Experian Plc (OTCQX:EXPGF) Q4 2016 Earnings Conference Call May 11, 2016 4:30 AM ET
Brian Cassin - Chief Executive Officer & Executive Director
Lloyd Pitchford - Chief Financial Officer & Executive Director
Kerry Williams - Chief Operating Officer & Executive Director
Kean Marden - Jefferies International Ltd.
Paul Sullivan - Barclays Capital Securities Ltd.
Rajesh Kumar - HSBC Bank
Ed Steele - Citigroup Global Markets Ltd.
Andy Grobler - Credit Suisse
Thomas Sykes - Deutsche Bank
Joel Spungin - Merrill Lynch
Okay. I think we're ready to make a start. So, good morning, ladies and gentlemen, and welcome to our Year-End Results Presentation. It's been a busy year at Experian, but I think we've had a very good year, a year where we've made a lot of progress and delivered a strong set of results. The last few times I think we stood up here we've been talking about the things that we needed to do to get our business back to organic revenue growth. And very pleasing to stand up here and say that we've delivered against that objective and we've now really delivered into our target range of organic revenue growth for the year.
And it's probably a little bit sooner than we had anticipated. We've had the benefit of some things that have gone well in the business. And as we look forward, now, our focus is on sustaining that growth going forward and we have a clear strategy for that.
As we look forward, you're going to hear us talking a little bit more about some of the key principles that are going to drive our growth and extend our lead in data, analytics and software services. And that's going to be about investing in new products, better customer service, building strong client relationships and also building out a full range of consumer services and putting the consumer at the heart of how our business runs. And we're going to provide you with a flavor of some of that today.
Okay. Let's kick off with the highlights. So, we delivered 5% organic revenue growth in FY 2016. And the growth trends steadily improved as we went through the year quarter-on-quarter. And we delivered 6% in H2. That's good and it's consistent with the targets that we set ourselves I think when we set our agenda out about 18 months ago. We've had some standout performances particularly in Credit Services and Decision Analytics. Market conditions have actually been pretty mixed, some good, some bad, strong in the U.S. Obviously, Brazil has been challenging, but we've managed to grow in every region and pretty much across all business lines.
The majority of these improvements have actually come from operational improvements that we've made in the business, so we're pretty pleased about that. And in the key area of North America Consumer Services, we're successfully repositioning that business. We have a clear path now for the future, better products, better engagement with consumers, and leveraging the power of the Experian portfolio to really build out propositions as we go forward. And you'll have seen a couple of weeks ago, our acquisition, our proposed acquisition of CSID. That's another major step in that direction.
18 months ago, we also said that we needed to sharpen our focuses of business. We've made a lot of progress on that. We've sold six businesses. We've exited a few countries. And we've generated substantial proceeds from there. So we're not finished with that, but I think we made a lot of progress against that objective. And today, we're already a tighter, better-focused business.
We returned about $1 billion of capital to shareholders last year, the mixture of share buybacks and dividends. And today, we've announced an extension of that, with another $400 million in FY 2017 and also an increase in our dividend by 2%.
Now, this chart shows the progression in organic revenue growth as we went through the year. We called out in Q3 that there was some one-off benefit, but the 6% growth continued into Q4. Very pleased about that. And the picture is a healthy one and has been an improving one.
Foreign exchange was a significant headwind for us in the year, but we were flat. We had flat margins at constant currencies. And the important thing is that we did that whilst making some substantial investments in the business. And you can see some examples of this as we go through the presentation.
Benchmark EPS for continuing operations was up 7% at constant FX. And we had a very strong cash performance converting about 105% of EBIT into cash. So, really strong outcome for the year.
Okay, let's go through the regional presentation and talk about North America. So, we had a good year in North America and big improvements on FY 2015. Our star performer in North America this year was Credit Services. It was a very strong performance across all the verticals driven by high volumes of credit marketing and new account openings. We also won a lot of new deals in FY 2016 and we had some great success in major contract renewals, where we managed to not only extend contract terms, but actually increase share of wallet. So, tremendous progress made in the business during the year.
Now, one of the reason that we're able to do that is something that we've mentioned to you before called One Experian, where we really pull together the capabilities that we have across the organization and lots of our business units, be it DA, be it data, be it analytics or some of the expertise that we have. And if we're able to do that successfully, we can move the conversations on from single point solutions into really more complex propositions. And that makes us a lot more difficult to compete with. And we really benefited from that this year.
Turning to Health, we had another great year that have extended their tremendous track record now double-digit, organic revenue growth, high teens. In fact, this business continues to develop very strongly. Our products continue to be recognized by industry classifications as best in class. And that's very important when it comes to things like RFPs. Our clients do look at that and it set us up really for a tremendous progress in years ahead.
In fact, in FY 2016, we had our best ever year for new client bookings. So, the visibility on that business is for continued strong growth as we go forward. A lot of the success there is also coming from increasing our share of wallet with existing clients as well as new logos. And we've also talked previously about our intention to start introducing more of the Experian product suite into healthcare. And the first one up on that would be Fraud where we're embedding our Precise ID authentication product into patient information systems. And that's going to help healthcare providers protect against identity fraud.
And we've made some real progress in Marketing Services over the last 18 months. Some of the portfolio shopping that I've referenced earlier on has been in this area, we've sold three businesses. And we've got certain parts of our business really back to good growth targeting, posted some very strong growth in the year and the shift to digital advertising target is really driving that.
Data quality business is growing well. We're finding new areas of growth not just in market, but also through geographical expansion, and that's going very well. And our cross-channel marketing business also continues to perform extremely strongly, but not yet big enough to offset the weak spot in the portfolio which is e-mail marketing. We do feel like we're getting on top of the issues in that business, but we do expect a few more quarters before we really get to the other end of that.
Just turning to Consumer Services. As we mentioned, we're back on a path to good growth. We're targeting a larger market there. We think there's some great opportunities to leverage the entire range of Experian products to address the needs of consumers. And we'll come back to that a little bit later in the presentation.
Okay. Latin America, a very robust performance and I think it's a story that you're - is well known to you. Market conditions really don't get much tougher than they have been in Brazil in the last year, but it still grew by high-single digits. And I think that's an outstanding performance by our Brazilian team in the light of that difficult backdrop. And we do get asked a question a lot which is how we're managing to do that in such a tough environment, and the answer is really three-fold.
First of all, we're getting some benefit from counter-cyclical products. You'd expect that for any bureau. That's delinquency notifications and collections. We're also taking share in that product segment. So, we've had some new competitive wins there. We've had great take-up of new features and business information, scores and other features, which has driven strong growth in that vertical. And we're delivering much stronger performance in Decision Analytics and in the other verticals in the region. So, all in all, a really great performance there. Outside of Brazil, our bureaus continuing to perform very strongly, and that's given us overall very good results for the business.
