Euromoney Institutional Investor
Euromoney Institutional Investor |
Pre-close trading update |
Trading update |
Media |
30 September 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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September is always a key month for Euromoney, and levels of uncertainty this year were exacerbated by the Brexit vote. Nevertheless, the pre-close trading update reassures that FY16 figures will be delivered broadly in line with market expectations, with PBT of “no less than £100m” and a closing net cash position of at least £80m. ERM’s valuation has returned to a small premium to other B2B media stocks, but remains at a discount to financial publishing groups and software companies in the financial vertical.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/14 |
406.6 |
116.2 |
70.6 |
23.0 |
15.6 |
2.1 |
09/15 |
403.4 |
107.8 |
70.1 |
23.4 |
15.7 |
2.1 |
09/16e |
399.0 |
100.5 |
64.2 |
23.4 |
17.1 |
2.1 |
09/17e |
405.0 |
103.0 |
65.8 |
23.4 |
16.7 |
2.1 |
09/18e |
413.0 |
109.3 |
69.8 |
24.0 |
15.8 |
2.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Growth in higher quality earnings
Underlying Q4 constant currency revenues were down 5% in Q416. However, this gives a distorted picture of group performance. ERM withdrew from a number of less (and un-) profitable training courses and events in commodity sectors, and this is also reflected in a more substantial fall off in sponsorship and delegate revenues. More importantly, subscription revenues picked up further in Q4, +2% (+1% in Q3), in line with the scenario outlined by management earlier in 2016. Content and subscriptions, the highest quality element of revenues, accounted for 55% of group in FY15. Reported FY16 revenues are indicated to be down 1% (slightly better than our projection), with pre-tax profit of over £100m (Edison forecast was £100.9m), and closing net cash over £80m (Edison £84m). For the transition year, FY17e, we have slightly adjusted our estimates (profit and earnings -3%) and now publish our provisional FY18 figures, showing the margin benefits emerging more strongly.
Reporting segments more clearly aligned
The FY16 figures will be reported in November by four key markets and by activity within these markets, giving a far clearer picture of how the components contribute and simplifying modelling. Headline FY14 and FY15 figures have now been shown in the new format to give proper comparators. The largest segment is ‘Asset management’ (38.7% FY15 ongoing revenue; 43.5% adj. operating profit), followed by ‘Pricing, data and market intelligence’ (33.1%; 34.5%), then ‘Banking and finance’ (20.6%; 14.5%), with the balance in ‘Commodity events’ (7.6%; 7.5%).
Valuation: Moving on up
Apart from volatility around the time of the UK referendum, ERM’s shares have performed well over the last six months, gaining 22% as the market has gained confidence in the new CEO’s strategy. While still below levels of quoted financial publishing groups and specialist software companies, the valuation has moved back to a small 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.
