Thursday, 8 November 2012

Experian (EXPN) ... H1 (still short)

Experian released its half year figures to 30 September 2012 this morning. Aside from the perfunctory stuff at the front, there are four factors towards the back which I reckon should be the main focus.
  1. Operating cash flow in H1 2013 was $433m, marginally down from $439m in H1 2012 (Mar yr-end). The group highlights that cash flow is seasonally weaker in the first half, but still this doesn’t fully explain why it should be lower than the prior year period. This is highlighted by the cash flow conversion being 73% in H1 2013, compared to 79% in H1 2012.

  2. The group is laying out its stall for $110m of “one-off restructuring costs.” Further, the majority of this is suggested to be in cash. $9m of this impacted the H1 cash flow statement, so it would seem the remaining $101m will impact in H2.

  3. Net capex and spend on intangibles (software, databases etc) continues to climb higher. Expenditure on these items rose to $218m in H1 2013, compared to $198m in H1 2012. This equated to 9.5% of sales, while it equated to 9.2% of sales in H1 2012, and 7.2% of sales in H1 2011.

  4. Despite “benchmark” profit again rising, when stripping out goodwill and intangible items, the group’s balance sheet continues to weaken. Net tangible LIABILITIES totalled $2,463bn in H1 2011, $2,645bn in H1 2012, $2,814bn for FY 2012 (Mar yr-end), and rose to $3,187bn in H1 2013. In the light of the loss of shareholder value attributable to PriceGrabber and LowerMyBills, I would be cautious as to the carried value attached to the goodwill and intangibles the group reports arriving at  its total net asset figure.

    The shares are currently flat on the day. For the above reasons and my prior observations (EXPN - a lot of acquisitions, capex and director selling) I remain short.

EXPN share price
EXPN current P/E and EV/EBITDA
EXPN consensus 2013 earnings momentum and share price

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