Now, I would make one other point, which is that you're probably all aware that Brazil is a pretty high-class cost-inflation environment. So, in order to keep moving our results for, we actually have to drive a lot of efficiencies in the business, and we've been doing that in FY 2016. And last year we've setup a new facility outside São Paulo. That will help us consolidate some of our back office functions and also benefit from a large pool of local talent in a new location we move to. So, it's these kind of actions and many others that we're taking to invest in the business during the downturn. And it's not just cost efficiency but it also covers things like positive data opt-ins, building our fraud and software capabilities and also introducing the data quality of business into Brazil, which we did last year.
So, a lot of actions there, which are positioning our business strongly for the future. Those investments were started in FY 2016. They're going to continue in FY 2017, and they're all included in our overall guidance for the year.
Okay. Moving to the UK, the performance was good particularly in B2B, where our growth rates have been pretty strong. Again, we had another good year in the UK for new business wins, and the majority of these wins where we combined capabilities from across our business lines. And just to give you a data point on that, where we manage to migrate client conversations from single product to multiproduct conversations, our win rate is extremely high. In fact, it's in excess of 80%. So, it's really to our advantage to move those conversations in that direction.
And we're seeing wins across lots of different segments. We've seen it in banking. We've seen it in alternative finance. We've seen it in energy sector. And it's been driven by a couple of factors, systems upgrades, demand for fraud products. That also includes some great examples of innovation where we've managed to use our data and capabilities in new segments such as the contract we won for fraud in the energy sector. So, a lot of good stuff happening.
I think, again, it illustrates this point about One Experian where we do have a real competitive advantage where we manage to move those client conversations on to our full suite of product set. Actually, most of our other competitors can't really match across the whole spectrum. They can match us maybe one-to-one, but not in every category. And so, the extent that we can do that, we're able to move that dialogue on, get better contract terms longer and often with a bigger share of wallet as we did in the U.S. and UK.
And in Consumer Services, we've referenced before this market is becoming more competitive. We do have a number of players now offering a range of consumer products, from premium paid services to free scores. A reminder, it's a market that we created 12 years ago. It's evolved a lot over that period.
And as we look forward, we're going to be evolving our business. We're going to be introducing a new tiered product offering to address all segments of the market, similar to the approach that we took in the U.S. And we're already building on that strong market position. You may have seen, this year, we've introduced new service - new products like scores on bank statements. And we have a raft of new introductions as we look forward over the next 12 months. So, our plans are already well-developed and we're executing on that strategy. And you'll see us responding as we go through over the next 12, 24 months.
EMEA/Asia Pacific I think is a really good story. Probably stood up here maybe two, three years ago and this business really wasn't moving forward. But we're now posting really good rates of growth. And it's down to a lot of the actions that we've taken operationally. We haven't really done anything structurally in that region over that period of time. But we've reduced the complexity. We've centralized a lot of functions. And we have fewer countries that we're focused on. And we're also focused on fewer product opportunities like fraud, software, analytics, cross-channel marketing also been growing very strongly there. So, we see a lot of good benefit in the short term. We see a lot of long-term growth potential there.
And that's actually also enabled us to move on to a lot of really quite big client wins in the region. And we think that there's still a lot of potential there, particularly in Asia Pacific. So, our goal in this region is to build the scale, build on the position that we've created over the last couple of years, and over time, build that into much more material profitability.
Okay. Just turning to strategy for a moment. We first showed you this slide in November 2014. And we had really five areas that we are focused on to get the business moving forward. And I think we can certainly tick quite a lot of those boxes. We've talked about some of them in terms of focus, capital returns, improving our efficiency. And our focus now is really much more towards driving our growth forward. And I'm going to talk about a few of those areas in the next couple of slides.
So, one of the areas that we're focused on to drive our growth is expanding our business by investing in new sources of data, to improve the depth and breadth of our coverage. And let me give you a few examples. In the U.S. and UK, we're adding more rental and telecommunications data to build out records on emerging consumers. We're also partnering with social media sites to improve our coverage on small businesses in the U.S. and we're partnering with players like Facebook to improve our targeting data.
In Brazil, our focus is on positive data and I'm going to spend a few moments updating you on that. The first thing I want to say is that we see positive data as a big opportunity for us in Brazil. It's going to expand the range of opportunities that we have as a business and actually it's hard to think of a business that's better positioned to take advantage of those opportunities that it will present. Very important point is the law in Brazil requires a consumer's permission to collect and use positive data. It's the consumer who decides whether a bureau receives positive data.
And when you have a situation when a consumer decides, that's where branding comes in and is really important. And Serasa is actually one of the most well-known brands in Brazil, frankly amongst any companies, but certainly in the financial sector. And it's also a brand which is incredibly well trusted by consumers. So, there is a need to leverage that brand and we've been investing in the last couple of years to do exactly that. There's also a need to educate consumers about positive data. Consumers don't naturally know what that's all about.
And if you look at some of the things that we've told you about over the last couple of years such as the credit fairs that we've run, services like Limpa Nome, really positioning Serasa as the consumer champion in that marketplace. And that's starting to open up a tremendous number of opportunities for us. We're already collecting consumer opt-ins and we're using a number of channels to do that: retail partnerships, some of our own branches, but also through the financial institutions. And today, we're receiving positive data on a regular basis from all data furnishers on the 3 million-plus consumers who've already opted in. And the rate of consumer adoption is actually accelerating. All of that is actions that we've taken at Experian Serasa, and we're well ahead of anybody else on this.
And we intend to keep that advantage as we move forward. If we look at the credit reporting system in Brazil today, we actually have 20% more negative data than any of our competitors. And 60% of our data comes outside the banking sector, so from retail and telecommunications companies. So really, it's a very comprehensive and broad-based bureau asset.
Now, positive data, as we said, is the next big step and all of our actions over the last couple of years and as we go forward will be aimed at building the most complete bureau by collecting positive data, permission data, really from all sources. And we're very confident that that's going to position us very strongly in the years ahead.
Okay. We talked a little bit about some of the examples of innovation that we've seen across the portfolio, and here are a few of them that we've called out. First of all, digital credit marketing. In North America, we're redefining credit marketing and this is going to be a very significant development. And what we're going to be able to do is to allow our clients to make pre-approved firm offers of credit to prospective customers. This is something which has been very difficult to achieve and it really required our capabilities across all of our business lines to make it happen. And we've been in pilot with a number of clients over the last six months. And the reception to this product is very strong and we're very confident as we roll that out in FY 2017, it should be a very successful product launch.
In Decision Analytics, last year, we made a significant investment in a new sophisticated fraud platform, building on our PowerCurve software to pull all of our fraud capabilities together. And one of the things that I think our clients tell us is that our fraud capabilities are impressive in terms of the breadth and capability, but sometimes difficult to consume because each one of them is a separate installation.
And so, we can expand our addressable market in fraud by actually making it easier for our clients to consume the products on an as-and-when-needed basis and also give them the flexibility to add in different capabilities from other companies and that's exactly what we're going to be doing with this product, and we'll be launching that in FY 2017, so also very exciting.
