36



8



-



8



- related tax credit



-



-



7



-



7



-



7



- purchase of shares by employee trusts



-



-



-



(28)



(28)



-



(28)



- other payments



-



-



(3)



-



(3)



-



(3)



Purchase and cancellation of own shares



(2)



-



(334)



-



(336)



-



(336)



Transactions in respect of non-controlling interests



-



-



-



-



-



1



1



Dividends paid



-



-



(381)



-



(381)



(2)



(383)



Transactions with owners



(2)



11



(678)



8



(661)



(1)



(662)



At 31 March 2017



100



1,530



18,813



(17,804)



2,639



12



2,651



 


 


Group cash flow statement


for the year ended 31 March 2018







































































































































































































































































































































 


 


Notes


 






 


 


2018






2017












US$m






US$m



Cash flows from operating activities


















Cash generated from operations



15(a)






1,529






1,525



Interest paid









(98)






(85)



Interest received









12






15



Dividends received from associates









3






3



Tax paid









(191)






(144)



Net cash inflow from operating activities - continuing operations



 



 



1,255



 



1,314



Net cash (outflow)/inflow from operating activities - discontinued operations



10(b)



 



(63)



 



41



Net cash inflow from operating activities



 



 



1,192



 



1,355





















Cash flows from investing activities


















Purchase of other intangible assets









(360)






(319)



Purchase of property, plant and equipment









(71)






(80)



Sale of property, plant and equipment









26






15



Purchase of other financial assets









(31)






(14)



Acquisition of subsidiaries, net of cash acquired



15(c)






(146)






(363)



Purchase of investments in associates









(56)






(33)



Disposal of subsidiaries - continuing operations









2






(4)



Net cash flows used in investing activities - continuing operations









(636)






(798)



Net cash flows from/(used in) investing activities - discontinued operations


 



10(b)






278






(21)



Net cash flows used in investing activities



 



 



(358)



 



(819)





















Cash flows from financing activities


















Cash inflow in respect of shares issued



15(d)






16






11



Cash outflow in respect of share purchases



15(d)






(581)






(364)



Other payments on vesting of share awards









(2)






(3)



Payments to acquire non-controlling interests



15(c)






(8)






(9)



New borrowings









864






159



Repayment of borrowings









(653)






(3)



Net payments for cross currency swaps and foreign exchange contracts









(13)






(23)



Receipts from equity swaps









1






2



Dividends paid









(392)






(383)



Net cash flows used in financing activities









(768)






(613)



 


 


















Net increase/(decrease) in cash and cash equivalents









66






(77)



Cash and cash equivalents at 1 April









81






151



Exchange movements on cash and cash equivalents









(10)






7



Cash and cash equivalents at 31 March



15(e)






137






81



 


Notes to the financial statements


for the year ended 31 March 2018


1. Corporate information

Experian plc (the 'Company') is the ultimate parent company of the Experian group of companies ('Experian' or the 'Group'). Experian is the 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 ordinary shares are traded on the London Stock Exchange's Regulated Market and have a Premium Listing.


2. Basis of preparation

The financial information set out in this preliminary announcement does not constitute the Group's statutory financial statements, which comprise the annual report and audited financial statements, for the years ended 31 March 2018 or 31 March 2017 but is derived from the statutory financial statements for the year ended 31 March 2018. The Group's statutory financial statements for the year ended 31 March 2018 will be made available to shareholders in June 2018 and delivered to the Jersey Registrar of Companies in due course. The auditor has reported on those financial statements and have given an unqualified report which does not contain a statement under Article 111(2) or Article 111(5) of the Companies (Jersey) Law 1991. The Group's statutory financial statements for the year ended 31 March 2017 have been delivered to the Jersey Registrar of Companies. The auditor reported on those financial statements and gave an unqualified report which did not contain a statement under Article 111(2) or Article 111(5) of the Companies (Jersey) Law 1991.


The Group's statutory financial statements for the year ended 31 March 2018 have been:


·    prepared in accordance with the Companies (Jersey) Law 1991 and International Financial Reporting Standards ('IFRS' or 'IFRSs') as adopted for use in the European Union (the 'EU') and IFRS Interpretations Committee interpretations (together 'EU-IFRS');


·    prepared on the going concern basis and under the historical cost convention, as modified for the revaluation of available-for-sale financial assets and certain other financial assets and financial liabilities;


·    presented in US dollars, the most representative currency of the Group's operations, and generally rounded to the nearest million;


·    prepared using the principal exchange rates set out on page 13; and


·    designed to voluntarily include disclosures in line with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS.


 


Other than those disclosed in this preliminary announcement, no significant events impacting the Group have occurred between 31 March 2018 and 16 May 2018 when this preliminary announcement was approved for issue.


This preliminary announcement has been prepared in accordance with the Listing Rules of the UK Financial Conduct Authority, using the accounting policies applied in the preparation of the Group's statutory financial statements for the year ended 31 March 2018. Those policies were published in full in the Group's statutory financial statements for the year ended 31 March 2017 and are available on a corporate website, at www.experianplc.com/annualreport.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


3. Recent accounting developments

There have been no accounting standards, amendments and interpretations effective for the first time in these financial statements and which have had a material impact on the financial statements.


There are a number of new standards and amendments to existing standards currently in issue but not yet effective, including three significant standards:


·    IFRS 9 'Financial Instruments';


·    IFRS 15 'Revenue from contracts with customers'; and


·    IFRS 16 'Leases'.


IFRS 9 and IFRS 15 are endorsed and effective for us for the year ending 31 March 2019 with IFRS 16 effective for us for the year ending 31 March 2020.


IFRS 9


IFRS 9 'Financial Instruments' replaces IAS 39 'Financial Instruments: Recognition and Measurement'. IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics.


 


Most of the financial assets we hold are measured at amortised cost or 'fair value through the profit and loss account' ('FVTPL') and no material change is expected for these assets. Those investments in the IAS 39 category of 'available for sale assets' will be designated as measured at 'fair value through other comprehensive income' ('FVOCI'), retaining the same financial statement effect as under IAS 39.


 


IFRS 9 replaces the 'incurred loss' impairment model in IAS 39 with a forward-looking 'expected credit loss' ('ECL') model. We will apply the hedge accounting requirements of IFRS 9. No material changes are expected to our hedge accounting relationships.


 


The Group will apply the classification and impairment changes retrospectively, however we will take advantage of the exemption allowing no restatement of comparative information for prior periods. IFRS 9 will require new disclosures, in particular regarding hedge accounting, credit risk and ECLs which we are currently assessing.


 


IFRS 15


IFRS 15 'Revenue from Contracts with Customers' establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. IFRS 15 replaces all existing revenue requirements in EU-IFRS and applies to all sales contracts with customers, unless the contracts are in the scope of the accounting standards on leases, insurance contracts and financial instruments.


 


The Group has undertaken a detailed review of its contracts and revenue recognition procedures to implement the new standard and is now evaluating the additional disclosure requirements that IFRS 15 introduces. In accordance with the IFRS 15 transition guidance, we will restate our financial results for the year ended 31 March 2018 upon application of the new standard. While the Group sees a mix of revenue acceleration on some contracts and revenue deferral on other contracts, growth rates are not expected to materially change and there is no effect on cash flow.


 


IFRS 15 is based on the principle that revenue is recognised when control of goods or services is transferred to the customer and provides a single, principles-based five-step revenue recognition model to be applied to all sales contracts. In implementing IFRS 15, the primary effect is in relation to certain contracts which are predominantly in the Decision Analytics and Credit Services business segments. The contracts affected represent less than 15% of Group revenue, with the effect being a change in the period in which multi-year revenue is recognised.


