The key features underlying the FY15 results were:
■
the headwinds in investment banking, structural and cyclical; and
■
difficult commodity markets and, associated at least in part with that, a tougher trading backdrop in emerging markets (which directly and indirectly drive around one-third of group revenues).
The impact on results was partly offset by:
■
the comparative strength of the asset management sector; and
■
(continuing) FX benefit, particularly in US$:£, where a one cent movement prompts revenue +/- £1.4m, PBT +/- £0.6m.
These factors were reflected in:
■
the further deterioration of the advertising revenue stream, down 11% underlying;
■
weakness in smaller events and conferences;
■
margin impact from the above, in addition to the margin effect of event timing differences, acquisitions and disposals and property/investment costs; and
■
the continuing growth in subscription revenue, ahead by 2% underlying (7% at headline level).
Exceptional items included an impairment of £10.7m on the balance sheet value of Indaba (bought in July 2014), but a substantial profit on the Dealogic deal, described in our December 2014 Outlook note. The group’s underlying cash conversion of 101% (FY14: 100%) has put the balance sheet back into a net cash position for the first time since 1997. Banking facility renewal is dependent on the acquisition pipeline.
Exhibit 1: Changes to forecasts
|
EPS |
PBT |
EBITDA |
|
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
2015 |
65.6 |
70.1 |
+7 |
107.0 |
107.8 |
+1 |
108.7 |
109.4 |
+1 |
2016e |
67.5 |
64.5 |
-4 |
110.5 |
101.0 |
-9 |
111.7 |
102.8 |
-8 |
2017e |
69.5 |
68.1 |
-2 |
114.0 |
106.6 |
-6 |
115.1 |
108.3 |
-6 |
Source: Company accounts, Edison Investment Research
The improvement in earnings relative to the improvement in profits stems from a lower than expected tax rate of 18% (underlying), reflecting a combination of reducing UK tax rates, the impact of amortisation of goodwill and mix. The lower rate is also reflected in our revised forecasts for FY16 and FY17, where we have assumed a 19% underlying rate. The reversal of the CAP costs, discussed in our earlier notes, has facilitated a modest rise in the recommended dividend from 23.0p to 23.4p, supported by the balance sheet cash position.
With no further substantial acquisitions currently in the pipeline, and with the inflow of cash from the Dealogic transaction of £13.5m (US$21.2m), cash is set to rise substantially over the course of the current year. Our model points to a figure of over £84m by end-September 2016.
Exhibit 2: Record and forecasts by activity
|
|
Source: Company accounts, Edison Investment Research
|
The Delphi project (a platform for authoring, storing and delivering content) is now complete, although there remain products to be transferred across to the platform. BCA and Global Capital are reportedly already seeing the benefits, with BCA launching its analytics tool and enhanced research service. There is a strong pipeline of further new products and information services being launched, with the launch processes and timescales considerably simplified on Delphi.
The group has also been investing in capital introduction networks under the Institutional Investor brand. These should deliver revenues from introduction fees, data service and platform fees, but also – once regulatory approval has been gained in the US, (which is expected in Spring 2016) – from basis points on the capital.
Euromoney has also been making strategic investments in fintech companies, such as Dealogic, Estimize and Zanbato Inc, which emphasise its transition from traditional business publisher to global online information business.
Initial thoughts of new CEO
Andrew Rashbass is understandably reluctant to be drawn on specifics at this early stage of his tenure and with the strategic review only just getting underway. This is scheduled to be published end-January/early-February 2016, along with a strategy day for analysts and investors. However, he is clear that Euromoney has been very successful in managing its transition from print to digital, which he believes it is more appropriate to think of as separate distribution channels rather than different products. Just as in the retail sector, people used to make the distinction between commerce and ecommerce revenue strands, but now merge the two as simply ‘business’, through different channels, the same argument should hold for content.
Exhibit 3: Financial summary
|
|
£m |
2013 |
2014 |
2015 |
2016e |
2017e |
30-September |
|
|
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
|
|
|
|
|
|
|
Revenue |
|
|
404.7 |
406.6 |
403.4 |
397.5 |
406.9 |
Cost of Sales |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Gross Profit |
|
|
404.7 |
406.6 |
403.4 |
397.5 |
406.9 |
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) |
(20.3) |
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 |
68.1 |
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 |
25.9 |
26.6 |
Operating Margin (before GW and except.) (%) |
|
29.9 |
29.5 |
26.5 |
24.9 |
25.6 |
|
|
|
|
|
|
|
|
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 |
172.4 |
228.1 |
Stocks |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Debtors |
|
|
77.4 |
68.4 |
83.7 |
79.5 |
81.4 |
Cash |
|
|
10.3 |
8.6 |
18.7 |
85.2 |
139.0 |
Other |
|
|
7.2 |
9.1 |
7.7 |
7.7 |
7.7 |
Current Liabilities |
|
|
(236.0) |
(208.9) |
(210.4) |
(212.9) |
(220.6) |
Creditors |
|
|
(214.8) |
(208.4) |
(209.4) |
(212.4) |
(220.1) |
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 |
445.6 |
473.7 |
503.9 |
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
105.0 |
110.2 |
109.5 |
102.8 |
104.1 |
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 |
67.0 |
53.9 |
Opening net debt/(cash) |
|
|
30.8 |
10.9 |
37.6 |
(17.7) |
(84.7) |
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) |
(84.7) |
(138.5) |
Source: Company accounts, Edison Investment Research
Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com DISCLAIMER
Copyright 2015 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Euromoney Institutional Investor and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2015. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent. |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 245 Park Avenue, 39th Floor 10167, New York US |
Sydney +61 (0)2 9258 1161 Level 25, Aurora Place 88 Phillip St, Sydney NSW 2000, Australia |
Wellington +64 (0)48 948 555 Level 15, 171 Featherston St Wellington 6011 New Zealand |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 245 Park Avenue, 39th Floor 10167, New York US |
Sydney +61 (0)2 9258 1161 Level 25, Aurora Place 88 Phillip St, Sydney NSW 2000, Australia |
Wellington +64 (0)48 948 555 Level 15, 171 Featherston St Wellington 6011 New Zealand |
|
