Experian 2014 Annual Report Download - page 34

30 Strategic report • Chief Executive’s statement
Chief Executive’s statement continued
Marketing Services
While organic revenue growth in
Marketing Services was just 1%, we
have made significant strategic progress
as we increasingly integrate and bundle
our products for clients.
Marketers are facing a world in which
consumers seamlessly switch between
media and devices, driving greater need
for marketing campaigns that are more
personalised and co-ordinated across
many channels. Experian is one of the
few companies in the world that can
bring together the data, data quality,
analytics and cross-channel marketing
services to help marketers do their jobs
more effectively. This suite is increasingly
resonating in the market, and we have a
growing pipeline of opportunities across
all regions.
Consumer Services
In Consumer Services, where revenue
grew 5% organically, we had a record year
in the UK, as the business moved from
strength to strength, but we faced some
challenges in North America.
We continue to evolve our business
model in North America, diversifying
and expanding into new areas. Our
strategy is focused on a number of
key elements, including:
• building on our leading position in
the affinity channel;
• building on Experian’s market-leading
position in business-to-business data
breach services;
• positioning the Experian.com
brand as the trusted brand for
consumers; and
• changing the way consumers
interact with their personal data,
by enhancing the user experience
with new tools and features.
These are important steps which
will strengthen our offerings in the
future and which position us strongly
in the marketplace.
Since April 2010 we have been restricted
in our ability to market our ‘free’ brands.
At the time, we elected to discontinue
advertising our freecreditreport.com brand
in response to new rules issued by the US
Federal Trade Commission and to focus
our investment on other brands, including
Experian.com. Without the benefit of
ongoing advertising, our ‘free’ brand
membership base has gradually eroded.
Earlier this year, we noted that we are
shifting our marketing efforts away
from the ‘free’ brands and putting
our investment behind our strongest
brand, Experian.com, where we have
tremendous recognition and brand
loyalty. We are now taking further steps
to accelerate the move into the Experian
brand, where response from consumers
has been encouraging. However, growth
in Experian.com is not yet of sufficient
size to fully offset attrition rates in the free
portfolio, and revenues in North America
Consumer Services declined in the fourth
quarter of the year. We expect this to
continue in the first half of FY15, before
improving later in the year as we reach a
tipping point for the Experian.com brand.
Our affinity business continues to build
and now represents c. 20% of North
America Consumer Services revenue. The
dynamics of the affinity model (where we
provide white-label consumer services
for large business-to-business clients)
are highly attractive, since contracts
are typically long term in nature and the
lifetime value of consumer relationships is
higher than in other parts of our business.
Over the past year we have been
successful in securing new multimillion
dollar affinity contract wins, which will
benefit the business over the coming year.
Our pipeline of future opportunities also
continues to be strong. We have also seen
good success in data breach services, as
we leverage the strength of the Experian
brand and our superior product offering.
These developments provide increasing
levels of balance and diversity in North
America Consumer Services and a
strong platform from which to expand
in the future.
Progress of acquisitions
I am pleased to report good progress
across our two most recent acquisitions,
Passport and 41st Parameter. These
acquisitions respectively boost our market
positions in healthcare payment services
and in fraud and identity management,
two of the most promising initiatives to
have emerged from our global growth
programme. Pro forma revenue growth
across the two acquired entities has been
strong in the period since acquisition, and
we have laid solid foundations from which
to deliver against the respective acquisition
buy plans during the coming year.
We completed the acquisition of Passport
in November 2013. We have had a strong
start, with the business performing well.
We were pleased to secure a broad range
of new business wins in the quarter
ending 31 March 2014, including new
hospital and physician practice clients, as
well as new sales into the existing client
base. The integration of Passport and
Experian Healthcare has also gone well,
as we have aligned the leadership team,
combined the salesforces and determined
our core product focus.
We acquired 41st Parameter in October
2013. Since that time we have signed 20
new clients to the business and we have
been successful in securing a number of
cross-sell opportunities, where existing
Experian clients have adopted 41st
Parameter products. This has included
the sale of 41st Parameter into an existing
identity management agreement with a
US public sector agency, for example.
Margin progression
We delivered good progress in EBIT
margin during the year, up 30 basis
points to 27.4%.
• EBIT margins in Credit Services
improved, reflecting revenue
growth, net of a ramp-up in
investment in the Australian credit
bureau and higher regulatory-
related expenditure in the US.
• Decision Analytics EBIT margins
were broadly flat, as revenue growth
was offset by margin dilution from
41st Parameter.
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