Scrutineer: The cost-cuts crunch
IF YOU were going to use a company as a touchstone for sentiment in the financial services industry, you could do worse than Experian. It is little surprise that the credit information business's shares have slumped about 40 per cent in the past year.
Northern Rock, bank liquidity problems and the credit crunch have entered the DNA of contemporary society.
As the news in the sector has been almost uniformly bad since last summer, Experian's stock market problems are understandable.
However, there was better news from the company yesterday.
Experian came in a little ahead of City forecasts with a 15 per cent rise in full-year profits to 945m.
As important for the City, the group announced a cost-cutting programme to address the negative knock-on effect of banks retrenching in loans and credit cards.
If you are a business running credit checks for financial institutions, and those institutions are cutting back on lending credit generally, you are bound to feel the cold wind blow yourself.
Chief executive Don Robert confirmed what we all know, that the squeeze in financial markets is now turning into an unpleasant time for consumers.
From job security to getting a mortgage, the man in the street is now under the cosh.
Experian should know. It has data on 40 million customers in Britain and 220 million in the United States, the latter the subprime station from where the runaway financial panic train set off.
Robert says: "The action seems to be moving from Wall Street to Main Street, from the capital markets to the consumer. The climate is decidedly cautious."
Experian has few arrows in its quiver to respond with other than a compensating look at overheads and possible asset sales.
The group had announced plans to reduce the cost-base by 80m in January. It has now raised that target by more than a third to 110m.
Nearly half will be cut between now and spring 2009.
Part of the plan is to relocate most of the company's business offshore as well as the old restructuring standby of integrating IT support functions. One-off restructuring costs will total 140m.
Analysts believe the most likely businesses to be sold are the shopping comparison website PriceGrabber and the French transaction processing arm.
Together they have a book value, stripping out any goodwill for brand and reputation, of between 600m and 700m.
The news on both trading and costcutting did not have a major impact on Experian's share price yesterday, the stock closing just off after earlier edging up a couple of pence, following on from the shares' partial recovery since March.
The company is not out of the woods. But at least the cost-cutting will be seen as addressing the threat to revenue in the current climate.
Another positive is that profit margins remain healthy at 21 per cent, with emerging markets helping to take up the slack from the challenges in Britain.
Experian's star will only really rise again when the macro climate for credit improves. Until then it will be in reactive rather than proactive mode, and the share price is likely to follow suit.
It thereby ends the horticultural stand-off where the Scottish magnate was frustrating the supermaket's plans for expansion of Dobbies with his 29 per cent minority shareholding.
Hunter's West Coast Capital has accepted an offer of 1,200p a share – 300p a share lower than the 1,500p a share Tesco paid for its 65.5 per cent holding less than a year ago and the 1,750p a share Hunter paid for a 10 per cent stake last June.
Given that Hunter is believed to have also bought some of his stake at an earlier stage at about seven and eight pounds a share, the waters are a little muddied on whether he has made a loss.
The balance of probabilities must be yes, but given his personal wealth it will not be of the magnitude to have him fretting.
Dobbies' management, meanwhile, will probably just be relieved that the unwelcome distraction of an irresistible force, Tesco, meeting an immovable object, Hunter, has been removed.