Audience Engine, in our targeting business, we referenced the fact that we've had some good growth there. And what this is doing is really delivering addressable advertising and making it a reality for media providers and advertisers. And we've been doing a nine-month pilot with about 70 major clients. And in using our tools, they've seen a 60% improvement in sales lift from the more precise targeting. That is the combination of our data and the tools that we're developing. So, again, another good indication of the growth that we really have available in that segment.
And then as we look at health, we talked a little bit about the fraud opportunity. We also launched a product called Patient Estimates. And this is a tool that enables patients to get a clear picture of their out-of-pocket financial obligations; often for consumers in the U.S., the extent to which they're going to get reimbursed for procedures they have to go through is a bit of mystery for them. And so, this is really addressing the industry need for greater transparency, and has been a very positive reception from our clients.
So, these are some examples of the innovation that we've got going on across the portfolio. These are investments that we made in FY 2016. We have many more that we did do also and we've got many more in the works for FY 2017.
Okay. Said we'd come back to North America Consumer Services. Actually, I think in two years, we've accomplished a lot in this business and we have a really simple strategy from this point on. The first point is to enrich the services that we provide. The second is to actually achieve greater levels of consumer engagement. And that actually applies not just to our Consumer Services business, but also integrating capabilities with our Credit Services business. And that's really where the benefit of being a bureau and a Consumer Services business will come to play a really strong role. And obviously, also we want to diversify our sources of revenue.
So, we're delivering on this and I think we've enhanced our product development capability very significantly. And we are taking a lot of steps to redefine that customer experience. Last year, we went through a major technology refresh and that's gone really well. And it's given us some additional capabilities and product features that we just simply didn't have a few years ago, such as the ability to send alerts to people, to tailor products to people on mobile devices. That's all now operational and giving us lots of new opportunities to drive revenue. And so, it's also given us the opportunity to proactively engage with consumers, which is something that we've not been able to do fully in the past. So, a lot of good momentum there.
And we've done things like we've expanded the use of FICO scores to now include industry-specific models so that when consumers go on and look at their FICO score, they're able to look at their FICO score in relation to an auto loan, for instance, and see themselves scored in that specific model. And we're now rolling out our lead generation prequalification product which, I think, will allow us to start generating revenue off a lot of the free leads that we've had. And our free channel has attracted just over 3.5 million consumers to date. And so, that's going to give us a chance to start monetizing that channel as we go forward.
That also is proving to be quite a strong retention tool because we can allow customers to switch between paid-for and free. And it means that they don't lose - we don't lose them as customers if they decide to end their subscription service.
We've also completed a lot of product refreshes in the affinity channel. And that's supporting their moves to get that business back to growth. So all these actions we've taken, there's been a hell of a lot of activity in the business. I think you've seen that in the results that are coming through. We're very excited about the future. We think a lot of these things we've done really position the business well. And we're also using all of those things to actually - as we think about how we're going to evolve the UK business. So all of these things, we're going to start to implement in our business in the UK as well.
Now, we mentioned identity. Actually, you probably picked up I'd mentioned identity quite a few times in this presentation. It actually cuts across lots of - our different businesses in, Decision Analytics, in the targeting business in North America. It's a key skill for us and a key capability of Experian.
And so, the CSID is a really good strategic fit for us. So we've taken another step not just to expand our presence in identity services, but also this is really going to help us enhance and enrich the consumer services products that we offer. And the combination is going to allow us to provide some pretty powerful solutions for consumers to manage and protect identities. We're going to distribute these products through the wholesale partnerships that we have in place for CSID, as well as in the direct-to-consumer and existing affinity channels.
We'll be enhancing our ProtectMyID product in the premium membership. And we'll be creating, hopefully through that exercise, higher value and more - and secure relationships with our consumers. CSID is also able to perform a lot of its activities, particularly cyber detection at a global level.
So, in time, we see this as a global growth opportunity for us. So, I think we're excited about the opportunities this gives to us in this business. It gives us the ability to really move the business on from where it is today and we look forward to completing this transaction.
Okay. Before I hand over to Lloyd, maybe I'll just summarize with a few points. We exited the year pretty strongly. It was a good year and we delivered growth - organic growth in the target range that we set out for ourselves about 18 months ago.
We are reinvesting back in the business significantly. You've seen some examples of that today. That's making a big difference. And we're also leveraging our scale as One Experian and that's going to enhance our competitive position and allow us to win better long-term contracts with our clients and build stronger relationships.
We've made a lot of progress in turning around North America Consumer Services. We're pleased with the progress that we've made there. And so as we look forward, our plans are really designed to keep that momentum moving forward, sustain the good growth that we've achieved and really capitalize on the unique strengths that we have as a business across the portfolio of products and services that we have.
So with that, I'll hand you over to Lloyd.
Thanks, Brian. Good morning, everyone. Let me start with some of the highlights and then we'll move on to the results in a little more detail. As Brian mentioned, we ended the year strongly with group organic revenue growth in Q4 of 6% which brought the growth overall for the year to 5%. EBIT margin at constant FX rates was stable as guided and benchmark EPS at constant FX grew by 5%. As you know, we saw some significant FX headwinds during the year and particularly with the volatility of the Brazilian real and the strength of the U.S. dollar. And this impacted revenue by 9%, EBIT margin by 60 basis points and EPS by 11% as we've triggered through the year. And at actual FX rates, it was another strong year for cash generation and with operating cash conversion of 105%. And finally, return on capital employed increased by 50 basis points to 15.4%.
So, turning from the highlights on to revenue growth, our goals for this year, as Brian mentioned, were to deliver improving growth and momentum within our target range. And we've delivered on this with sequential improvement throughout FY 2016. The one-off benefit from the on-boarding of the new Affinity client is highlighted in Q3 in the chart and you can see that that momentum continued into the fourth quarter, which is when we traditionally report our strongest growth. As you can see on the right, all of the regions contributed to that group - organic growth progression. So overall, good progress for the year and within our target medium-term range.
Taking a look at two specific focus areas, North America Consumer Services and Brazil. On the left is the recovering trend in North America Consumer Services. And as you can see, we made good progress with continued strength and a growing scale in experian.com, reduced drag from some of our legacy areas and a boost to Affinity from the new client on-boarding. And importantly, we finished the year in a modest growth position on North America Consumer Services.
Chart on the right shows the growth trends in Brazil where it continues to be a very uncertain economic environment. But through a combination of support from counter-cyclical products, proactive self-help and the business has performed well and strengthened a little in the traditionally strong fourth quarter, you can see there. So overall, a good revenue performance in these two businesses through the year.
Now moving on to EBIT and the key margin drivers, you can see we've adjusted for the disposals we made during the year and reinstated the prior year to 27.3%. And for FY 2016, we delivered on our guidance that we laid out at the start of the year of flat constant currency margin.
