Euromoney Institutional Investor — Strategy proving prescient

Euromoney Institutional Investor — Strategy proving prescient

Euromoney’s Q1 update demonstrates the value of management’s focus on Pricing, Data and Market Intelligence, where 9% growth has more than offset well-flagged weakness in Asset Management, down 4%. Full year guidance is unchanged, but we point out that our forecasts do not reflect December’s acquisitions of BoardEx and The Deal yet to complete. Management expects these to be earnings enhancing in their first year. Net cash at end December of £93.8m is prior to payment for these deals of $87.3m (£66.6m), leaving ample resource for further deals.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Euromoney Institutional Investor

Strategy proving prescient

AGM trading update

Media

1 February 2019

Price

1,266.00p

Market cap

£1382m

Net cash (£m) at 31 December 2018

93.8

Shares in issue

109.2m

Free float

50.8%

Code

ERM

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.5

(2.4)

5.1

Rel (local)

3.2

(0.4)

13.7

52-week high/low

1450.0p

1126.0p

Business description

Euromoney Institutional Investor is a global, multi-brand information business that provides critical data, price reporting, insight, analysis and must-attend events to financial services, commodities, telecoms and legal markets.

Next events

Interim results

16 May 2019

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Russell Pointon

+44 (0)20 3077 5700

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

Euromoney’s Q1 update demonstrates the value of management’s focus on Pricing, Data and Market Intelligence, where 9% growth has more than offset well-flagged weakness in Asset Management, down 4%. Full year guidance is unchanged, but we point out that our forecasts do not reflect December’s acquisitions of BoardEx and The Deal yet to complete. Management expects these to be earnings enhancing in their first year. Net cash at end December of £93.8m is prior to payment for these deals of $87.3m (£66.6m), leaving ample resource for further deals.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/17

428.4

106.5

76.4

30.6

16.6

2.4

09/18

414.1

109.2

81.3

32.4

15.6

2.6

09/19e

400.0

98.1

72.9

32.5

17.4

2.6

09/20e

412.0

103.6

76.9

34.2

16.5

2.7

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

Balance shifts further to pricing

Management has been clear on the attractions of being the authoritative voice in opaque and semi-opaque markets. ERM’s Fastmarkets brand is clearly gaining traction, with the news that it will set the reference prices of the LME’s three new cash-settled derivatives in aluminium, alumina and cobalt. Pricing, Data & Market Intelligence was 42% of FY18 group revenues, and is set to be markedly higher in FY19 given the premium growth over the rest of the group. The issues in Asset Management are well documented and the subscription revenue decline of 4% was in line with FY18 trends, but improved from the 6% decline in Q118. The product suite and cost base here were addressed in Q418, taking out £7m of annualised cost. The Events business, focused in earlier periods on fewer, larger events, has continued to perform well, with revenues up 3%. Although this is slower than FY18’s 7% growth, it is against tougher comparatives. The statement refers to advertising trends consistent with FY18 (down 5%), but this is now less than 10% of group total.

Cash resource remains strong

The growth in subscription and content revenues helps the already strong cash conversion characteristics of the group. The £98.3m end December cash figure is prior to the acquisitions referred to above (as is our current forecast end FY19 figure of £157.4m). With the committed RCF of £240m and uncommitted accordion of £130m, there is plenty of firepower for further acquisitions. The group has a clear preference for off-market deals of non-core assets within other groups rather than high-profile auctions where private equity interest inflates prices.

Valuation: Undeserved discount

Euromoney’s shares continue to trade at a notable discount to global financial data peers, currently valued at an CY19 EV/sales of 4.1x, EV/EBITDA of 17.4x and P/E of 22.6x. Given the resilience of the earnings, high level of subscription income and attractive cash conversion, this discrepancy appears to us to be excessive.

Exhibit 1: Financial summary

£m

2017

2018

2019e

2020e

Year end 30 September

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

428.4

414.1

400.0

412.0

Cost of Sales

0.0

0.0

0.0

0.0

Gross Profit

428.4

414.1

400.0

412.0

EBITDA

 

 

110.3

112.9

101.2

106.8

Operating Profit (before amort. and except.)

