Other items
Balance sheet
Net assets amounted to US$2,225m (2008: US$2,103m), which is equivalent to US$2.20 per share (2008: US$2.08), excluding own shares held by employee trusts.
Cash flow and net debt
Experian has continued to be strongly cash generative in the half with operating cash flow of US$421m (2008: US$396m) and a cash flow conversion of 88%. Free cash flow in the half was US$344m (2008: US$270m). Acquisition spend of US$9m (2008: US$52m) and equity dividends of US$135m (2008: US$121m) were funded from free cash flow.
At 30 September 2009, net debt was US$2,048m (31 March 2009: US$2,110m) with undrawn committed borrowing facilities of US$865m (31 March 2009: US$1,050m). In the six months ended 30 September 2009, the related net interest expense, before financing fair value remeasurements, was US$41m (2008: US$60m). This expense included a charge of US$2m (2008: credit of US$10m) in respect of the interest expense on pension liabilities less the expected return on pension assets (see note 11).
During the six months ended 30 September 2009, 6.375% Eurobonds 2009 with a par value of £203m were redeemed at their date of maturity, resulting in an increase in drawings from existing committed borrowing facilities. No other borrowings are due for repayment until July 2012.
Exceptional items (continuing operations)
| Six months ended 30 September | 2009 US$m |
2008 US$m |
|||
| Restructuring costs | 21 | 30 | |||
| Cessation of bureau activities | 3 | - | |||
| Loss on disposal of businesses | 22 | 3 | |||
| Total exceptional items | 46 | 33 |
Expenditure of US$21m (2008: US$30m) arose in the period in connection with the Group’s strategic programme of cost efficiency measures. Of this, US$9m (2008: US$13m) related to redundancy and US$12m (2008: US$15m) related to offshoring activities, infrastructure consolidations and other restructuring activities.
During the period, and as previously announced, Experian completed the closure of its Canadian credit bureau and terminated its joint venture bureau in Japan.
The loss on disposal of businesses in the period primarily arose as a result of the disposal of the National Business Database in North America.
Other non-GAAP measures (continuing operations)
| Six months ended 30 September | 2009 US$m |
2008 US$m |
||||
| Amortisation of acquisition intangibles | 64 | 70 | ||||
| Charge in respect of the demerger-related equity incentive plans | 15 | 21 | ||||
| Financing fair value remeasurements | (40 | ) | (27 | ) | ||
| Total other non-GAAP measures | 39 | 64 |
See Appendix 2 for definition of non-GAAP measures
Tax
The Group’s effective rate of tax for the six months ended 30 September 2009 based on Benchmark PBT was 22.0% (2008: 20.9%). This rate is defined as the total tax expense, adjusted for the tax impact of non-Benchmark items and further excluding the benefit of a one-off corporation tax credit of US$20m in the six months ended 30 September 2008, divided by Benchmark PBT. The Group’s cash tax rate for continuing operations (based on tax paid in the period and Benchmark PBT for continuing operations) was 3.7% (2008: 9.6%).
Earnings per share
At 30 September 2009, Experian had approximately 1,026m ordinary shares in issue of which 14m shares were held by employee trusts. Accordingly, the number of shares to be used for the purposes of calculating basic earnings per share from 30 September 2009 is 1,012m.
In the six months ended 30 September 2009, basic earnings per share were 24.5 US cents (2008: 25.5 US cents), after a loss of 0.8 US cents (2008: 0.4 US cents) in respect of discontinued operations. Benchmark earnings were 31.6 US cents (2008: 30.7 US cents), an increase of 2.9%.
Foreign exchange
The principal exchange rates used to translate revenue and EBIT in the period are:
| 2009 | 2008 | Depreciation against the US$ | |||||
| Sterling : US$ | 1.57 | 1.93 | 18.7% | ||||
| US$ : Brazilian real | 1.99 | 1.68 | 18.5% | ||||
| Euro : US$ | 1.40 | 1.53 | 8.5% |
The effect of these exchange rate changes on the results for the period is to decrease reported revenue by US$154m and EBIT by US$34m.
The principal exchange rates used to translate assets and liabilities at the period end are as follows:
| 2009 | 2008 | ||||
| Sterling : US$ | 1.60 | 1.79 | |||
| US$ : Brazilian real | 1.78 | 1.92 | |||
| Euro : US$ | 1.46 | 1.41 |
FARES
On 29 October 2009, Experian announced certain arrangements in respect of FARES, which is owned 20% by Experian and 80% by The First American Corporation. Further details are given in note 24 to the unaudited condensed Group half-yearly financial statements.
Retirement benefit obligations and assets
There is a net retirement benefit obligation at 30 September 2009 of US$129m (2008: asset US$62m). This consists of a deficit in the defined benefit plans of US$72m (2008: surplus US$109m) and other pension obligations of US$57m (2008: US$47m). Further details of the movement during the period and the assumptions used in determining retirement benefit obligations and assets are included in note 17 to the unaudited condensed Group half-yearly financial statements.
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 in the UK and Ireland are seasonally weighted towards the second half of the year, reflecting some exposure to the retail sector. PriceGrabber, which is mainly reported within North America Interactive, is seasonally weighted towards the third quarter as online shopping volumes traditionally increase towards the Christmas period.
Risks and uncertainties
The principal risks and uncertainties affecting Experian are those described below and are unchanged from those for the year ended 31 March 2009. Additional explanations are set out on page 28 and 29 of the annual report and financial statements for the year ended 31 March 2009.
Data
- Risk that data Experian holds may be inappropriately used.
- Risk that legislative or government regulatory reforms may alter what data Experian can collect and how it is collected.
Technology
- Risk of system or facilities security breaches.
- Risk of business process or system failure interruptions.
People
- Risk of highly skilled personnel loss.
General economy
- Risk of macroeconomic factors impacting the demand for our products or services.
- Risk of client consolidations impacting revenue and profits.
- Financial and capital risks and uncertainties which are further discussed in the financial review on pages 30 to 38 of the annual report and financial statements for the year ended 31 March 2009.
- Risk of counterparty non-performance or failure.
Other risks
- Risks of increased competition.
- Risk of acquisitions not meeting expectations.
- Risk of material adverse litigation outcomes.
- Risk of intellectual property rights loss or infringement.