In North America, in the UK and Ireland, the margin there reflects some growth investments that Brian outlined and also high regulatory costs. And we held margins steady in Latin America, a result of some of the efficiencies that offset some of the inflationary factors. And in EMEA/Asia Pacific, you're seeing the benefits of increasing scale benefits in that business as it grows. And after the FX effect of 60 basis points, the reported margin was 26.7%.
Turning to look at the regional performances in a little more detail. If we start with North America, total organic revenue growth was 3%. Credit Services had a strong year, delivering 10% organic growth overall and this was helped by volume growth in credit marketing and origination volumes while both health and auto maintained that double-digit growth rates.
Decision Analytics showed some softness due mainly to the weakness in the public sector vertical we talked about during the year and despite some strength in fraud prevention.
Marketing Services was also slightly weaker due to attrition in the email marketing business. Targeting & Data Quality continued to grow well and there were significant business wins in the new cross-channel marketing platform.
As highlighted earlier, whilst lower overall for the year, our turnaround strategy in Consumer Services has taken good effect. Looking ahead, we expect the first half growth in FY 2017 to be around the level of Q4 growth before improving as we deliver on some further aspects of the product roadmap in the second half of the year. The lower EBIT margin mainly reflects the growth investment to support the consumer channel and strategic growth investments across the business lines.
Turning to Latin America, you can see despite the continuing challenges in the external environment, 7% organic growth represents a good outcome for the year. Growth in Credit Services was driven in Brazil by a mix of delinquency letters, price and new product introductions. And there was also a strong contribution from other bureau across the region. Decision Analytics improved as we exited the year, helped by new analytics and scores as we further enhanced accuracy through introduction of some new attributes.
And turning to the margin, this was maintained at constant currency despite the investments in the new initiatives some of which Brian referenced earlier. And as we look ahead, we see no near-term change to the challenging external environment, so I think that means growth in the year ahead may moderate within the mid-single-digit range.
In the UK and Ireland, we delivered 5% organic growth. Good growth in Credit Services driven by strong volumes, new business wins and good progress in key channels such as SME and insurance. The strong performance in Decision Analytics was boosted by a one-off rollout of a new verification service in the UK public sector and we'll lap that in the first quarter of this year. Marketing Services declined fractionally, whilst in Consumer Services, organic growth was driven by higher membership in the first half of the year.
Growth rates slowed in the second half with some membership attrition. And looking ahead, we intend to launch a tiered multiproduct platform in the UK similar to how we've progressed the business in the U.S. So, you may see some softening as we go through this year as we leave that business through that transition. And in the UK, the margin reflected increased regulatory and legal costs associated with the introduction of the FCA regime.
Finally, moving on to EMEA and Asia Pacific, organic growth was 7%. The decline in Credit Services was mainly due to weakness in markets such as the Nordics and South Africa, which offset a good performance in India and Japan. Decision Analytics and Marketing Services were very strong, helped by new business wins, increased customer penetration as we focused on the integrated One Experian propositions which Brian outlined earlier. And overall losses were significantly reduced as we've driven efficiencies and start to drive scale benefits.
We turn to the income statement summary. Our total EBIT, you can see, was $1,210 million, 3% ahead of the prior year at constant FX, down 7% at actual FX. Net interest was stable as free cash flow and disposal proceeds through the year balanced the cash returned to shareholders. This resulted in benchmark PBT of $1,136 million, 3% ahead at constant rates and 8% lower at actual rates.
The benchmark tax rate for the year was 24.9%. And after a reduction in the weighted average number of shares, benchmark EPS was $0.891, 5% up on the prior year at constant FX and 6% down after the FX drag I mentioned. And if you adjust for discontinued activities that we sold during the year, the continuing EPS at constant FX was up 7%.
Looking at the reconciliation of benchmark to statutory PBT, you can see the exceptional items in there, principally the net gains on disposals. The other key movements were in financing, fair value re-measurements which relate to foreign currency effects on intragroup funding into Brazil.
And if you take those into account, you can see statutory PBT $1,027 million which was 2% higher than the prior year. As I mentioned, cash flow was very strong again for the year with 105% of EBIT converted into operating cash. And net CapEx was $325 million which is around 7% of group revenue, a little below our guidance range. And alongside a small working capital inflow, this led to operating cash flow of $1,270 million and free cash flow of over $1 billion represents a cash conversion rate of 125% of benchmark earnings.
Maybe now turn to our medium-term financial framework. You'll remember we introduced this last year and it's guided our investment and the capital allocation decisions as we look to create sustainable value from the business. Our financial framework across the medium term is to deliver mid-single-digit organic growth and through the disciplined allocation of the group's cash flow potential to report strong growth in earnings per share, meaning high-single or low-double digits over time.
If we look at how we applied this framework during the year, as I mentioned, we continued to generate significant cash flow and this has provided the balance sheet flexibility to both grow the business and provide ongoing returns to shareholders.
During the year, the group utilized organic cash flow and non-core disposal proceeds to invest organically in some of the key growth initiatives and our foundational priorities that Brian discussed earlier. And we followed through on the commitment to shareholder returns with nearly $1 billion in the form of dividends and share buybacks.
For FY 2017, we continued to invest to drive growth in line with the strategic objectives. As you know, we recently announced the agreement to acquire CSID for $360 million. At the end of the year, we had around $140 million of our buyback program still to conclude. And we've topped that up and increased it to an overall buyback of $400 million for the year ahead. And looking ahead, we'll continue to rigorously apply this capital framework and balancing our investment across organic investment, in innovation and growing the business, optimizing and investing in the portfolio and returning cash to shareholders.
Looking at the balance sheet, we ended the year with net debt of $3 billion, down $200 million on the prior year. After generating free cash flow of over $1 billion in disposal proceeds, net share repurchases were $592 million and dividends paid $380 million. As you can see, the net-debt-to-EBITDA ratio at the end of the year was 1.9 times, which is just below the bottom of our target range, which is 2 to 2.5 times, giving us plenty of flexibility as we look ahead to FY 2017 and beyond. And you can see on the right-hand side, pro forma for CSID, had we earned that for the year, net-debt-to-EBITDA at the end of March would have been 2.1 times.
As part of the capital framework, one of the key measures we use to assess our performance is the returns we're making from the capital base. And in FY 2015, post-tax return on capital was 14.9%. You can see from the chart organic growth performance has increased during the year by 70 basis points after adjusting for FX and disposals. So overall, a return on capital employed of 15.4%.
Moving to some modeling considerations guidance for the year ahead. As we said, we expect the acquisition of CSID to complete sometime during the first half and add one to two percentage points to group revenue in FY 2017 depending on its final close date. We expect net interest in FY 2017 to be in the region of £80 million to £85 million and that's inclusive of the CSID investment and the total £400 million of expected share purchases.
Benchmark tax is expected to be flat around 25%. And as a reminder, our cash tax rate will trend up over the next five to six years towards that P&L rate. And we expect CapEx to return within our framework guidance range of 8% to 9% of revenue.
