Euromoney Institutional Investor
Euromoney Institutional Investor |
Headwinds still blowing |
Q1 trading update |
Media |
29 January 2016 |
Share price performance
Business description
Next events
Analysts
Euromoney Institutional Investor is a research client of Edison Investment Research Limited |
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Euromoney’s (ERM) Q1 update shows trading conditions remaining challenging, with the poor start to the year in equity markets added to the mix. Subscription revenues are still growing (up 2% at constant currency), but the continuing depressed oil price is showing through in lower delegate revenues. Currency has clearly swung in the group’s favour and the cash performance remains strong. The capital markets day, when new CEO Andrew Rashbass will present the strategy update, is now six weeks away and the shares are likely to mark time in the meantime.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/14 |
406.6 |
116.2 |
70.6 |
23.0 |
12.5 |
2.6 |
09/15 |
403.4 |
107.8 |
70.1 |
23.4 |
12.6 |
2.6 |
09/16e |
390.0 |
101.0 |
64.5 |
23.4 |
13.7 |
2.6 |
09/17e |
397.5 |
106.6 |
68.0 |
23.4 |
13.0 |
2.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Markets difficult, currency helpful
The issues surrounding confidence in banking markets have been well rehearsed and the impact of weak commodity markets is also built into market consensus. The revenue from Delegates is bearing the brunt of the low energy prices (down 19% at constant currency in Q1), while advertising continues to drift as expected. The activities addressed at the asset management markets have been much more resilient to date, primarily coming through in subscription revenues. Should equity markets remain weak, there may be some further impact down the line, although the recent strength of the US dollar will be helpful in buoying revenues, with a translation effect at the operating profit level of £0.6m for every one cent movement. We have only made minor adjustments to our numbers on the back of this statement, with a small (2%) reduction in revenue, but maintaining our profit projections, which were previously at the lower end of market range.
Cash gives flexibility
Cash at the end of December was £30.3m, and cash flows in the current year will benefit from the receipt of the Dealogic proceeds. Coupled with the group’s good record on cash conversion, our model shows a considerable build in cash resources over the year, with an end-September projection of £84.8m. This gives plenty of flexibility in drawing up the strategic plan – to be announced on 9 March.
Valuation: Traditional premium eroded
The current valuation can only be looked at in the current context. Having recovered post the final result in late November, ERM’s share price has fallen 18% over the last couple of weeks, with equity market weakness having an impact at the direct and indirect level. The valuation is now at a premium of just 3% to the B2B media average on CY16 EV/EBITDA (a 1% discount on P/E), with the market’s judgement at least partially suspended until the new strategy can be assessed.
Exhibit 1: Financial summary
£m |
2013 |
2014 |
2015 |
2016e |
2017e |
||
30-September |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
404.7 |
406.6 |
403.4 |
390.0 |
