Experian 2007 Annual Report Download - page 32

Financial review
30 |Experian Annual Report 2007
Demerger
On 10 October 2006, the separation of Experian Group
Limited and Home Retail Group was completed by way of
demerger. As part of the demerger, Experian Group Limited
became the ultimate holding company of GUS plc. The
demerger transaction has been accounted for in
accordance with the UK GAAP principles of merger
accounting, which are not in conflict with IFRS and reflect
the economic substance of the transaction. The distribution
to GUS plc shareholders of shares in Home Retail Group plc
has been accounted for as a dividend in specie in the
financial statements. In addition the results of Home Retail
Group have been represented as discontinued.
Sales
Group sales from continuing operations grew by 14%
from $3,064m to $3,481m.
Profit
Benchmark profit before tax for continuing operations
rose by $87m to $714m. The increase in benchmark
profit is largely a result of the 14% increase in sales from
continuing operations. Profit before tax from
discontinued operations decreased by 74% to $228m
principally because the prior year includes a full year of
the Home Retail Group results.
Taxation
The Group’s effective rate of tax for the year was 22.4%,
based on benchmark profit. This compares to 17.5%
last year.
Shareholder return and dividends
Following the demerger and equity issue completed in
October, Experian now has approximately 1,022m
Ordinary shares in issue. The number of shares to be
used for the purposes of calculating basic earnings per
share going forward is 1,006m after deducting own
shares held.
Basic earnings per share were 49.9c in the year to
31 March 2007. The basic earnings per share for the
prior year of 107.5c includes 59.1c related to
discontinued operations. Benchmark earnings per share
increased to 59.7c from 54.5c last year. The Board has
announced a dividend of 11.5c, giving a dividend of 17c
for the full year. The dividend for the year is covered 3.5
times from benchmark earnings.
Share price and total shareholder return
On 6 October 2006 shares in GUS plc ceased to be listed
on the London Stock Exchange’s market for listed
securities. Trading in shares in Experian Group Limited on
the London Stock Exchange commenced on 11 October
2006. On that day, Experian Group Limited also raised
£800m by way of a share offer at an offer price of
560p per share.
The share price of Experian ranged from a low of 559.5p
to a high of 631.5p during the period since listing. On
31 March 2007, the mid market price was 585.5p, giving
a market capitalisation of $11.7bn at that date.
Shareholders’ funds
Shareholders’ funds amount to $2,107m, equivalent to
$2.06 per share, a decrease of $3,347m in the year. This
principally reflects the reduction of net assets following
the demerger of Home Retail Group (decrease of
$5,627m) offset by the proceeds of the equity issue
(increase of $1,441m).
Cash flow and net debt
The Group’s free cash flow before acquisitions,
divestments and dividends was $577m compared with
$574m in 2006. Capital expenditure in 2007 was
$275m, $63m higher than last year. Capital expenditure,
which included accelerated spend of $20m on data
centre consolidation, was equivalent to 121% of the
depreciation charge in 2007. Free cash flow was used to
fund acquisitions of $118m, the purchase of other
financial assets and investment in associates of $42m
and dividends of $401m (principally the final dividend
paid by GUS plc). Cash outflow from exceptional items
amounted to $98m. After proceeds from disposals of
businesses of $258m, net cash inflow for the year was
$176m. Net debt at 31 March 2007 decreased by
$2,029m to $1,408m, down from $3,437m at
31 March 2006.
Acquisitions
Acquisition expenditure amounted to $118m, including
deferred and contingent consideration on prior year
acquisitions.
Liquidity and funding
The maturity, currency and interest rate profile of the
Group’s borrowings are shown in note 26 to the financial
statements. The maturity profile is spread over the next
seven years, to avoid excessive concentration of re-
financing needs. At 31 March 2007 undrawn committed
borrowing facilities totalled $2,450m.
Treasury and risk management
The Group’s Treasury function seeks to reduce
exposures to foreign exchange, interest rate and
other financial risks, to ensure sufficient
liquidity is available to meet foreseeable
needs and to invest cash assets safely and
profitably. It does not operate as a profit
centre and transacts only in relation to
underlying business requirements. It
operates policies and procedures which
are periodically reviewed and approved
by the Board and are subject to regular
Group Internal Audit reviews.
Introduction | Business review | Governance | Financial statements
£800 m
At the time of the
demerger, Experian
raised £800 million to
support future
growth initiatives