 


The key change for the Group under IFRS 15 is the introduction of the concept of separately identifiable performance obligations and recognising revenue when these have been met and the customer takes control. It will therefore result in fewer of our services being separated/unbundled. We see the largest impacts in the following areas:


·    Software licence and delivery services will primarily be accounted for as a single performance obligation, with revenue recognised when the combined offering is delivered to the customer. We will see a new distinction in treatment between Experian-hosted solutions (revenue spread over the contract term) and on-premise software licence arrangements (revenue recognised on delivery completion). For these contracts we will generally see a delay in when delivery revenue is recognised compared to current accounting.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


3. Recent accounting developments (continued)

·      


·    Batch data arrangements which include an ongoing update service will be apportioned across each delivery to the customer, rather than apportioned on Experian delivery hours.


·    Platform set-up fees across a range of business units will be recognised over the contractual life of the wider service provided to the customer, compared to the current approach of recognition as the set-up is delivered.


·    There are a small number of arrangements where we previously concluded that the Group is acting as Principal (recognising revenue and costs on a gross basis) and under IFRS 15 guidance we now determine that we are acting as an Agent (only the fee which we are entitled to for arranging the promised goods/services is recognised as revenue). These presentational changes have no effect on our reported Benchmark EBIT.


·    Certain costs will be deferred as Contract Assets and expensed over the period in which the related revenue stream is recognised. These costs include sales commissions and labour costs directly relating to an implementation service.


Our provisional findings are that the effect of adopting IFRS 15 is not considered material to the Group. The estimated adjustment to total equity at 1 April 2018 is a decrease of US$134m. For the financial year ended 31 March 2018, the restatement to an IFRS 15 basis is expected to result in our revenue and profit after tax for the financial year being US$78m and US$31m lower respectively than under the previous accounting standards. Our Benchmark operating cash flow will not be affected by this restatement and on a full-year basis we do not expect a material effect on our future growth rates.


 


IFRS 16


IFRS 16 'Leases' introduces a new on-balance sheet approach for all lease payables. A range of transition options are available, these and potential disclosures are currently being assessed by the Group. It is expected that the discounted value of operating commitments as disclosed will be brought onto the balance sheet in the form of a material right-of-use asset and lease liability. This change is not expected to have a material effect on the net assets or profit of the Group once implemented.


 


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


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


4. Use of non-GAAP measures in the financial statements

As detailed below, the Group has identified and defined certain measures that it believes assist understanding of Experian's performance. The measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, 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 5(a))

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' post-tax results.


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 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 calculation 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 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 5(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 31 March 2018, which are not disclosed as exited business activities, are reported as ongoing activities.

(f) Constant exchange rates

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.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


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

(g) Total growth (note 5(d))

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.


(h) Organic revenue growth (note 5(d))

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.


(i) Benchmark earnings and Total Benchmark earnings (note 11)

Benchmark earnings comprise Benchmark PBT less attributable tax and non-controlling interests. The attributable tax for this purpose excludes significant tax credits and charges arising in the year which, in view of their size or nature, are not comparable with previous years, together with tax arising on exceptional items and on other adjustments made to derive Benchmark PBT. Benchmark PBT less attributable tax is designated as Total Benchmark earnings.


(j) Benchmark earnings per share ('Benchmark EPS') (note 11(a))

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.


(l) Benchmark tax charge and rate (note 9(b))

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 9(b) to these financial statements. The Benchmark effective rate of tax is calculated by dividing the Benchmark tax charge by Benchmark PBT.


(m) Exceptional items (note 7(a))

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.


(n) Full-year dividend per share (note 12)

Full-year dividend per share comprises the total of dividends per share announced in respect of the financial year.


(o) Benchmark operating and Benchmark free cash flow

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 and the 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.

(p) Cash flow conversion

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


(q) Net debt and Net funding (note 16)

Net debt is borrowings (and the fair value of derivatives hedging borrowings) excluding 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 accrued interest, less cash held in Group Treasury.


(r) Return on capital employed ('ROCE')

ROCE is defined as Benchmark EBIT less tax at the Benchmark rate divided by a three-point average of capital employed 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 the average capital employed in discontinued operations, and to add Net debt.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


5. Segment information


IFRS 8 disclosures



















































































































































































































































































































































































































































































































(a) Income statement









North


 America


 



Latin


America


 



UK and Ireland


 



 EMEA/


Asia Pacific1


 



Total operating segments



Central


Activities


 



Total continuing  operations



 



Year ended 31 March 2018



US$m



US$m



US$m



US$m



US$m



US$m



US$m



 



Revenue from external customers
























 



Ongoing activities



2,646



788



830



393



4,657



-



4,657



 



Exited business activities



5



-



-



-



5



-



5



 



Total



2,651



788



830



393



4,662



-



4,662



 



























 



Reconciliation from Benchmark EBIT to profit/(loss) before tax
























 



Benchmark EBIT
























 



Ongoing activities



833



267



260



9



1,369



(79)



1,290



 



Exited business activities



1



-



-



-



1



-



1



 



Total



834



267



260



9



1,370



(79)



1,291



 



Net interest expense included in Benchmark PBT (note 8(b))



-



-



-



-



-



(85)



(85)



 



Benchmark PBT



834



267



260



9



1,370



(164)



1,206



 



Exceptional items (note 7(a))



(57)



-



-



-



(57)



-



(57)



 



Amortisation of acquisition intangibles



(79)



(20)



(9)



(4)



(112)



-



(112)



 



Acquisition expenses



(13)



-



(5)



(2)



(20)



-



(20)



 



Adjustment to the fair value of contingent consideration



-



-



(3)



-



(3)



-



(3)



 



Fair value gain on step acquisition



-



-



4



-



4



-



4



 



Interest on uncertain tax provision



-



-



-



-



-



(20)



(20)



 



Financing fair value remeasurements



-



-



-



-



-



(4)



(4)



 



Profit/(loss) before tax



685



247



247



3



1,182



(188)



994



 







































North


 America


 



Latin


America


 



UK and Ireland


 



EMEA/


Asia Pacific1



Total operating segments



Central


Activities


 



Total continuing operations



 



Year ended 31 March 2017



US$m



US$m



US$m



US$m



US$m



US$m



US$m



 



























 



Revenue from external customers
























 



Ongoing activities



2,452



730



807



341



4,330



-



4,330



 



Exited business activities



5



-



-



-



5



-



5



 



Total



2,457



730



807



341



4,335



-



4,335



 



























 



Reconciliation from Benchmark EBIT to profit/(loss) before tax
























 



Benchmark EBIT
























 



Ongoing activities



779



251



246



(3)



1,273



(76)



1,197



 



Exited business activities



2



-



-



--



2



-



2



 



Total



781



251



246



(3)



1,275



(76)



1,199



 



Net interest (note 8(b))



-



-



-



-



-



(75)



(75)



 



Benchmark PBT



781



251



246



(3)



1,275



(151)



1,124



 



Amortisation of acquisition intangibles



(70)



(22)



(8)



(4)



(104)



-



(104)



 



Acquisition expenses



(12)



(1)



(1)



(2)



(16)



-



(16)



 



Financing fair value remeasurements



-



-



-



-



-



67



67



 



Profit/(loss) before tax



699



228



237



(9)



1,155



(84)



1,071



 



1.     EMEA/Asia Pacific represents all other operating segments.


2.     Revenue and Benchmark EBIT by operating segment for the year ended 31 March 2017 have been re-analysed between ongoing and exited business activities, following the disposal of our Experian Public Records business in March 2018.


 


Additional information by operating segment, including that on total and organic growth at constant exchange rates, is provided within pages 3 to 9.