Taking into account the expected share buybacks, we've got a full-year weighted average number of shares expected to be around £940 million for the year ahead. And finally, FX continues to be volatile, but first time for a while, we've been able to say we don't expect it to have an impact on the results for the year ahead.
So, wrapping up with our summary and outlook, I think we've made significant progress over the past year, delivering mid-single-digit organic growth and flat margins at constant currency, in line with the targets we set out and providing a strong platform for future sustainable growth. For FY 2017, we expect group organic revenue growth to be in our target mid-single-digit range and with our traditional weighting slightly towards the second half.
For the year, we expect, again, stable margins at constant currency as we continue to invest behind our strategic priorities and deliver further progress in benchmark earnings per share. And we'll continue to focus on the strategic priorities we've laid out, investing in our highest growth opportunities, focusing our portfolio and rigorously applying our financial framework to focus on that creation of sustainable, compound, long-term value.
Thank you. I'll hand you back to Brian.
Okay. Thanks, Lloyd. So, I think we've had a good year and I think we laid out some of the agenda for the year ahead. Our ambition over the last couple of years and going forward has been to build a better, stronger company, which is capable of fulfilling and sustaining the growth ambitions that we have. We're going to do that by continuing to invest in our business, in product innovation, new data sources, technology security, operational excellence and also superior customer service. And as a result, we believe that we're going to be in a great position to continue to generate significant shareholder value in the future.
Thank you very much and that's the end of the presentation. So, I'm going to ask Kerry Williams, our COO, to join us on stage and we'll take your questions.
A - Brian Cassin
Could I ask that you wait for the mic before you ask a question? Thank you. Okay. Can we go here?
Morning. It's Kean Marden from Jefferies. Could I ask two please? First of all, looking at the overall Consumer division, the margins there fell by about 300 basis points year-on-year. Could you maybe break that down behind whether it's the North American business or the UK business primarily driving that? And does like-for-like revival - so organic revenue growth revival in that unit, does that require margin dilution for a while or do we stabilize or start to see an improvement coming through in the future?
And then secondly, just looking at developments in the last sort of couple of days with the U.S. Treasury Department's white paper on sort of the online lending business models. Is that a channel that you're already exploiting or does that provide you with a growth avenue, revenue?
Lloyd, do you want to take the margin question? And, Kerry, do you want to deal with the second?
Yeah. I think we've obviously progressed our offerings significantly this last year in North America with the launch of the FICO partnership. So clearly, there are elements of the cost base particular to this year. And I think as you look ahead in North America, you'd expect a more even mix of flow-through of revenue down to margin. The UK is a different market. I think clearly, we'll be investing in a product set there in the year ahead.
In regards to the online lending, it is a sector that we play in. We have about 30% market share. I think we've been a little bit more cautious in who we do business with. And so, we're quite comfortable with the ones that we are doing business with. And we expect them to continue to grow. It's a nice piece of business for us, but it's certainly not a substantially material piece of business for us.
The Treasury white paper doesn't necessarily lead to a step-up in the regulatory framework and therefore increased demand from that channel?
No. The issue that that channel is having right now is the funding sources that are drying up for them from some of the major banks. And so, they - when they solve their funding issues, they'll be able to continue their growth.
Yeah. Maybe I'd add actually that the funding issues are one thing. Actually, the white paper really points to opportunities for us because it takes it more into the mainstream, the processes that you have to follow. And actually, that's where products and services that we provide really come into fruition and particularly giving people comfort on things like veracity or the verification of loan details and consumer balances outstanding. These are all things that we do across the whole spectrum. And I think there's plenty of opportunity for us to do that. Whether that balances some of the business declines they might see if they hit a bit of turbulence, we don't know. But I think that there's upsides there as well. Okay. Paul in the front.
Great. Thank you. It's Paul Sullivan from Barclays. Could you firstly give us a sense of the proportion of growth that you think you're seeing from new product development that you've put in place over the last couple of years, and how you see that changing over the next couple of years. And also the level of investment that's gone alongside that, and is that the main thing that is holding back operational gearing at the group? That's the first question.
Secondly, the potential threat in terms of positive data new entrants in the Brazilian market, do you see that as a potential threat and how do you view the costs that you may need to put into the business as you ramp up positive data and the impact that could have on margin?
And then the final question on the UK business. You've talked about potential for - it looks like margin attrition and possibly revenue attrition over the next sort of 12, 18 months as you sort of reinvent that model. Do we look at the experience you've seen in the U.S. as a guide to how bad it could get? I don't know if you just could help us quantify the downside risks there.
Okay. I think we'll deal with this in sections. I'll ask Kerry and Lloyd to comment. Let's just deal with the investment point because I think this is actually across the piece. If you look at our business over the last couple of years, we've had to deal with a number of issues in terms of turning businesses around. Consumer Services North America, we've taken a lot of action in Marketing Services and we've also done that at the same time as actually putting investment back into our business, and some of the initiatives that you've seen up there have been stuff that we've done and invested behind in FY 2016. We were quite clear when we sat - when we stood up, I suppose, 18 months ago, about what we wanted to do from a margin perspective and that our flat margin guidance gives us the ability to do that. And that was a job that we had to do.
And as we look forward, we always see a lot of opportunities to invest in the business. And again, as we look forward to next year, we see that flat margin guidance giving us the ability to do that as well as to manage through transitions that we've done. We've had some significant transitions in this business over the last couple of years. You've seen it. I think we coped extremely well with that. I think we've come out of the other side of that really strongly. So, we fully expect to be able to continue to manage our way through and pursue the growth opportunities that we've got. I'll let Lloyd come back on that in terms of try and quantify some of that in a second.
On the Brazilian side, as I said in the presentation, positive data is a big opportunity for us. We referenced there the fact that consumers have to opt in. So, unless the consumer sees some benefit from positive data, they're not actually going to opt in. Now, over the last couple of years, we have done more work than anybody in Brazil to really generate consumer knowledge and education around that, and we're seeing a response. We're also seeing a response which is such that positive data is actually synonymous with Serasa. And our brand strength is really, really powerful in Brazil. We regularly rank amongst the most trusted brands in Brazil, and also amongst the most widely known.
So, we've got a very strong business. We've got a very strong position. And we're very confident that we will be able to build out the most comprehensive set of data in that marketplace. We're also very confident of the capabilities that we have as an organization to do stuff with that positive data. It's one thing having the data. It's another thing building the products and services on it.
And competition, we live with competition in every marketplace that we operate in, some of which actually is independent bureaus, some of which are bank-owned. It's no different. We have competition today in Brazil that we respond to every day. So, we look at it as an ability to expand our business, an opportunity which is there, not least, not just on the bureau side, but actually when you start to think about some of the things that we can do from the consumer side once we start to sort of educate them around positive data and what we can do in Consumer Services with our brand. Actually, there's a whole raft of things that we can do and we have a lot of playbooks that we've seen in the U.S. and other places that we're actively investing in and investing behind today. So, our view is longer term, we're going to see that drive our business forward.
