Preliminary Results Part 2

RNS Number : 1728M
Experian plc
19 May 2010
 



Group income statement                                               

for the year ended 31 March 2010   



2010


2009


Notes

US$m


US$m

Revenue

6

3,880


3,873

Cost of sales


(1,889)


(1,824)

Gross profit


1,991


2,049






Distribution costs


(419)


(387)

Administrative expenses


(879)


(1,049)






Operating expenses


(1,298)


(1,436)

Operating profit


693


613






Finance income



196


182

Finance expense



(286)


(259)






Net finance costs

9

(90)


(77)






Share of post-tax profits of associates


58


42

Profit before tax

6

661


578

Group tax expense

10

(17)


(84)

Profit after tax for the year from continuing operations


644


494

 





(Loss)/profit for the year from discontinued operations

11

(8)


12

Profit for the year


636


506






Attributable to:





Owners of Experian plc


600


486

Minority interests


36


20

Profit for the year


636


506













US cents


US cents

Earnings per share





Basic

12

59.0


48.0

Diluted

12

58.1


47.5






Earnings per share from continuing operations





Basic

12

59.8


46.8

Diluted

12

58.9


46.3











Full year dividend per share

13

23.0


20.0



Group statement of comprehensive income

for the year ended 31 March 2010



2010


2009



US$m


US$m

Profit for the year


636


506

Other comprehensive income:





Fair value gains/(losses) - available for sale financial assets


5


(8)

Actuarial losses - defined benefit pension plans


(20)


(146)

Currency translation differences


209


(428)

Reclassification of cumulative fair value losses - available for sale financial assets


5


-

Reclassification of cumulative exchange gain - divestments


-


(3)

Total other comprehensive income for the year, net of tax (note 10)

 

199

 

(585)

Total comprehensive income for the year, net of tax

 

835

 

(79)






Attributable to:





Owners of Experian plc


760


(55)

Minority interests


75


(24)

Total comprehensive income for the year, net of tax

 

835

 

(79)

 

 

Non-GAAP measures - reconciliation of profit before tax to Benchmark PBT

 



2010


2009


Notes

US$m


US$m

Profit before tax

6

661


578

exclude: exceptional items

8

72


117

exclude: amortisation of acquisition intangibles

8

140


132

exclude: goodwill adjustment

8

-


1

exclude: charges in respect of the demerger-related equity incentive plans

8

28


32

exclude: financing fair value remeasurements

8

9


(19)

exclude: tax expense on share of profits of associates

6

-


2

Benchmark PBT - continuing operations

6

910


843













2010


2009

Benchmark earnings per share from continuing operations


US cents


US cents

Basic

12

67.1


62.3

Diluted

12

66.1


61.6



Group balance sheet

at 31 March 2010



2010


2009


Notes

US$m


US$m

Non-current assets





Goodwill


3,412


3,125

Other intangible assets


1,233


1,189

Property, plant and equipment


451


479

Investments in associates


243


332

Deferred tax assets


176


13

Trade and other receivables


8


5

Available for sale financial assets


33


26

Other financial assets


88


61



5,644


5,230

Current assets





Inventories


3


4

Trade and other receivables


800


738

Current tax assets


4


17

Other financial assets


27


21

Cash and cash equivalents


175


129



1,009


909

Assets classified as held for sale

21

25


-



1,034


909

Current liabilities





Trade and other payables


(1,062)


(995)

Loans and borrowings


(17)


(314)

Current tax liabilities


(154)


(91)

Provisions


(59)


(66)

Other financial liabilities


(20)


(22)



(1,312)


(1,488)

Liabilities classified as held for sale

21

(12)


-



(1,324)


(1,488)

Net current liabilities


(290)


(579)

Total assets less current liabilities


5,354


4,651

Non-current liabilities





Trade and other payables


(14)


(42)

Loans and borrowings


(1,834)


(2,003)

Deferred tax liabilities


(213)


(135)

Provisions


(14)


(15)

Retirement benefit obligations

15

(88)


(58)

Other financial liabilities


(754)


(499)



(2,917)


(2,752)

Net assets


2,437


1,899

 





Equity





Share capital

19

102


102

Share premium

19

1,453


1,449

Retained earnings


16,591


16,251

Other reserves


(15,860)


(16,017)

Attributable to owners of Experian plc


2,286


1,785

Minority interests


151


114

Total equity


2,437


1,899



 

 

Group statement of changes in total equity

for the year ended 31 March 2010


 

Share capital (Note 19)

 

Share premium

(Note 19)

 

Retained earnings

 

 

Other reserves

Attributable to  owners of  Experian plc

Minority interests

 

Total equity


US$m

US$m

US$m

US$m

US$m

US$m

US$m

At 1 April 2009

102

1,449

16,251

(16,017)

1,785

114

1,899

Comprehensive income:

 







Profit for the year

-

-

600

-

600

36

636

Other comprehensive income:

 







Fair value gains - available for sale financial assets

 

-

 

-

 

5

 

-

 

5

 

-

 

5

Actuarial losses - defined benefit pension plans

 

-

 

-

 

(20)

 

-

 

(20)

 

-

 

(20)

Currency translation differences

-

-

-

170

170

39

209

Reclassification of cumulative fair value losses - available for sale financial assets

 

 

-

 

 

-

 

 

5

 

 

-

 

 

5

 

 

-

 

 

5

Total other comprehensive income

-

-

(10)

170

160

39

199

Total comprehensive income

-

-

590

170

760

75

835

Transactions with owners:








Employee share incentive plans:








- value of employee services

-

-

67

-

67

-

67

- proceeds from shares issued

-

4

-

-

4

-

4

Exercise of share options

-

-

(103)

151

48

-

48

Purchase of own shares by employee trusts

 

-

 

-

 

-

 

(164)

 

(164)

 

-

 

(164)

Liability on put option over minority interests

 

-

 

-

 

(8)

 

-

 

(8)

 

-

 

(8)

Minority interests arising on business combinations

 

-

 

-

 

-

 

-

 

-

 

4

 

4

Dividends paid during the year

-

-

(206)

-

(206)

(42)

(248)

Transactions with owners

-

4

(250)

(13)

(259)

(38)

(297)

At 31 March 2010

102

1,453

16,591

(15,860)

2,286

151

2,437

 

 


 

Share capital (Note 19)

 

Share premium

(Note 19)

 

Retained earnings

 

 

Other reserves

Attributable to  owners of  Experian plc

Minority interests

 

Total equity


US$m

US$m

US$m

US$m

US$m

US$m

US$m

At 1 April 2008

102

1,442

16,065

(15,653)

1,956

161

2,117

Comprehensive income:

 







Profit for the year

-

-

486

-

486

20

506

Other comprehensive income:








Fair value losses - available for sale financial assets

 

-

 

-

 

(8)

 

-

 

(8)

 

-

 

(8)

Actuarial losses  - defined benefit pension plans

 

-

 

-

 

(146)

 

-

 

(146)

 

-

 

(146)

Currency translation differences

-

-

-

(384)

(384)

(44)

(428)

Reclassification of cumulative exchange gain - divestments

 

-

 

-

 

(3)

 

-

 

(3)

 

-

 

(3)

Total other comprehensive income

-

-

(157)

(384)

(541)

(44)

(585)

Total comprehensive income

-

-

329

(384)

(55)

(24)

(79)

Transactions with owners:








Employee share incentive plans:








- value of employee services

-

-

57

-

57

-

57

- proceeds from shares issued

-

7

-

-

7

-

7

Exercise of share options

-

-

(11)

