Experian 2008 Annual Report Download - page 26

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24 Experian Annual Report 2008
Financial risk management
The Group seeks to reduce its
exposures to foreign exchange,
interest rate and other financial risks.
Full disclosures in respect of financial
risks, as required by IFRS 7 ‘Financial
Instruments: Disclosures’ which
became effective from 1 April 2007,
are included within the notes to the
financial statements.
Foreign exchange risk
The Group’s reported profit can be
significantly affected by currency
movements. In the year ended 31
March 2008 approximately 36% of
the Group’s EBIT from continuing
operations was earned in currencies
other than the US Dollar.
The Group operates internationally
and is exposed to foreign exchange risk
from future commercial transactions,
recognised assets and liabilities and
investments in, and loans between,
entities with different functional
currencies. The Group manages such
risk, primarily within entities whose
functional currencies are Sterling,
by borrowing in the relevant foreign
currencies and using forward foreign
exchange contracts. The principal
transaction exposures are to the US
Dollar and the Euro.
The Group has investments in entities
with other functional currencies,
whose net assets are exposed to
foreign exchange translation risk. In
order to reduce the impact of currency
fluctuations on the value of such
entities, the Group has a policy of
borrowing in US Dollars and Euros, as
well as in Sterling and of entering into
forward foreign exchange contracts in
the relevant currencies.
Interest rate risk
The Group’s interest rate exposure
is managed by the use of fixed and
floating rate borrowings and by the
use of interest rate swaps to adjust
the balance of fixed and floating rate
liabilities. The Group also mixes
the duration of its borrowings to
smooth the impact of interest rate
fluctuations.
Credit risk
The Group’s exposure to credit risk is
managed by dealing only with banks
and financial institutions with strong
credit ratings, within limits set for
each organisation. Dealing activity is
closely controlled and counterparty
positions are monitored regularly.
1 Growth at constant exchange rates
2 Discontinuing activities include MetaReward, UK account processing and Loyalty Solutions
3 EBIT margin is for continuing direct business only, excluding FARES
Reconciliation of revenue and EBIT by principal activity
Organic
2008 2007 Growth1 growth1
12 months to 31 March US$m US$m % %
Revenue
Credit Services 1,901 1,503 19 1
Decision Analytics 469 392 13 7
Marketing Services 830 728 10 1
Interactive 859 784 9 9
Total – continuing activities 4,059 3,407 14 4
Discontinuing activities2 71 85 n/a
Total 4,130 3,492 14
EBIT
Credit Services – direct business 531 419 21
Serasa integration charge (11) – n/a
Total Credit Services – direct business 520 419 19
FARES 54 61 (11)
Total Credit Services 574 481 15
Decision Analytics 154 136 7
Marketing Services 78 65 18
Interactive 189 173 9
Central activities (57) (47) (15)
Total – continuing activities 938 808 13
Discontinuing activities2 7 18 n/a
Total 945 825 11
EBIT margin
Credit Services – direct business 27.4% 27.9%
Decision Analytics 32.8% 34.7%
Marketing Services 9.4% 8.9%
Interactive 22.0% 22.1%
Total EBIT margin3 21.8% 21.9%
Financial review continued