 


 



 


Notes to the financial statements (continued)


for the year ended 31 March 2018


5. Segment information (continued)


























































(b) Revenue by country- continuing operations















 2018






2017






US$m






US$m



USA



2,646






2,449



UK



823






800



Brazil



707






649



Colombia



63






62



Other



423






375






4,662






4,335



Revenue is primarily attributable to countries other than Ireland. No single client accounted for 10% or more of revenue in the current or prior year. Revenue from the USA, the UK and Brazil in aggregate comprises 90% (2017: 90%) of Group revenue.


(c) Revenue by business segment


The additional analysis of revenue from external customers provided to the chief operating decision-maker and accordingly reportable under IFRS 8 is given within note 6. This is supplemented by voluntary disclosure of the profitability of groups of service lines. For ease of reference, we continue to use the term 'business segments' when discussing the results of groups of service lines.


(d) Reconciliation of revenue from ongoing activities















































































































North


 America


 



Latin


America


 



UK and Ireland


 



EMEA/


Asia Pacific



Total ongoing activities






US$m



US$m



US$m



US$m



US$m



Revenue for the year ended 31 March 2017



2,452



730



807



341



4,330



Adjustment to constant exchange rates



-



(3)



(3)



1



(5)



Revenue at constant exchange rates for the year ended 31 March 2017



2,452



727



804



342



4,325



Organic revenue growth



139



46



(2)



36



219



Revenue from acquisitions



55



-



8



-



63



Revenue at constant exchange rates for the year ended 31 March 2018



2,646



773



810



378



4,607



Adjustments to actual exchange rates



-



15



20



15



50



Revenue for the year ended 31 March 2018



2,646



788



830



393



4,657





















Organic revenue growth at constant rates



6%



6%



-



11%



5%



Total revenue growth at constant rates



8%



6%



1%



11%



7%



 


The above table demonstrates the application of the methodology set out in note 4 in determining organic and total revenue growth at constant exchange rates. Revenue at constant exchange rates for both years is reported using the average exchange rates applicable for the year ended 31 March 2017.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


6. Information on business segments (including non-GAAP disclosures)

























































































































































































































































































































































































































































 


 


 



Credit


Services


 



Decision


Analytics


 



Marketing


Services


 



Consumer Services


 



Total business segments



Central


Activities


 



Total


 continuing operations



Year ended 31 March 2018



US$m



US$m



US$m



US$m



US$m



US$m



US$m



Revenue from external customers
























Ongoing activities



2,606



668



457



926



4,657



-



4,657



Exited business activities



5



-



-



-



5



-



5



Total



2,611



668



457



926



4,662



-



4,662



























Reconciliation from Benchmark EBIT to profit/(loss) before tax
























Benchmark EBIT
























Ongoing activities



898



144



133



194



1,369



(79)



1,290



Exited business activities



1



-



-



-



1



-



1



Total



899



144



133



194



1,370



(79)



1,291



Net interest expense included in Benchmark PBT (note 8(b))



-



-



-



-



-



(85)



(85)



Benchmark PBT



899



144



133



194



1,370



(164)



1,206



Exceptional items (note 7(a))



(29)



(28)



-



-



(57)



-



(57)



Amortisation of acquisition intangibles



(80)



(9)



(4)



(19)



(112)



-



(112)



Acquisition expenses



(12)



-



-



(8)



(20)



-



(20)



Adjustment to the fair value of contingent consideration



(3)



-



-



-



(3)



-



(3)



Fair value gain on step acquisitions



4



-



-



-



4



-



4



Interest on uncertain tax provision



-



-



-



-



-



(20)



(20)



Financing fair value remeasurements



-



-



-



-



-



(4)



(4)



Profit/(loss) before tax



779



107



129



167



1,182



(188)



994












 


 



Credit


Services


 



Decision


Analytics


 



Marketing


Services


 



Consumer Services


 



Total business segments



Central


Activities


 



Total  continuing operations



Year ended 31 March 2017



US$m



US$m



US$m



US$m



US$m



US$m



US$m



























Revenue from external customers
























Ongoing activities



2,384



584



421



941



4,330



-



4,330



Exited business activities



5



-



-



-



5



-



5



Total



2,389



584



421



941



4,335



-



4,335



























Reconciliation from Benchmark EBIT to profit/(loss) before tax
























Benchmark EBIT
























Ongoing activities



815



120



95



243



1,273



(76)



1,197



Exited business activities



2



-



-



-



2



-



2



Total



817



120



95



243



1,275



(76)



1,199



Net interest (note 8(b))



-



-



-



-



-



(75)



(75)



Benchmark PBT



817



120



95



243



1,275



(151)



1,124



Amortisation of acquisition intangibles



(76)



(9)



(4)



(15)



(104)



-



(104)



Acquisition expenses



(7)



-



-



(9)



(16)



-



(16)



Financing fair value remeasurements



-



-



-



-



-



67



67



Profit/(loss) before tax



734



111



91



219



1,155



(84)



1,071






1.     Additional information by business segment, including that on total and organic growth at constant exchange rates, is provided within pages 3 to 9 and within Appendix 2 on page 15.


 


2.   Revenue and Benchmark EBIT by business segment for the year ended 31 March 2017 have been re-analysed between ongoing and exited business activities, following the disposal of our Experian Public Records of business in March 2018.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


7. Exceptional items and Other adjustments made to derive Benchmark PBT - continuing operations


(a) Charge for Exceptional items and Other adjustments made to derive Benchmark PBT


 































































































































2018



2017






US$m



US$m



Exceptional items:









Canadian legal settlement (note 7(b))



32



-



Legal provisions movements (note 7(c))



25



-



Charge for exceptional items



57



-












Other adjustments made to derive Benchmark PBT









Amortisation of acquisition intangibles



112



104



Acquisition expenses



20



16



Adjustment to the fair value of contingent consideration



3



-



Interest on uncertain tax provisions



20



-



Fair value gain on step acquisition



(4)



-



Financing fair value remeasurements



4



(67)



Charge for Other adjustments made to derive Benchmark PBT



155



53



Charge for Exceptional items and Other adjustments made to derive Benchmark PBT



 


212



 


53












By income statement caption:









Labour costs



7



6



Amortisation and depreciation charges



112



104



Other operating charges



69



10



Within operating profit



188



120



Finance expense (note 8(a))



24



(67)



Charge for Exceptional items and Other adjustments made to derive Benchmark PBT



 


212



 


53



 


Acquisition expenses comprise professional fees and expenses associated with completed, ongoing and terminated acquisition processes, as well as the integration costs associated with completed deals.


 


(b) Canadian legal settlement


On 6 March 2018 the Group settled a contractual dispute in Canada that arose following a 2008 sales process in our now divested BakerHill business. All costs relating to the dispute have been paid in the year.


 


(c) Legal provisions movements


During the year ended 31 March 2018, we paid US$7m of legal fees and increased provisions by a further net US$18m in respect of a number of related legal claims. We may benefit from applicable insurance recoveries in future years.


