Experian PLC

LSE:EXPN

Earnings Call Transcript 2021-Q1

[Operator]

Good morning, everyone, and thank you so much for joining to the Experian Q1 trading update call. My name is Greg, the operator on the call. [Operator Instructions] And now I would like to hand the call over to Brian Cassin. Sir, please go ahead.

[Brian J. Cassin, CEO & Executive Director]

Well, thank you very much. Good morning, everybody, and welcome to our Q1 trading update call. Really hope that you and all your families have stayed safe and well throughout this time. We've resumed this quarterly update call while the pandemic continues just to keep you as up to date as possible and give you as much transparency on the business and how we're coping during the current crisis. I'm here today with Lloyd Pitchford who will take you through the trading performance after my opening remarks. So we're very pleased with how Q1 turned out. It was better than we expected. Total revenue was down 1% at constant currency, and organic revenue growth was down 2%. North America was more than resilient and, in fact, delivered growth for the quarter as we benefit from countercyclical strength in mortgage and in consumer services. Brazil, too, was robust, growing into Q1. Results in these geographies drove the overall results, and we're very happy with that. That said, we did have weaker performance elsewhere in the group, and conditions obviously remain challenging. Operations continue to function very smoothly with a few minor exceptions. We're still largely operating on a remote basis, and the market is adapting to that new way of working. Engagement with clients has been very high, and we are actively launching new offers to help customers cope with the challenges created by the crisis. I'm also very pleased to report that we completed the acquisition of the German credit bureau in the quarter. And in June, we agreed the sale of our stake in Finicity to Mastercard, and this is the first significant liquidity event of our minority and venture investments program. So with that, let me touch on some of the Q1 highlights. We had a good result in North America. New lending volumes are still depressed due to tight constraints on credit criteria, but it's not a uniform picture across all lenders. Some, particularly those serving in commerce, have prospered during the crisis. And this has helped to offset some lower lending volumes elsewhere. Conversation is very much focused on how clients manage their existing portfolios particularly with respect to forbearance and payment deferral behaviors and the strong demand across areas of the portfolio like credit risk analysis and fraud. We continue to press forward with our innovation portfolio with good pipeline generation for Experian One, CrossCore 2.0. Sure Profile, our new synthetic ID offer, has also had a very strong market reception. Consumer Services was a standout performance at the quarter. We added subscribers to both credit education and identity monitoring. April, May and June, in fact, some of the highest -- saw some of the highest activation levels ever. We've also expanded our lead generation marketplace during the quarter. And we also added auto insurance to our marketplace offering, and this has had a very fast start and is already contributing to growth. Now moving over to Latin America. Brazil surprise on the upside. Consumer Services more than doubled in size in the quarter, which is frankly an astonishing performance in the teeth of the crisis. And I think this highlights more than anything the potential of the business we have built in consumer in Brazil over the last few years. We've also started to see uptake in positive data products, and it's this portfolio diversity which helps us withstand the weakening macro environment even as viral infection rates have increased in Brazil over the last weeks and months. And it illustrates the strength of our brand and our market position. Positive data portfolio is incredibly strong. The Serasa Score is hugely outperforming others in the market, and we've also secured new agreements for Ascend. In fact, despite the short-term headwinds, we are excited about growth opportunities to our new products, and we expect that all of these initiatives are going to help us to hold up quite well in the current climate and position us very strongly for the future. Moving to the U.K. It's been a tough quarter in the U.K. with a very depressed macro due to a very strict lockdown and tight client constraints on new lending. In the early phases, the market environment was characterized by rapid reductions in both credit demand and supply. That has started to change a bit with a rebound in consumer credit demand, but as yet, not matched on the supply side. We have seen a handful of new brands come back in to lend. There are stricter policies, and we're doing all that we can to help the market move forward. There are some bright spots. Affordability solutions are selling well. We've secured a marquee account for Experian Ascend. Our business -- credit business has been very resilient, and there is good demand for analytics. However, that's not yet sufficient to offset the declines we've seen in origination activity, and we're not anticipating imminent recovery in Consumer Services when the lending environment remains as it is. We're making good progress with the transformation of our U.K. business. We've done a lot of work to map out technology transformation. We simplified our organizational structure, and we've put in new measures to enhance service quality. Our ambition, obviously, looking beyond the current period, is to get the U.K. to the same level of performance as our other businesses with more profitable growth, and we believe that we're well down this path. And as we emerge from the crisis, we expect to drive innovation-led growth and generate new opportunities for in the long term in the U.K.Turning to EMEA and Asia Pacific. Our bureau markets in EMEA were affected as lockdowns were implemented. First in Italy and latterly, in South Africa. Markets like India have also been very hard hit. That said, we do see some clients positioning to take advantage of recovery, and there are opportunities, particularly in areas like collections.The good news is there's been a marked pickup in new business activity in some parts of Asia Pacific. And looking out to FY '22, we feel very encouraged. We saw more new business activity last quarter than we have done in the past 18 months. We've also signed some very large new contracts with PowerCurve Collections. And with that, I'll hand over to Lloyd for the financials.

