Chief Executive's review

Experian performed well in 2010, notwithstanding the challenges presented by the global economic downturn. Our organic revenue growth was 2%, we expanded our margins by 80 basis points to 24.4% and our Benchmark EPS grew by 8% to 67.1 US cents per ordinary share. We also delivered another strong cash performance with free cash flow of US$818m, up 11%.

This meant that we ended the year comfortably within our target gearing range, at 1.8x adjusted net debt to EBITDA, including the current value of the Serasa put option. The strength of this performance has enabled us again to raise our full-year dividend, which is up 15% to 23.00 US cents per ordinary share.

We were able to deliver this strong performance because of the balance in our portfolio, the strength of our market position and strong execution against our cost efficiency programme. We were especially pleased with the outstanding performances across Latin America and at Interactive, which helped to offset the drag effect of the global economic recession.

Progress in the year included:

strong growth in emerging markets, which now account for nearly one fifth of our revenue;
an increased contribution from non-financial B2B verticals and the consumer channel. We now generate more than 60% of our revenue from outside financial services;
a strong contribution from products developed in the past five years, which again accounted for over 20% of Group revenue; and
our cost efficiency programme, which delivered savings ahead of plan.

Key trends

As we move forward, we see a number of trends which will influence our performance over the coming year.

Within financial services, we see gradual recovery across many of the developed markets in which we operate. In key territories such as North America, unemployment rates have started to level off, delinquency rates are starting to fall, lenders are beginning to solicit new customers and small businesses are starting to look for funding to expand. Experian has a key role to play in this recovery process, helping to restore confidence in the global retail banking system with our world-class data, analytics and software tools.
Across the retail sector, we see consumer spending driving improvement among retailers. We also see a steady shift to more targeted digital advertising channels and we are increasing our efforts to benefit from this trend as client marketing budgets return.
And at Consumer Direct in North America, the new marketing strategy for freecreditscore.com implemented from 1 April 2010 is progressing in line with expectations. We have had recent dialogue with the Federal Trade Commission regarding our site, freecreditreport.com, and we have made further changes to this site through the addition of consumer disclosures. We remain vigilant regarding any regulatory changes that may affect our business and will adapt as needed.

Strategic priorities

While global economic recovery will help our business, our goal is to accelerate growth by creating new market opportunities, building greater scale and further cementing our global leadership position. Each year, we develop specific plans which set our priorities and allow us to concentrate our resources. These plans are executed within our strategic framework to focus on data and analytics, drive profitable growth and optimise capital efficiency. Our action plan is centred on taking control of growth through a series of defined initiatives:

Expanding our global reach

Geographic expansion — we see significant scope to take our existing credit and marketing products into fast-growing markets, for example Brazil, India, China, South Africa and Eastern Europe.
Vertical expansion — we are further repurposing our data and platforms to build scale positions in new verticals such as the public sector, telecoms, utilities and US healthcare payments.
New market channels — we see opportunity to further expand in underpenetrated segments, such as small and medium enterprises.

Delivering innovative data and analytics

We are investing in our data sources, our platforms and our products across the globe to bring the fresh insights and innovation that our customers need. For example, we are benefiting from recent addition of income data in our US consumer credit bureau; we are enhancing our products and platforms in business information; we are developing new analytics which will extend our fraud prevention capabilities; we are introducing new digital advertising services within our marketing business and we are investing further behind the launch of ProtectMyID, our identity monitoring tool for consumers.

Executing superior sales and operations

Growth in our business will be delivered by our people and we are investing in our business to sustain our high performance sales culture and to maximise efficiency across our operations.

These initiatives, along with targeted, infill acquisitions that are tightly coupled to the core, are central to our goal of delivering strong, sustainable returns for our shareholders.

Net debt

Net debt was reduced by US$483m to US$1,627m at 31 March 2010, after funding capital expenditure of US$314m, and net share purchases of US$114m by employee trusts and in respect of employee share incentive plans. In addition, there was a net inflow of US$66m from disposals net of acquisitions. As at 31 March 2010, the net debt to EBITDA gearing ratio was 1.8x, which is at the lower end of our 1.75-2.0x adjusted target debt range. The gearing ratio is adjusted to include the put option over the 30% minority stake in Serasa, valued at US$661m at 31 March 2010.

