Euromoney Institutional Investor — Update 30 September 2016

Euromoney Institutional Investor — Update 30 September 2016

Euromoney Institutional Investor

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Euromoney Institutional Investor

Pre-close trading update

Trading update

Media

30 September 2016

Price

1,100p

Market cap

£1,411m

US$1.30/£

Net cash (£m) at end September 2016

>80

Shares in issue

128.3m

Free float

32%

Code

ERM

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.9

18.1

17.0

Rel (local)

4.9

8.0

1.3

52-week high/low

1,207.00p

852.50p

Business description

Euromoney Institutional Investor (ERM) is an international business-to-business information and events group. Its portfolio of over 50 specialist businesses spans macroeconomic data, investment research, news and market analysis, industry forums and institutes, financial training and excellence awards.

Next events

Full year results

24 November 2016

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5700

Euromoney Institutional Investor is a research client of Edison Investment Research Limited

September is always a key month for Euromoney, and levels of uncertainty this year were exacerbated by the Brexit vote. Nevertheless, the pre-close trading update reassures that FY16 figures will be delivered broadly in line with market expectations, with PBT of “no less than £100m” and a closing net cash position of at least £80m. ERM’s valuation has returned to a small premium to other B2B media stocks, but remains at a discount to financial publishing groups and software companies in the financial vertical.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/14

406.6

116.2

70.6

23.0

15.6

2.1

09/15

403.4

107.8

70.1

23.4

15.7

2.1

09/16e

399.0

100.5

64.2

23.4

17.1

2.1

09/17e

405.0

103.0

65.8

23.4

16.7

2.1

09/18e

413.0

109.3

69.8

24.0

15.8

2.2

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Growth in higher quality earnings

Underlying Q4 constant currency revenues were down 5% in Q416. However, this gives a distorted picture of group performance. ERM withdrew from a number of less (and un-) profitable training courses and events in commodity sectors, and this is also reflected in a more substantial fall off in sponsorship and delegate revenues. More importantly, subscription revenues picked up further in Q4, +2% (+1% in Q3), in line with the scenario outlined by management earlier in 2016. Content and subscriptions, the highest quality element of revenues, accounted for 55% of group in FY15. Reported FY16 revenues are indicated to be down 1% (slightly better than our projection), with pre-tax profit of over £100m (Edison forecast was £100.9m), and closing net cash over £80m (Edison £84m). For the transition year, FY17e, we have slightly adjusted our estimates (profit and earnings -3%) and now publish our provisional FY18 figures, showing the margin benefits emerging more strongly.

Reporting segments more clearly aligned

The FY16 figures will be reported in November by four key markets and by activity within these markets, giving a far clearer picture of how the components contribute and simplifying modelling. Headline FY14 and FY15 figures have now been shown in the new format to give proper comparators. The largest segment is ‘Asset management’ (38.7% FY15 ongoing revenue; 43.5% adj. operating profit), followed by ‘Pricing, data and market intelligence’ (33.1%; 34.5%), then ‘Banking and finance’ (20.6%; 14.5%), with the balance in ‘Commodity events’ (7.6%; 7.5%).

Valuation: Moving on up

Apart from volatility around the time of the UK referendum, ERM’s shares have performed well over the last six months, gaining 22% as the market has gained confidence in the new CEO’s strategy. While still below levels of quoted financial publishing groups and specialist software companies, the valuation has moved back to a small premium to other quoted B2B media stocks, reflecting its quality and consistency of earnings (itself a reflection of its well-known brands), strong balance sheet and cash conversion.

Financial summary

Exhibit 1: Financial summary

£m

2014

2015

2016e

2017e

2018e

30-September

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

406.6

403.4

399.0

405.0

413.0

Cost of Sales

0.0

0.0

0.0

0.0

0.0

Gross Profit

406.6

403.4

399.0

405.0

413.0

EBITDA

 

 

122.7

109.4

102.3

104.8

111.1

Adjusted Operating Profit (before amort. and except.)