[Lloyd M. Pitchford, CFO & Executive Director]

Thanks, Brian, and good morning, everyone. As you've seen, Q1 came in better than we'd anticipated, with total revenue decline at constant exchange rates of minus 1% and an organic revenue decline of 2%. Exchange rates were a 4% revenue headwind in the quarter mainly due to weakness in the Brazilian real. Total revenue declined at actual exchange rates by 5%. We delivered growth in North America and in Brazil, which was offset by weakness across our other regions. Consumer Services was up 8%, and B2B declined by 5%. Turning to the performance by region. You'll see that we've enhanced our normal reporting disclosure to provide the additional color on our revenue growth that we provided in May, and I hope you find that helpful. So let's start with North America, where organic revenue was up 4%, with B2B up 1% and Consumer Services up 10%. Data was up by 1%, with the core bureau continuing to show good levels of resilience. Mortgage refinancing volumes were very strong and more than offset the decline in card and loan volumes, and we continue to see good growth from Ascend. Overall, the core bureau -- consumer bureau grew by 6% in the quarter, including the positive contribution from the strength in mortgage volumes. And just to help scale this contribution, the strength in mortgage added around 2% to group growth during the quarter. So you can see it was a substantial tailwind. We saw a lot of volatility in automotive with volume recovery from the April lows, as incentives drove used car sales and consumer activity resumed, and auto was down 3% for the quarter as a whole. Our targeting business had a tough quarter, impacted by the reduction in advertising spend you'd expect across the retail sector. Decisioning was flat, with health delivering organic revenue growth of 1%. Core products, such as payments, identity and collection services have held up, but there continues to be a big backlog in elective procedures and lower transactional activity as a result. Decision Analytics was down modestly for the quarter. Double-digit growth in Consumer Services reflected strength in paid-for membership for credit education and identity monitoring services. Lead generation also performed well as expansion to the automotive insurance vertical helped offset the constriction in credit card and loan personal supply. It was a strong quarter for our audience generation with free membership growing to 33 million. Boost also added new accounts to take the total to over 4 million connections. Moving on to Latin America where revenue growth was down 1%, reflecting growth in Brazil, offset by a decline in Spanish Latin America. At constant exchange rates, total revenue was flat overall, including the revenue from the Sentinel Peru acquisition. After the impact of FX headwinds, revenue declined by 26%. B2B was down 5% organically while Consumer Services more than doubled, up 104%. Data declined by 4%, reflecting lower consumer bureau volumes, partially mitigated by relative resilience in business credit and our automotive vertical. Decisioning declined 9% with lower revenue in analytics and decisioning software. And as Brian mentioned, Consumer Services continues to make great progress, and we had a very strong quarter, driven by Limpa Nome debt resolution service as consumers are looking to renegotiate sustainable payment plans with credit providers. Our credit matching service, eCred, also delivered increased lead generation volumes, and we now serve over 46 million consumers in Brazil. Turning to the U.K., which saw a 15% decline in organic revenue, down 18% at actual rates. B2B and Consumer Services declined by 15% and 18%, respectively. Data was down 16% due to lower transaction volumes on the bureau and reduced demand for targeting data. Decisioning declined by 13%, impacted by slower software purchase decisions. And Consumer Services declined 18%, reflecting lower credit match marketplace and credit subscription revenues. Free membership, however, continued to grow and is now at around 8 million members. Moving on to EMEA and Asia Pacific where organic revenue declined by 20%, with data and Decisioning down 13% and 29%, respectively. Data was impacted early on by the COVID-19 lockdowns across most markets. As lockdowns eased, volume trends in our larger bureau markets have mainly improved with some signs of stabilization, particularly in EMEA. Decisioning has been impacted due to the challenges of remote sales and delivery and some delay in client investment decisions. And turning now to near-term trading expectations. As you'd expect, we continue to experience a high level of uncertainty as we look ahead, particularly around the potential for the reimposition of lockdowns and the variability of economic activity. Our current view is that organic revenue for Q2 will be in the range of flat to minus 5%. On costs, we continue to finally balance tight cost control with investment in organizational capacity to position ourselves well for the recovery. There's no change to our expectation that organic costs will be broadly flat for the half. FX also continues to be a headwind. And if current rates prevail, we now expect a 4% EBIT headwind for the full year.And finally, we've now completed the acquisition of Arvato risk management in Germany. And taken together with the smaller acquisitions annualizing from last year, we expect the acquisitions to add around 2% to revenue growth for the rest of the year. And with that, I'll hand you back to Brian.

