As indicated in the year-end trading update, FY19 figures were ahead of expectations, with continued good progress in Pricing, Data and Market Intelligence (PDMI), where the Fastmarkets brand is gaining traction. There was no new news on Asset Management, now accounted as discontinued. £50m of net cash at the year-end allows plenty of scope for investment and M&A towards the goal of a fully ‘3.0’ business model, embedded in its clients’ workflows. The $20.4m purchase of Wealth–X clearly fits with this. Recent share price weakness has opened up a notable discount to global B2B information peers.
Euromoney Institutional Investor |
Awaiting Asset Management resolution |
Full year results |
Media |
27 November 2019 |
Share price performance
Business description
Next events
Analysts
Euromoney Institutional Investor is a research client of Edison Investment Research Limited |
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As indicated in the year-end trading update, FY19 figures were ahead of expectations, with continued good progress in Pricing, Data and Market Intelligence (PDMI), where the Fastmarkets brand is gaining traction. There was no new news on Asset Management, now accounted as discontinued. £50m of net cash at the year-end allows plenty of scope for investment and M&A towards the goal of a fully ‘3.0’ business model, embedded in its clients’ workflows. The $20.4m purchase of Wealth–X clearly fits with this. Recent share price weakness has opened up a notable discount to global B2B information peers.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/18 |
390.3 |
99.9 |
73.6 |
32.5 |
16.7 |
2.6 |
09/19 |
401.7 |
104.6 |
77.7 |
33.1 |
15.8 |
2.7 |
09/20e |
415.5 |
105.0 |
77.8 |
33.7 |
15.8 |
2.7 |
09/21e |
428.0 |
111.0 |
82.3 |
35.0 |
14.9 |
2.8 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Flat revenue, improving margin
FY19 flat underlying revenues reflect the mix between good performance in PDMI (up 4%) and continued weakness in Asset Management (-4%), with some softness in the smaller Banking & Finance segment (-1%). Subscriptions income was 60% of group revenues, with Events now at 31% and Advertising/other reduced to the 9% balance. Underlying PBT, though, was up by 9%, again with PDMI leading the way, with 5% adjusted operating profit growth. PDMI adjusted operating margin dipped slightly from 36% to 35% due to acquisition mix changes. For Asset Management, adjusted operating margin picked up from 41% to 43% as restructuring savings fed through. Group operating cash conversion at 98% remains very strong, with only modest capex requirements within the business (£10m in FY19), with further investment expensed at the operating level.
M&A timing and directional sensitivities
Asset Management remains in our forecasts until the position is resolved, with disposal not dependent on acquisition. Assets in the pricing space are particularly attractive but securing them in a competitive landscape is not easy and other 3.0 B2B opportunities, like Wealth-X, may take precedence. It fits well with BoardEx, bought last year. With Asset Management stripped out, subscription income dips to 48% of group revenues, with Events rising to 41%. Reporting segments are to be realigned from FY20, with Pricing to be standalone and the remaining elements of PDMI to join with Banking & Finance in a new Data & Market Intelligence segment.
Valuation: Discount opened up
Global B2B information peers’ shares have performed well over 2019 to date, climbing on average by 31%, while Euromoney has come back from around £15 prior to the announcement of the strategic review in September. Its shares are now at a discount of around 25% to peers across EV/EBITDA and P/E metrics, more reflecting the uncertainty associated with the business review, despite the intrinsically strong business model.
Trading and IFRS 16 adjustments
We have made adjustments to our forecasts, based on these results, but also now incorporating IFRS 16 for FY20 and FY21 and Wealth-X for ten months of FY20 and a full year for FY21. Broadly, the impact of IFRS16 is to increase EBITDA by around £2m and add £1m to the interest line. In terms of the balance sheet, the leases now shown as debt amount to £71.2m. Visually, this has a substantial impact on the forecast net debt for end FY20, which we now model at £10m (post the Wealth-X purchase), rather than £106m net cash, as before. Bank covenants continue to reflect the non-IFRS 16 position, as standard.
