Experian - contents. Experian a portfolio of opportunities. December 2005

Transcription

1 Experian a portfolio of opportunities December 2005 Experian - contents Overview Growth drivers in the UK International opportunities Experian North America Experian Interactive Appendix 2

2 Experian Experian is a global leader in providing information solutions to organisations and consumers We help organisations find, develop and manage profitable customer relationships; with information, decision-making solutions and processing services We empower consumers to understand, manage and protect their personal information and assets 3 Experian helping organisations Enables major banks to reduce bad debt losses Helps retailers to grow customer loyalty and cross-sell new products Prevents fraud for online retailers 4

3 Experian helping consumers Enabled 44 million US consumers to refinance their mortgage Helps a mobile phone company to offer the right services to its 13m users Told over 8m consumers by text and about changes to their credit report 5 Experian - what we do Information is the foundation of our business Consumer credit Business credit Vehicle histories Insurance databases Catalogue purchasing habits Consumer marketing 300m plus consumers c. 25m businesses c. 500m vehicles c. 30m policies c. 105m US households c. 120m households INFORMATION Credit Marketing 6

4 Experian - what we do Solutions add value to the information SOLUTIONS Scoring and decisions Fraud prevention Application and account processing Customer data integration Classifying consumers and businesses Economic analysis and forecasting Strategy Manager Hunter /Detect Transact /Autoscore /GEMS Truvue Mosaic Business Strategies INFORMATION Credit Marketing 7 Experian balanced portfolio International 42% North America 58% Interactive Interactive 19% 19% Outsourcing 8% Information 42% Outsourcing 8% Credit 49% Solutions Marketing 31% 24% Sales six months to September 2005 Continuing activities 8

5 Experian how we are paid Information Volume-based contracts Solutions Value-based long-term contacts Outsourcing Cost-plus long-term contracts Interactive Subscriptions; pay-per-lead 9 Experian broad offering Publishing/media 2% Government 3% Automotive 3% Telecom/utilities/ insurance 8% Direct-toconsumer 12% Retail/ home shopping 13% % of sales by vertical market Other 6% Year to March 2005 Financial services 53% Over 50,000 clients in more than 60 countries Top 10 clients account for about 25% of sales At least 85% of top 50 clients dealt with Experian for over five years Clients include: AOL Time Warner BNP Paribas Barclays Citigroup Ford HBOS MBNA McDonald s Microsoft Morgan Stanley Orange Société Générale 10

6 Experian competitive strength No single competitor offers as many products and solutions in as many countries $2.5bn Global sales revenue $m North America International 19x 20x 30x 20x 22x Experian D&B Equifax Acxiom Harte-Hanks Fair, Isaac Mar 05 Dec 04 Dec 04 Mar 05 Dec 04 Sep 05 All figures are for last full year of actuals Number on top of bar represents prospective PE rating Exchange rate 1:$1.85 Source: Company accounts Reuters Estimates 11 Experian investment highlights Market leading positions selling to businesses and consumers Scale gives us high barriers to entry Global leader in long term growth markets Unequalled product offer Delivering Double-digit growth in sales and profit Strong cash flow 12

7 Experian building shareholder value Sales* m EBIT* m 949 1,018 1,115 1,201 1,286 1, % +14% +12% +2% +5% +29% +16% +20% +20% +3% +3% +36% H1 06 Year to March H1 06 Year to March 2005 onwards under IFRS * Growth rates at constant currency and from 2004 for continuing activities only 13 Experian strong cash flow m % 75% 50% 25% 0 0% Year to March Operating cash flow (LHS) Operating cash flow as % of EBIT (RHS) Operating cash flow is defined as operating profit plus depreciation and amortisation, less capex, plus change in working capital and associates 14

8 Experian - key growth drivers Growth in direct-to-consumer market and online advertising Increase in consumer credit and card usage Move to multi-channel marketing Growth in fraud prevention Growth in demand for information in new sectors, e.g. automotive, insurance, business-to-business, government Growth in emerging markets 15

9 Growth drivers in the UK Experian International growth record CAGR of 20% sales and 23% profit m m Year to March Sales (LHS) Operating profit (RHS) 18

10 Experian International Founded in 1980 Strong organic growth Rest of World* 41% UK 59% Supported by complementary acquisitions Wide product range Wide geographic reach Sales Year to March 2005 * Continental Europe, Eastern Europe, South Africa, Latin America, Asia Pacific 19 Experian in UK - total solutions provider Clear market leader in Information and Solutions Grown to offer widest range of services in any one country Principal credit information supplier to nine of the top ten UK banks Future growth driven by Deeper client relationships, e.g. HBOS Product innovation, e.g. authentication; fraud detection New sectors, e.g. government; business-to business; direct-to-consumer 20

