COVID-19 potential impact

Euromoney Institutional Investor 13 March 2020 Update
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Euromoney Institutional Investor

COVID-19 potential impact

Trading update

Media

13 March 2020

Price

869p

Market cap

£949m

$1.30/£

Net cash (£m) at 28 February 2020

12.2

Shares in issue

109.2m

Free float

99%

Code

ERM

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(28.4)

(30.9)

(28.4)

Rel (local)

2.0

(5.3)

(4.6)

52-week high/low

1,498p

869p

Business description

Euromoney Institutional Investor is a global, multi-brand information business that provides critical data, price reporting, insight and analysis to global and specialist markets.

Next events

Interim results

21 May 2020

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 has outlined the impact to date of Coronavirus COVID-19 on its events business and listed its short-term schedule that may be subject to postponement or cancellation. June is a large month for the group’s events and decisions are yet to be taken about these. Our revised model takes the view that these events do not proceed, but that those scheduled for September do. We have assumed a small residual impact in FY21 as the programme is reconfigured. This group’s share price continues to sit at a marked discount to peers, reflecting the uncertainty associated with the strategic review, despite the intrinsically strong business model.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/18

390.3

99.9

73.6

32.5

11.8

3.7

09/19

401.7

104.6

77.7

33.1

11.2

3.8

09/20e

369.5

75.0

55.5

33.1

15.7

3.8

09/21e

418.0

104.0

77.1

33.1

11.3

3.8

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

Adjustments to forecasts

We have reduced our FY20 forecast revenue by £46m, reflecting the £6m of business already foregone or postponed, the £12m due for April and May, and £28m scheduled for June. This may well prove overly pessimistic, as some events may be suitable for virtualisation; some may be sufficiently local or regional to proceed. Others may be rescheduled within the group’s financial year, subject to customers’ feedback and venue availability. The situation is obviously very fluid and there should be greater clarity by May’s interims. We have trimmed £10m from our FY21 revenue to reflect that there may be a knock-on effect if events are pushed into a period with a duplicate scheduled. The impact at profit level is mitigated by some cost savings such as pay and hiring freezes, reduced travel costs and lower non-critical capital expenditure. Our FY20e PBT number reduces by £30m to £75m. The proportion of subscriptions in the group’s revenue mix (60% in FY19) rises to 70% under our modelled scenario for FY20e.

Resilient balance sheet

The group had £12.2m net cash at end February and has unutilised committed facilities of £240m. We now expect the group to have just over £40m of net debt at the September year-end (was £11m), but to return to a net cash position the following year. The result of the strategic review of the Asset Management segment could change this position significantly.

Valuation: Remains deeply discounted

Euromoney’s share price is c 40% below highs of around £15 prior to the strategic review announced in September. It now stands at a discount of around 33% to peers across EV/EBITDA and P/E metrics (although not all forecasts are yet adjusted for the COVID-19 impact), reflecting the uncertainty associated with the current business environment as well as the strategic review, despite the intrinsically strong business model.

Exhibit 1: Financial summary

£m

2018

2019

2020e

2021e

30-September

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

390.3

401.7

369.5

418.0

Cost of Sales

(63.5)

(60.0)

(55.4)

(62.7)

Gross Profit

326.8

341.7

314.1

355.3

EBITDA

 

 

105.0

108.2

83.5

114.5

Operating Profit (before amort. and except.)

 

 

101.6

105.4

77.5

106.9

Intangible Amortisation

(22.7)

(25.1)

(25.6)

(25.6)

Exceptionals

81.4

0.0

0.0

0.0

Capital Appreciation Plan

0.0

0.0

0.0

0.0

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

160.3

80.3

51.9

81.3

Associates

0.1

(0.1)

0.0

0.0

Net Interest

(1.8)

(0.7)

(2.5)

(2.9)

Exceptional financials

(6.6)

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

99.9

104.6

75.0

104.0

Profit Before Tax (FRS 3)

 

 

152.0

79.5

49.4

78.4

Tax

(20.6)

(20.8)

(15.0)

(20.8)

Profit After Tax (norm)

79.3

83.8

60.0

83.2

Profit After Tax (FRS 3)

102.5

58.7

34.4

57.6

Average Number of Shares Outstanding (m)

107.4

107.6

107.6

107.6

EPS - normalised (p)

 

 

73.6

77.7

55.5

77.1

EPS - (IFRS) (p)

 

 

122.2

54.4

31.8

53.4

Dividend per share (p)

32.5

33.1

33.6

33.1

EBITDA Margin (%)

26.9

26.9

22.6

27.4

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

26.0

26.3

21.0

25.6

BALANCE SHEET

Fixed Assets

 

 

616.5

433.9

430.6

404.3

Intangible Assets

588.2

405.4

401.1

379.6

Tangible Assets

24.0

23.2

24.2

19.4

Investments

4.3

5.3

5.3

5.3

Current Assets

 

 

165.7

397.4

383.3

442.9

Stocks

0.0

0.0

0.0

0.0

Debtors

68.3

49.0

55.4

62.7

Cash

78.3

50.1

31.0

83.3

Other

19.1

298.4

296.9

296.9

Current Liabilities

 

 

(262.2)

(273.2)

(205.8)

(222.5)

Creditors

(262.2)

(273.2)

(205.8)

(222.5)

Short term borrowings

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(41.4)

(31.7)

(191.6)

(120.4)

Long term borrowings

0.0

0.0

(71.2)

(71.2)

Other long term liabilities

(41.4)

(31.7)

(120.4)

(49.2)

Net Assets

 

 

478.6

526.4

416.5

504.3

CASH FLOW

Operating Cash Flow

 

 

108.6

92.4

75.7

118.3

Net Interest

(2.8)

(0.2)

0.1

(0.4)

Tax

(38.9)

(38.4)

(32.2)

(18.3)

Capex

(4.9)

(10.0)

(10.0)

(10.9)

Acquisitions/disposals

195.8

(48.4)

(15.8)

0.0

Equity Financing/Other

2.7

11.9

0.0

0.0

Dividends

(34.2)

(35.8)

(36.8)

(36.3)

Net Cash Flow

226.2

(28.5)

(19.1)

52.3

Opening net debt/(cash)

 

 

154.6

(78.3)

(50.1)

40.2

Redemption of pref

0.0

0.0

0.0

0.0

Other

0.0

0.3

(71.2)

0.0

Closing net debt/(cash)

 

 

(78.3)

(50.1)

40.2

(12.1)

Source: Company accounts, Edison Investment Research


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 research department of Edison 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 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison 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.

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.

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

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

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 research department of Edison 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 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison 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.

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.

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

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

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