[Brian J. Cassin, CEO & Executive Director]

Thanks, Lloyd. So to summarize, the backdrop to Q1 made it one of the toughest quarters we've ever had to trade through. But in the face of some extraordinary circumstances, we've been remarkably resilient. I'm more and more confident that we will emerge well from this with our market position enhanced and well-positioned for the future. We've identified a lot of new products specific to the current environment, and we're investing for the future, putting in place steps to ensure a good FY '22. And with that, let's open the line for your questions.

[Operator]

[Operator Instructions] And we have our first incoming question, and it is coming from the line of Paul Sullivan.

[Paul Daniel Alexander Sullivan, Director & Analyst]

Can you hear me?

[Brian J. Cassin, CEO & Executive Director]

Yes. We can hear you.

[Paul Daniel Alexander Sullivan, Director & Analyst]

Great. Fantastic. Just a couple from me. Firstly, I don't know if you could indulge us with the June exit rate. If I recall correctly, I think you said before the comp was tougher in June than April. So did you get back to growth? It seems like you did. And then, secondly, could you give us a bit more color on what you'd need to see from a sort of macro perspective to deliver either the upper or bottom end of the guidance range for the second quarter as flat, given the sort of improvement in volumes that you've alluded to, flat to be viewed as somewhat conservative. And what's your assumption on the contribution of mortgage and the U.S. consumer growth within that? Because that's -- clearly, they are the 2 sort of countercyclical areas that we're seeing. And then just finally, quickly, Joe Biden's public credit bureau comment, any comment there?

[Brian J. Cassin, CEO & Executive Director]

Okay. Thanks, Paul. I will hand over to Lloyd to see whether he's prepared to indulge you in the June exit rate in a second. I'll just give you a bit of color. I think as we -- we're very pleased with how we performed in Q1. That said, it's pretty difficult to forecast in an environment like this. Nobody thinks for a moment we're out of the woods yet. We are seeing some places in North America go back into lockdown, not least places like California, Texas and Florida, as we've seen. So I think there's just still a lot of uncertainty out there. We've been helped a lot by mortgage and Consumer Services, which has been terrific. I think it's difficult to predict exactly to what extent they will continue to contribute growth at the rate that they have done month-by-month. And so I think that gives you a little bit of color about some of the background to trying to forecast in this kind of environment. So I think we take all of that into account. And Lloyd, do you want to add?

