Experian
Equity Market Cap (M) £25,220
Industrials
Nadia Ridout-Jamieson, Chief Communications Officer
The ever-expanding capabilities of AI, most recently the release of workflow plug-ins for Anthropic’s Large Language Model Claude, have led to some market concern that data and analytics businesses such as Experian may be disaggregated from their value chains.
Experian’s business is built largely around the credit bureau data model. In simple terms, individual lending institutions provide lending data to Experian, which aggregates and structures it with data from numerous other lenders before selling the wider dataset back to the lenders that contributed to it, allowing them to better evaluate the credit risk of borrowers. Whilst such data is not proprietary to Experian, it is to the lenders and is highly sensitive in nature, meaning it is non-public and heavily regulated, but absolutely essential to Experian’s customers.
Away from essential data, Experian also provides analytics and tools to its customers, mostly via its Ascend platform. Whilst recently released AI plug-in functionality does bear resemblance to such products, therefore presenting AI disruption risk, they currently do not possess the level of sophistication or specialisation required to be comparable, with features more focussed on workflow management rather than critical core business tasks. Nadia highlighted the typically high degree of integration for Ascend across customer business functions including origination, fraud and risk teams where the upheaval and disruption from changing core systems presents meaningful switching costs. Furthermore, the cost of mis-step, such as incorrectly pricing loans or underestimating risk is high, even for short periods of time or isolated incidences.
Nadia also added that with Ascend, customers have sought to evolve prior relationships from supplier-customer structures towards partnerships, with contract lengths increasingly moving from 3-5 years to 5-10 years.
GSK
Equity Market Cap (M) £88,446
Healthcare
Mick Readey and James Dodwell, Investor Relations Directors
As anyone who has been following the current US administration, and specifically Robert F Kennedy Jr’s tenure as the United States Secretary of Health and Human Services, in any detail will be aware, this has been a tough environment to be a major vaccine manufacturer. It was therefore here that we started our discussion. GSK admits the vaccine environment is chaotic, but it expects a rebound in easily preventable diseases to change public perception. Measles rates in Texas have seen a resurgence following declining rates of vaccine usage. Subsequent uptake has been better as the obvious benefits of vaccines are reaffirmed. Whilst a headwind to the business at the moment, the long-term benefits of vaccines remain clear and GSK remains a key player.
The team were keen to stress that headwinds in the vaccines business had been offset by much stronger performance in the specialty medicines business, which makes up roughly a third of revenue. The recently formed oncology business and the key HIV franchise have seen strong growth in recent years.
A big question that GSK faces is whether the expiry of patents from 2028 onwards in its profitable HIV franchise can be effectively offset by drugs in its pipeline. Another key area of disagreement is around a cancer drug called Blenrep. Blenrep has recently received approval, yet the approval was for a narrower patient group than initially expected and questions remain around the side effects of the drug, which include blurred vision. GSK were keen to stress that Blenrep’s sales potential remains larger than most expect, but many investors will need to see sales numbers before fully baking this into their expectations.
Halma
Equity Market Cap (M) £15,588
Information Technology
Marc Ronchetti, CEO, Carole Cran, CFO
Halma possesses an enviable track record of success in mergers and acquisitions, which extends over several decades. At first glance the acquisition strategy appears simple: acquire businesses operating in small but highly critical market niches that are cogs in a wider value chain, providing a platform for solid gross margins and compound growth.
Given this approach, it would be forgivable to assume that a well-resourced competitor could replicate such an approach with a reasonable degree of ease. Marc pointed to the key being in the finer details: targeting businesses that are founder-run and not for sale requires patience and the ability to foster strong relationships with founders. What is more such founders are typically more concerned about protecting their business legacy than maximising the sale price, making the Halma name and its 50-year history of acquiring and nurturing such businesses difficult to look past when the time to sell comes, a unique source of competitive advantage for Halma.
Strong operating performance for the group post-Covid has been reasonably broad-based, the standout however has been the photonics business within the Environmental & Analysis division, bought for just £14m in 2011. Key to this success has been a relationship with a hyperscaler using the technology in its datacentres. Marc highlighted limited forward visibility here, with a wide range of potential outcomes for this business dependent on how capital expenditure (capex) evolves over the coming decade. Given lofty market expectations for future growth here and the potential for hyperscaler capex growth to stall in the years to come, we remain mindful of the risks this situation presents given Halma’s current valuation.
FINANCIALSDeutsche Börse
Factset
Intercontinental Exchange
London Stock Exchange Group
S&P Global
HEALTH CAREGSK
INDUSTRIALSExperian
IMI
RELX
INFORMATION TECHNOLOGYHalma
MATERIALSCroda International
Givaudan
REAL ESTATELondonMetric Property