11 UK consumer credit growth slowing Gross lending growth slowed, but some offset as client spend shifts from acquiring customers to managing existing accounts annual % change Net lending Gross lending F 2007F 2008F 2009F 2010F Source: Bank of England; Experian Business Strategies forecasts 21 Experian in UK - HBOS contract Over 40m five-year contract Experian offers a unique combination of services Credit Information Consumer and business lending Credit Solutions Application processing/scoring solutions Fraud prevention capabilities Consumer and business authentication Marketing Information Analysis and consultancy support Marketing Solutions Database hosting Outsourced data processing Experian selling new products, such as fraud prevention Experian supporting HBOS across its product groups, e.g. mortgage, credit cards 22

12 Fraud Fraud is a growing global issue Total fraud losses in US are $150bn - $115bn in healthcare and insurance, $13bn in financial services and $13bn borne by merchants (Experian) Total UK fraud losses of 20bn in 2003 (Fraud Advisory Panel) Global credit card fraud estimated at $4bn (Juniper Bank) Online fraud will cost US merchants $2.6bn or 2% of sales in 2004 (CyberSource) Between $600bn and $1.5 trillion is money-laundered globally each year (UN Office of Drug Control and Crime Prevention) Experian offers global solutions 23 Fraud prevention saving clients money Hunter: identifies at the application stage fraudulent new accounts or claims Global solution: standalone or webbased Immediate benefits 3m per month for a major bank 1.5m per month for a large building society 1m plus per month for a medium-sized mortgage lender 1m per month for a major motor finance organisation 0.5m per month for an Internet bank 24

13 Experian in UK - public sector Apply skills developed in financial services to public sector Complying with anti-money laundering regulations Reducing fraudulent benefit claims Supporting collection of local and national taxes Improving accuracy of data held on individuals Enabling instant confirmation of valid vehicle insurance Helping the police allocate resources by postcode risk index Forecasting economic and demographic trends for local and national government 25 QAS accelerating growth in public sector Leading supplier of address management software Continued growth in public sector New business sales Excellent customer retention Strong performances in Healthcare (NHS) Established government agencies Making markets in Criminal justice Local government Cross-selling opportunities Experian Intact Authentication 26

14 Business information and solutions Global sales of business information and solutions exceed 100m Sell credit and marketing information and solutions predominantly about small and medium-sized businesses to clients of all sizes Competitive advantages Ability to blend business and consumer information Concentrating on value-added solutions to improve operational efficiency for clients Recent acquisition of Baker Hill providing software and consulting services to US commercial lending banks Cross-sell into 1,100 banks 27 Experian in UK - business information and solutions Market leader in information and solutions for acquiring and managing business customers Continuing double-digit growth; gaining UK market share Three major UK banks Anti-money laundering software FSA-compliant automated application processing Trebled productivity of field-based sales teams Viking Direct Sophisticated risk scoring in application processing Reduced bad debts without compromising same day delivery offer to customers Centrica Deployed automated risk solutions in energy business Reduced new customer vetting process from hours to seconds 28

15 International opportunities Experian International - strong global presence Experian operates in over 60 countries around the world Countries where we have offices: Argentina Australia Austria Brazil Bulgaria Canada China Denmark Finland France Germany Greece Hong Kong Ireland Italy Japan Monaco Netherlands Norway Russia Singapore South Africa South Korea Spain Sweden Turkey United Kingdom United States 30

16 Experian International - unparalleled product offer Operate eleven consumer credit bureaux Operate seven business credit bureaux Interface with over 70 credit bureaux globally Classify over a billion consumers worldwide Hold lifestyle data on 14 million UK individuals and 8 million households Provide detailed economic forecasts for 25 countries Deliver billions of customer decisions annually 31 Experian International - tailoring the offer Continental Europe European countries still have different legal, regulatory and cultural environments Lead with decision analytics Follow with credit bureaux where possible Spain Italy Scandinavia Establish a presence as allowed France fraud bureau 32

17 Experian success in Spain Experian Spain now has the widest end-to-end range of solutions Enter with scoring/ decisions Establish credit bureau Marketing Services acquisition Win main credit bureau contract Start credit card processing for US client Launch Mosaic consumer segmentation Add fraud prevention/ anti-money laundering Credit bureau contract extended to Experian in France Largest market outside the UK Employs 2,500 FTEs About 60% of sales from card and payment processing consolidating the industry Other activities include Back-office processing Decision solutions Business information services 34