 


8. Net finance costs










































































(a) Net finance costs included in profit before tax












2018



2017






US$m



US$m



Interest income:









Bank deposits, short-term investments and loan notes



(15)



(14)



Interest income



(15)



(14)












Finance expense:









Interest expense



100



89



Charge/(credit) in respect of financing fair value remeasurements



4



(67)



Interest on uncertain tax provisions



20



-



Finance expense



124



22












Net finance costs included in profit before tax



109



8



 


Notes to the financial statements (continued)


for the year ended 31 March 2018


8. Net finance costs (continued)












































 









(b) Net interest expense included in Benchmark PBT












2018



2017






US$m



US$m



Interest income



(15)



(14)



Interest expense



100



89












Net interest expense included in Benchmark PBT



85



75



9. Tax - continuing operations


(a) Group tax charge and effective rate of tax


 





































2018



2017






US$m



US$m












Group tax charge



149



259



Profit before tax



994



1,071



Effective rate of tax based on profit before tax



15.0%



24.2%



 


In the normal course of business, the Group has a number of open tax returns with various tax authorities with whom it is in active dialogue. At 31 March 2018 the Group held current provisions of US$301m (2017: US$213m) in respect of uncertain tax positions. 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. The resolution of these tax matters make take many years. The Group does not expect to materially increase its uncertain tax provision in the next 12 months, however if an opportunity arose to resolve the matters for less than the amounts provided, a settlement may be made with a corresponding reduction in the provision.


 


(b) Reconciliation of the Group tax charge to the Benchmark tax charge




















































2018



2017






US$m



US$m



Group tax charge



149



259



Tax relief on Exceptional items and Other adjustments made to derive Benchmark PBT



53



35



Exceptional tax items



107



-



Benchmark tax charge



309



294












Benchmark PBT



1,206



1,124



Benchmark tax rate



25.6%



26.2%



 


Exceptional tax items include the credit on restatement of deferred tax balances in North America, the recognition of previously unrecognised tax losses and an increase in the Group's uncertain tax provisions.


 


(c) Tax recognised in other comprehensive income and directly in equity


In the year ended 31 March 2018, the credit of US$52m (2017: US$10m) in respect of other comprehensive income is after a deferred tax charge of US$6m (2017: credit of US$2m), relating to remeasurement losses on post-employment benefit assets and obligations.


In the year ended 31 March 2017, a tax credit relating to employee share incentive plans of US$7m was recognised in equity and reported as appropriate within transactions with owners. This amount comprised a current tax credit of US$2m and a deferred tax credit of US$5m.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


10. Discontinued operations


On 31 May 2017, the Group completed the divestment of its email/cross-channel marketing business ('CCM'), and the results and cash flows of this business are accordingly classified as discontinued. We completed a transaction to divest our comparison shopping and historic lead generation businesses in October 2012, and their results and cash flows are classified as discontinued.


(a) Results for discontinued operations


The loss for the financial year from discontinued operations of US$30m (2017: profit of US$53m) comprises a loss of US$30m (2017: profit of US$66m) in respect of CCM. In the prior year a loss of US$13m was recognised in respect of the comparison shopping and lead generation businesses. This disposal has now been finalised. This disposal has now been finalised with receipt of US$15m in respect of the loan note outstanding.


 


 


The results of CCM were:


















































































































































 2018









2017









US$m









US$m



Revenue






48









308



Labour costs






(28)









(153)



Data and information technology costs






(8)









(27)



Depreciation and amortisation charges






-









(27)



Marketing and customer acquisition costs






(1)









(3)



Other operating charges






(14)









(50)



Total operating expenses






(51)









(260)



Separation and transaction related charges






(28)









(18)



(Loss)/profit before tax






(31)









30



Tax credit






8









36



(Loss)/profit after tax of discontinued operations






(23)









66





















Profit on disposal of discontinued operations (note 21(a))






54









-



Tax charge in respect of disposal






(61)









-



(Loss)/profit for the financial year from discontinued operations






(30)









66



 


Depreciation and amortisation includes amortisation of acquisition intangibles of US$nil (2017: US$7m). The operating loss for the year ended 31 March 2018 includes certain restructuring and one-off costs of separation. A deferred tax credit on the disposal of US$45m was recognised in the year ended 31 March 2017.


 


The results of the comparison shopping and lead generation businesses were:


















































 2018









2017









US$m









US$m



Loss on disposal of discontinued operations






-









(22)



Tax credit in respect of disposal






-









9



Loss for the financial year from discontinued operations






-









(13)



 


The loss on disposal in the prior year arose from the reduction in the carrying value of the loan note receivable issued as part of the disposal. The remaining carrying value of the loan note (US$15m) was received during the year.


 












































 (b) Cash flows for discontinued operations






 2018









2017









US$m









US$m



Cash (outflow)/inflow from operating activities






(63)









41



Cash flow from/(used in) investing activities






278









(21)



Net cash inflow from discontinued operations






215









20



 


The cash outflow from operating activities of US$63m (2017: inflow of US$41m) relates to CCM and is stated after tax paid of US$22m (2017: US$9m).


      


Cash flow from investing activities of US$278m (2017: used in investing activities US$21m) comprises an inflow of US$263m (2017: outflow of US$24m) relating to the email/cross-channel marketing business, and a cash inflow of US$15m (2017: US$3m) on the redemption of the loan note which arose on the disposal of the comparison shopping and lead generation businesses.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


11. Earnings per share disclosures




















































































































































































































































































































(a) Earnings per share


















 






Basic



Diluted



 






2018



2017



2018



2017



 






US cents



US cents



US cents



US cents



Continuing and discontinued operations






88.9



92.1



88.0



91.4



Add/(less): discontinued operations loss/(profit)






3.2



(5.6)



3.2



(5.6)



Continuing operations






92.1



86.5



91.2



85.8



Add: other adjustments made to derive Benchmark PBT, net of related tax






5.7



1.9



5.7



1.9



Benchmark EPS (non-GAAP measure)






97.8



88.4



96.9



87.7





















 















(b) Analysis of earnings


(i) Attributable to owners of Experian plc


















 












2018



2017



 












US$m



US$m



Continuing and discontinued operations












815



866



Add/(less): discontinued operations loss/(profit)












30



(53)



Continuing operations












845



813



Add: other adjustments made to derive Benchmark PBT, net of related tax






52



18



Benchmark earnings attributable to owners of Experian plc (non-GAAP measure)



897



831



 


















(ii) Attributable to non-controlling interests






























2018



2017















US$m



US$m



Continuing and discontinued operations






-



(1)



Add: amortisation of acquisition intangibles attributable to non-controlling interests, net of related tax






-



-



Benchmark earnings attributable to non-controlling interests (non-GAAP measure)



-



(1)



 















(c) Reconciliation of Total Benchmark earnings to profit for the financial year





















2018



2017















US$m



US$m



Total Benchmark earnings (non-GAAP measure)












897



830



(Loss)/profit from discontinued operations












(30)



53



Loss from other adjustments made to derive Benchmark PBT, net of related tax



(52)



(18)



Profit for the financial year












815



865





















(d) Weighted average number of ordinary shares






























2018



2017















million



million



Weighted average number of ordinary shares












917



940



Add: dilutive effect of share incentive awards, options and share purchases






9



8



Diluted weighted average number of ordinary shares












926



948



 


Notes to the financial statements (continued)


for the year ended 31 March 2018


12. Dividends


(a) Dividend information





































































2018






2017






US cents


per share



US$m






US cents


per share



US$m



Amounts recognised and paid during the financial year:


















First interim - paid in February 2018 (2017: January 2017)



13.50



124






13.00



121



Second interim - paid in July 2017 (2017: July 2016)



28.50



264






27.50



260



Dividends paid on ordinary shares



42.00



388






40.50



381





















Full year dividend for the financial year



44.75



407






41.50



386



 


A second interim dividend in respect of the year ended 31 March 2018 of 31.25 US cents per ordinary share will be paid on 20 July 2018, to shareholders on the register at the close of business on 22 June 2018. This dividend is not included as a liability in these financial statements. This second interim dividend and the first interim dividend paid in February 2018 comprise the full-year dividend for the financial year of 44.75 US cents per ordinary share.