   20

9

      -

            9

Minority interests arising on business combinations

 

-

 

-

 

-

 

-

 

-

 

2

 

2

Disposal of minority interests

-

-

-

-

-

(1)

(1)

Dividends paid during the year

-

-

(189)

-

(189)

(24)

(213)

Transactions with owners

-

7

(143)

20

(116)

(23)

(139)

At 31 March 2009

102

1,449

16,251

(16,017)

1,785

114

1,899



Group cash flow statement

for the year ended 31 March 2010



2010


2009


US$m


US$m

Cash flows from operating activities





Cash generated from operations

16(a)

1,157


1,102

Interest paid


(107)


(157)

Interest received


39


29

Dividends received from associates


41


28

Tax paid


(48)


(39)

Net cash inflow from operating activities                                    

1,082

 

963






Cash flows from investing activities





Purchase of property, plant and equipment


(58)


(75)

Purchase of other intangible assets

16(c)

(256)


(230)

Sale of property, plant and equipment


30


-

Purchase of investments in associates


(7)


(29)

Disposal of other financial assets and investments in associates


118


-

Acquisition of subsidiaries, net of cash acquired


(41)


(179)

Disposal of subsidiaries


(11)


191

Net cash flows used in investing activities

 

(225)

 

(322)






Cash flows from financing activities





Issue of ordinary shares


4


7

Receipt of share option proceeds


60


9

Purchase of own shares by employee trusts and in respect of employee share incentive plans


(178)


-

New borrowings


692


71

Repayment of borrowings


(1,217)


(278)

Capital element of finance lease rental payments


(2)


(3)

Net receipts/(payments) from derivative financial instruments held to manage currency profile


33


(160)

Net receipts/(payments) from equity swaps


14


(11)

Payment into bank deposit


(14)


(29)

Dividends paid


(248)


(213)

Net cash flows used in financing activities


(856)


(607)

 

 





Exchange and other movements

35


(37)

Net increase/(decrease) in cash and cash equivalents - continuing operations


36


(3)






Net decrease in cash equivalents - discontinued operations

11

-


(17)






Net increase/(decrease) in cash and cash equivalents

 

36


(20)






Cash and cash equivalents at 1 April


127


147

Cash and cash equivalents at the end of the year


163


127

 



Notes to the financial statements

for the year ended 31 March 2010

1. Corporate information and basis of preparation

Experian plc (the 'Company'), which is the ultimate parent company of the Experian group of companies ('Experian' or the 'Group'), is incorporated and registered in Jersey under Jersey Companies Law as a public company limited by shares and is resident in Ireland. The Company's shares are traded on the London Stock Exchange's Regulated Market.

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 2010 or 31 March 2009 but is derived from the statutory financial statements for the year ended 31 March 2010. The Group's statutory financial statements for the year ended 31 March 2010 will be delivered to the Jersey Registrar of Companies in due course. The auditors have 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 2009 have been delivered to the Jersey Registrar of Companies. The auditors 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 are prepared in accordance with International Financial Reporting Standards ('IFRS' or 'IFRSs') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations applicable to companies reporting under IFRS. The Group's statutory financial statements are presented in US dollars, as this is the most representative currency of the Group's operations, and they are rounded to the nearest million. They are prepared under the historical cost convention, as modified for the revaluation of available for sale financial assets and certain other financial assets and financial liabilities including derivatives. Except as indicated in note 2, the Group's statutory financial statements have been prepared on a basis consistent with the year ended 31 March 2009. The principal exchange rates used are set out in note 5.

This preliminary announcement has been prepared in accordance with the Listing Rules of the UK Financial Services Authority, using the accounting policies applied in the preparation of the Group's statutory financial statements for the year ended 31 March 2010. Those policies were published in full in the Group's statutory financial statements for the year ended 31 March 2009 and are available on the Corporate website, at www.experianannualreport.ie.

Other than those disclosed in this preliminary announcement, no significant events impacting the Group have occurred between 31 March 2010 and 19 May 2010 when the financial information was approved for issue.

2. Presentation of financial information

There have been two significant developments in financial reporting which became effective for Experian at the start of the current financial year and these have been taken into account in the presentation of the Group's statutory financial statements:

 

a) IAS 1 'Amendment - Presentation of Financial Statements'

This revised standard requires that the Group statement of changes in total equity is now presented as a primary statement. The standard also prohibits the presentation of items of income and expense within this statement and requires such 'non-owner changes in equity' to be presented separately from 'owner changes in equity'. Accordingly the standard requires that all 'non-owner changes in equity' are shown in a performance statement and, as permitted by the standard, the Group has elected to comply with this requirement by presenting a Group income statement and a Group statement of comprehensive income. Items in the Group statement of comprehensive income and Group statement of changes in total equity are shown net of related tax.



Notes to the financial statements (continued)

for the year ended 31 March 2010

2. Presentation of financial information (continued)

b) Segmental reporting - adoption of IFRS 8 'Operating Segments'

Under IFRS 8, an operating segment is a component of an entity:

·     that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components);

·     whose operating results are regularly reviewed by the chief operating decision maker to assess its performance and make decisions about resources to be allocated to the segment; and

·     for which discrete financial information is available.

 

Experian is organised into, and managed on a worldwide basis over, the following five operating segments, based on geographical areas, supported by its central Group functions:

·     North America;

·     Latin America;

·     UK and Ireland;

·     Europe, Middle East and Africa ('EMEA'); and

·     Asia Pacific.

 

The chief operating decision-maker, identified in accordance with the requirements of IFRS 8, assesses the performance of the above operating segments on the basis of EBIT, as defined in note 4.

 

The 'All other segments' category required to be disclosed under IFRS 8 has been captioned in these financial statements as EMEA/Asia Pacific. This combines information in respect of the EMEA and the Asia Pacific segments as, on the basis of their share of the Group's results and net assets, neither of these operating segments is individually reportable under IFRS 8. Accordingly the information given in respect of this category is comparable to that previously disclosed under IAS 14 in respect of EMEA/Asia Pacific.

 

Experian separately presents information equivalent to segment disclosures in respect of the costs of its central Group functions under the caption of 'Central Activities', as management believes that the reporting of this information is helpful to users of the financial statements. Information disclosed under Central Activities includes costs arising from finance, treasury and other global functions.

 

Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties. There is no material impact from inter-segment transactions on the Group's results.

 

Segment information for the full year provided to the chief operating decision-maker, and reportable under IFRS 8, is presented in note 6. This includes analysis of the Group's revenues over groups of service lines. This is supplemented by additional voluntary disclosure of the profitability of those same groups of service lines within note 7, and is equivalent to disclosures previously provided of segmental information analysed by business segment under IAS 14. For ease of reference, Experian continues to use the term 'business segments' when discussing the results of groups of service lines.

 

The North America and the UK and Ireland segments derive revenues from all of the Group's major service lines. The Latin America, EMEA and Asia Pacific segments currently do not derive revenue from the Interactive service line.