18 Experian International - emerging markets Best growth opportunities in emerging markets where Rising GDP per capita Increasing use of consumer credit Serving both local and global clients Often enter via decision solutions Must be sensitive to local operating environment Already serve clients in over 20 countries in Eastern Europe and Asia Pacific 35 Experian in Korea Experian now serves six of the seven largest Korean banks 36

19 Experian in Russia Large, growing market JV signed in April 2005 with Interfax, Russia s leading provider of information and services to the financial market Launched first national credit bureau in June 2005 Already selling decision solutions to five of the top 15 banks Over 20 clients have agreed to join the bureau Small P&L investment but well-positioned for long-term growth 37

20 Experian North America Experian North America Well balanced portfolio Wider product offer than competitors Interactive Credit Interactive transforming the growth profile Marketing Sales 6 months to September

21 North America building on core credit US credit sales increased by 18% in H1 excluding acquisitions Helped by strong market and FACTA revenue Innovative products Next generation triggers used by five of top seven card issuers User-friendly new format business credit reports More effective sales execution Vertical market focus on regional banks, credit unions and telecommunications Sale of entire product range into former affiliate territories 41 North America repositioning marketing US marketing sales increased by 8% in H1 excluding acquisitions Traditional client needs Emerging client needs Names and addresses Multi-channel marketing Additional customer information Complete view of customer base Individual campaigns Lifetime customer management Many suppliers Single supplier 42

22 Experian Interactive Experian North America- transforming the portfolio Sales H Sales H Marketing Solutions 15% Outsourcing 10% Consumer Direct 1% Credit Information 49% Marketing Information 10% Marketing Solutions 13% Consumer Direct 14% Lead Generation 18% Marketing Information 17% Credit Solutions 9% Credit Solutions 8% Credit Information 36% 44

23 Experian Interactive Credit reports and monitoring services (45% of sales) Online lead generation (55% of sales) US and UK 45 Experian Interactive - helping consumers Check my credit Apply for mortgages Shop for credit card offers Enroll in online education programmes Become a trusted and preferred source for consumers when making key financial decisions Offer a wide range of products that assist consumers in managing the financial aspects of key life events 46

24 Experian Interactive - common business model Consumers Experian websites Search listings Partners Affiliates Customer acquisition channels Broadcast Experian data assets Experian modelling and analytics Customer acquisition Customer monetisation Lead generation Experian products Advertisers 47 Growth of online customer acquisition 25 Online advertising spending 20 18% CAGR 04 to 09 $bn e 2006e 2007e 2008e 2009e Source: emarketer 48

25 Consumer Direct - strong organic growth Leading player in selling credit products to consumers Sales grew by 33% in 2005 Growth drivers Increased Internet usage Awareness of credit importance ID theft protection Product development 49 LowerMyBills.com One-stop financial portal for consumers to get better deals on their recurring monthly expenses Current focus on home loans Platform can be extended to other financial verticals Financial service providers pay Experian a fee for providing leads $22bn spent by mortgage lenders on acquiring customers $1bn of this spent online Online spend growing at c. 30% per annum Synergies with other parts of Experian 50

26 Experian Interactive investment highlights Large and growing markets Growth underpinned by increasing use of Internet by Consumers (more convenient) Organisations (more cost effective) Scale 11th biggest player by unique visitors in US Largest online financial services advertiser in US Partnerships with all leading portals and search engines Significant synergies with Experian Information and Solutions Internationally scaleable over time 51 Experian - summary No single competitor matches our scale, product range or global footprint Strong organic growth opportunities across the businesses Global R&D driving product innovation Acquisitions are a key part of our strategy for growth Managing regulatory and privacy concerns is a core competency 52

27 Appendix Experian what we are Credit Credit Information Solutions Outsourcing Interactive Marketing Marketing Sales ( m) % of sales 46% 32% 10% 12% Year to March 2005 underlying growth 2 8% 5% 7% 37% No of people (FTE) 3 5,023 3,985 2, Sales per FTE ( k) Sales are for the year to March 2005 and exclude discontinued activities 2 Growth excluding discontinued activities and corporate acquisitions at constant exchange rates 3 As at March

28 Experian - Information Key characteristics Core skill Market type Sales channel Product characteristics Acquire, compile, manage and deliver large databases Steady growth Large market Regulated Data sell Salesforce-led Contract, licences Ad-hoc purchases (marketing only) Revenue earned per transaction Volume-driven pricing Country specific Capital intensive Online, real-time delivery 55 Experian - Solutions Key characteristics Core skill Market type Sales channel Specialist analytical and software development skills Good growth Many niche competitors Strategic for clients Executive level sponsorship Software/IT sell Sell to client specialists Consultancy-led Long-term relationships Revenue earned per transaction and by fees Product characteristics Highly customised Value-added pricing Global products Global alliances Intellectual property rights 56