119.8

106.7

98.3

100.5

106.5

Intangible Amortisation

(16.7)

(17.0)

(17.8)

(17.8)

(17.8)

Exceptionals

2.6

33.4

(12.9)

0.0

0.0

Capital Appreciation Plan

(2.4)

2.5

0.0

0.0

0.0

Operating Profit before ass's & fin. except'ls

103.3

123.1

67.5

82.7

88.7

Associates

0.3

2.4

2.4

2.4

2.4

Net Interest

(1.6)

(1.3)

(0.1)

0.2

0.5

Exceptional financials

(0.6)

(0.9)

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

116.2

107.8

100.5

103.0

109.3

Profit Before Tax (FRS 3)

 

 

101.5

123.3

69.7

85.2

91.5

Tax

(25.6)

(17.6)

(19.1)

(19.6)

(20.8)

Profit After Tax (norm)

90.8

88.9

81.4

83.5

88.5

Profit After Tax (FRS 3)

75.9

108.2

50.7

65.6

70.7

Average Number of Shares Outstanding (m)

126.5

126.4

126.4

126.4

126.4

EPS - normalised fully diluted (p)

 

 

70.6

70.1

64.2

65.8

69.8

EPS - (IFRS) (p)

 

 

59.1

83.4

39.9

51.7

55.7

Dividend per share (p)

23.0

23.4

23.4

23.4

24.0

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

30.2

27.1

25.6

25.9

26.9

Operating Margin (before GW and except.) (%)

29.5

26.5

24.6

24.8

25.8

BALANCE SHEET

Fixed Assets

 

 

564.2

579.1

546.5

513.9

481.1

Intangible Assets

545.4

531.4

499.3

467.3

435.2

Tangible Assets

18.6

9.5

8.9

8.3

7.7

Investments

0.1

38.3

38.3

38.3

38.3

Current Assets

 

 

86.0

110.1

171.8

223.9

280.6

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

68.4

83.7

79.8

81.0

82.6

Cash

8.6

18.7

84.3

135.2

190.3

Other

9.1

7.7

7.7

7.7

7.7

Current Liabilities

 

 

(208.9)

(210.8)

(213.6)

(220.7)

(228.5)

Creditors

(208.4)

(209.8)

(213.1)

(220.2)

(228.0)

Short term borrowings

(0.5)

(1.0)

(0.5)

(0.5)

(0.5)

Long Term Liabilities

 

 

(84.7)

(33.2)

(45.2)

(43.4)

(43.4)

Long term borrowings

(45.7)

0.0

0.0

0.0

0.0

Other long term liabilities

(39.1)

(33.2)

(45.2)

(43.4)

(43.4)

Net Assets

 

 

356.5

445.2

459.5

473.7

489.9

CASH FLOW

Operating Cash Flow

 

 

110.2

109.5

102.2

100.5

106.5

Net Interest

(1.1)

(1.1)

0.1

0.4

0.6

Tax

(22.5)

(13.7)

(16.8)

(17.2)

(18.3)

Capex

(6.3)

9.4

(3.5)

(3.7)

(4.0)

Acquisitions/disposals

(58.9)

(15.6)

13.2

0.0

0.0

Equity Financing / Other

(21.5)

(4.4)

0.0

0.0

0.0

Dividends

(29.0)

(29.4)

(29.1)

(29.1)

(29.9)

Net Cash Flow

(29.3)

54.6

66.1

50.9

55.1

Opening net debt/(cash)

 

 

10.9

37.6

(17.7)

(83.8)

(134.7)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

Other

2.6

0.7

0.0

0.0

0.0

Closing net debt/(cash)

 

 

37.6

(17.7)

(83.8)

(134.7)

(189.8)

Source: Euromoney Institutional Investor accounts, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Euromoney Institutional Investor and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

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NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Euromoney Institutional Investor and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Entertainment One — Update 30 September 2016

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