Euromoney Institutional Investor
Euromoney Institutional Investor |
Waiting for September |
Trading update |
Media |
21 July 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 Q3 update indicates that year-to-date financial performance is in line with management expectations. As is usual, the full year outcome depends on September’s trading performance, which typically provides around 20% of annual profits. For 2016, September’s prospects are hard to call. While sterling weakness boosts reported results, uncertainty in client markets has been exacerbated by the Brexit vote and it is prudent to leave forecasts where they are for now. Cash conversion remains very strong and is a key attraction of the stock, with £83m of net cash on the balance sheet at 30 June. The share price is likely to mark time until the market picture becomes clearer.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/14 |
406.6 |
116.2 |
70.6 |
23.0 |
13.6 |
2.4 |
09/15 |
403.4 |
107.8 |
70.1 |
23.4 |
13.7 |
2.4 |
09/16e |
390.0 |
101.0 |
64.5 |
23.4 |
14.9 |
2.4 |
09/17e |
397.5 |
106.5 |
68.0 |
23.4 |
14.2 |
2.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Market uncertainties offset currency benefit
Euromoney sells to many countries, but invoices mainly in US dollars and sterling, with around two-thirds of its revenues (including 30% of UK revenues) and the same proportion of operating profits generated in US dollars. The accounts quantify the effect of a one cent movement against sterling as shifting revenue ± £1.4m and PBT ± £0.6m. This shift will be more noticeable from Q416 and into FY17 and, were the trading backdrop stable, we would be raising our forecasts mechanistically to reflect this move. However, given the degree of current uncertainty post the Brexit vote, particularly for participants in financial markets, the circumspect option of leaving numbers unchanged is our preferred course.
Underlying rate of decline reduced
Reported (and underlying) Q316 revenues were down 1% at £104.7m. The reduced underlying rate of decline (from 6% in H116) reflects easier comparatives and also the first positive impact from the implementation of the new strategic plan described in our notes of March and May. The earlier conclusion that subscriptions rates had bottomed out appears to be holding good, with these underlying revenues ticking up 1% y-o-y. Advertising revenues continue to retrench (-14%), in line with our modelling assumptions, while a meaningful uplift in sponsorship revenues (+9%) reflect a good performance from larger finance and telecoms events.
Valuation: Small discount to sector
ERM traditionally trades at a 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. The weakness of customers’ markets has undermined these advantages and the valuation currently sits at an 8% discount to sector average for calendar 2016e P/E, a 2% discount on EV/EBITDA.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016e |
2017e |
||
30-September |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
406.6 |
403.4 |
390.0 |
397.5 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Profit |
406.6 |
403.4 |
390.0 |
397.5 |
||
EBITDA |
|
|
122.7 |
109.4 |
102.7 |
108.2 |
Adjusted Operating Profit (before amort. and except.) |
119.8 |
106.7 |
98.7 |
103.9 |
||
Intangible Amortisation |
(16.7) |
(17.0) |
(17.8) |
(17.8) |
||
Exceptionals |
2.6 |
33.4 |
(12.9) |
0.0 |
||
Capital Appreciation Plan |
(2.4) |
2.5 |
0.0 |
0.0 |
||
Operating Profit before ass's & fin. except'ls |
103.3 |
123.1 |
68.0 |
86.1 |
||
Associates |
0.3 |
2.4 |
2.4 |
2.4 |
||
Net Interest |
(1.6) |
(1.3) |
(0.0) |
0.3 |
||
Exceptional financials |
(0.6) |
(0.9) |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
116.2 |
107.8 |
101.0 |
106.5 |
Profit Before Tax (FRS 3) |
|
|
101.5 |
123.3 |
70.3 |
88.7 |
Tax |
(25.6) |
(17.6) |
(19.2) |
(20.2) |
||
Profit After Tax (norm) |
90.8 |
88.9 |
81.8 |
86.3 |
||
Profit After Tax (FRS 3) |
75.9 |
108.2 |
51.1 |
68.5 |
||
Average Number of Shares Outstanding (m) |
126.5 |
126.4 |
126.4 |
126.4 |
||
EPS - normalised fully diluted (p) |
|
|
70.6 |
70.1 |
64.5 |
68.0 |
EPS - (IFRS) (p) |
|
|
59.1 |
83.4 |
40.2 |
54.0 |
Dividend per share (p) |
23.0 |
23.4 |
23.4 |
23.4 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
30.2 |
27.1 |
26.3 |
27.2 |
||
Operating Margin (before GW and except.) (%) |
29.5 |
26.5 |
25.3 |
26.1 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
564.2 |
579.1 |
546.5 |
513.9 |
Intangible Assets |
545.4 |
531.4 |
499.3 |
467.3 |
||
Tangible Assets |
18.6 |
9.5 |
8.9 |
8.3 |
||
Investments |
0.1 |
38.3 |
38.3 |
38.3 |
||
Current Assets |
|
|
86.0 |
110.1 |
183.6 |
239.0 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
68.4 |
83.7 |
78.0 |
79.5 |
||
Cash |
8.6 |
18.7 |
97.9 |
151.8 |
||
Other |
9.1 |
7.7 |
7.7 |
7.7 |
||
Current Liabilities |
|
|
(208.9) |
(208.3) |
(209.2) |
(216.4) |
Creditors |
(208.4) |
(207.3) |
(208.7) |
(215.9) |
||
Short term borrowings |
(0.5) |
(1.0) |
(0.5) |
(0.5) |
||
Long Term Liabilities |
|
|
(84.7) |
(33.2) |
(45.2) |
(43.4) |
Long term borrowings |
(45.7) |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(39.1) |
(33.2) |
(45.2) |
(43.4) |
||
Net Assets |
|
|
356.5 |
447.7 |
475.7 |
493.1 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
110.2 |
109.5 |
102.8 |
104.1 |
Net Interest |
(1.1) |
(1.1) |
0.1 |
0.4 |
||
Tax |
(22.5) |
(13.7) |
(16.9) |
(17.8) |
||
Capex |
(6.3) |
9.4 |
(3.5) |
(3.7) |
||
Acquisitions/disposals |
(58.9) |
(15.6) |
26.2 |
0.0 |
||
Equity Financing / Other |
(21.5) |
(4.4) |
0.0 |
0.0 |
||
Dividends |
(29.0) |
(29.4) |
(29.1) |
(29.1) |
||
Net Cash Flow |
(29.3) |
54.6 |
79.7 |
53.9 |
||
Opening net debt/(cash) |
|
|
10.9 |
37.6 |
(17.7) |
(97.4) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
2.6 |
0.7 |
0.0 |
(0.0) |
||
Closing net debt/(cash) |
|
|
37.6 |
(17.7) |
(97.4) |
(151.3) |
Source: Company accounts, Edison Investment Research
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Research: TMT
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