29 Experian - Outsourcing Key characteristics Core skill Process and logistics knowledge Market type Sales channel Steady growth Many competitors, including clients inhouse offers Capacity sell Service-led Long-term relationships Revenue earned per transaction Product characteristics Generic process; customised delivery Cost-based pricing Volume-driven; scale is key Country specific (France) Labour intensive 57 Experian - Interactive Key characteristics Core skill Online consumer marketing Market type High growth Large and growing market Sales channel Partnerships with major Internet portals, advertisers and web publishers Leverages core financial services client relationships Product characteristics White label Pay-per-performance Country specific 58

30 Experian - broad product reach No single competitor offers as many products and solutions Equifax TransUnion D&B Fair, Isaac Equifax FDC TSYS Credit Information Marketing Credit Solutions Marketing Acxiom Equifax infousa Acxiom Harte-Hanks 59 Experian - products by region Global services Decision support (Global) Application processing (Global) Fraud solutions (Global) Consumer information Business information Account processing Automotive information Property information Insurance information Micromarketing Economic analysis and forecasting List enhancement Database hosting Cheque/debit processing Direct-to-consumer credit information US Canada Latin America UK Republic of Ireland Nordic Region France/Belgium/ North Africa Netherlands Germany/Austria Spain/Portugal Italy Central & Eastern Europe Turkey Middle East Asia Service offered Service offered via third party bureau Service offered via JV with First American Real Estate (FARES) South Africa Australia/NZ 60

31 Experian North America sales mix 6 months to 30 September Underlying $m $m mix growth 1 Credit - Information % 18% - Solutions % 15% Total % 18% Marketing - Information % 7% - Solutions % 9% Total % 8% Interactive % 39% Continuing activities % 18% Discontinued activities 2 13 Total reported sales Excluding corporate acquisitions 61 Experian International sales mix 6 months to 30 September Underlying m m mix growth 1 Credit - Information % 7% - Solutions % 4% Total % 5% Marketing - Information % 5% - Solutions % 10% Total % 7% Interactive % 4% Elimination (2) (2) Continuing activities % 5% Discontinued activities 1 14 Total reported sales Excluding acquisitions and at constant exchange rates 62

32 Experian accelerating organic growth Sales growth* % 18% 29% 17% Organic growth accelerating Supplemented by targeted acquisitions H2 estimated acquisition contribution 14% 14% 9% c. 20% in North America 7% 2% 5% 8% 6% 6% 8% 9% 12% Minimal in International H1 06 Year to March Contribution from acquisitions Organic growth * At constant currency and for continuing activities only 63 Experian acquisition strategy Organic growth accelerated in last four years Acquisitions are key part of growth strategy Often small; always complementary; bringing Data New products Geographical expansion Vertical market expansion Consolidation Must generate double-digit post-tax returns over time 64

33 Experian - cost profile 100% of sales 100% of sales 100% of sales 21% EBIT 21% EBIT 21% EBIT 46% Labour 39% Labour 54% Labour 7% 7% 19% Data IT Other 7% 9% 24% Data IT Other 9% 3% 13% Data IT Other Global North America International Costs are for the year to March Direct businesses only, excluding discontinued activities. Depreciation and data amortisation: 9% of sales in North America and 6% of sales in International. R&D: about 5% of sales in both businesses. Other includes marketing (mainly Experian Interactive in North America), other depreciation, occupancy, royalties and voice telecommunications) 65 Experian - cash flow Year to March m m m Operating profit continuing activities Operating profit discontinued activities 1 (6) 2 Total operating profit Depreciation/amortisation Capital expenditure (109) (102) (128) Working capital Dividend from associates, less share of profit (16) (3) (10) Operating cash flow

34 US mortgage market $bn 4,500 4,000 US mortgage originations Year to December 3,500 3,000 2,500 2,000 1,500 1, F 06F 07F Purchase originations Refinance originations Source: Mortgage Bankers Association October Financial calendar 12 January Third Quarter Trading Update 12 April Second Half Trading Update 24 May Preliminary Results 19 July AGM and First Quarter Trading Update 16 November Interim Results 68

35 Contacts GUS plc One Stanhope Gate London W1K 1AF Tel: Fax: Website: David Tyler Group Finance Director Tel: Fax: david.tyler@gusplc.com Peter Blythe Director of Finance Tel: Fax: peter.blythe@gusplc.com Fay Dodds Director of Investor Relations Tel: Fax: fay.dodds@gusplc.com Stuart Ford Investor Relations Manager Tel: Fax: stuart.ford@gusplc.com 69 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. 70