 


In the year ended 31 March 2018, the employee trusts waived their entitlements to dividends of US$5m (2017: US$5m). There is no entitlement to dividend in respect of own shares held as treasury shares.


 


(b) Income Access Share ('IAS') arrangements


As its ordinary shares are listed on the London Stock Exchange, the Company has a large number of UK resident shareholders. In order that shareholders may receive Experian dividends from a UK source, should they wish, the IAS arrangements have been put in place. The purpose of the IAS arrangements is to preserve the tax treatment of dividends paid to Experian shareholders in the UK, in respect of dividends paid by the Company. Shareholders who elect, or are deemed to elect, to receive their dividends via the IAS arrangements will receive their dividends from a UK source (rather than directly from the Company) for UK tax purposes.


Shareholders who hold 50,000 or fewer Experian plc shares on the first dividend record date after they become shareholders, unless they elect otherwise, will be deemed to have elected to receive their dividends under the IAS arrangements.


Shareholders who hold more than 50,000 shares and who wish to receive their dividends from a UK source must make an election to receive dividends via the IAS arrangements. All elections remain in force indefinitely unless revoked.


Unless shareholders have made an election to receive dividends via the IAS arrangements, or are deemed to have made such an election, dividends will be received from an Irish source and will be taxed accordingly.


13. Capital expenditure, disposals and capital commitments


During year ended 31 March 2018, the Group incurred capital expenditure of US$431m (2017: US$399m) in continuing operations.


Excluding any amounts in connection with the disposal of businesses, the book value of other intangible fixed assets and property, plant and equipment disposed of in the year ended 31 March 2018 was US$9m (2017: US$6m) and the amount realised was US$26m (2017: US$15m).


At 31 March 2018, the Group had capital commitments in respect of property, plant and equipment and intangible assets and for which contracts had been placed of US$27m (2017: US$33m). These include commitments of US$8m not expected to be incurred before 31 March 2019. Commitments as at 31 March 2017 included commitments of US$13m not then expected to be incurred before 31 March 2018.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


14. Post-employment benefits - IAS19 Information

















































































































































































































































































































(a) Balance sheet assets/(obligations)









 






2018



2017



 






US$m



US$m



 



Retirement benefit assets/(obligations) - funded plans:









 



Fair value of funded plans' assets



1,180



1,041



 



Present value of funded plans' obligations



(1,133)



(1,027)



 



Assets in the Group balance sheet for funded defined benefit pensions



47



14



 












 



Obligations for unfunded post-employment benefits:









 



Present value of defined benefit pensions - unfunded plans



(53)



(49)



 



Present value of post-employment medical benefits



(5)



(5)



 



Liabilities in the Group balance sheet



(58)



(54)



 












 



Net post-employment benefit obligations



(11)



(40)



 



 


Pension assets are deemed to be recoverable and there are no adjustments in respect of minimum funding requirements as, under the Experian Pension Scheme rules, future economic benefits are available to the Group in the form of reductions in future contributions or refunds of surplus.












 



(b) Movements in net post-employment benefit assets/(obligations) recognised in the Group balance sheet






 






2018



2017



 






US$m



US$m



 



At 1 April



(40)



(29)



 



Differences on exchange



(1)



2



 



Charge to Group income statement



(10)



(8)



 



Remeasurement gains/(losses) recognised within other comprehensive income



28



(13)



 



Contributions paid by the Group and employees



12



8



 



At 31 March



(11)



(40)



 












 



(c) Income statement charge









 






2018



2017



 






US$m



US$m



 



By nature of expense:









 



Current service cost



6



5



 



Administration expenses



2



2



 



Charge within labour costs



8



 



Charge within operating profit



8



 



Interest expense



2



1



 



Total charge to income statement



10



8



 












 



(d) Financial actuarial assumptions









 






2018



2017



 






%



%



 



Discount rate



2.4



2.5



 



Inflation rate - based on the UK Retail Prices Index (the 'RPI')



3.1



3.2



 



Inflation rate - based on the UK Consumer Prices Index (the 'CPI')



2.1



2.2



 



Increase in salaries



3.6



3.7



 



Increase for pensions in payment - element based on the RPI (where cap is 5%)



2.9



3.0



 



Increase for pensions in payment - element based on the CPI (where cap is 2.5%)



1.7



1.7



 



Increase for pensions in payment - element based on the CPI (where cap is 3%)



1.8



1.9



 



Increase for pensions in deferment



2.1



2.2



 



Inflation in medical costs



6.1



6.2



 



The mortality and other demographic assumptions used at 31 March 2018 remain broadly unchanged from those used at 31 March 2017 and disclosed in the Group's statutory financial statements for the year then ended.



 


Notes to the financial statements (continued)


for the year ended 31 March 2018


15. Notes to the Group cash flow statement






























































































































































































































































































































(a) Cash generated from operations















 









2018






2017



 






Notes



US$m






US$m



 



Profit before tax






994






1,071



 



Share of post-tax profit of associates






(8)






(4)



 



Net finance costs






109






8



 



Operating profit






1,095






1,075



 



Profit on disposals of fixed assets






(17)






(9)



 



Depreciation and amortisation1






438






426



 



Charge in respect of share incentive plans






76






61



 



Increase in working capital



15(b)



(70)






(39)



 



Acquisition expenses - difference between income statement charge and amount paid






5






3



 



Adjustment to the fair value of contingent consideration






3






-



 



Fair value gain on revaluation of step acquisition






(4)






-



 



Movement in exceptional items included in working capital






3






8



 



Cash generated from operations






1,529






1,525



 



 


 















 



1. Depreciation and amortisation includes amortisation of acquisition intangibles of US$112m (2017: US$104m) which is excluded from Benchmark PBT.



 



 















 



(b) Increase in working capital















 









2018






2017



 









US$m






US$m



 



Inventories






-






1



 



Trade and other receivables






(142)






(59)



 



Trade and other payables






72






19



 



Increase in working capital






(70)






(39)



 



 















 



(c) Cash flows on acquisitions (non-GAAP measure)















 






Note



2018






2017



 









US$m






US$m



 



Purchase of subsidiaries



20(a)



147






380



 



Net cash acquired with subsidiaries



20(a)



(6)






(22)



 



Deferred consideration settled






5






5



 



As reported in the Group cash flow statement






146






363



 



Acquisition expenses paid






15






13



 



Payments to acquire non-controlling interests






8






9



 



Cash outflow for acquisitions (non-GAAP measure)






169






385



 



 


Notes to the financial statements (continued)


for the year ended 31 March 2018


15. Notes to the Group cash flow statement (continued)



 



 



 



 



 



(d) Cash outflow in respect of net share purchases (non-GAAP measure)































































































































































































    



Note






2018



2017



 












US$m



US$m



Issue of ordinary shares












(16)



(11)



Purchase of shares by employee trusts












37



28



Purchase and cancellation of own shares












544



336



Cash outflow in respect of net share purchases (non-GAAP measure)












565



353





















As reported in the Group cash flow statement:


















Cash inflow in respect of net share purchases












(16)



(11)



Cash outflow in respect of net share purchases












581



364















565



353





















 



(e) Analysis of cash and cash equivalents


















 



 












2018



2017



 












US$m



US$m



Cash and cash equivalents in the Group balance sheet












156



83



Bank overdrafts












(19)



(2)



Cash and cash equivalents in the Group cash flow statement












137



81



(f) Reconciliation of Cash generated from operations to Benchmark operating cash flow (non-GAAP measure)


























































































Note






2018



2017















US$m



US$m



Cash generated from operations






15(a)






1,529



1,525



Purchase of other intangible assets












(360)



(319)



Purchase of property, plant and equipment












(71)



(80)



Sale of property, plant and equipment












26



15



Acquisition expenses paid












15



13



Dividends received from associates












3



3



 Cash outflow in respect of exceptional items


 












54



(8)



Benchmark operating cash flow (non-GAAP measure)












1,196



1,149



 


Benchmark free cash flow for the year ended 31 March 2018 was US$915m (2017: US$933m). Cash flow conversion for the year ended 31 March 2018 was 93% (2017: 96%).