[Lloyd M. Pitchford, CFO & Executive Director]

Yes. Sure. So why don't I start with the guidance for Q2. I think as you see in our numbers, we've got 3 particular tailwinds as we've come through this quarter. One is the consumer business in Brazil, in Latin America, and I think we expect that to continue. That's structural and result of all the investments that we've been making there. And then you move to North America, and you've got the really strong position in mortgage. It's strong, but variable. So if I look back over the last 30 days, on any individual day, mortgage has been up from a range of 30% to close to 80%. So you can see that it's strong, but it's quite variable. And clearly, as we look ahead, we have to form a range of scenarios for how long will that mortgage growth sustain and at what level. The other area is consumer. Again, we've seen a really strong inflow in credit subscriptions, which is a response to the current pandemic. So again, similarly, we've got a range of forecasts as we think about how long that will sustain for. So when we look at the range into the second quarter, we've got probably 3 things affecting it. The first is what is the level of restrictions in economic activities, so the degree of lockdowns. We're clearly watching the news as you are and seeing further restrictions placed in different parts of the world as we're seeing new outbreaks. And so the bottom end of our range, the minus 5% assumes that we see a reimposition of lockdowns across some key markets. Similarly, the bottom end of the range assumes that the high end of the mortgage and consumer strength that we've seen at times in the last month doesn't continue and it weakens. What you have to believe to get to 0? You have to think that the general upward trend in economic activity continues. We don't see the reimposition of lockdowns, and you see the high end of both mortgage and consumer into the second quarter. And that really -- that volatility we've seen and the expectation for what we're seeing in economic activity shapes the range, and that's why I don't really want to give a June exit rate because I don't think it's helpful in predicting where we would be in that range for Q2. You can clearly see that May and June together was stronger than April and conditions have generally improved.

[Brian J. Cassin, CEO & Executive Director]

Okay. And then just coming back on to Joe Biden comments. The first thing I'd say is we're in the middle of an election campaign and we always see proposals coming forward. There tends to be a lot of difference between what is touted and what actually gets implemented. By way of background, this is not a new proposal. We've seen this many, many times over the years, and we see it in lots of jurisdictions. Generally speaking, when people look at the detail, they realize that it's incredibly difficult to do, technically difficult to do and generally, most people sort of row back from these kinds of proposals. That's our experience. And they realized actually, backed up by many analysis, that the private credit bureau do a great job and they introduced a lot of innovations to the marketplace. So I think that's the context, really, around that Joe Biden point.

[Operator]

And we have a few other questions in the queue. The next one is coming from the line of Alexander Mees.

[Alexander Mees, Head of UK Small and Mid Cap Research]

Three, please. Firstly, just following up on your response to Paul's question, Lloyd. I just wonder if you can explain why U.S. mortgage share volumes are so variable from day to day. Just curious as to why that would be.Secondly, you've obviously seen some very good strength in credit subscriptions, credit education products in North America. Are you seeing anything like that in the U.K.?And lastly, I wonder if the remote working that you talked about, Brian, is affecting your ability to win new software projects at the moment and if there's that pent-up demand to come?

[Brian J. Cassin, CEO & Executive Director]