 



Notes to the financial statements (continued)

for the year ended 31 March 2010

3. Other recent accounting developments

The following accounting standards, amendments and interpretations issued by the IASB and the IFRIC are effective for the Group's accounting periods beginning on or after 1 April 2009 but have had no material effect on the results or financial position of the Group disclosed within these financial statements:

·        Amendment to IFRS 2 - 'Share-Based Payments'

·        Amendment to IAS 23 - 'Borrowing Costs'

·        Amendments to IAS 32 and IAS 1 - 'Puttable Financial Instruments and Obligations arising on Liquidation'

·        Amendments to IAS 39 and IFRS 7 - 'Reclassification of Financial Instruments'

·        Improvements to IFRSs (May 2008)

·        IFRIC 13 - 'Customer Loyalty Programmes'

·        IFRIC 15 - 'Agreements for the Construction of Real Estate'

·        IFRIC 16 - 'Hedges of a Net Investment in a Foreign Operation'

 

At the balance sheet date, a number of new standards, amendments and interpretations were in issue but are not yet effective for the Group and have not been early adopted:

·        Amendment to IAS 27 - 'Consolidated and Separate Financial Statements'

·        Amendment to IAS 39 - 'Eligible Hedged Items'

·        Amendment to IFRS 2 - 'Group Cash-Settled Share-Based Payment Transactions'

·        Revision to IFRS 3 - 'Business Combinations'

·        Improvements to IFRSs (April 2009)

·        Amendments to IFRIC 9 and IAS 39 - 'Embedded Derivatives'

·        IFRIC 17 - 'Distributions of Non-Cash Assets to Owners'

·        IFRIC 18 - 'Transfers of Assets from Customers'

 

The amendments to IAS 27 and IFRS 3 will impact the accounting treatment of acquisitions in the Group's statutory financial statements. If they had been adopted, the other new standards, amendments or interpretations would have had no material effect on the results or financial position of the Group disclosed within these financial statements although a number would lead to additional or revised disclosures.

 

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

The Group has identified certain measures that it believes will assist understanding of the performance of the business. 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 important comparables and key measures used within the business for assessing performance.

 

The following are the key non-GAAP measures identified by the Group and used in the Group's statutory financial statements:

 

Benchmark profit before tax ('Benchmark PBT')

Benchmark PBT is defined as profit before amortisation of acquisition intangibles, goodwill impairments, charges in respect of the demerger-related equity incentive plans, exceptional items, financing fair value remeasurements, tax and discontinued operations. It includes the Group's share of associates' pre-tax profit.

 

Earnings before interest and tax ('EBIT')

EBIT is defined as profit before amortisation of acquisition intangibles, goodwill impairments, charges in respect of the demerger-related equity incentive plans, exceptional items, net finance costs, tax and discontinued operations. It includes the Group's share of associates' pre-tax profit.

 

Notes to the financial statements (continued)

for the year ended 31 March 2010

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

Benchmark earnings

Benchmark earnings represents Benchmark PBT less attributable tax and minority interests. Benchmark earnings attributable to minority interests represents that portion of Benchmark earnings that relate to minority interests. Benchmark PBT less attributable tax is designated as overall benchmark earnings.

 

Benchmark earnings per share ('Benchmark EPS')

Benchmark EPS represents Benchmark earnings divided by the weighted average number of shares in issue, and is disclosed to indicate the underlying profitability of the Group.

 

Exceptional items

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

 

Operating cash flow

Operating cash flow is calculated as cash generated from operations adjusted for outflows in respect of the purchase of property, plant and equipment and other intangible assets and adding dividends from associates but excluding any cash inflows and outflows in respect of exceptional items. It is defined as EBIT less changes in working capital, plus depreciation/amortisation, less capital expenditure, less profit retained in associates.

 

Net debt

Net debt is calculated as total debt less cash and cash equivalents and other highly liquid bank deposits with original maturities greater than three months. Total debt includes loans and borrowings (and the fair value of derivatives hedging loans and borrowings), overdrafts and obligations under finance leases. Accrued interest is excluded from net debt.

5. Foreign currency

The principal exchange rates used in these financial statements are as follows:


Average


    Closing


2010

2009


2010

2009

2008








Sterling : US dollar

1.58

1.69


1.52

1.43

1.99

US dollar : Brazilian real

1.88

1.96


1.79

2.30

1.75

Euro : US dollar

1.41

1.41


1.35

1.33

1.58

Assets and liabilities of undertakings whose functional currency is not the US dollar are translated into US dollars at the exchange rates ruling at the balance sheet date. Their income statements are translated into US dollars at average exchange rates (unless these averages are not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rates on the dates of the transactions).



Notes to the financial statements (continued)

for the year ended 31 March 2010

6. Segment information

i) Income statement



Continuing operations1

 

 

 

North

 America

 

Latin

America

 

UK and Ireland

        EMEA/

Asia Pacific3

Total operating segments

 

Central

Activities

Total

continuing  operations

Year ended 31 March 2010

US$m

US$m

US$m

US$m

US$m

US$m

US$m

Revenue from external customers2

2,068

559

792

461

3,880

-

3,880









Reconciliation from EBIT to profit/(loss) before tax - continuing operations








EBIT

623

166

212

52

1,053

(62)

991

Net interest (note 9(b))

-

-

-

-

-

(81)

(81)

Benchmark PBT

623

166

212

52

1,053

(143)

910

Exceptional items (note 8)

(45)

-

(10)

(11)

(66)

(6)

(72)

Amortisation of acquisition intangibles

(48)

(39)

(39)

(14)

(140)

-

(140)

Charges in respect of the demerger-related equity incentive plans

(11)

-

(7)

(2)

(20)

(8)

(28)

Financing fair value remeasurements

-

-

-

-

-

(9)

(9)

Profit/(loss) before tax

519

127

156

25

827

(166)

661


 



 


Continuing operations1

 

 

 

 

North

 America

 

Latin

America

 

UK and Ireland

        EMEA/

Asia Pacific3

Total operating segments

 

Central

Activities

Total continuing  operations

 

Year ended 31 March 2009

US$m

US$m

US$m

US$m

US$m

US$m

US$m

 

Revenue from external customers2

2,083

462

902

426

3,873

-

3,873

 









 

Reconciliation from EBIT to profit/(loss) before tax - continuing operations








 

EBIT

616

118

213

49

996

(57)

939

 

Net interest (note 9(b))

-

-

-

-

-

(96)

(96)

 

Benchmark PBT

616

118

213

49

996

(153)

843

 

Exceptional items (note 8)

(49)

-

(30)

(22)

(101)

(16)

(117)

 

Amortisation of acquisition intangibles

(48)

(38)

(34)

(12)

(132)

-

(132)

 

Goodwill adjustment

(1)

-

-

-

(1)

-

(1)

 

Charges in respect of the demerger-related equity incentive plans

(14)

-

(9)

(3)

(26)

(6)

(32)

 

Financing fair value remeasurements

-

-

-

-

-

19

19

 

Tax expense on share of profits of associates

(2)

-

-

-

(2)

-

(2)

 

Profit/(loss) before tax

502

80

140

12

734

(156)

578

 

1    In the year ended 31 March 2010, a loss before tax of US$8m arose in respect of discontinued operations, which comprised the Group's transaction processing activities in France. In the year ended 31 March 2009, additional revenue from external customers of US$201m and profit before tax of US$26m arose in respect of these discontinued operations. Further information on discontinued operations is shown in note 11.

2    Revenue from external customers arose principally from the provision of services. There is no material inter-segment revenue.

3    EMEA/Asia Pacific represents all other operating segments.

 

 


2010

2009

ii) Revenue by country - continuing operations

US$m

US$m

USA

2,064

2,079

UK

784

893

Brazil

556

457

Other

476

444

Total

3,880

3,873

1      No single customer accounted for 10% or more of the Group's revenue from external customers in the year ended 31 March 2010 and the year ended 31 March 2009.

2      The Company is resident in Ireland.  Revenue with Irish external customers represents less than 1% of the Group's revenue from external customers and accordingly all the Group's revenues is attributable to foreign countries.

 

iii) Revenue by business segment - continuing operations

The analysis by business segment of revenue from external customers is given within note 7.