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


16. Net debt (non-GAAP measure)























































































































(a) Analysis by nature












 2018



 2017



 



US$m



US$m



Cash and cash equivalents (net of overdrafts)



137



81



Debt due within one year - commercial paper



(353)



(152)



Debt due within one year - bonds and notes



(572)



(600)



Debt due within one year - finance lease obligations



(3)



(1)



Debt due after more than one year - bonds and notes



(1,837)



(1,618)



Debt due after more than one year - bank loans and finance lease obligations



(706)



(651)



Derivatives hedging loans and borrowings



(74)



(232)



 



(3,408)



(3,173)



 









(b) Analysis by balance sheet caption












 2018



 2017



 



US$m



US$m



Cash and cash equivalents



156



83



Current borrowings



(956)



(759)



Non-current borrowings



(2,558)



(2,285)



Total reported in the Group balance sheet



(3,358)



(2,961)



Accrued interest reported within borrowings above but excluded from Net debt



24



20



Derivatives reported within financial assets



50



15



Derivatives reported within financial liabilities



(124)



(247)



 



(3,408)



(3,173)



 


















































































































































(c) Analysis of movements in Net debt



 



 



 



 



 



 



 



 



 



 









Net debt


at 1 April 2017






Movements in the year ended 31 March 2018






Net debt at


31 March 2018















Net cash inflow






Net share purchases






Fair value gains/(losses)






Exchange and other movements















US$m






US$m






US$m






US$m






US$m






US$m



Borrowings*






(3,044)






(213)






-






46






(303)






(3,514)



Derivatives hedging loans and borrowings






(232)






13






-






(72)






217






(74)



Total financing liabilities






(3,276)






(200)






-






(26)






(86)






(3,588)



Cash and cash equivalents*






83






630






(565)






-






8






156



Accrued interest






20






4






-






-






-






24



 



 



(3,173)



 



434



 



(565)



 



(26)






(78)






(3,408)



 


* Total reported in the balance sheet.


 


17. Undrawn committed bank borrowing facilities















































2018



2017






US$m



US$m



Facilities expiring in:









One to two years



150



200



Two to three years



375



150



Three to four years



1,800



225



Four to five years


 



-



1,800



 



2,325



2,375



 


These facilities are at variable interest rates and are in place for general corporate purposes, including the financing of acquisitions and the refinancing of other borrowings.                                                                                                    


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


18. Called up share capital and share premium account



































































 


 



Number of shares






Called up share


capital



Share


premium


account






million






US$m



US$m



At 1 April 2016



1,023.0






102



1,519



Shares issued under employee share incentive plans



0.8






-



11



Purchase and cancellation of own shares


 



(18.2)






(2)



-



At 31 March 2017



1,005.6






100



1,530



Shares issued under employee share incentive plans



1.1






-



16



Purchase and cancellation of own shares


 



(26.6)






(3)



-



At 31 March 2018



980.1






97



1,546



19. Own shares held





























































Number of shares






Cost


of shares






million






US$m



At 1 April 2016



77






1,240



Purchase of shares by employee trusts



1






28



Exercise of share options and awards



(3)






(36)



At 31 March 2017



75






1,232



Purchase of shares by employee trusts



2






37



Exercise of share options and awards



(3)






(42)



At 31 March 2018



74






1,227



Own shares held at 31 March 2018 include 62 million shares held as treasury shares and 12 million shares held by employee trusts. Own shares held at 31 March 2017 include 62 million shares held as treasury shares and 13 million shares held by employee trusts. The total cost of own shares held at 31 March 2018 of US$1,227m (2017: US$1,232m) is deducted from other reserves in the Group balance sheet.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


20. Acquisitions


(a) Acquisitions in the year


The Group made three acquisitions during the year ended 31 March 2018, in connection with which provisional goodwill of US$133m was recognised based on the fair value of the net assets acquired of US$58m.


These transactions included:


The Group acquired the whole of the issued share capital of Clarity Services, Inc. ('Clarity'), a leading credit bureau servicing the sub-prime market, based in the USA, on 6 October 2017 for a purchase consideration of US$109m, net of cash acquired. Clarity's products are highly complementary to Experian's and include unique credit data and insights into over 60m individuals. The acquisition reinforces our position as the leading national credit bureau, striving to support 100% of US consumers.


Net assets acquired, goodwill and acquisition consideration are analysed below.





















































































































































































Clarity Services, Inc.


US$m



Other


US$m



Total


US$m



Intangible assets:















Customer and other relationships






21



17



38



Software development






24



11



35



Marketing-related assets






4



1



5



Intangible assets






49



29



78



Property, plant and equipment






1



-



1



Trade and other receivables






6



6



12



Deferred tax assets






1



-



1



Cash and cash equivalents






4



2



6



Trade and other payables






(11)



(7)



(18)



Loans and borrowings






-



(2)



(2)



Deferred tax liabilities






(14)



(6)



(20)



Total identifiable net assets






36



22



58



Goodwill






77



56



133



Total






113



78



191


















Satisfied by:















Cash






104



43



147



Fair value 25% associate stake






-



17



17



Deferred and contingent consideration






9



18



27



Total






113



78



191


















 



These provisional fair values contain amounts which will be finalised no later than one year after the date of acquisition. Provisional amounts have been included at 31 March 2018 as a consequence of the timing and complexity of the acquisitions. Goodwill represents the synergies, assembled workforces and future growth potential of the businesses. None of the goodwill arising in the year of US$133m is currently deductible for tax purposes.


The contingent consideration arrangement in respect of Clarity Services, Inc. and one of the immaterial acquisitions requires payments to the former owners based on the achievement of revenue targets. For the contingent consideration in respect of Clarity Services, Inc. the payments are due at the end of each year for three years following acquisition and the potential amount that the Group could be required to pay under this arrangement is between US$nil and US$32m. For the other acquisition, payments are due at the end of each of the first three years following acquisition, and the potential amount that the Group could be required to make under this arrangement is between US$nil and US$21m. The fair value of this consideration has been estimated during the year and an increase of US$3m has been recognised in the Group income statement based on the latest forecasts of business performance. Fair value measurements of contingent consideration are categorised as Level 3 as defined in IFRS 13 'Fair Value Measurement'.


There have been no other material gains, losses, error corrections or other adjustments recognised in the year ended 31 March 2018 that relate to acquisitions in the current or prior years.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


20. Acquisitions


(b) Additional information


(i) Current year acquisitions




















































































Clarity Services, Inc.


US$m



Other


US$m



Total


US$m



Increase in book value from fair value adjustments:












Intangible assets



49



29



78



Net deferred tax liabilities



(14)



(6)



(20)



Increase in book value from fair value adjustments



35



23



58















Gross contractual amounts receivable in respect of trade and other receivables



5



 


6



 


11



Pro forma revenue from 1 April 2017 to date of acquisition



23



3



26



Revenue from date of acquisition to 31 March 2018



23



10



33



Profit before tax from date of acquisition to 31 March 2018



1



1



2















 



At the dates of acquisition, the gross contractual amounts receivable in respect of trade and other receivables of US$11m were expected to be collected in full.