Exhibit 1: Forecast changes
Year end |
Normalised EPS (p) |
Normalised PBT (£m) |
EBITDA (£m) |
||||||
September |
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
FY19 |
73.5 |
77.7 |
+6 |
99.0 |
104.6 |
+6 |
102.2 |
108.2 |
+6 |
FY20e |
77.9 |
77.8 |
u/c |
105.0 |
105.0 |
u/c |
108.2 |
113.5 |
+5 |
FY21e |
87.1 |
82.3 |
-6 |
117.3 |
111.0 |
-5 |
120.7 |
121.6 |
+1 |
Source: Euromoney Institutional Investor accounts, Edison Investment Research. Note: FY19 ‘old’=reported.
FY20e numbers take account of a large event, ABS East, being rescheduled from September to October to lessen the potential impact of the Florida hurricane season and the closing down of CIE in Australia. With the Wealth-X contribution now included in the figures, the implication is therefore that we are taking a slightly more cautious stance on the prospects for FY21e than when we made our first projections earlier in the year.
M&A includes disposals
Management’s strategy remains one of continuing recycling of capital to align the group with its 3.0 objectives and the last three years have seen a considerable realignment of the portfolio. The strategic review of the Asset Management segment, though, is on a different scale, as this segment accounted for 36% of FY19 group revenue and 43% of operating profit. Exhibit 3, below, shows how the blend of revenue by type changes in the context of a full disposal. Pre-central costs, a full disposal would reduce operating margins from 36.0% to 32.3%. However, at this stage, it is not possible to model how much those central costs (£36.7m in FY19) would reduce on a disposal.
The segment consists of three assets: Institutional Investor, BCA and Ned Davis Research; and it may happen that any disposal is conducted by stages rather than all together.
|
Exhibit 2: FY19 revenue by type including Asset Management |
Exhibit 3: FY19 revenue by type excluding Asset Management |
|
|
|
Source: Euromoney Institutional Investor accounts |
Source: Euromoney Institutional Investor accounts |
|
Exhibit 2: FY19 revenue by type including Asset Management |
|
|
Source: Euromoney Institutional Investor accounts |
|
Exhibit 3: FY19 revenue by type excluding Asset Management |
|
|
Source: Euromoney Institutional Investor accounts |
The acquisition of Wealth-X brings a complementary revenue stream to BoardEx, as a provider of data-driven intelligence on the world’s wealthiest individuals, used for business development and Know Your Client activities. Its proprietary database is embedded in the workflow of banks, wealth managers, luxury brands and non-profit customers. The purchase, for $20.4m, is at 1.6x FY19 revenue and 25.6x FY19 EBITDA, expected to fall below 12x FY20 EBITDA. Revenue has been growing at a CAGR of 13% for the three years to December 2019. We have assumed a small moderation of this rate of growth and included it for ten months of FY20.
New segmental split proposed
The reporting segments now stand as Asset Management, PDMI and Banking & Finance. Pricing has become an increasingly important element of PDMI, although the extent was not previously disclosed. The Fastmarkets brand grew well in FY19, with revenues ahead by 10%, and has been building traction, which can only be helped by the LME decision to use it for the benchmarking of lithium contracts. Along with the Commodity Events of GlobalGrain and the Coaltrans conferences, it will now constitute the new Pricing reporting segment.
The remaining group businesses will join with the previous Banking & Finance segment to form the Data & Market Intelligence segment (DMI), made up of two parts: Telecoms; and Financial & Professional Services.
|
Exhibit 4: New segments by FY19 revenue |
Exhibit 5: FY19 revenue excluding Asset Management |
|
|
|
Source: Euromoney Institutional Investor accounts |
Source: Euromoney Institutional Investor accounts |
|
Exhibit 4: New segments by FY19 revenue |
|
|
Source: Euromoney Institutional Investor accounts |
|
Exhibit 5: FY19 revenue excluding Asset Management |
|
|
Source: Euromoney Institutional Investor accounts |
Pricing’s revenues are predominantly subscription at 77%, with 17% from Events and 6% from Advertising and Other, while DMI will be more heavily skewed to Events. These represent 55% of its FY19 revenues, with 32% coming from subscriptions and the balancing 13% from Advertising/ Other.