Notes to the financial statements (continued)

for the year ended 31 March 2010

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



Continuing operations1

 

 

 

Credit

Services

Decision

Analytics

Marketing

Services

Interactive

Total business segments

Central

Activities

Total

 continuing operations

Year ended 31 March 2010

US$m

US$m

US$m

US$m

US$m

US$m

US$m

Revenue from external customers2

1,669

441

734

1,036

3,880

-

3,880









Reconciliation from EBIT to profit/(loss) before tax - continuing operations








EBIT

605

119

86

243

          1,053

(62)

991

Net interest (note 9(b))

-

-

-

-

-

(81)

(81)

Benchmark PBT

605

119

86

243

1,053

(143)

910

Exceptional items (note 8)

(20)

(5)

(33)

(8)

(66)

(6)

(72)

Amortisation of acquisition intangibles

(57)

(6)

(45)

(32)

(140)

-

(140)

Charges in respect of the demerger-related equity incentive plans3

-

-

-

-

-

(28)

(28)

Financing fair value remeasurements

-

-

-

-

-

(9)

(9)

Profit/(loss) before tax

528

108

8

203

847

(186)

661





Continuing operations1

 

 

Credit

Services

Decision

Analytics

Marketing

Services

 

Interactive

Total business segments

 

Central

Activities

Total

 continuing operations

Year ended 31 March 2009

US$m

US$m

US$m

US$m

US$m

US$m

US$m

Revenue from external customers2

1,666

487

770

950

3,873

-

3,873









Reconciliation from EBIT to profit/(loss) before tax - continuing operations








EBIT

554

142

88

212

996

(57)

939

Net interest (note 9(b))

-

-

-

-

-

(96)

(96)

Benchmark PBT

554

142

88

212

996

(153)

843

Exceptional items (note 8)

(41)

(16)

(23)

(9)

(89)

(28)

(117)

Amortisation of acquisition intangibles

(54)

(6)

(40)

(32)

(132)

-

(132)

Goodwill adjustment

-

-

(1)

-

(1)

-

(1)

Charges in respect of the demerger-related equity incentive plans3

-

-

-

-

-

(32)

(32)

Financing fair value remeasurements

-

-

-

-

-

19

19

Tax expense on share of profits of associates

(2)

-

-

-

(2)

-

(2)

Profit/(loss) before tax

457

120

24

171

772

(194)

578

1    In the year ended 31 March 2010, a loss before tax of US$8m arose in respect of discontinued operations, which comprised the Group's transaction processing activities in France. In the year ended 31 March 2009, additional revenue from external customers of US$201m and profit before tax of US$26m arose in respect of these discontinued operations. Further information on discontinued operations is shown in note 11.

2    Revenue from external customers arose principally from the provision of services. There is no material inter-segment revenue.

3    No allocation by business segment is made for charges in respect of the demerger-related equity incentive plans as the underlying data is maintained only to provide an allocation by operating segment.



Notes to the financial statements (continued)

for the year ended 31 March 2010

8. Exceptional and other non-GAAP measures


2010

2009


US$m

US$m

Exceptional items



Restructuring costs

41

92

Loss arising in connection with arrangements with FARES

4

-

Cessation of bureau activities

3

15

Loss on disposal of businesses

24

3

Demerger and related restructuring costs

-

7

Total exceptional items

72

117

 



Other non-GAAP measures



Amortisation of acquisition intangibles

140

132

Goodwill adjustment

-

1

Charges in respect of the demerger-related equity incentive plans

28

32

Financing fair value remeasurements

9

(19)

Total other non-GAAP measures

177

146

Exceptional items and other non-GAAP measures are in respect of continuing operations. Exceptional items are charged to administrative expenses.

Exceptional items

Expenditure of US$41m (2009: US$92m) arose in the year in connection with the Group's strategic programme of cost efficiency measures. Of this US$21m (2009: US$51m) related to redundancy, US$17m (2009: US$34m) related to offshoring activities, infrastructure consolidations and other restructuring activities and US$3m (2009: US$7m) related to asset write-offs.

During the year, Experian recognised a loss of US$4m in connection with arrangements with FARES primarily as a result of the reclassification through the Group income statement of earlier losses in respect of holdings of First Advantage Corporation Class A common stock.

During the year ended 31 March 2010, and as previously announced, the Group completed the closure of its Canadian credit bureau and terminated its joint venture bureau in Japan. Charges associated with the closure of the bureaux in the year ended 31 March 2009 included US$13m of fixed asset write-offs, including the related investment in associate, and a further US$2m of closure costs.

The loss on disposal of businesses in the year ended 31 March 2010primarily arose as a result of the disposal of the National Business Database in North America.

Demerger and related restructuring costs in the year ended 31 March 2009 comprised legal and professional fees, together with costs in connection with the cessation of a number of subsidiaries of the former GUS plc.

Cash outflows in respect of exceptional items are analysed in note 16(d).

Other non-GAAP measures

IFRS requires that, on acquisition, specific intangible assets are identified and recognised separately from goodwill and then amortised over their useful economic lives. These include items such as brand names and customer lists, to which value is first attributed at the time of acquisition. The Group has excluded amortisation of these acquisition intangibles from its definition of Benchmark PBT because such a charge is based on judgments about their value and economic life.

A goodwill adjustment of US$1m arose in the year ended 31 March 2009 under IFRS 3 'Business Combinations' on the recognition of previously unrecognised tax losses on prior years' acquisitions. The corresponding tax benefit reduced the tax charge for that year by US$1m.

Charges in respect of demerger-related equity incentive plans relate to one-off grants made to senior management and at all staff levels at the time of the demerger, under a number of equity incentive plans. The cost of these one-off grants is being charged to the Group income statement over the five years from flotation in October 2006, but excluded from the definition of Benchmark PBT. The cost of all other grants is being charged to the Group income statement and included in the definition of Benchmark PBT.

 

Notes to the financial statements (continued)

for the year ended 31 March 2010

8. Exceptional and other non-GAAP measures (continued)

An element of the Group's derivatives is ineligible for hedge accounting under IFRS. Gains or losses on these derivatives arising from market movements, together with gains and losses on put options in respect of acquisitions, are credited or charged to financing fair value remeasurements within finance income and finance expense in the Group income statement.

9. Net finance costs


2010

2009


US$m

US$m

a) Net finance costs



Interest income:



Expected return on pension plan assets

47

69

Other interest income

19

28

Interest income

66

97

Financing fair value gains:



Movement in fair value of Serasa put option

-

21

Other financing fair value gains

130

64

Financing fair value gains

130

85

Finance income

196

182

 



Interest expense:



Interest expense on pension plan liabilities

48

52

Other interest expense

99

141

Interest expense

147

193

Financing fair value losses:



Movement in fair value of Serasa put option

113

-

Other financing fair value losses

26

66

Financing fair value losses

139

66

Finance expense

286

259

 



Net finance costs

90

77




b) Net interest expense included in Benchmark PBT



Net finance costs

90

77

Financing fair value remeasurements

(9)

19




Net interest expense included in Benchmark PBT

81

96




c) Financing fair value remeasurements included in net finance costs



Financing fair value gains

(130)

(85)

Financing fair value losses

139

66




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

9

(19)



Notes to the financial statements (continued)

for the year ended 31 March 2010

10. Group tax expense

The effective rate of tax is 2.6% (2009: 14.5%) based on the profit before tax for the year ended 31 March 2010 of US$661m (2009: US$578m) and the Group tax expense of US$17m (2009: US$84m). The Group tax expense comprises a UK tax credit of US$103m (2009: credit of US$43m) and non-UK tax charge of US$120m (2009: US$127m).