If the transactions had occurred on the first day of the financial year, then estimated additional contribution to Group revenues would have been US$26m and the profit before tax would have been US$1m.


(ii) Prior year acquisitions


The Group acquired the whole of the issued share capital of CSIdentity Corporation during the year ended 31 March 2017 and a cash outflow of US$358m was reported in the Group cash flow statement for that year, after deduction of US$22m in respect of net cash acquired.


There was also deferred consideration settled of US$5m on acquisitions made prior to 31 March 2015.


There have been no material gains, losses, error corrections or other adjustments recognised in the year ended 31 March 2018 that relate to acquisitions made prior to 31 March 2016.


(iii) Future acquisitions


On the 15 March 2018, we agreed to acquire 100% of the share capital of ClearScore (Credit Laser Holdings Limited) for US$385m. The transaction is expected to complete during the year ended 31 March 2019, subject to UK regulatory approval.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


21. Disposals


(a) Profit on disposal









































































































Disposal of the email/cross-channel marketing business:


 






 


 


US$m



Net assets disposed of - book value at date of disposal:









Goodwill






214



Other intangible assets






50



Property, plant and equipment






17



Trade and other receivables






73



Deferred tax assets






2



Trade and other payables






(10)



Accruals and deferred income






(13)



Current tax liabilities






(3)



Deferred tax liabilities






(17)



Net assets disposed of






313












 



Disposal proceeds:









 



Net cash proceeds after consideration of working capital adjustments and mutual transaction costs



270



Promissory Note






75



Share of divested business






31



Transaction costs and provisions






(9)



Total net proceeds






367



Profit on disposal






54



(b) Cash inflow from disposals






































































 


 


 


CCM


US$m



Comparison shopping and lead generation businesses


US$m



 


 


 


Other


US$m



Total


US$m



Proceeds received in cash



270



-



2



272



Transaction costs



(7)



-



-



(7)



Proceeds from loan note



-



15



-



15



Net cash Inflow from disposals



263



15



2



280



 


As indicated in note 10, in the year ended 31 March 2018, we divested CCM and received the remaining value of the loan note receivable in relation to the disposal of the comparison shopping and lead generation businesses. In addition, we divested a small North America based business, the proceeds of which were US$2m.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


22. Related party transactions


The Group's related parties were disclosed in the Group's statutory financial statements for the year ended 31 March 2017. During the year an additional associate undertaking was created following the divestment of CCM disclosed in note 10. As a result of this transaction the Group now owns 25% of the issued share capital of Vector CM Holdings (Cayman), L.P. ('Vector'), a partnership incorporated in Cayman Islands.


 


During the year ended 31 March 2018 the Group entered into the following transactions with Vector and its subsidiaries:



















































































Transaction amount



Balance owed to Experian



 









To 31 March 2018



To 31 March 2017



At 31 March 2018



At 31 March 2017









US$m



US$m



US$m



US$m



Promissory note






78



-



78



-



Interest on promissory note






2



-



2



-



Transitional Services Arrangement ('TSA') fees






15



-



1



-



Net amounts exchanged and due under the TSA






3



-



2



-









98



-



83



-



 


The promissory note is due and payable to Experian on 31 May 2024 with interest also payable on this date. A Transitional Services Arrangement ('TSA') is in place between the Group and Vector to provide services to the partnership for a period of twelve months unless terminated earlier or an agreement to extend is executed. During the year ended 31 March 2018 and until the conclusion of the TSA, we process transactions on behalf of Vector. We receive a pre-agreed fee for the execution of the TSA and do not receive any margin on individual transactions. Details of amounts arising from the TSA are shown in the table below.


 

























































Transaction amount



Balance owed to Vector












To 31 March 2018



To 31 March 2017



At 31 March 2018



At 31 March 2017












US$m



US$m



US$m



US$m



Cash received on behalf of Vector









77



-



6



-



 

















































Transaction amount



Balance owed to Experian









To 31 March 2018



To 31 March 2017



At 31 March 2018



At 31 March 2017









US$m



US$m



US$m



US$m



Cash paid on behalf of Vector






80



-



8



-



 


 


The Group also acquired a 25% stake in London & Country Mortgages Limited. No material transactions have been entered into with the associate since the date of investment.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


23. Contingencies


(a) North America security incident


 


In September 2015, Experian North America suffered an unauthorised intrusion to its Decision Analytics computing environment that allowed unauthorised acquisition of certain data belonging to a client, T-Mobile USA, Inc. We notified the individuals who may have been affected and offered free credit monitoring and identity theft resolution services. In addition, government agencies were notified as required by law. The costs of directly responding to this incident were reflected in a US$20m income statement charge in the year ended 31 March 2016.


 


We have received a number of class actions and other related claims in respect of the incident and are working with regulators and government bodies as part of their investigations. It is currently not possible to predict the scope and effect on the Group of these various regulatory and government investigations and legal actions, including their timing and scale. In the event of unfavourable outcomes, the Group may benefit from applicable insurance recoveries.


 


(b) Brazil tax


As previously indicated, Serasa S.A. 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. In August 2017, the Brazilian courts ultimately upheld Experian's position in respect of the tax years from 2007 to 2010 with no further right of appeal. The Brazilian tax authorities have raised a similar assessment in respect of the 2011 and 2012 tax years, in which approximately US$50m was claimed, and may raise similar claims in respect of other years. 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, success in the first case and other factors in respect of the claim.


  


(c) Other litigations and claims


There continues 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 12(a).


25. Company website


A full range of investor information is available at <<www.experianplc.com>>. Details of the 2018 Annual General Meeting ('AGM'), to be held at The Shelbourne Hotel, 27 St. Stephen's Green, Dublin 2, D02 H529, Ireland at 9.30am on Wednesday,18 July 2018, are given on the website and in the notice of meeting. Information on the Company's share price is available on the website.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


26. Risks and uncertainties


Risk management is an essential element of how we run Experian, to help us deliver long-term shareholder value and to protect our business, people, assets, capital and reputation.


Successfully managing existing and emerging risks is critical to our long-term success and to achieving our strategic objectives. To seize the opportunities in front of us, we must accept a reasonable degree of risk and manage that risk appropriately. Risk management is therefore integral to our corporate governance and how we run our business.


The Board is responsible for maintaining and reviewing the effectiveness of our risk management activities from a financial, operational and strategic perspective. These activities are designed to identify and manage, rather than eliminate, the risk of failure to achieve business objectives or to successfully deliver our business strategy. Our risk management framework supports the successful running of the business, by identifying and where possible managing risks to an acceptable level and delivering assurance on these.


We've built the risk management framework to identify, evaluate, analyse, mitigate and monitor those risks that threaten the successful achievement of our business strategy and objectives, within our risk appetite.


(a)  Risk area - Loss or inappropriate use of data and systems


Description


We hold and manage sensitive consumer information that increases our exposure and susceptibility to cyber-attacks, either directly through our online systems or indirectly through our partners or third-party contractors.


Potential impact


Losing or misusing sensitive consumer data could cause problems for consumers and result in material loss of business, substantial legal liability, regulatory enforcement actions and/or significant harm to our reputation.


Examples of control mitigation


•     We deploy physical and technological security measures, combined with monitoring and alerting for suspicious activities.


•     We maintain an information security programme for identifying, protecting against, detecting, and responding to cyber security risks and recovering from cyber security incidents.


•     We impose contractual security requirements on our partners and other third parties who use our data, complemented by periodic reviews of third-party controls.


•      We maintain insurance coverage, where feasible and appropriate.


 


(b)  Risk area - Failure to comply with laws and regulations


Description


We hold and manage sensitive consumer information and must therefore comply with a range of privacy and consumer protection laws, regulations and contractual obligations.