Well, let's -- let me deal with the last one first, because undoubtedly, the market for new business is softer for sure. And I don't think it has impacted our ability to win businesses there to be won. And actually, as I said, in some of the territories, we're seeing that sort of come through. We referenced the fact that we've signed some pretty major PowerCurve Collections contracts, which is not surprising considering the focus of people over the next sort of year or 2. So I don't think -- I think the market is adapting to it. I think we can get business done. We're engaging with clients, in some cases, actually engaging the clients even more than we did before lockdown. So I don't think that's impacted it per se. I think we obviously are seeing a softer environment because everybody faces the same uncertainty that we all face, and so that's the main factor that impacts things. I think on the -- going back to the credit subscriptions, there is a difference in consumer behavior between the 2 markets that we've seen, and I think that we will put this down to a couple of factors. First of all, U.S. consumers have behaved really entirely consistently with the way that they did post the financial crisis. We saw very significant growth in our credit education, credit subscription business back then. We're seeing the same now. I think that is linked to the fact that U.S. consumers are highly conscious of their credit profiles, their credit scores and so on. I think the second factor, and this is a -- it's less sort of evidence-based, but I think it's more a sort of our view as we look across the different trends is we don't see the same level of kind of urgent concern about that in the U.K. Could well be down to the furlough schemes and the fact that actually when you look at the macro trends, there isn't really much sort of income distress at this point. You've seen deposits in the U.K. grow very substantially if you look at the banking reports, and our data supports that. So I don't know whether the sort of concern about credit outlook has really hit home in the U.K. in the way it's hit home early in the U.S., and I think that does explain some of the early behavior. Now having said that, as we went through the quarter, we started to see much greater interest in our subscription products in the U.K. than we did in the early parts of that. So there's a possibility that could reverse. That's the best color we can give on that. And Lloyd, do you want to just talk about...

[Lloyd M. Pitchford, CFO & Executive Director]

Yes, on mortgage. I think in some respects, mortgage isn't that different from some of the volatility we're seeing in our other volumes. So to give an equivalent number on auto on days in the first quarter, we were -- we saw volumes down 60-plus percent. On other days, we saw them up 20-plus percent. So I think just the nature of the current environment we're in means that there's quite a bit of volatility on daily flows. And clearly, as we're thinking about outlooks, we're just mindful of that, and being able to forecast is a little more difficult than normal.

[Brian J. Cassin, CEO & Executive Director]

Yes. And just one point to add to that. I think mortgage refinance has obviously been a big part of driving that spike. And mortgage refinance is not a sort of smooth, linear progression. It depends when original loans were taken out, and it depends when they come up for the end of their contract. And that tends to be lumpy. I think that's one of the reasons why you see some of the volatility.

[Operator]

And the next question is coming from the line of Rory McKenzie.

[Rory Edward McKenzie, European Support Services Analyst]

It's Rory here. Just a follow-up with 2 questions on the Consumer Services business. Obviously, you talked about the really good consumer engagement overall. I think your global membership numbers are up kind of 40% year-over-year. I want to ask about linking that to the revenue forecast, which obviously is kind of plus 8%. So firstly, on the subscription numbers. Can you give more detail about how much that grew? And also should we expect a higher churn in that as maybe some of these newer members maybe kind of -- I guess, the attrition as maybe their conditions normalize? And then, secondly, on the lead generation side. Again, what's been the performance there as lenders, I guess, kind of pulled back initially and then maybe returned more in the U.S. more recently?

[Lloyd M. Pitchford, CFO & Executive Director]

Okay. So if you take the direct-to-consumer piece of our North America business, we've said over the last few quarters that's been growing really strongly in the kind of 15% to 20% range. And if you drill down below that, we saw double-digit growth in our core credit education revenue in the quarter and very strong growth in identity protection. So that was over -- up over 40%. So we continue to see that grow strong. I think exactly how that translates into forecast for churn. We often find you have to wait a little to see a new cohort of members that are coming in for a particular reason. You have to wait a little bit to see exactly how that affects the churn statistics. So one of the questions, for example, is how much of this new member is related to the mortgage transaction volumes that we're seeing in the market? We often see new members associated with that, and how much are generally trying to improve their financial position? So I think we probably would expect a little bit of additional churn on this membership. But clearly, subscription volumes tend to stay with you for a little while.

[Brian J. Cassin, CEO & Executive Director]

What was the second part of your question, Rory?

[Rory Edward McKenzie, European Support Services Analyst]

On the lead generation.