 

The effective rate of tax based on Benchmark PBT of US$910m (2009: US$843m) and the associated tax charge of US$184m (2009: US$184m), excluding the effect of a one-off tax credit of US$105m (2009: US$20m), is 20.2% (2009: 21.8%). The one-off deferred tax credit in the year ended 31 March 2010 involves UK entities that are still part of the Group but is excluded from the calculation of the effective rate of tax based on Benchmark PBT in view of the size and non-recurring nature of this benefit. The one-off corporation tax credit in the year ended 31 March 2009 was excluded from the calculation of the effective rate of tax based on Benchmark PBT as it related to arrangements involving entities no longer part of the Group. A further tax credit of US$24m arose in the year ended 31 March 2010 following resolution of historic positions and the tax expense of US$17m in the Group income statement and the tax on Benchmark PBT of US$184m are both stated after this credit.

 

The reconciliation of the tax expense reported in the Group income statement to the Benchmark tax charge is as follows:

 


2010

2009


US$m

US$m

Group tax expense

17

84

Add: one-off tax credit

105

20

Add: tax relief on exceptional items

33

25

Add: tax relief on other non-GAAP measures

29

53

Tax expense on share of profit of associates

-

2

Tax on Benchmark PBT                                  

184

184

 

In the year ended 31 March 2010, a deferred tax charge of US$3m (2009: credit of US$56m) was recognised in other comprehensive income with the credit in the year ended 31 March 2009 principally relating to actuarial losses on defined benefit pension plans. In the year ended 31 March 2010, a tax credit relating to employee share incentive plans of US$12m (2009: US$4m) was recognised in equity and reported as appropriate within transactions with owners. This amount comprised current tax of US$4m (2009: US$1m) and deferred tax of US$8m (2009: US$3m). 

Notes to the financial statements (continued)

for the year ended 31 March 2010

11. Discontinued operations

The Group disposed of its transaction processing activities in France on 31 October 2008 and the results and cash flows of that business are accordingly classified as discontinued.

Results for discontinued operations

 

2010

 

2009

 

US$m

 

US$m

Revenue

-

 

201

Cost of sales

-

 

(147)

Gross profit

-

 

54

Distribution costs

-

 

(6)

Administrative expenses

-

 

(49)

Operating expenses

-

 

(55)

Loss for discontinued operations

-

 

(1)

 

 

 

 

(Loss)/profit on disposal of discontinued operations:




(Loss)/profit on disposal

(8)


27

Tax charge in respect of (loss)/profit on disposal

-


(14)

(Loss)/profit after tax on disposal of discontinued operations

(8)


13

(Loss)/profit for the year from discontinued operations

(8)

 

12

 

There was a net cash inflow on the disposal of the transaction processing activities in France of US$191m in the year ended 31 March 2009 on the completion of the sale and a further cash outflow of US$17m in the year ended 31 March 2010 on the settlement of additional related costs. These cash flows are disclosed within net cash flows used in investing activities from continuing operations in the Group cash flow statement.

 

Cash flows attributable to discontinued operations         

 

2010

 

2009

 

US$m

 

US$m

From operating activities

-

 

(10)

From investing activities

-

 

(10)

Exchange and other movements

-

 

3

Net decrease in cash and cash equivalents in discontinued operations

-

 

(17)

Notes to the financial statements (continued)

for the year ended 31 March 2010

12. Basic and diluted earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders of the Company by a weighted average number of ordinary shares in issue during the year (excluding own shares held in employee trusts, which are treated as cancelled).

The calculation of diluted earnings per share reflects the potentially dilutive effect of employee share incentive plans. The earnings figures used in the calculations are unchanged for diluted earnings per share.

 

2010

2009

Basic earnings per share:         

US cents

US cents

Continuing and discontinued operations

59.0

48.0

Discontinued operations

0.8

(1.2)

Continuing operations

59.8

46.8

Add back of exceptional and other non-GAAP measures, net of tax

7.3

15.5

Benchmark earnings per share from continuing operations (non-GAAP measure)

67.1

62.3

 



 

2010

2009

Diluted earnings per share:

US cents

US cents

Continuing and discontinued operations

58.1

47.5

Discontinued operations

0.8

(1.2)

Continuing operations

58.9

46.3

Add back of exceptional and other non-GAAP measures, net of tax

7.2

15.3

Benchmark diluted earnings per share from continuing operations (non-GAAP measure)

66.1

61.6

 


 

2010

2009

Earnings attributable to owners of Experian plc:

US$m

US$m

Continuing and discontinued operations

600

486

Discontinued operations

8

(12)

Continuing operations

608

474

Add back of exceptional and other non-GAAP measures, net of tax

73

157

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

681

631

 



 

2010

2009

Earnings attributable to minority interests:

US$m

US$m

Continuing and discontinued operations

36

20

Add back of amortisation of acquisition intangibles attributable to the minority, net of tax

9

8

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

45

28

 


 

2010

2009

Reconciliation of benchmark earnings to profit for the year:

US$m

US$m

Overall benchmark earnings (non-GAAP measure)

726

659

(Loss)/profit from discontinued operations

(8)

12

Loss from exceptional and other non-GAAP measures

(82)

(165)

Profit for the year

636

506





2010

2009

Weighted average number of ordinary shares:

m

m

Weighted average number of ordinary shares in issue during the year

1,015

1,013

Dilutive effect of share incentive awards

15

12

Diluted weighted average number of ordinary shares

1,030

1,025



Notes to the financial statements (continued)

for the year ended 31 March 2010

 

2010

 

2009

 

US cents

per share

US$m

 

US cents

per share

US$m

Amounts recognised and paid during the year:

 

 

 

 

 

First interim - paid in January 2010 (2009: January 2009)

7.00

71

 

6.75

68

Second interim - paid in July 2009 (2009: July 2008)

13.25

135

 

12.00

121

Ordinary dividends paid on equity shares

20.25

206

 

18.75

189

 

 

 

 

 

 

Full year dividend for the year ended 31 March

23.00

 

 

20.00

203

A dividend of 16 US cents per ordinary share will be paid on 23 July 2010 to shareholders on the register at the close of business on 25 June 2010 and is not included as a liability in these financial statements. This dividend, together with the first interim dividend of 7 US cents per ordinary share paid in January 2010, comprises the full year dividend for the year ended 31 March 2010 of 23 US cents.

Unless shareholders elect by 25 June 2010 to receive US dollars, their dividends will be paid in sterling at a rate per share calculated on the basis of the exchange rate from US dollars to sterling on 2 July 2010.

Pursuant to the Income Access Share arrangements put in place as part of the demerger of Experian and Home Retail Group in October 2006, shareholders in the Company can elect to receive their dividends from a UK source (the 'IAS election'). Shareholders who held 50,000 or fewer Experian shares (i) on the date of admission of the Company's shares to listing on the London Stock Exchange and (ii) in the case of shareholders who did not own shares at that time, on the first dividend record date after they become shareholders in the Company, unless they elect otherwise, will be deemed to have elected to receive their dividends under the IAS election arrangements. Shareholders who hold more than 50,000 shares and who wish to receive their dividends from a UK source must make an IAS election. All elections remain in force indefinitely unless revoked. Unless shareholders have made an IAS election, or are deemed to have made an IAS election, dividends will be received from an Irish source and will be taxed accordingly.