I'll ask Kerry just to add some bit more color to some of our activities on that over the last couple of years and we'll come back to Lloyd on the question on investments in consumer.
Sure, Brian. So, the consumers in Brazil, we spend a lot of time doing research to find out how they view positive data and how they view Serasa Experian in particular and it's very interesting. Before positive data was enacted and we did our research with the consumers, they view Serasa as a great brand and they view Serasa as the one that has the ability to say no when they are applying for credit. And after positive data has been enacted, the consumers' response is to view Serasa as, well, of course, that's who I want to have my data because they can say no. They're obviously the one that will say yes. And they view other entities in the marketplace as not having their best interest of being able to provide that impartial ability to provide the data into the lending decision. So, the consumers have a very specific view of Serasa and positive data and they view it in a manner that we're there, we're in a position to help them.
The credit fairs that Brian has mentioned, Limpa Nome and MeProteja in terms of things that we've rolled out to the consumers with our education, helping them to understand how to improve their credit backgrounds are all resonating very well with the consumers. And at the same time, we have many different segments of the market, whether it's midsize institutions, whether it's Telco’s, whether it's retailers, they're highly motivated to make sure that there is a robust provider of data - positive data in the marketplace so that they can continue to move their business forward.
So when you take all that together and the fact that the direct-to-consumer business really doesn't exist at scale in Brazil today and you start adding this together, we have a great opportunity to create the direct-to-consumer business. And at the end of it, as we collect the opt-ins, our Brazilian bureau will actually be the most resilient bureau that exists anywhere in the world of any bureau provider because it will be made up of millions of direct authorizations from consumers and no one can take that away from the consumer and no one can withhold that data because that's how the law is.
And so, we're very excited about this because this just creates an additional moat around our business as we collect these opt-ins and our ability to monetize and serve the consumers in the future.
Lloyd, do you want to deal with that?
Yeah. I'll maybe touch on a comment on the innovation and margin and then on to the UK. I think if you look back at the financial framework we've put in place, it's about creating sustainable, long-term growth. And that means investing back in the business. And that also means investing through the P&L and not just in capital. And I think where we laid out that framework, we said we'd think of margin each year as an output, not an input constraint. And we've got lots of opportunities, some of which Brian mentioned, to invest in innovation. And we can do that within that flat margin guidance.
I think if you look at innovation spend increasingly with our One Experian approach, we're putting bundled products together, so across our different businesses and across different platforms. And that means going to customers and selling them a bundle of activities is much more difficult than it has been in the past to break that out. But equally, that's a more compelling sales proposition to our customers. So we don't break out innovation in the last two years or more recently, we think very much about those bundled propositions.
Onto the UK, clearly, the UK is a different market to the U.S. We've got a lot of learnings from the U.S. transition and a lot of product development, the technology platform that we've developed in the U.S. that we can port over to the UK. So, I think the UK experience is very different from the U.S. It could soften from where we are here, about 1% as we take - introduce those new propositions. Where we're heading to is a much better place, which ultimately, the market where we can segment it and offer different propositions to different customers is a much bigger market. And that's the experience from the U.S.
Go - in the middle there. Go, Rajesh.
Hi. Rajesh Kumar from HSBC. Just following up on the Brazil question. Clearly, two years back, you said write-down positive from the story. It seems to have come back in a big way. You collected 3 million signatures. I remember you said you need at least 10 to 15 for it to be commercial. What are we seeing in terms of the pace of collections that suddenly makes you put that back on the slide pack? And also a follow-up on the expense of positive data collection. What's the run rate expense? How it's capitalized? If we could get some color.
So, I think we'll address that. Last couple of years, we've been running a lot of research and pilots as to what the most effective way of collecting positive data is. It's more of a sort of scale challenge than anything else. And I think that through that work, we've alighted on what we think the best mechanism is. And so, we have a variety of different opportunities that we're going to pursue. I'll ask Kerry to just talk a little bit more about that. And then, Lloyd, why don't you comment on the costs?
So, all of the opt-ins that we've collected so far have all been through our test channels. We haven't actually rolled out our complete program and that's actually coming just in the next few weeks or months. So, we've been testing - we've been making sure we understand which channels work the best, how the consumers view it and who are going to be our partners. Some of the things that we found is we tested with one of the retailers where they actually gave us real estate within their stores because this is very important to them and the retailers are very interested in making sure that the data is collected because that helps them move merchandise. And so, the response rates there have been very significant.
We've also been working on the ability to collect online. But we have to go through various fraud authentication measures in Brazil. And without a positive database existing in Brazil, authentication of the consumer in an online environment is much more difficult. We've been working with fabra bond. We've been getting approvals. We think that we'll be able to go to the online opt-in environment in the not too distant future with the progress that we've made there.
So, we have a number of channels that we've been testing and we're now in the process of actually moving those forward into what I would call production. So, the 3-plus million that we've collected have all been through our testing efforts, not because we've been rolling out a full operational program at this point. So, we're very encouraged that just our test results have resulted in the £3 million, £3.5 million opt-ins, which has almost doubled just in the last 12 months and it just is continuing to accelerate as this starts to become a virtual process where the consumers understand what they need to do.
I think just to add to that. We talk about some of the channels outlined in my presentation. Just to be clear, we're getting opt-ins from financial institutions as well. So, this is from really every distribution channel in Brazil and those opt-ins continue to increase everywhere. So as Kerry said, we're not at scale yet and we haven't pushed it at scale. But I think we're very encouraged with the progress that we've made.
On the accounting policy if you - similar to all other assets, if the cost is direct and incremental, then you capitalize it and we capitalize data cost. If it's very general in nature, we would expense. And most data appears both in capital; data programs appear both in capital and expense. Spend to date has been pretty immaterial. If you look at the Brazil margin this last year, flat at constant currency and our CapEx came in overall for the group below our guidance range, so it's been immaterial this year.
So, should we expect it to increase as you ramp up the collection process in Brazil?
So, our CapEx guidance is in our normal guidance range, 8% to 9%. So no change to that.
And just on the GI feedback, which the banks have started. These are same banks who sold you Serasa. Do you understand why they're doing it? It's a bit confusing for all of us looking at that. They sold you Serasa and then they're starting as a competitor, just doesn't make sense why they would do that.
Kerry, you want to...
We work constantly with the banks down there. And we ask them lots of reasons why. I can only tell you some of the answers that they've given us. One is that they have a great desire to make sure that they do not incur legal exposure. So Brazil is very litigious from the consumers. And so, with this new source of positive data, they want to make sure that they have the ability to ensure that they're not suffering greater legal exposure.
