Other items
Central activities
In the six months ended 30 September 2007, the reported costs of
central activities were $27m. Central costs in 2006 were $21m, reflecting
pre-demerger charges. Central activities costs are expected to be
about $54m in this full financial year at prevailing exchange rates.
The costs for the year ended 31 March 2007 were $47m reflecting a lower
run rate prior to demerger.
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Net debt and interest
At 30 September 2007, Experian had net debt of $3,027m (March 2007:
$1,408m). The increase in the period primarily reflects the additional
borrowings to fund the acquisitions of Serasa and Hitwise.
In the six months ended 30 September 2007, the reported net interest
expense was $58m (2006: $74m), before financing fair value remeasurements.
The net interest expense for the period includes a credit to interest
of $10m (2006: $8m), relating to the expected return on pension
assets less the interest on pension liabilities.
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Exceptional items
| |
Six months ended 30 September |
2007 |
2006 |
|
| |
|
$m |
$m |
|
| |
Demerger-related costs |
(2) |
(123) |
|
| |
UK account processing closure costs |
- |
(28) |
|
| |
Total |
(2) |
(151) |
|
| |
|
|
|
|
Costs relating to the demerger of Experian and Home Retail Group
in the half year periods comprised mainly legal and professional
fees in respect of the transaction and costs in respect of the
cessation of the corporate functions of GUS plc.
In April 2006, Experian announced the phased withdrawal from
large-scale credit card and loan account processing in the UK.
As previously disclosed, the costs of withdrawal of approximately
$28m were charged in the six months ended 30 September 2006. During
the period Experian subcontracted the provision of these services
to First Data. This arrangement reduces risk around staff retention
and client migration for continuing customer contracts. We expect
this business to breakeven for the remainder of the period to
closure in September 2009.
All other restructuring costs have been charged against EBIT
in the segments in which they are incurred.
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Amortisation of acquisition intangibles
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 customer
relationships, completed technology, data provider relationships,
trademarks and brand names, to which value is first attributed at
the time of acquisition. In the six months ended 30 September 2007,
the charge for amortisation of acquisition intangibles was $50m
(2006: $37m).
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Charges in respect of demerger-related
equity incentive plans
Charges in respect of demerger-related equity incentive plans of
$24m relate to one-off grants made to senior management and all
other staff levels at the time of 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 following the
demerger, but is excluded from the definition of Benchmark PBT.
The cost of all other grants is charged to the Group income statement
and is included in the definition of Benchmark PBT.
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Financing fair value remeasurements
An element of Experian’s derivatives is ineligible for hedge
accounting. Gains or losses on these derivatives arising from
market movements are charged or credited to the Group income
statement. In the six months ended 30 September 2007, this charge
amounted to $34m (2006: $12m).
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Taxation
In the six months ended 30 September 2007, the effective rate of
tax on Benchmark PBT, defined as the total tax expense adjusted
for the tax impact of non-Benchmark items divided by Benchmark PBT,
was 23.0%. Experian expects the effective rate of tax on Benchmark
PBT to be approximately 23% for the current financial year.
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Earnings per share
At 30 September 2007, Experian had approximately 1,023m ordinary
shares in issue. The number of shares to be used for the purposes
of calculating basic earnings per share going forward is 1,010m
after deducting own shares held.
In the six months ended
30 September 2007, Benchmark EPS was 29.5 cents and basic EPS
for continuing operations was 22.2 cents. This was calculated
on a weighted average number of shares of 1,008m.
Comparatives for the six months ended 30 September 2006 reflect
the GUS capital structure during the period. Benchmark EPS was
29.4 cents and basic EPS from continuing operations was 25.1 cents.
This was calculated on a weighted average number of shares of
856m.
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Foreign exchange
The £/$ exchange rate moved from an average of $1.84 in the
six months ended 30 September 2006 to $1.99 in 2007. The €/$
exchange rate moved from an average of $1.27 in the six months
ended 30 September 2006 to $1.35 in 2007. This increased reported
sales by $63m during the period and EBIT by $12m.
The closing £/$ exchange rate at 30 September 2007 was
$2.04 (2006: $1.87), and the €/$ exchange rate was $1.42
(2006: $1.27).
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Seasonality
Some activities at Experian exhibit seasonality. Credit Services
activities in Latin America are weighted towards the first half
of the year reflecting the timing of the holiday season in Brazil.
Marketing Services activities in North America and the UK and Ireland
are seasonally weighted towards the second half of the year, reflecting
some exposure to the retail sector. PriceGrabber, which is reported
within North America Interactive, is seasonally weighted towards
the third quarter as online shopping volumes traditionally increase
towards the Christmas period.
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Risks and uncertainties
Risks to Experian are anticipated and regularly assessed and our
internal controls are enhanced where necessary to ensure that such
risks are appropriately mitigated. The principal risks and uncertainties
to Experian in the second half of the year remain those detailed
on page 35 of our Annual Report for 2007, a copy of which is available
on our website at www.experiangroup.com.
There has been no change to these principal risks.
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