The Company offers a Dividend Reinvestment Plan ('DRIP') which enables those shareholders who receive their dividends under the IAS election arrangements to use their cash dividends to purchase Experian shares. Such shareholders who wish to participate in the DRIP for the first time, in respect of the second interim dividend for the year ended 31 March 2010 to be paid on 23 July 2010, should return a completed and signed DRIP mandate form to be received by the Company's Registrars, by no later than 25 June 2010. For further details please contact the Registrars.

The employee trusts waived their entitlements to dividends of US$2m (2009: US$2m).

14. Capital expenditure, disposals and capital commitments

During year ended 31 March 2010 the Group incurred capital expenditure of US314m (2009: US$315m (including US$10m in respect of discontinued 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 2010 was US$34m and the amount realised was US$30m.

At 31 March 2010, the Group had capital commitments in respect of property, plant and equipment and intangible assets and for which contracts had been placed of US$44m (2009: US$22m).



Notes to the financial statements (continued)

for the year ended 31 March 2010

15. Retirement benefit obligations - defined benefit plans

Amounts recognised in the Group balance sheet




2010

2009


US$m

US$m

Retirement benefit obligations - funded plans:



Present value of funded plans' liabilities

860

614

Fair value of funded plans' assets

(822)

(595)

Deficit in the funded plans

38

19




Retirement benefit obligations - unfunded plans:



Present value of unfunded pension arrangements

36

26

Liability for post-retirement healthcare

14

13

Retirement benefit obligations - unfunded plans

50

39




Net retirement benefit obligations

88

58

The Group's retirement benefit obligations and assets are denominated primarily in sterling.




Movements in amounts recognised in the Group balance sheet




2010

2009


US$m

US$m

At 1 April

58

(132)

Differences on exchange

3

9

Total amounts recognised in Group income statement

11

(7)

Actuarial losses recognised within other comprehensive income

28

202

Contributions paid by the Group

(12)

(14)

At 31 March

88

58




Expenses/(income) recognised in the Group income statement




2010

2009


US$m

US$m

Administrative costs (after exceptional income of US$nil (2009: US$3m))

10

10

Net finance expense/(income)

1

(17)

Total charge/(credit) to Group income statement

11

(7)




Actuarial assumptions




2010

2009


%

%

Rate of inflation

3.7

3.4

Rate of increase for salaries

4.7

5.2

Rate of increase of pensions in payment and deferred pensions

3.6

3.4

Rate of increase in medical costs

7.7

6.5

Discount rate

5.5

6.9

The mortality assumptions used at 31 March 2010 remain broadly unchanged from those used at 31 March 2009.



Notes to the financial statements (continued)

for the year ended 31 March 2010

16. Notes to the Group cash flow statement



2010

2009


Notes

US$m

US$m

a) Cash generated from operations




Operating profit


693

613

(Profit)/loss on sale of property, plant and equipment


(2)

6

Loss on sale of other intangible assets


3

3

Loss on disposal of businesses


24

3

Depreciation and amortisation


417

420

Goodwill adjustment


-

1

Losses in respect of associates


4

5

Charge in respect of equity incentive plans


61

52

Change in working capital

16(b)

(22)

7

Movement in exceptional items included in working capital


(21)

(8)

Cash generated from operations


1,157

1,102

 




b) Change in working capital




Decrease/(increase) in inventories


1

(2)

(Increase)/decrease in receivables


(38)

24

Increase/(decrease) in payables


18

(11)

Difference between pension cost in Group income statement and contributions paid


(3)

(4)

Change in working capital


(22)

7

 




c) Purchase of other intangible assets




Databases


168

153

Internally generated software


45

38

Internal use software


43

39

Purchase of other intangible assets


256

230





d) Cash outflow in respect of exceptional items




Total exceptional items

8

72

117

Working capital movements


21

8

Asset write-offs


(3)

(15)

Losses in respect of associates


(4)

(5)

Loss on disposal of businesses


(24)

(3)

Cash outflow in respect of exceptional items


62

102

17. Reconciliation of cash generated from operations to operating cash flow (non-GAAP measure)



2010

2009


Notes

US$m

US$m

Cash generated from operations

16(a)

1,157

1,102

Purchase of property, plant and equipment


(58)

(75)

Purchase of other intangible assets

16(c)

(256)

(230)

Sale of property, plant and equipment


30

-

Dividends received from associates


41

28

Add back of net cash outflow from exceptional items

16(d)

62

102

Operating cash flow


976

927



Notes to the financial statements (continued)

for the year ended 31 March 2010

18. Analysis of net debt (non-GAAP measure)


2010

2009


US$m

US$m

Cash and cash equivalents (net of overdrafts)

163

127

Bank deposits with maturity greater than three months

44

29

Derivatives hedging loans and borrowings

(2)

28

Debt due within one year

-

(295)

Finance leases

(8)

(9)

Debt due after more than one year

(1,824)

(1,990)

Net debt

(1,627)

(2,110)

 



Net debt by balance sheet caption:



Cash and cash equivalents

175

129

Loans and borrowings (current)

(17)

(314)

Loans and borrowings (non-current)

(1,834)

(2,003)

Net debt by balance sheet caption

(1,676)

(2,188)

Bank deposits within financial assets

44

29

Accrued interest

7

21

Derivatives hedging loans and borrowings

(2)

28

Net debt

(1,627)

(2,110)

At 31 March 2010, the Group had undrawn committed borrowing facilities of US$1,932m (2009: US$1,050m) which expire more than two years after the balance sheet date.

During the year ended 31 March 2010, the Group issued 4.75% Guaranteed notes 2020 with a nominal value of €500m at an issue price of 99.914%. During the year ended 31 March 2010, 6.375% Eurobonds 2009 with a par value of £203m were redeemed at the date of their maturity.

 

19. Share capital and share premium

 

 

 

Number of shares


Called up share

 capital

Share

premium

account


m


US$m

US$m

At 1 April 2008

1,023.4


102

1,442

Allotted under share option plans

1.9


-

7

At 31 March 2009

1,025.3


102

1,449

Allotted under share option plans

0.8


-

4

At 31 March 2010

1,026.1


102

1,453

 

Notes to the financial statements (continued)

for the year ended 31 March 2010

20. Acquisitions and disposals

(a) Acquisitions for the year ended 31 March 2010

The Group made several acquisitions during the year, none of which is considered to be individually material.

In aggregate, the acquired businesses contributed revenues of US$12m to the Group for the periods from their respective acquisition dates to 31 March 2010. The acquired businesses contributed aggregate profit after tax of US$1m to the Group for the periods from their respective acquisition dates to 31 March 2010. If these acquisitions had been completed on 1 April 2009, further revenues of US$29m would have been reported. It has been impracticable to estimate the impact on Group profit after tax had the acquired entities been owned from 1 April 2009, as their accounting policies and period end dates did not accord with those of the Group prior to their acquisition.

There have been no material gains, losses, error corrections or other adjustments recognised in the year ended 31 March 2010 that relate to acquisitions that were effected in the current or previous years. Contingent consideration settled during the year on acquisitions made in previous years was US$9m.

(b) Disposals

During the year ended 31 March 2010, there was a loss of US$24m on the disposal of a number of the Group's smaller businesses including the National Business Database in North America with a related cash inflow of US$6m. Costs and cash outflows during the year ended 31 March 2010 in respect of the earlier disposal of the transaction processing activities in France are detailed in note 11.

21. Assets and liabilities classified as held for sale

During the year, approval was given to a number of small disposals and accordingly the assets and liabilities of the businesses involved are classified as held for sale at 31 March 2010. The transactions have been completed since the balance sheet date and the resulting gain or loss on disposal will be recognised in the year ending 31 March 2011.