A large financial institution down there may have 500,000 lawsuits in their legal department on any given day, so that's how litigious it is in the Brazilian market. So, that's one of the reasons that they've given us. Beyond that, that's kind of the main thing that they have said, is the reason that they want to do it. The reason that the regulators, the reason that the government and the consumer advocacy groups want to do it is because of the very high interest rates that exist in Brazil. If you have a credit card in Brazil and you revolve a balance there, you're most likely paying 100% or more on an annual basis.
And so, the reason that positive data was put in in the first place was to allow the ability to offer lower interest rates to the consumers because there was a better transparency of their ability to repay. And so, you can draw your own conclusions from that.
Okay. So, isn't it a long-term investment for them? And then very uncharacteristic investment for them in terms of typically banks are not known for starting up a tech company. So, just don't get my head around what's the pressing need for them to start their own. Obviously, like you, they can go through the online route to get this opt-ins if that is the route required for them.
Yeah. In the Brazilian market, the banks have had a history of starting different companies over time. So, and there's - in any particular area that they do this, there may be three or four companies operating that are not owned by the banks and there may be one company that's owned by the banks. It is not unusual for the banks to do these kind of things.
So just behind. If we can go to Ed and then Andy, I'll come to you next.
Thanks. Ed Steele from Citi. Just a couple questions. First of all, following on that discussion, could you just remind me when you get - you've got your 3 million opt-ins. Does that mean you have to share these opt-ins with your current competitor and any newer competitors or are they just for Serasa? And how does it work the other way around? So should this new entrant get lots of opt-ins because you've got the deal in place? Do you necessarily get those?
Yeah. So, that's the point that the consumer decides. So, where we collect opt-ins ourselves, that's our information. Where an opt-in is collected through a different channel, the consumer is free to decide which organization can get the data. And that comes back to the point about brand. And I think if we did a blind test today and say to 10 Brazilian consumers, if they're going to give their positive data to an organization, which organization will they give it to? I'm pretty sure 10 of them will say they're going to give it to Serasa. So that's where the real advantage comes in. But the consumer chooses. So, they have a choice as to who they can give their data to.
So, when the banks who obviously are clubbing together, when they pursue their opt-ins, will the...
They can't restrict it just to the banks, if that's what your question is.
They have to give them a choice. So, it won't just be opt-in for positive data. And by the way, you've only got one choice. They will see the range of options there. Serasa will be...
It's against the law to restrict it, just to...
So, there is going to be the ability for consumers to actually give their data to many people. And again, I keep coming back to the point which is, whoever has the strongest competitive position, whoever has the strongest brand, whoever has the strongest presence of mind with consumers is going to do very well in that scenario.
Thank you. And just a follow up on that. So with your 3 million opt-ins, what percentage of those have also opted in for your existing competitor, because presumably you've had to provide that option....
Do you know the percentage of opt-ins?
Yeah. We do know that percentage. It's not one that we release. It is heavily in our favor, the process that we're going through, so.
Let me give you a real live example which kind of illustrates. So in the UK, we have a very strong brand. Most people know who Experian is. And about 18 months ago, the government launched IDAS, which is essentially your ability to access government services through online verification and you'll all see it if you go on the websites. And if you there, you'll see that there's a multitude of people that you can authenticate yourselves through. And essentially, there are variations in the product. But to a consumer, they don't know that at the outset. So, who are they going to pick? They're going to pick the post office, are they going to pick Experian? They've got no basis to make a choice except brand.
Well, guess what? 70% plus of consumers pick Experian. Why? Because they know Experian. They trust the Experian brand and we're synonymous with things like identification and information. So, if we look at - and we do these tests - if we look at the strength of our brand in the UK and we look at the strength of the Serasa brand in Brazil, Serasa is the strongest brand we have in the portfolio. Full stop. Absolutely hands down. The media coverage that we get for our credit fair activities in Serasa is valued at frankly hundreds of millions of dollars, which we don't pay for.
So, I think we have a tremendously powerful position there, and there's obviously uncertainty around a process when a consumer has to do something new, but that uncertainty applies to every player in the marketplace. And in those situations, the strongest player usually does very well.
Brian, if I could add to that. All of our efforts around positive data and the education that we've done, the testing that we've done with the consumers has been viewed very positively. The consumer advocacy groups, the regulators and the consumers themselves, and the announcements that the banks made about their bureau was not viewed positively with all of the market testing that we did with the consumers, with the advocacy groups and with other entities in the market. So, our brand, I think, just puts us in an excellent position as we move forward with this initiative.
Very, very quickly. On India and Australia, you haven't mentioned them as part of the growth in EMEA. Is that because they remain very immaterial in revenue?
Quite possibly. I think we spent some time talking about it in the past. I mean, India is growing very strongly for us. In fact, our performance there is getting better and better. It's still very small. But I think we're very happy with that. Part of the reason that you see Asia Pacific perform very well is because we've done extremely well, particularly in Decision Analytics there. And I think we're getting close to actually having pretty much every bank in Australia and New Zealand running on PowerCurve software. And if you think about that most of the decision engines are going to be linked into the Experian products and services for some time to come, you'll realize that gives us quite a significant competitive advantage in that marketplace.
So, the bureau, there's nothing really new to add on that. That always has been focused on a bureau when comprehensive data comes into place, comprehensive data is not in place today in Australia. So, for us, it's still - it's built, but it's still really waiting for that legislation to become enacted. But I think once comprehensive clear data comes into play, then we have a tremendous opportunity because of the installed base that we have there. So, I think we see that as a good opportunity going forward.
Okay. We'll move over to Andy. He's had his hand up for a while.
Andy Grobler from Credit Suisse. Just three if I may. One more on Brazil. You talked about the 3 million opt-ins that you have. Do you know how many opt-ins there have been in total in Brazil? So, what proportion have come to Experian?
Secondly, on Marketing. CCM is growing very quickly as email weakens. At what point do you think you'll get to the tipping point so that the growth in cross-channel marketing is dominating that division? And then thirdly, just on organic growth for fiscal 2017, you expect it to be second half-weighted against tougher comps. Why that expectation?
Okay. Kerry, you may know the specifics. We have more opt-ins in Brazil than anybody else combined actually. You'll give the specifics please?
Yeah. So because the information is shared at an industry trade group meeting, I don't want to speak out of turn. What I would tell you is that the only other entity that has collected and has talked about this is in the hundreds of thousands.
On the Marketing Services question then, we do see continued great progress in CCN. Growth rates are extremely high in that product and we are continuing to see some attrition in the email. I think that a lot of the attrition in email is down to some of the operational problems we've had in the past. We've spent a lot of time over the last 18 months fixing those. So, we believe that we're moving into a much better position at that business in this coming year.
I don't think that we can be exactly precise - as precise as you would want us to be in terms of when that will turn into overall growth at that portfolio level, but second half would be our target. Hopeful that we would get there. Still, there's a range of outcomes.
But what I can say is that we've done a lot in that Marketing Services portfolio, not just to position the other businesses for growth, also to exit some of the businesses which you've seen, really tightened that up and significantly improved operating performance. So we're in a much better position even though the growth is obviously not where we want it to be, and that's really our focus for the next year.