Of course, additional new assets that come into the group as the proceeds from any Asset Management disposal are spent and existing facilities deployed may change the picture considerably. Group management is confident that the acquisition pipeline is healthy, with a good number of projects at various stages. The group carries minimal debt (bar the leases now categorised as such under IFRS 16) and has an undrawn committed revolving credit facility of £240m (and an uncommitted £130m accordion). It therefore has the potential to do a substantial deal or a number of smaller deals.
Uncertainty in the price
The current position of the business is weighing on the valuation, as the market waits to see how the changes will play out. Euromoney’s shares are trading at a notable discount to the peer group across all metrics, as is shown in the table below.
Exhibit 6: Comparative valuation
Name |
Price - reporting currency |
Quoted currency |
Ytd performance (%) |
Market cap (m) |
EV/sales last (x) |
EV/EBITDA (x) |
P/E (x) |
FCF |
||||
last |
1FY |
2FY |
last |
1FY |
2FY |
yield 1 |
||||||
Thomson Reuters Corp |
71.64 |
C$ |
48 |
35,811 |
6.5 |
21.0 |
25.2 |
19.5 |
64.0 |
57.2 |
36.9 |
2.1 |
Envestnet Inc |
65.22 |
US$ |
33 |
3,422 |
4.6 |
43.2 |
20.9 |
18.1 |
241.0 |
30.5 |
25.2 |
0.0 |
Morningstar Inc |
155.55 |
US$ |
42 |
6,659 |
||||||||
Swissquote Group Holding-reg |
45.48 |
CHF |
1 |
697 |
7.4 |
3.2 |
2.9 |
2.6 |
16.5 |
16.3 |
13.8 |
2.3 |
Wilmington plc |
2.30 |
GBp |
29 |
201 |
1.9 |
9.5 |
9.4 |
8.9 |
13.3 |
12.6 |
11.9 |
4.1 |
Informa plc |
7.86 |
GBp |
25 |
9,842 |
4.6 |
15.7 |
12.9 |
12.6 |
14.4 |
15.6 |
14.7 |
3.0 |
Hyve Group plc |
80.60 |
GBp |
27 |
598 |
3.5 |
51.6 |
12.9 |
11.9 |
18.4 |
16.5 |
15.2 |
3.1 |
Ascential plc |
3.26 |
GBp |
(14) |
1,314 |
3.7 |
13.5 |
11.6 |
10.9 |
15.7 |
18.8 |
16.7 |
1.9 |
Relx |
18.56 |
GBp |
15 |
35,991 |
5.5 |
16.0 |
15.0 |
14.4 |
20.8 |
20.2 |
18.8 |
2.4 |
GlobalData |
10.65 |
GBp |
81 |
1,258 |
7.9 |
45.5 |
31.7 |
28.4 |
45.5 |
39.9 |
1.3 |
|
MSCI |
256.00 |
US$ |
74 |
21,690 |
28.3 |
28.1 |
25.0 |
42.2 |
40.1 |
36.0 |
1.0 |
|
MarketAxess |
398.00 |
US$ |
88 |
15,089 |
52.1 |
51.5 |
44.6 |
74.9 |
73.0 |
64.4 |
0.5 |
|
Average |
37.3 |
5.1 |
27.2 |
20.2 |
17.9 |
52.1 |
31.5 |
26.7 |
2.0 |
|||
Median |
30.7 |
4.6 |
21.0 |
15.0 |
14.4 |
19.6 |
20.2 |
18.8 |
2.1 |
|||
Euromoney |
12.54 |
GBp |
5 |
1,359 |
3.2 |
12.0 |
11.3 |
10.0 |
16.1 |
15.7 |
14.7 |
4.8 |
Discount |
-30% |
-43% |
-24% |
-30% |
-18% |
-22% |
-22% |
130% |
||||
Source: Refinitiv, Edison Investment Research. Note: Prices as at 22 November.