Debt funding

During the year, we started an 18 month programme to refinance our bank and bond facilities with an issuance in February 2010 of €500m Guaranteed notes at 4.75% due 2020, which was swapped into US dollars. This programme will continue in the year ending 31 March 2011, as we aim to spread debt maturities and diversify our sources of funding. The marginal cost of new funding sources is higher than the funds being replaced and, as a result, for the year ending 31 March 2011, our current expectation is that net interest expense will be in the range of US$90-100m.

Capital strategy

We have recently undertaken a re-evaluation of our capital policy and payout ratios in light of the investment needs of the business, the reduction in total net debt and ongoing strength in cash generation. We remain committed to a prudent but efficient balance sheet consistent with our desire to retain a strong investment grade credit rating. Our target gearing ratio, net debt adjusted for the current value of the put option over the minority shares in Serasa, divided by EBITDA, will remain unchanged at 1.75-2.0x.

We anticipate that continuing strength in our cash generation, as well as receipts from the FARES disposal, will result in net debt being below our gearing targets. Accordingly, it is our current intention to adjust our distribution policies to shareholders as follows:

We intend to increase our dividend payout ratio over the next twelve months. By the time of the second interim dividend next year, we expect to have dividend cover based on Benchmark EPS of around 2.5 times on an annual basis; our previous policy was to have cover on this basis of at least three times.
We will commence a share buyback programme of around US$300m, to be implemented over the next twelve months, subject to free cash flow and acquisition expenditure. It is planned to repurchase an additional US$50m to satisfy employee share incentive plans. The total share repurchase over the next twelve months is therefore expected to be approximately US$350m.

Dividend

For the year ended 31 March 2010, we have announced a second interim dividend of 16.00 US cents per share. This gives a full-year dividend of 23.00 US cents per share, 2.9 times covered by Benchmark EPS, and up 15% as we transition to our increased dividend payout. The second interim dividend will be paid on 23 July 2010 to shareholders on the register at the close of business on 25 June 2010.

Changes to external reporting calendar

We have undertaken a review of financial reporting frequency in order to bring greater efficiency to our external reporting. Henceforth, we will issue financial updates on a quarterly basis only. This brings us into line with reporting frequencies across our peer group. Going forward, our financial calendar will include the Q1 Interim Management Statement (in July), the half-yearly report (in November), the Q3 Interim Management Statement (in January) and the preliminary results (in May). We aim to accelerate the reporting of our half-yearly and preliminary results starting in the year ending 31 March 2012.

Our people

The strength of our performance is down to the outstanding achievements of our people. It is reflective of a terrific effort by our employees, in the face of some tough market conditions. I salute their dedication and commitment and I would like to take this opportunity to thank all our employees for their single-mindedness and strength of purpose over the past year.

Revenue and EBIT by geography

Revenue

EBIT

Year ended 31 March

2010 US$m

2009 US$m

Growth1 %

2010 US$m

2009 US$m

Growth1 %

North America

2,060

2,059

628

623

Latin America

559

462

166

118

UK and Ireland

779

843

)

212

211

EMEA/Asia Pacific

461

426

Sub total

3,859

3,790

1,058

1,001

Central Activites2

(62

)

(57

)

Continuing activities

3,859

3,790

996

944

Discontinuing activities3

n/a

)

n/a

Total

3,880

3,873

991

939

EBIT margin4

24.4%

23.6%

1.	Total growth at constant exchange rates
2.	Central Activities comprise costs of central corporate functions
3.	Discontinuing activities include UK account processing and other smaller discontinuing activities
4.	EBIT margin is for continuing business only, excluding FARES. Further analysis can be in the financial review

Reconciliation of EBIT - continuing operations

EBIT

Year ended 31 March

2010
US$m

2009
US$m

EBIT from continuing operations

991

939

Net interest

(81

)

(96

)

Benchmark PBT

910

843

Exceptional items

(72

)

(117

)

Amortisation of acquisition intangibles

(140

)

(132

)

Goodwill adjustment

)

Charges for demerger-related equity incentive plans

(28

)

(32

)

Financing fair value remeasurements

)

Tax expense on share of profits of associates

)

Profit before tax

661

578

Group tax expense

(17

)

(84

)

Profit after tax for continuing operations

644

494

Benchmark EPS (US cents)

67.1

62.3

Basic EPS for continuing operations (US cents)

59.8

46.8

Weighted average number of ordinary shares (million)

1,015

1,013

See financial review for analysis of revenue and EBIT by business segment and reconciliation of revenue and EBIT by operating segment

See the financial review and note 4 to the Group financial statements, for definitions of non-GAAP measures