Euromoney Institutional Investor
Euromoney Institutional Investor |
Sterling top-line benefits |
AGM statement |
Media |
27 January 2017 |
Share price performance
Business description
Next events
Analysts
Euromoney Institutional Investor is a research client of Edison Investment Research Limited |
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The AGM trading update shows Q117 revenues up 6%. On an underlying basis, though, the top line dipped 5%. The difference stems from the gain from sterling moves, along with portfolio changes. The statement includes a cautionary note over activities targeted at asset management, with geopolitical factors continuing to play out. The main forecast changes relate to the share buyback earlier this month, boosting EPS and, by implication, dividend. The group has moved to pro forma net debt of £92m, which our model shows reducing to £53m by the year end, thanks to the inherently strong cash flow. Restructuring benefits should be stronger in FY18e, when the rating differential to peers looks more anomalous.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/15 |
403.4 |
107.8 |
70.1 |
23.4 |
15.9 |
2.1 |
09/16 |
403.1 |
102.5 |
66.5 |
23.4 |
16.8 |
2.1 |
09/17e |
420.0 |
100.0 |
72.6 |
26.5 |
15.4 |
2.4 |
09/18e |
440.0 |
103.9 |
77.0 |
30.5 |
14.5 |
2.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Tailwinds and headwinds
The standout figure in the update is the reported 20% uplift in subscription/content revenues. Once currency and portfolio changes are stripped out, though, these underlying revenues progressed a modest 1%. New product development and enhancement should help support revenues in the face of cost and pricing headwinds in the asset management sector. Advertising, as expected, continues to retrench (-16% Q117 vs Q116). Sponsorship and delegates were both down 14%, in part reflecting the withdrawal from a number of less (and un-) profitable training courses and events in commodity sectors in H216. With two-thirds of revenue and PBT earned in US$, the 6% top-line gain equates to -5% underlying.
Forecast changes from buyback
We have updated our forecasts in part to reflect currency, but with more significant impact from the share buyback from DMGT that completed on 6 January. 19.25m shares were purchased for cancellation at £9.75 with the cost met 37% in cash, 63% in new bank term loans. Our EPS forecast increases 8% in FY17e; +10% for FY18e, with dividend forecasts rising from 23.4p to 26.5p; from 24.0p to 30.5p in those years. The acquisition strategy is not compromised by the return to a net debt position post the buyback. As well as the strong cash flow, the group has put in place an £80m five-year revolving credit facility. The new facilities add £3m to cost.
Valuation: Discount to peers
The low historic liquidity and concentrated ownership limited the pool of potential investors, so the reduction in DMGT’s stake to 49.1% (post the combined impact of the market sale of 13m shares and buyback of 19m) lowers that hurdle. Our valuation methodology using historic and forward revenue and EBITDA multiples shows the group continuing to trade at a discount of around 16% to peers.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016 |
2017e |
2018e |
||
30-September |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
406.6 |
403.4 |
403.1 |
420.0 |
440.0 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Profit |
406.6 |
403.4 |
403.1 |
420.0 |
440.0 |
||
EBITDA |
|
|
122.7 |
109.4 |
104.2 |
109.6 |
115.8 |
Adjusted Operating Profit (before amort. and except.) |
119.8 |
106.7 |
101.4 |
105.4 |
111.2 |
||
Intangible Amortisation |
(16.7) |
(17.0) |
(16.7) |
(17.8) |
(17.8) |
||
Exceptionals |
2.6 |
33.4 |
(37.3) |
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 |
47.4 |
87.5 |
93.4 |
||
Associates |
0.3 |
2.4 |
(1.8) |
(2.4) |
(2.4) |
||
Net Interest |
(1.6) |
(1.3) |
(1.7) |
(3.0) |
(4.9) |
||
Exceptional financials |
(0.6) |
(0.9) |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
116.2 |
107.8 |
102.5 |
100.0 |
103.9 |
Profit Before Tax (FRS 3) |
|
|
101.5 |
123.3 |
43.9 |
82.2 |
86.1 |
Tax |
(25.6) |
(17.6) |
(12.9) |
(19.8) |
(20.9) |
||
Profit After Tax (norm) |
90.8 |
90.2 |
89.6 |
80.2 |
83.0 |
||
Profit After Tax (FRS 3) |
75.9 |
108.2 |
31.0 |
62.4 |
65.2 |
||
Average Number of Shares Outstanding (m) |
126.5 |
126.4 |
126.5 |
112.1 |
107.3 |
||
EPS - normalised fully diluted (p) |
|
|
70.6 |
70.1 |
66.5 |
72.6 |
77.0 |
EPS - (IFRS) (p) |
|
|
59.1 |
83.5 |
24.3 |
55.4 |
60.5 |
Dividend per share (p) |
23.0 |
23.4 |
23.4 |
26.5 |
30.5 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
30.2 |
27.1 |
25.9 |
26.1 |
26.3 |
||
Operating Margin (before GW and except.) (%) |
29.5 |
26.5 |
25.2 |
25.1 |
25.3 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
564.2 |
579.1 |
601.9 |
601.9 |
601.9 |
Intangible Assets |
545.4 |
531.4 |
551.1 |
551.1 |
551.1 |
||
Tangible Assets |
18.6 |
9.5 |
14.9 |
14.9 |
14.9 |
||
Investments |
0.1 |
38.3 |
35.9 |
35.9 |
35.9 |
||
Current Assets |
|
|
86.0 |
110.1 |
170.3 |
130.3 |
148.0 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
68.4 |
83.7 |
79.0 |
81.0 |
82.6 |
||
Cash |
8.6 |
18.7 |
84.2 |
41.6 |
57.7 |
||
Other |
9.1 |
7.7 |
7.1 |
7.7 |
7.7 |
||
Current Liabilities |
|
|
(208.9) |
(210.8) |
(249.4) |
(220.7) |
(228.5) |
Creditors |
(208.4) |
(209.8) |
(249.0) |
(220.2) |
(228.0) |
||
Short term borrowings |
(0.5) |
(1.0) |
(0.4) |
(0.5) |
(0.5) |
||
Long Term Liabilities |
|
|
(84.7) |
(33.2) |
(45.3) |
(137.4) |
(65.4) |
Long term borrowings |
(45.7) |
0.0 |
0.0 |
(94.0) |
(22.0) |
||
Other long term liabilities |
(39.1) |
(33.2) |
(45.3) |
(43.4) |
(43.4) |
||
Net Assets |
|
|
356.5 |
445.2 |
477.5 |
374.2 |
456.1 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
110.2 |
109.5 |
102.2 |
100.5 |
106.5 |
Net Interest |
(1.1) |
(1.1) |
0.1 |
0.1 |
(1.8) |
||
Tax |
(22.5) |
(13.7) |
(16.8) |
(16.7) |
(17.4) |
||
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 |
(187.7) |
0.0 |
||
Dividends |
(29.0) |
(29.4) |
(29.1) |
(29.3) |
(32.4) |
||
Net Cash Flow |
(29.3) |
54.6 |
66.1 |
(136.7) |
51.1 |
||
Opening net debt/(cash) |
|
|
10.9 |
37.6 |
(17.7) |
(83.8) |
52.9 |
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) |
52.9 |
1.8 |
Source: Company accounts, Edison Investment Research
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Henderson Alternative Strategies Trust