397.5 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Profit |
404.7 |
406.6 |
403.4 |
390.0 |
397.5 |
||
EBITDA |
|
|
125.0 |
122.7 |
109.4 |
102.8 |
108.3 |
Adjusted Operating Profit (before amort. and except.) |
121.1 |
119.8 |
106.7 |
98.8 |
104.0 |
||
Intangible Amortisation |
(15.9) |
(16.7) |
(17.0) |
(17.8) |
(17.8) |
||
Exceptionals |
2.2 |
2.6 |
33.4 |
0.0 |
0.0 |
||
Capital Appreciation Plan |
(2.1) |
(2.4) |
2.5 |
0.0 |
0.0 |
||
Operating Profit before ass's & fin. except'ls |
105.3 |
103.3 |
123.1 |
81.0 |
86.2 |
||
Associates |
0.3 |
0.3 |
2.4 |
2.4 |
2.4 |
||
Net Interest |
(2.7) |
(1.6) |
(1.3) |
(0.1) |
0.2 |
||
Exceptional financials |
(7.6) |
(0.6) |
(0.9) |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
116.5 |
116.2 |
107.8 |
101.0 |
106.6 |
Profit Before Tax (FRS 3) |
|
|
95.3 |
101.5 |
123.3 |
83.2 |
88.8 |
Tax |
(22.2) |
(25.6) |
(17.6) |
(19.2) |
(20.2) |
||
Profit After Tax (norm) |
94.3 |
90.8 |
88.9 |
81.8 |
86.3 |
||
Profit After Tax (FRS 3) |
73.0 |
75.9 |
108.2 |
64.0 |
68.5 |
||
Average Number of Shares Outstanding (m) |
125.5 |
126.5 |
126.4 |
126.4 |
126.4 |
||
EPS - normalised fully diluted (p) |
|
|
71.0 |
70.6 |
70.1 |
64.5 |
68.0 |
EPS - (IFRS) (p) |
|
|
57.9 |
59.1 |
83.4 |
50.5 |
54.0 |
Dividend per share (p) |
22.8 |
23.0 |
23.4 |
23.4 |
23.4 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
30.9 |
30.2 |
27.1 |
26.4 |
27.2 |
||
Operating Margin (before GW and except.) (%) |
29.9 |
29.5 |
26.5 |
25.3 |
26.2 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
528.9 |
564.2 |
579.1 |
559.5 |
539.7 |
Intangible Assets |
505.6 |
545.4 |
531.4 |
512.3 |
493.1 |
||
Tangible Assets |
22.6 |
18.6 |
9.5 |
8.9 |
8.3 |
||
Investments |
0.7 |
0.1 |
38.3 |
38.3 |
38.3 |
||
Current Assets |
|
|
94.9 |
86.0 |
110.1 |
171.0 |
226.5 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
77.4 |
68.4 |
83.7 |
78.0 |
79.5 |
||
Cash |
10.3 |
8.6 |
18.7 |
85.3 |
139.2 |
||
Other |
7.2 |
9.1 |
7.7 |
7.7 |
7.7 |
||
Current Liabilities |
|
|
(236.0) |
(208.9) |
(208.3) |
(209.2) |
(216.4) |
Creditors |
(214.8) |
(208.4) |
(207.3) |
(208.7) |
(215.9) |
||
Short term borrowings |
(21.2) |
(0.5) |
(1.0) |
(0.5) |
(0.5) |
||
Long Term Liabilities |
|
|
(46.0) |
(84.7) |
(33.2) |
(45.2) |
(43.4) |
Long term borrowings |
0.0 |
(45.7) |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(46.0) |
(39.1) |
(33.2) |
(45.2) |
(43.4) |
||
Net Assets |
|
|
341.7 |
356.5 |
447.7 |
476.1 |
506.4 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
105.0 |
110.2 |
109.5 |
102.9 |
104.2 |
Net Interest |
(2.9) |
(1.1) |
(1.1) |
0.1 |
0.4 |
||
Tax |
(19.0) |
(22.5) |
(13.7) |
(16.9) |
(17.8) |
||
Capex |
(10.7) |
(6.3) |
9.4 |
(3.5) |
(3.7) |
||
Acquisitions/disposals |
(26.5) |
(58.9) |
(15.6) |
13.5 |
0.0 |
||
Equity Financing / Other |
(21.7) |
(21.5) |
(4.4) |
0.0 |
0.0 |
||
Dividends |
(27.3) |
(29.0) |
(29.4) |
(29.1) |
(29.1) |
||
Net Cash Flow |
(3.1) |
(29.3) |
54.6 |
67.1 |
54.0 |
||
Opening net debt/(cash) |
|
|
30.8 |
10.9 |
37.6 |
(17.7) |
(84.8) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
23.0 |
2.6 |
0.7 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
10.9 |
37.6 |
(17.7) |
(84.8) |
(138.7) |
Source: Company accounts, Edison Investment Research
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