 


US$m

Assets classified as held for sale:


Other intangible assets

16

Property, plant and equipment

2

Trade receivables - net

6

Other prepayments and accrued income

1

Assets classified as held for sale

25

 


Liabilities classified as held for sale:


Tax liabilities

6

Accruals and deferred income

6

Liabilities classified as held for sale

12

 



Notes to the financial statements (continued)

for the year ended 31 March 2010

 

22. Related parties

FARES

In October 2009, the Group announced the following arrangements in respect of FARES, which is owned 20% by Experian and 80% by The First American Corporation ('FAC'), and in respect of First Advantage Corporation ('FADV'), an associate of FARES:

 

·     Following an offer by FAC to acquire the issued and outstanding shares of FADV Class A common stock in consideration for shares in FAC, Experian has elected to tender its direct and indirect holdings in FADV Class A common stock for shares in FAC. Experian directly and indirectly holds some 3.8m shares of FADV Class A common stock with a value of approximately US$69m and, on exchange and conversion, will hold some 2% of the total issued share capital of FAC.

·     Experian has agreed in principle that FARES will dispose of its interests in two business assets (the plant management and imaged documents businesses) to FAC with Experian receiving a cash consideration on completion of US$48m.

·     Experian and FAC have agreed in principle to amend the buy-out arrangements governing Experian's 20% interest in the balance of FARES (excluding the FARES interest in FADV and the two business assets disposed of to FAC). Under the amended terms, if the buy-out is exercised in 2010, cash consideration of some US$314m will be payable to Experian by 31 December 2010. Thereafter the consideration payable for Experian's 20% interest in FARES will revert to a set valuation multiple, consistent with the current terms.

 

In connection with these arrangements:

·     Experian received cash of US$70m from the sale during the year of all the shares in FAC which it received in exchange for its direct and indirect holdings in FADV Class A common stock.

·     FARES disposed of its interests in the two business assets and Experian received cash consideration of US$48m in the year ended 31 March 2010.

·     Experian received notice from FAC in respect of the exercise of its buy-out option on 22 April 2010 and will accordingly report the results of FARES as a discontinued operation in the Group financial statements for the year ending 31 March 2011. Any gain on disposal will also be reported in the Group financial statements for that year.

·     Experian recognised an exceptional loss of US$4m primarily as a result of the reclassification through the Group income statement of earlier losses in respect of the holdings of FADV Class A common stock and a fair value gain of US$9m on the FAC option which is reported within financing fair value remeasurements (note 9).

 

Cash inflows of US$118m in respect of the transactions completed in the year ended 31 March 2010 are disclosed within net cash flows used in investing activities from continuing operations in the Group cash flow statement.

During the year the Group made net sales and recharges, under normal commercial terms and conditions that would be available to third parties, to FARES and its associate FADV of US$28m (2009: US$25m).

Other associates

The Group's interests in other associated undertakings are not individually material. There were additions of US$7m during the year ended 31 March 2010 principally in respect of the arrangements with seven of India's leading financial services institutions to operate a credit information bureau in India. As part of the application process, Experian can only hold a maximum of 49% of the equity of the licensed entity and this has been a key factor in classifying this investment as an associate.

Other related party transactions

There were no other material related party transactions.



Notes to the financial statements (continued)

for the year ended 31 March 2010

 

23. Contingencies

There are a number of pending and threatened litigation claims involving the Group in North America and Latin America which are being vigorously defended. The directors do not believe that the outcome of any such pending or threatened litigation will have a materially adverse effect on the Group's financial position. However, as is inherent in legal proceedings, there is a risk of outcomes unfavourable to the Group. In the case of unfavourable outcomes the Group would benefit from applicable insurance recoveries.

24. Events occurring after the end of the reporting period

Details of the second interim dividend approved since the end of the reporting period are given in note 13.

On 22 April 2010, Experian received notice from FAC of the exercise of its buy-out option in respect of Experian's interest in FARES (see note 22).

As indicated in note 21, the Group completed some small disposals following the balance sheet date.

25. Company website

The Company has a website which contains up-to-date information on Group activities and published financial results. The directors are responsible for the maintenance and integrity of statutory and audited information on this website. The work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the preliminary announcement since it was initially presented on the website. Jersey legislation and the United Kingdom regulation governing the preparation and dissemination of financial information may differ from requirements in other jurisdictions.

 



Notes to the financial statements (continued)

for the year ended 31 March 2010

 

26. Risks and uncertainties 

Experian has a risk management framework which provides a structured and consistent process for identifying, assessing and responding to risks. These risks are assessed in relation to the Group's strategy to focus on data and analytics, drive profitable growth and optimise capital efficiency.

 

Risk management operates at all levels throughout the Group, across geographies, business lines and operational support functions. The Board is ultimately responsible for risk management, which includes the Group's risk governance structure and maintaining an appropriate internal control framework. Management's responsibility is to manage risk on behalf of the Board. By reporting regularly to the Board and to the Audit Committee, the internal audit and the global risk management functions provide support to the Board in maintaining effective risk management across the Group.

 

The key components of the Group's existing risk management framework, which are regularly reviewed, have operated throughout the year ended 31 March 2010, with some minor enhancements to further embed social, ethical and environmental (SEE) risks into the risk process in support of the Group's corporate responsibility strategy.

 

Risk factors

Risks to Experian's business are either specific to Experian's business model, such as information security, or more general, such as the impact of competition. Experian has identified the following principal risks and uncertainties.

 

a) Principal risks

i) Risk area - Loss or inappropriate usage of data

Potential impact - The Group's business requires the appropriate and secure utilisation of consumer and other sensitive information by its business units or its third party partners. Internet-based electronic commerce requires the secure transmission of confidential information over public networks, and several of our products are accessed through the Internet. Security breaches in connection with maintaining data and the delivery of our products and services could harm our reputation, business and operating results.

Mitigation strategies - The Group has established rigorous information security policies, standards, procedures, and recruitment and training schemes, which are embedded throughout its business operations. The Group also screens new third party partners carefully and conducts targeted audits on their operations. Continued investments are made in IT security infrastructure, including the significant use of data and communications encryption technology.

 

ii) Risk area - Dependence upon third parties to provide data and certain operational services

Potential impact - The Group's business model is dependent upon third parties to provide data and certain operational services, the loss of which could significantly impact the quality of and demand for our products. Similarly, if one of our outsource providers, including third parties with whom we have strategic relationships, were to experience financial or operational difficulties, their services to us would suffer or they may no longer be able to provide services to us at all, significantly impacting delivery of our products or services.

Mitigation strategies - The Group's legal, regulatory and government affairs departments work closely with senior management to adopt strategies to help secure and maintain access to public and private information. The Group's global strategic sourcing department works closely with senior management to select and negotiate agreements with strategic suppliers based on criteria such as delivery assurance and reliability.

 



Notes to the financial statements (continued)

for the year ended 31 March 2010

 

26. Risks and uncertainties(continued)

iii) Risk area - Exposure to legislation or regulatory reforms

Potential impact - Changes in the legislative, regulatory and judicial environment in the countries in which the Group operates may adversely affect our ability to collect, manage, aggregate, use, exchange and sell data.  Proposed US financial services reforms and potential amendments to the Fair Credit Reporting Act (FCRA) could impact the Group's operating results. For example, the Federal Trade Commission (FTC) issued final rules in February 2010 regarding disclosure requirements for the advertising of free credit report offers.  In addition, the Group is subject to changes in specific countries' tax laws.  Our future effective tax rates could be adversely affected by changes in tax laws.