Financial summary
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016e |
2017e |
2018e |
||
30-September |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
406.6 |
403.4 |
399.0 |
405.0 |
413.0 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Profit |
406.6 |
403.4 |
399.0 |
405.0 |
413.0 |
||
EBITDA |
|
|
122.7 |
109.4 |
102.3 |
104.8 |
111.1 |
Adjusted Operating Profit (before amort. and except.) |
119.8 |
106.7 |
98.3 |
100.5 |
106.5 |
||
Intangible Amortisation |
(16.7) |
(17.0) |
(17.8) |
(17.8) |
(17.8) |
||
Exceptionals |
2.6 |
33.4 |
(12.9) |
0.0 |
0.0 |
||
Capital Appreciation Plan |
(2.4) |
2.5 |
0.0 |
0.0 |
0.0 |
||
Operating Profit before ass's & fin. except'ls |
103.3 |
123.1 |
67.5 |
82.7 |
88.7 |
||
Associates |
0.3 |
2.4 |
2.4 |
2.4 |
2.4 |
||
Net Interest |
(1.6) |
(1.3) |
(0.1) |
0.2 |
0.5 |
||
Exceptional financials |
(0.6) |
(0.9) |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
116.2 |
107.8 |
100.5 |
103.0 |
109.3 |
Profit Before Tax (FRS 3) |
|
|
101.5 |
123.3 |
69.7 |
85.2 |
91.5 |
Tax |
(25.6) |
(17.6) |
(19.1) |
(19.6) |
(20.8) |
||
Profit After Tax (norm) |
90.8 |
88.9 |
81.4 |
83.5 |
88.5 |
||
Profit After Tax (FRS 3) |
75.9 |
108.2 |
50.7 |
65.6 |
70.7 |
||
Average Number of Shares Outstanding (m) |
126.5 |
126.4 |
126.4 |
126.4 |
126.4 |
||
EPS - normalised fully diluted (p) |
|
|
70.6 |
70.1 |
64.2 |
65.8 |
69.8 |
EPS - (IFRS) (p) |
|
|
59.1 |
83.4 |
39.9 |
51.7 |
55.7 |
Dividend per share (p) |
23.0 |
23.4 |
23.4 |
23.4 |
24.0 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
30.2 |
27.1 |
25.6 |
25.9 |
26.9 |
||
Operating Margin (before GW and except.) (%) |
29.5 |
26.5 |
24.6 |
24.8 |
25.8 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
564.2 |
579.1 |
546.5 |
513.9 |
481.1 |
Intangible Assets |
545.4 |
531.4 |
499.3 |
467.3 |
435.2 |
||
Tangible Assets |
18.6 |
9.5 |
8.9 |
8.3 |
7.7 |
||
Investments |
0.1 |
38.3 |
38.3 |
38.3 |
38.3 |
||
Current Assets |
|
|
86.0 |
110.1 |
171.8 |
223.9 |
280.6 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
68.4 |
83.7 |
79.8 |
81.0 |
82.6 |
||
Cash |
8.6 |
18.7 |
84.3 |
135.2 |
190.3 |
||
Other |
9.1 |
7.7 |
7.7 |
7.7 |
7.7 |
||
Current Liabilities |
|
|
(208.9) |
(210.8) |
(213.6) |
(220.7) |
(228.5) |
Creditors |
(208.4) |
(209.8) |
(213.1) |
(220.2) |
(228.0) |
||
Short term borrowings |
(0.5) |
(1.0) |
(0.5) |
(0.5) |
(0.5) |
||
Long Term Liabilities |
|
|
(84.7) |
(33.2) |
(45.2) |
(43.4) |
(43.4) |
Long term borrowings |
(45.7) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(39.1) |
(33.2) |
(45.2) |
(43.4) |
(43.4) |
||
Net Assets |
|
|
356.5 |
445.2 |
459.5 |
473.7 |
489.9 |
CASH FLOW |
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Operating Cash Flow |
|
|
110.2 |
109.5 |
102.2 |
100.5 |
106.5 |
Net Interest |
(1.1) |
(1.1) |
0.1 |
0.4 |
0.6 |
||
Tax |
(22.5) |
(13.7) |
(16.8) |
(17.2) |
(18.3) |
||
Capex |
(6.3) |
9.4 |
(3.5) |
(3.7) |
(4.0) |
||
Acquisitions/disposals |
(58.9) |
(15.6) |
13.2 |
0.0 |
0.0 |
||
Equity Financing / Other |
(21.5) |
(4.4) |
0.0 |
0.0 |
0.0 |
||
Dividends |
(29.0) |
(29.4) |
(29.1) |
(29.1) |
(29.9) |
||
Net Cash Flow |
(29.3) |
54.6 |
66.1 |
50.9 |
55.1 |
||
Opening net debt/(cash) |
|
|
10.9 |
37.6 |
(17.7) |
(83.8) |
(134.7) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
2.6 |
0.7 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
37.6 |
(17.7) |
(83.8) |
(134.7) |
(189.8) |
Source: Euromoney Institutional Investor accounts, Edison Investment Research
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