Potential impact


Non-compliance may result in material litigation, including class actions, as well as regulatory actions. These could result in civil or criminal liability or penalties, as well as damage to our reputation.


Examples of control mitigation


•     We maintain a compliance management framework that includes defined policies, procedures and controls for Experian employees, business processes and third parties such as our data resellers.


•     We assess the appropriateness of using data in new and/or changing products and services.


•     We vigorously defend all pending and threatened claims, employing internal and external counsel to effectively manage and conclude such 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.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


 


26. Risks and uncertainties (continued)


(c)  Risk area - Business conduct risk


Description


Our business model is designed to create long-term value for people, businesses and society through our data assets and innovative analytics and software solutions. Inappropriate execution of our business strategies or activities could adversely affect our clients, consumers or counterparties.


Potential impact


Consumers or clients could receive inappropriate products or not have access to appropriate products, resulting in material loss of business, substantial legal liability, regulatory enforcement actions or significant harm to our reputation.


Examples of control mitigation


•     We maintain appropriate governance and oversight that include policies, procedures and controls designed to safeguard personal data, avoid detriment to consumers, provide consumer-centric product design and delivery, and effectively respond to enquiries and complaints. These activities also support a robust conduct risk management framework.


•     We enforce our Global Code of Conduct, Anti-Corruption Policy and Gifts and Hospitality Policy. If we believe employees or suppliers are not following our conduct standards, we will investigate thoroughly and take disciplinary action where appropriate.


(d)  Risk area - Non-resilient IT/business environment


Description


Delivery of our products and services depends on a number of key IT systems and processes that expose our clients, consumers and businesses to serious disruptions from systems or operational failures.


Potential impact


A significant failure or interruption could have a materially adverse effect on our business, financial performance, financial condition and/or reputation.


Examples of control mitigation


•     We maintain a significant level of resiliency in our operations, designed to avoid material and sustained disruptions to our businesses, clients and consumers.


•     We design applications to be resilient and with a balance between longevity, sustainability and speed.


•     We maintain a global integrated business continuity framework that includes industry-appropriate policies, procedures and controls for all our systems and related processes, as well as ongoing review, monitoring and escalation activities.


•     We duplicate information in our databases and maintain backup data centres.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


26. Risks and uncertainties


(e)  Risk area - Undesirable investment outcomes


Description


We critically evaluate and may invest in acquisitions and other growth opportunities, including internal performance improvement programmes, any of which may not produce the desired financial or operating results.


Potential impact


•     Failure to successfully implement our key business strategies could have a materially adverse effect on our ability to achieve our 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 and/or significant harm to our reputation.


Examples of control mitigation


•     We design our incentive programmes to optimise shareholder value through delivery of balanced, sustainable returns and a sound risk profile over the long term.


•     We carry out comprehensive business reviews.


•     We perform due diligence and post-investment reviews on acquisitions and partnerships.


•     We employ a rigorous capital allocation framework.


•     We analyse competitive threats to our business model and markets.


 


(f)   Risk area - Adverse and unpredictable financial markets or fiscal developments


Description


We operate globally and our results could be affected by global or regional changes in fiscal or monetary policies:


•     A substantial change in credit markets in the USA, UK or Brazil could reduce our financial performance and growth potential in those countries.


•     We present our financial statements in US dollars. However, we transact business in a number of currencies. Changes in other currencies relative to the US dollar could affect our financial results.


•     A substantial rise in USA, EU or UK interest rates could increase our future cost of borrowings.


•     We are subject to complex and evolving tax laws and interpretations, which may change significantly. This includes the conclusion of legal arguments between the European Commission and the UK government over whether part of the UK's tax regime is contrary to the European Union State Aid provisions. These changes may increase our effective tax rates in the future. Uncertainty about the application of these laws may also result in different outcomes from the amounts we provide.


Potential impact


•     The USA, UK and Brazil markets are significant contributors to revenue. A reduction in one or more of these consumer and business credit services markets could reduce our revenue and profit.


•     We benefit from the strengthening of currencies relative to the US dollar and are adversely affected by currencies weakening relative to it.


•     We have outstanding debt denominated principally in US dollars, pounds sterling and euros. As this debt matures, we may need to replace it with borrowings at higher rates.


•     Earnings could be reduced and tax payments increased as a result of settling historical tax positions or increases in our effective tax rates. 


Examples of control mitigation


•     We have a diverse portfolio by geography, product, sector and client.


•     We provide counter-cyclical products and services.


•     We convert cash balances 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 2018


26. Risks and uncertainties


 


(g)  Risk area - New legislation or changes in regulatory enforcement


Description


We operate in an increasingly complex environment, in which many of our activities and services are subject to legal and regulatory influences. New laws, new interpretations of existing laws, changes to existing regulations and/or heightened regulatory scrutiny could affect how we operate. For example, future regulatory changes could impact how we collect and use consumer information for marketing, risk management and fraud detection. Regulatory changes could impact how we serve Consumer Services' clients or how we market services to clients or consumers.


Potential impact


We may suffer increased costs or reduced revenue resulting from modified business practices, adopting new procedures, self-regulation and/or litigation or regulatory actions resulting in liability or fines.


Examples of control mitigation


•     We use internal and external resources to monitor planned and realised changes in legislation.


•     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.


•     We execute our Compliance Management Programme, which directs the structure, documentation, tools and training requirements to support compliance on an ongoing basis.


 


(h)  Risk area - Increasing competition


Description


Our competitive landscape continues to evolve, with traditional players reinventing themselves, emerging players investing heavily and new entrants making large commitments in new technologies or new approaches to our markets, including marketing, consumer services, and business and consumer credit information. There is a risk that we will not respond adequately to such business disruptions or that our products and services will fail to meet changing client and consumer preferences.


Potential impact


Price reductions may reduce our margins and financial results. Increased competition may reduce our market share, harm our ability to obtain new clients or retain existing ones, affect our ability to recruit talent and can influence our investment decisions. We might also be unable to support changes in the way our businesses and clients use and purchase information, affecting our operating results.


Examples of control mitigation


•     We continue to research and invest 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 in 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.


 


Notes to the financial statements (continued)


for the year ended 31 March 2018


 


26. Risks and uncertainties (continued)


 


(i)   Risk area - Data ownership, access and integrity


Description


Our business model depends on our ability to collect, aggregate, analyse and use consumer and client information. There is a risk that we may not have access to data because of consumer privacy and data accuracy concerns, or data providers being unable or unwilling to provide their data to us or imposing a different fee structure for using their data.


Potential impact


Our ability to provide products and services to our clients could be affected, leading to a materially adverse impact on our business, reputation and/or operating results.


Examples of control mitigation


•     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.


 


(j)   Risk area - Dependency on highly skilled personnel


Description


Our success depends on the ability to attract, motivate and retain key talent and build future leadership.


Potential impact


Not having the right people could materially affect our ability to service our clients and grow our business.


Examples of control mitigation


•     In every region, we have ongoing recruitment, personal and career development, and talent identification and development programmes.


•     We periodically carry out our Global People Survey 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.


 


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 Strategic 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, together with a description of the principal risks and uncertainties that they face, which is included in note 26.


The names and functions of the directors in office as at 17 May 2017 were listed in the Experian annual report 2017. In the period from 17 May 2017 to the date of this report:


·      Mike Rogers was appointed to the Board as a non-executive director on 1 July 2017; and


·      Dr Ruba Borno was appointed to the Board as a non-executive director on 1 April 2018.


A list of current directors is maintained on the Company website at www.experianplc.com.


By order of the Board


Charles Brown


Company Secretary


16 May 2018


 


 



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