Mitigation strategies - The Group's legal, regulatory and government affairs departments work closely with senior management to adopt strategies to educate lawmakers, regulators, consumer and privacy advocates, and other stakeholders to support the public policy debate, where appropriate. This includes advocating and promoting new industry self-regulatory standards, when appropriate, to address consumer concerns about privacy and information sharing.

 

iv) Risk area  - Regulatory compliance

Potential impact - The Group's businesses must comply with federal, regional, provincial, state and other jurisdictional regulations and best practice, including privacy and information security laws.

Mitigation strategies - To the best of Experian's knowledge, the Group is in compliance with data protection requirements in each jurisdiction in which it operates. The Group's regulatory compliance departments work closely with the businesses to adopt strategies to help ensure compliance with jurisdictional regulations and identified business ethics which includes active monitoring of its collection and use of personal data.

 

v) Risk area - Interruptions in business processes or systems

Potential impact - The Group's ability to provide reliable services largely depends on the efficient and uninterrupted operation of our computer network systems, data and call centres, as well as maintaining sufficient staffing levels. System or network interruptions, or the unavailability of key staff or management resulting from a pandemic outbreak, could delay and disrupt our ability to develop, deliver or maintain our products and services, causing harm to our business and reputation and resulting in loss of customers or revenue.

Mitigation strategies - Comprehensive business continuity plans and incident management programmes are maintained to minimise business and operational disruptions including pandemic incidents. The Group maintains full duplication of all information contained in databases and runs back-up data centres. Support arrangements have been established with third party vendors and there are strict standards, procedures and training schemes for business continuity. The Group also monitors potential pandemic threats and adjusts action plans.

 

vi) Risk area - Dependence on recruitment and retention of highly skilled personnel

Potential impact - The ability of the Group to meet the demands of the market and compete effectively with other IT suppliers is, to a large extent, dependent on the skills, experience and performance of its personnel. Demand is high for individuals with appropriate knowledge and experience in the IT and business services market. The inability to attract, motivate or retain key talent could have a serious consequence on the Group's ability to service client commitments and grow our business.

Mitigation strategies - Effective recruitment programmes are ongoing across all business areas, as well as personal and career development initiatives. Talent identification and development programmes have been implemented and are reviewed annually. Compensation and benefits programmes are competitive and also regularly reviewed.

 



Notes to the financial statements (continued)

for the year ended 31 March 2010

 

26. Risks and uncertainties(continued)

b) Other risks

i) Risk area - Exposure to material adverse litigation

Potential impact - The Group is regularly involved in a number of pending and threatened litigation claims, including a number of class actions in the United States. As is inherent in all legal proceedings, litigation outcomes cannot be predicted with certainty and there is a risk of unfavourable outcomes to the Group.

Mitigation strategies - The Group vigorously defends all pending and threatened litigation claims. The Group employs internal counsel and engages external counsel to assist in the effective management and disposal of litigation proceedings. Insurance coverage is maintained against litigation risks where such coverage is feasible and appropriate.

 

ii) Risk area - Exposure to country and regional risk (political, financial, economic, social) particularly in North America and United Kingdom

Potential impact - The Group's global footprint subjects its businesses to economic, political and other risks associated with international sales and operations. A variety of factors, including changes in a specific country's or region's political, economic, or regulatory requirements, as well as the potential for geopolitical turmoil, including terrorism and war, could result in loss of services, prevent our ability to respond to agreed service levels or fulfil other obligations. These risks are generally outside the control of the Group.

Mitigation strategies - The Group's portfolio is diversified by geography, by product, by sector and by client in order to protect itself against many of these fluctuations, especially those that are restricted to individual territories and market sectors. The Group operates in over 90 countries and derives 73% of its revenue from North America and the United Kingdom.

 

iii) Risk area - Exposure to consolidation among clients and markets

Potential impact - The financial services, mortgage, retail and telecommunications industries are intensely competitive and have been subject to consolidation. Consolidation in these and other industries could result in reductions in the Group's revenue and profits through price compression from combined service agreements or through a reduced number of clients.

Mitigation strategies - No single client accounts for more than 1% of the Group's revenue, which reduces the probability of this potential risk having a significant impact on the Group's business. In addition, the Group continues to expand in other vertical markets such as the public sector, telecommunications, utilities and healthcare, as well as invest in a wide range of countercyclical products and solutions, across all relevant business lines.

 

iv) Risk area - Acquisitions may not meet expectations

Potential impact - The Group's acquisitions, strategic alliances, joint ventures and divestitures may result in financial outcomes that are different than expected.

Mitigation strategies - The Group assesses all acquisitions rigorously, using both in-house experts and professional advisers. In addition, the Group conducts extensive post-acquisition reviews to ensure performance remains consistent with the acquisition business plan.

 

v) Risk area - Exposure to the unpredictability of financial markets (foreign exchange, interest rate and other financial risks)

Potential impact - As the Group operates on an international basis, it is exposed to the risk of currency fluctuations and the unpredictability of financial markets in which it operates.

Mitigation strategies - The Group's financial risk management focuses on the unpredictability of financial markets and seeks to minimise potentially adverse effects on the Group's financial performance.

 



Notes to the financial statements (continued)

for the year ended 31 March 2010

 

26. Risks and uncertainties(continued)

vi) Risk area - Exposure to increasing competition

Potential impact - The Group operates in a number of geographic, product and service markets that are highly competitive. Competitors may develop products and services that are superior to ours or that achieve greater market acceptance than our products and services which could result in the loss of clients or reduction in revenue.

Mitigation strategies - The Group is committed to continued research and investment in new data sources, people, technology and products to support its strategic plan.

 

vii) Risk area - Loss or infringement of intellectual property rights

Potential impact - The Group's success depends, in part, upon proprietary technology and related intellectual property rights. The extent to which intellectual property rights can be protected varies in different jurisdictions. Third parties may claim that the Group is infringing their intellectual property rights or our intellectual property rights could be infringed by third parties. If the Group does not enforce our intellectual property rights successfully, our competitive position may suffer, which could harm our operating results.

Mitigation strategies - The Group, where appropriate and feasible, relies upon a combination of patent, copyright, trademark and trade secret laws, as well as various contractual restrictions, to protect our proprietary technology and continues to monitor this situation. The Group also vigorously defends all third party infringement claims.

 

viii) Risk area - Data centre security breaches

Potential impact - The Group is highly dependent on information technology networks and systems to process, transmit and store electronic information. Security breaches of our data centres can create system disruptions, shutdowns or unauthorised disclosure of confidential information.

Mitigation strategies - The Group's data centres are protected against physical break-ins. The Group has strict standards, procedures and training schemes for physical security.

 

 

Key aspects of the Experian risk management framework:

·        Defined and communicated business principles and strategies

·        Clear Group objectives, supported by financial and non-financial key performance indicators ('KPIs')

·        Standardised process to identify, evaluate and manage significant risks on an ongoing basis

·        Control reviews and follow-ups performed by management, internal audit and third parties

·        Budgetary controls and monthly performance reviews, including achievement of objectives and KPIs

·        Regional risk management committees with local oversight of risk management processes

·        Executive risk management committee with global oversight of risk management processes

·        Regular reporting on risk by senior management to the Audit committee

·        Audit Committee regular risk updates to the Board

 



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 management 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, and a description of the principal risks and uncertainties that they face is included in note 26.

At the date of this statement, the names and functions of the directors in office are those listed in the Experian annual report 2009, save that Ms Danon left the Board on 31 December 2009.

By order of the Board

 

Charles Brown

Company Secretary

19 May 2010


This information is provided by RNS
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