[Brian J. Cassin, CEO & Executive Director]

Yes. So maybe I'll just add a bit of color to that. We definitely did have seen a significant change in the lead generation market. No surprise, that's a lot of -- a lot of products have been withdrawn from the market. I think we saw that more aggressively in the U.K. than we did in the U.S. There are still offers out there. Our business has, as you know, been growing very strongly. We haven't been impacted as much as others. In fact, I think our lead generation still grew in the U.S. And I think that's just down to the fact that we are still sort of growing that business. And as we said before on this, we -- the quality of offers that people get off our platform is generally perceived to be very high, and so we've been one of the last platforms that people pull product for. So we still have a reasonable panel of products on there. And of course, as we also said last time, demand for credit in the U.S. remains high. Some of the search trends for credit remain elevated versus the year-on-year. So you still have a lot of demand for credit, and you have restricted supply. And so where products are available on our platform, we're seeing good demand for that. We're seeing good execution.

[Lloyd M. Pitchford, CFO & Executive Director]

And we talked about the addition of auto insurance vertical this quarter as well, which is contributing towards growth. And that's a continuation of our -- of the strategy we've talked to you about to add new outlets for our other markets and our other data through the direct-to-consumer channel. So we've got a what we think is a pretty powerful distribution platform now for other use cases for our other data.

[Rory Edward McKenzie, European Support Services Analyst]

Yes. So just one follow-up. I mean how sticky do you think some of the changes in that panel could be? Obviously, we're seeing peers cut and pull back from the market, whereas you've clearly continue to invest. And there are some strong indicators out there like up download share is increasing. So do you think this changes your kind of midterm market share aspirations in the U.S. market?

[Brian J. Cassin, CEO & Executive Director]

Yes. Absolutely. I mean we are -- I think we're the only platform in the market that's actually doing well right now. And we are taking share, obviously, and we continue to remain very bullish about our prospects there.

[Operator]

And the next question is coming from the line of George Gregory.

[George Nicholas Gregory, Research Analyst]

Firstly, just on Boost. You flagged that you've now got 4 million accounts connected. Now that quite a big step-up versus the 3 million you reported just a couple of months ago. Is that also being driven by the mortgage activity? Was it specific to marketing or other seasonality? Just interested in how you see the trajectory for your Boost accounts. And secondly, I know we've talked around the subject already, but regarding your core U.S. credit report volumes. Have you seen any softening recently given the localized reintroduction of lockdowns that you referenced? Or is that something that you see more as a risk factor? And finally, you referenced, Brian, an encouraging outlook for your EMEA/APAC business into fiscal '22. Just wondered if you could elaborate on why that confidence was specific to next year and the lead time on that growth improvement, please?

[Brian J. Cassin, CEO & Executive Director]

Sure. Okay. I'll touch on all 3 of these and then ask Lloyd to add his perspectives. Boost -- I think Boost is one of those products where we almost launched at a perfect time, which is just over a year ago. So it's had enough time to gain market consciousness. And of course, at a time like this, when people are particularly concerned about having the best credit profile that they can, I think that heightens the interest in a product like Boost, which can give real benefit to people that they can perhaps see more clearly now than maybe it was a bit more difficult to see that when times are buoyant. So I just think you're seeing that -- really, that reflection, that pickup is a function of the length of time the product has been in market and the change in circumstances in the backdrop, which heightens interest in the product. I think on the core U.S. credit volumes, some of these territories have just recently gone into lockdown, and California was this week. So it's too early, and it also depends how long the lockdowns last for. So can't really -- we can't really sort of say there's any direct impact as of yet. And then on the EMEA/APAC one. The reason for the FY '22 outlook on that is because of the length of time that it takes for these contracts, particularly collections, which are quite long delivery times, where we get to recognize the revenue. And it's a -- and as more of your pipeline shifts to those kind of contracts, you tend to get it either back-end loaded or actually providing profile into next year. Lloyd, do you want to add any color on that?

[Lloyd M. Pitchford, CFO & Executive Director]

No. I think that covers it. Probably the second one, just on the credit report volumes. Across most markets -- probably with the exception of India, across most markets, the peak decline was in the first half of April. And volatility day-to-day, but a generally improving trend. But we're just mindful of the news flow. So hopefully, call that out pretty clearly in the scenarios for the top and the bottom end of our guidance range.

[Operator]

And the next question is coming from the line of Rajesh Kumar.