Exhibit 7: Financial summary
£m |
2018 |
2019 |
2020e |
2021e |
||
30-September |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
390.3 |
401.7 |
415.5 |
428.0 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Profit |
390.3 |
401.7 |
415.5 |
428.0 |
||
EBITDA |
|
|
105.0 |
108.2 |
113.5 |
121.6 |
Operating Profit (before amort. and except.) |
|
|
101.6 |
105.4 |
107.5 |
113.9 |
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 |
81.9 |
88.3 |
||
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 |
105.0 |
111.0 |
Profit Before Tax (FRS 3) |
|
|
152.0 |
79.5 |
79.4 |
85.4 |
Tax |
(20.6) |
(20.8) |
(21.0) |
(22.2) |
||
Profit After Tax (norm) |
79.3 |
83.8 |
84.0 |
88.8 |
||
Profit After Tax (FRS 3) |
102.5 |
58.7 |
58.4 |
63.2 |
||
Average Number of Shares Outstanding (m) |
107.4 |
107.6 |
107.6 |
107.6 |
||
EPS - normalised (p) |
|
|
73.6 |
77.7 |
77.8 |
82.3 |
EPS - (IFRS) (p) |
|
|
122.2 |
54.4 |
54.2 |
58.6 |
Dividend per share (p) |
32.5 |
33.1 |
33.7 |
35.0 |
||
EBITDA Margin (%) |
26.9 |
26.9 |
27.3 |
28.4 |
||
Operating Margin (before GW and except.) (%) |
26.0 |
26.3 |
25.9 |
26.6 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
616.5 |
433.9 |
430.9 |
404.5 |
Intangible Assets |
588.2 |
405.4 |
401.1 |
379.6 |
||
Tangible Assets |
24.0 |
23.2 |
24.5 |
19.6 |
||
Investments |
4.3 |
5.3 |
5.3 |
5.3 |
||
Current Assets |
|
|
165.7 |
397.4 |
419.1 |
473.5 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
68.3 |
49.0 |
62.3 |
64.2 |
||
Cash |
78.3 |
50.1 |
59.9 |
112.3 |
||
Other |
19.1 |
298.4 |
296.9 |
296.9 |
||
Current Liabilities |
|
|
(262.2) |
(273.2) |
(217.3) |
(225.0) |
Creditors |
(262.2) |
(273.2) |
(217.3) |
(225.0) |
||
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 |
441.1 |
532.6 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
108.6 |
92.4 |
110.3 |
121.7 |
Net Interest |
(2.8) |
(0.2) |
0.1 |
(0.4) |
||
Tax |
(38.9) |
(38.4) |
(37.5) |
(19.5) |
||
Capex |
(4.9) |
(10.0) |
(10.3) |
(11.0) |
||
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) |
(36.9) |
(38.4) |
||
Net Cash Flow |
226.2 |
(28.5) |
9.8 |
52.5 |
||
Opening net debt/(cash) |
|
|
154.6 |
(78.3) |
(50.1) |
11.3 |
Redemption of pref |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.3 |
(71.2) |
0.0 |
||
Closing net debt/(cash) |
|
|
(78.9) |
(50.1) |
11.3 |
(41.1) |
Source: Euromoney Institutional Investor accounts, Edison Investment Research
|
|
Abacus reported revenue of US$4.1m in Q319, up 97.4% year-on-year. Through the first nine months sales are up 99.3%. For the quarter, CBD CLINIC sales were US$2.9m, up 42.7% compared to Q318, and CBDMEDIC sales were US$1.2m, up 71.9% compared to Q219. We expect this high rate of growth for CBDMEDIC to continue as the brand can now be found in 4,600 retail locations (up from 3,000 last quarter) and will be in 7,000 as of January of 2020 thanks to the upcoming deployment in an additional major national retail pharmacy chain.