Experian's Brazil business hurts revenue growth

Experian's annual pre-tax profits fell slightly as a weakening Brazilian real and the struggling Latin American economy weighed on the credit history checking company's results.

The FTSE 100 data provider known for its credit checking and fraud prevention software said on Tuesday that foreign exchange transactions had an "adverse effect on reported margins", citing the weakening of the Brazilian real relative to the dollar and the depreciation of the euro.

Latin America accounts for 18 per cent of Experian's revenue. Brazil has in particular become a key market for Experian, built around the purchase six years ago of Serasa in Brazil, with the unit commanding a 65 per cent local market share and generating 35 per cent operating margins. But the economy has weakened considerably.

Pre-tax profits were $1.01bn for the year to the end of March, down from $1.05bn in the previous year. Revenue dropped $30m to $4.81bn. Its margin on earnings before interest and tax narrowed to 27.2 per cent from 27.4 per cent.

Brian Cassin, Experian's chief executive, said the company had outperformed the "very difficult weak economic backdrop in Brazil" but acknowledged the contracting economy there had meant lending activities in the country were lower.

The company said clients in the Brazilian retail lending sector were focusing more on risk mitigation strategies than on originating new loans.

Despite the headwinds from Brazil's economy, which probably fell into recession in the first quarter, Mr Cassin said Experian hoped to expand its footprint in Brazil beyond credit services. He said information analysis and anti-fraud products were two business lines the company had "not developed out" yet in the country.

Anti-fraud is Experian's biggest growth market given rising cyber crime. Future growth for the company, which holds credit files on 800m consumers worldwide, depends on exploiting this data in new ways.

Experian said that the adverse effect of exchange rates hit reported revenue by $103m and pushed earnings before interest and tax down by $44m.

However, it has managed to partially mitigate the effect of the currency on its results thanks to recent acquisitions in the US. This included its purchase of US company 41st Parameter, a fraud prevention service, which it has also rolled out in the UK, Brazil and Australia.

Mr Cassin, who took over last July, also said Experian's US healthcare business was helped by Passport Health Communications, which it agreed to buy at the end of 2013.

In its North American business, which contributes half of Experian's sales, revenue rose to $2.47bn from $2.4bn. The company said its strong performance in credit services there reflected a better environment for lending in North America.

But on an organic basis - which excludes the effects of foreign exchange and acquisitions - revenue in the region fell 2 per cent.

The Dublin-based company has rebranded its US consumer website as Experian.com and this year made the scores of FICO, a popular US credit scorer, available to consumers through the website launched late last year.

Net debt fell to $3.2bn, down from $3.7bn at the end of the first half of the year.

The company declared a second interim dividend of 27 cents per share, bringing the total dividend for the year to 39.25 cents per share, up 5 per cent on the year before.

Shares were down 0.7 per cent at £11.69 in early trading.

In a statement, Mr Cassin said the company continued to aim for "mid single-digit organic revenue growth" in the medium term.

"While foreign exchange is a headwind, at constant currency we expect margins for the year to be stable and to deliver further progress in benchmark earnings per share," he added, referring to EPS excluding exceptional items such as acquisitions.

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