[Rajesh Kumar, Analyst]

Just when you look at the main discussions you're having with your customers, what are the main pain points? What are they asking you for in terms of consultancy, in terms of health? Or is it too early in the pandemic to know exactly what are the new things they are interested in? And the second one is on Brazil positive data. Could you give us an update on how that is progressing? Or if that is moving ahead at all, given the state of lockdown?

[Brian J. Cassin, CEO & Executive Director]

Yes. On positive data, was that, Rajesh?

[Rajesh Kumar, Analyst]

Yes.

[Brian J. Cassin, CEO & Executive Director]

Yes. It is progressing. I think I referenced that in my script. We are seeing good interest in that. We're seeing -- we're selling products. So we are seeing that pick up in the marketplace. I think, obviously, we would have seen it pick up much more rapidly, I think, if we hadn't gone to COVID. But I think what we've seen so far gives us great confidence that our expectations that this is going to be a real driver over the next few years is correct. So yes, we're seeing progress. Obviously, not as much as we would have done outside of COVID, but we move forward. I got -- we referenced all the things that the clients are interested in. They're intensely interested in looking at how their portfolios are performing, so that drives demand for analytics. It also drives demand for further down the line sort of how do they deal with customers that -- where credit visibility has dropped, for example, because some information is not on the file; what's going to happen when the furlough schemes end in the U.K., for example. So all of those conversations about how do you deal with the new environment, and that cuts across for lots of different products. So still very much in the early stages because I think everybody is still thinking this through, but those are the kind of things that are exercising people. I think just back on Brazil, Rajesh, in a positive data environment, you can see the potential for the direct-to-consumer business that we're developing there. We're pretty thrilled with the progress that we're making. We've been investing behind it now for a number of years, and a firm confidence that over the next few years we can build this into a pretty material business with a positive data environment as a backdrop.

[Operator]

The next one is coming in from the line of Anvesh Agrawal.

[Anvesh Agrawal, Equity Analyst]

I got a couple of questions. First, just on the health business, and it sort of remained resilient throughout the quarter. And one of the comment you made at the time of, I think, full year result was this is not so much dependent on the collections and it is much more contracted. So as we sort of look forward, is that probably right to think that this business probably remains stable but remains stable at a lower level and probably it's hard to grow that business meaningfully, at least in FY sort of '21? And then second is on the cost side. I know you've guided to 1H costs being flat. But in an environment where the growth sort of remains in flat to, let's say, down low single-digit for the entire year, do you have some levers to pull in the second half? Or you sort of expect the cost to remain flat in that sort of environment as well?

[Brian J. Cassin, CEO & Executive Director]

So let me deal with the health business first. I think you referenced collections. I think, actually, what we said was that during the COVID crisis, we are seeing lower admissions to -- for hospital, for normal hospital treatments, and that's sort of continued. Notwithstanding that, the business has continued to perform well. It's actually slightly improved, I think, since we reported to you last. We did expect the health business should grow this year. As you said, it will grow at a lower rate than we are used to, but we do think that's a temporary thing. We don't think that that's -- obviously, that trend will reverse at some point. So we still remain in a very good position there.On the cost side, I think we've been very clear about our stance on costs. We have lots of levers to pull on costs. It's a question of judgment as to how much we need to do at any particular point in time. We've managed the expense base very carefully to this point. We are very mindful that we want to retain the organization capacity as much as we can. But I think a lot of it depends really on how we see the outlook from here. We're trading well so far. So we keep that under constant review. Anything you want to add on that?

[Lloyd M. Pitchford, CFO & Executive Director]

No. We gave a pretty clear framework with May results. And you can see that in the near term, only a small portion is variable with volume, and flat cost for the first half, we think, is a good place, and then we'll pick up the second half as we see the market scenario firm.

[Operator]

And we have no more questions in the queue.

[Brian J. Cassin, CEO & Executive Director]

Okay. Well, thanks, everybody, for joining today. I hope we all stay safe and look forward to speaking to you again in November for our interim results. Thank you very much.