107.1

110.7

98.9

104.3

Intangible Amortisation

(20.8)

(22.7)

(24.0)

(24.0)

Exceptionals

(31.3)

81.4

0.0

0.0

Capital Appreciation Plan

0.0

0.0

0.0

0.0

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

55.1

169.4

74.9

80.3

Associates

3.3

1.1

0.0

0.0

Net Interest

(4.0)

(2.6)

(0.7)

(0.7)

Exceptional financials

(13.7)

(6.6)

0.0

0.0

Profit Before Tax (norm)

 

 

106.5

109.2

98.1

103.6

Profit Before Tax (FRS 3)

 

 

40.7

161.2

74.2

79.7

Tax

(19.8)

(21.6)

(19.6)

(20.7)

Profit After Tax (norm)

86.6

87.6

78.5

82.9

Profit After Tax (FRS 3)

37.3

109.7

54.6

59.0

Average Number of Shares Outstanding (m)

112.5

107.4

107.3

107.3

EPS - normalised (p)

 

 

76.4

81.3

72.9

76.9

EPS - (IFRS) (p)

 

 

18.1

129.8

50.7

54.8

Dividend per share (p)

30.6

32.4

32.5

34.2

EBITDA Margin (%)

25.8

27.3

25.3

25.9

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

25.0

26.7

24.7

25.3

BALANCE SHEET

Fixed Assets

 

 

648.8

615.6

553.8

528.9

Intangible Assets

594.0

588.2

533.8

509.3

Tangible Assets

24.4

23.1

15.7

15.3

Investments

30.4

4.3

4.3

4.3

Current Assets

 

 

127.8

165.7

230.1

283.8

Stocks

0.0

0.0

0.0

0.0

Debtors

64.5

68.3

68.0

72.1

Cash

4.4

78.3

157.4

207.0

Other

58.9

19.1

4.7

4.7

Current Liabilities

 

 

(267.5)

(245.3)

(252.1)

(265.3)

Creditors

(267.5)

(245.3)

(252.1)

(265.3)

Short term borrowings

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(212.3)

(42.4)

(57.9)

(57.9)

Long term borrowings

(168.9)

0.0

0.0

0.0

Other long term liabilities

(43.4)

(42.4)

(57.9)

(57.9)

Net Assets

 

 

296.8

493.6

473.9

489.6

CASH FLOW

Operating Cash Flow

 

 

118.2

108.6

103.9

107.3

Net Interest

(1.5)

(2.8)

0.1

0.1

Tax

(21.8)

(38.9)

(17.3)

(18.2)

Capex

(10.9)

(4.9)

(2.0)

(2.1)

Acquisitions/disposals

(99.9)

195.8

30.1

0.0

Equity Financing / Other

(193.0)

2.7

0.0

0.0

Dividends

(31.3)

(34.8)

(35.6)

(37.4)

Net Cash Flow

(240.2)

225.6

79.1

49.5

Opening net debt/(cash)

 

 

(83.8)

154.6

(78.3)

(157.4)

Redemption of pref

0.0

0.0

0.0

0.0

Other

1.8

0.0

0.0

0.0

Closing net debt/(cash)

 

 

154.6

(78.3)

(157.4)

(207.0)

Source: Euromoney Institutional Investor accounts, Edison Investment Research

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This report has been commissioned by Euromoney Institutional Investor and prepared and issued by Edison, in consideration of a fee payable by Euromoney Institutional Investor. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

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New Zealand

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. 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 (i.e. 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.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

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United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Euromoney Institutional Investor and prepared and issued by Edison, in consideration of a fee payable by Euromoney Institutional Investor. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Fluence Corporation — Delivering on a demanding target

An impressive Q4 (73% y-o-y organic revenue growth) saw Fluence deliver on its FY18 target. Demand for its higher-margin smart product solution (SPS) remains strong with revenues expected to ‘at least’ double y-o-y in FY19. Its target of EBITDA breakeven by Q419 is reaffirmed and our profit forecasts are largely unchanged. With $38m of net cash and growing evidence of execution, we believe investors can now focus on the long-term growth story.

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