Yeah. We've seen the mix improve quite substantially this year. We've ended the year - over 20% of that email business is now the new platform versus the old platform, so that the weight of that mix will start to bear fruit, I think, as we maybe come into the second half and turn the year.
On organic growth, just traditionally, we have a strong close to the year. I think it's a fine point we might - let's say you had a 5% number for the year as a whole, we might be a little under that, 4.5% to 5% in the first half, 5% to 5.5% for the second half. It's a very fine point.
Thanks. It's Tom Sykes from Deutsche Bank. Just you mentioned the free option as capturing people that churned off Experian.com. Was just wondering if you could just remind us how long people are staying on Experian.com for and particularly, how quickly they may churn off once they make a major purchase like an auto or take out a mortgage?
And then just on the Affinity clients, are we right in thinking there was zero contribution to the Q4 organic in Consumer Services in the U.S. from the Affinity clients that you on-boarded in the previous quarter? And is there a pipeline at all that you can see of potential new Affinity clients that may provide that degree of one-off gain?
And then just finally on - you mentioned your wallet share gain. Is there any way you feel you may have been a little exceptional in terms of the wallet share gain in the last year that may not be able to be replicated at all, please?
Okay. Do you want to deal with the growth questions, and I'll go over retention?
Yes. So, the one-off element that was a contract where there was an on-boarding fee and then an ongoing fee. So, the piece that we've called out, it was just the on-boarding fee, so that that contract earns income and that's included in the 1% that we discussed for Q4.
The question of how long are people staying, I think our goal ultimately is to have people for the long term. And sometimes they'll be in Experian.com and then they'll go down to a free product or transact in between.
So, our end position is actually we have people for a lifetime. The people who just transact, who come in around a particular transaction might be on the Experian.com platform for two to three to four months, that sort of range. But our goal is to extend that with the introduction of the free platform and the ability for people to move up and down between.
Okay. Sorry, the average for how long people are staying on that at the moment, and is there any change in that?
There's been no change. It's been somewhere in that three- to five-month range.
Okay. Great. Thank you. And just on the wallet share, whether you think anything is exceptional at all.
I'll let Kerry address that. In my presentation, I referenced the fact that we'd made great progress in Credit Services North America and the UK this year. And a lot of that reflects the fact that we're doing extremely well with new business wins, but also client retentions.
And what's interesting is that some of the client retentions, we've had some very big renewals this year, not only have we maintained our position in those key prime clients that we've actually managed to extend the terms and increase the contract value. And that's additional capabilities and back to the One Experian thing we've talked - so it's real, live examples in practice today where when we can bring these capabilities together, we can actually do a lot better.
Kerry, do you want to comment a bit more?
Yeah. That's right. And in terms of just what's in that wallet share, those growth rates, it's fairly steady, so there's nothing lumpy in those numbers that would appear down the road.
And your final question, I think, was on Affinity.
It was just whether there were any other prospective on-boardings that may take place - that you can see a pipeline of potential [indiscernible].
Yeah. We've always got a pipeline in that Affinity product and we've talked a little bit about it the last year. The ones that actually land is always quite difficult to forecast. So, a decent pipeline, but the core financial institutions is still quite a challenging area. That's - one of the opportunities that we see with CSID is some of the broader membership affinity channels.
Okay. I think we've got time for one more question. And we have at the front here, we had a hand up for a long time. So - if you've still got your question.
Thank you, Brian. It's Joel Spungin from Merrill Lynch. Just got three quick ones actually. Just, first of all, on the U.S. business in particular with regards to the healthcare vertical which, obviously, grew very well in the past year. I was just wondering if you can give us a sense. There has been some speculation that that market is maturing. Over the medium term, do you think you can maintain the sort of double-digit growth rate you've been doing there or is that likely to come back? My first question.
Second one is with regards to the UK Credit business, which had a very strong end to the year. I was just wondering if you could elaborate whether there was any sort of one-off factors in the final quarter of the year or whether that is a rate that you expect to maintain over the next few quarters.
And then finally, just, again, on the Consumer business. Just from my understanding, when you talk about the 3 million of totally free members in the U.S., is this service that they're getting now and the data they're getting the same as a subscriber would get on Credit Karma? Is it an identical like-for-like product? And is it likely that the UK market will move the same way, i.e., it'll effectively give people access to their credit score for free and try and sort of sell them subscription products around that?
Well, we might deal with them in reverse order. Well, the UK has actually had a free proposition in marketplace for quite some time called Noddle, and actually they have quite a large membership base and have had really extending back over, probably starting four or five years. That hasn't impacted our growth in our business at all actually over that period.
So, there is the first piece of evidence that there is clearly a distinct possibility that the market can serve both free and paid-for. What we've seen is new entrants in that; so we've seen a lot more activity. And we do expect that the market will develop along that way. There will be some consumers who are only interested in a free proposition, and some consumers that are prepared to pay. And what they're prepared to pay for is a better value proposition.
If you look at some of where our brand positioning is going, what consumers really need is information that's relevant to them. And what's relevant to them is information that's actually used in credit decisions. And a lot of the feedback you get on - even in Credit Karma in the U.S., for example, would be - well it's interesting to see what the score is that I get on Credit Karma, but it doesn't mean anything to me in real life; hence the interest and understanding what the FICO score does for them in particular product propositions. So, your equivalent of your FICO score in the UK is the Experian score because our scores are used in more credit decisions than all of the rest put together.
So, that's real point of contact and education for the consumers which it enables us to build products and services around that in differentiation. So, yes, we believe that it is going to go in a similar way, but we do believe actually that the longer-term opportunity in both markets is actually substantially bigger than our subscription base. And some of that will be around the lead generation products that we would be introducing. And they will be slightly different to the lead generation products that are in the marketplace today. They'll be more targeted, more accurate and more relevant for consumers. And that's going to make a significant difference. And what we've talked about leveraging the portfolio of Experian and the power of our products and services in these areas, these are exactly the sort of things that we're doing. So, you're going to see that roll out.
And of course, the identity piece is very important. CSID will be an important addition to that. So, we see a whole range of information services for consumers that we'll use to build our propositions in these markets and actually also in Brazil. And we see opportunities elsewhere. I think probably anything to add on that, Kerry, or do you want to go back to the growth points?
I think you're right, UK Credit Services had a great year and a particularly strong finish to the year. So like all these things, it will hit those comps as we go through this year. There's clearly a fairly solid credit environment in the UK and some of the bundling innovations that we've got, but tougher comps. You might expect it to be a little lower in the year ahead. Health, we've got lots of opportunities outside of the businesses that we're in; Brian touched on one of those in his remarks, but we've got lots of others. So, we think innovation and some of the investments that we're putting into health will continue to drive that double-digit growth rate.
Okay. We're going to bring it to a close. Thanks, everybody, for attending and look forward to seeing you again soon.
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