Euromoney’s AGM update indicates that trading after Q1 remains on track for the full year, with underlying revenue flat year-on-year. Within this, the Pricing, Data and Market Intelligence segments are ahead (a 9% increase in Pricing subscriptions is particularly encouraging), while trading in the Asset Management segment continues to be soft. The net cash balance gives plenty of scope for acquisitions, regardless of the outcome of the Asset Management strategic review. The shares are trading at a wide discount to peers, around 33%, which we regard as unjustified on fundamentals.
Euromoney Institutional Investor |
Trading trends continue |
AGM trading update |
Media |
28 January 2020 |
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 AGM update indicates that trading after Q1 remains on track for the full year, with underlying revenue flat year-on-year. Within this, the Pricing, Data and Market Intelligence segments are ahead (a 9% increase in Pricing subscriptions is particularly encouraging), while trading in the Asset Management segment continues to be soft. The net cash balance gives plenty of scope for acquisitions, regardless of the outcome of the Asset Management strategic review. The shares are trading at a wide discount to peers, around 33%, which we regard as unjustified on fundamentals.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/18 |
390.3 |
99.9 |
73.6 |
32.5 |
17.9 |
2.5 |
09/19 |
401.7 |
104.6 |
77.7 |
33.1 |
16.9 |
2.5 |
09/20e |
415.5 |
105.0 |
77.8 |
33.7 |
16.9 |
2.6 |
09/21e |
428.0 |
111.0 |
82.3 |
35.0 |
16.0 |
2.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Growth in core segments
The results will now be reported across the three segments of Data & Market Intelligence (DMI), Pricing, and Asset Management, as outlined in our November update. Underlying revenue in Q1 in DMI was up by 3%. Pricing climbed a similar amount, with stronger growth in subscriptions (+9%) diluted by some softness in the events business. Asset Management continued to underperform the group, as it now has for some time, with underlying revenue down by 6%, and subscriptions 9% lower. Company guidance is unchanged for FY20, as are our forecasts.
Cash resource
The end-December net cash figure of £27.3m compares to the end-FY19 figure of £50.1m. The outflow is a result of both the Wealth-X purchase ($20.4m) and UK corporation tax payments. The group is inherently highly cash generative (average of 99% conversion of operating profit over the last 10 years). It has an undrawn committed revolving credit facility of £240m (with an uncommitted £130m accordion), meaning that it has plenty of firepower for potential acquisitions, as well as resource for organic investment, regardless of the outcome of the strategic review.
Valuation: Discount persists
Global B2B information peers’ shares performed very well over the last 12 months, climbing on average by 40%, while Euromoney’s share price is 6% higher than a year ago, having hit highs of around £15 prior to the announcement of the strategic review in September. Its shares are now trading at a discount of around 33% to peers across EV/EBITDA and P/E metrics. This reflects the uncertainty associated with the strategic review, despite the intrinsically strong business model.
Exhibit 1: Financial summary
£m |
2018 |
2019 |
2020e |
2021e |
||
30-September |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
390.3 |
401.7 |
415.5 |
428.0 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Profit |
390.3 |
401.7 |
415.5 |
428.0 |
||
EBITDA |
|
|
105.0 |
108.2 |
113.5 |
121.6 |
Operating Profit (before amort. and except.) |
|
|
101.6 |
105.4 |
107.5 |
113.9 |
Intangible Amortisation |
(22.7) |
(25.1) |
(25.6) |
(25.6) |
||
Exceptionals |
81.4 |
0.0 |
0.0 |
0.0 |
||
Capital Appreciation Plan |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit before ass's & fin. except'ls |
160.3 |
80.3 |
81.9 |
88.3 |
||
Associates |
0.1 |
(0.1) |
0.0 |
0.0 |
||
Net Interest |
(1.8) |
(0.7) |
(2.5) |
(2.9) |
||
Exceptional financials |
(6.6) |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
99.9 |
104.6 |
105.0 |
111.0 |
Profit Before Tax (FRS 3) |
|
|
152.0 |
79.5 |
79.4 |
85.4 |
Tax |
(20.6) |
(20.8) |
(21.0) |
(22.2) |
||
Profit After Tax (norm) |
79.3 |
83.8 |
84.0 |
88.8 |
||
Profit After Tax (FRS 3) |
102.5 |
58.7 |
58.4 |
63.2 |
||
Average Number of Shares Outstanding (m) |
107.4 |
107.6 |
107.6 |
107.6 |
||
EPS - normalised (p) |
|
|
73.6 |
77.7 |
77.8 |
82.3 |
EPS - (IFRS) (p) |
|
|
122.2 |
54.4 |
54.2 |
58.6 |
Dividend per share (p) |
32.5 |
33.1 |
33.7 |
35.0 |
||
EBITDA Margin (%) |
26.9 |
26.9 |
27.3 |
28.4 |
||
Operating Margin (before GW and except.) (%) |
26.0 |
26.3 |
25.9 |
26.6 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
616.5 |
433.9 |
430.9 |
404.5 |
Intangible Assets |
588.2 |
405.4 |
401.1 |
379.6 |
||
Tangible Assets |
24.0 |
23.2 |
24.5 |
19.6 |
||
Investments |
4.3 |
5.3 |
5.3 |
5.3 |
||
Current Assets |
|
|
165.7 |
397.4 |
419.1 |
473.5 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
68.3 |
49.0 |
62.3 |
64.2 |
||
Cash |
78.3 |
50.1 |
59.9 |
112.3 |
||
Other |
19.1 |
298.4 |
296.9 |
296.9 |
||
Current Liabilities |
|
|
(262.2) |
(273.2) |
(217.3) |
(225.0) |
Creditors |
(262.2) |
(273.2) |
(217.3) |
(225.0) |
||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(41.4) |
(31.7) |
(191.6) |
(120.4) |
Long term borrowings |
0.0 |
0.0 |
(71.2) |
(71.2) |
||
Other long-term liabilities |
(41.4) |
(31.7) |
(120.4) |
(49.2) |
||
Net Assets |
|
|
478.6 |
526.4 |
441.1 |
532.6 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
108.6 |
92.4 |
110.3 |
121.7 |
Net Interest |
(2.8) |
(0.2) |
0.1 |
(0.4) |
||
Tax |
(38.9) |
(38.4) |
(37.5) |
(19.5) |
||
Capex |
(4.9) |
(10.0) |
(10.3) |
(11.0) |
||
Acquisitions/disposals |
195.8 |
(48.4) |
(15.8) |
0.0 |
||
Equity Financing / Other |
2.7 |
11.9 |
0.0 |
0.0 |
||
Dividends |
(34.2) |
(35.8) |
(36.9) |
(38.4) |
||
Net Cash Flow |
226.2 |
(28.5) |
9.8 |
52.5 |
||
Opening net debt/(cash) |
|
|
154.6 |
(78.3) |
(50.1) |
11.3 |
Redemption of pref |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.3 |
(71.2) |
0.0 |
||
Closing net debt/(cash) |
|
|
(78.3) |
(50.1) |
11.3 |
(41.1) |
Source: Company accounts, Edison Investment Research
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Elbit Medical recently signed an agreement to sell most of its stake in InSightec for $102m at a $702m valuation for the company, leaving Elbit Medical with approximately 4.7% of InSightec (the company estimates approximately 3.7% on a fully diluted basis). At the end of Q319, Elbit Medical owned 22% of InSightec and 18% on a fully diluted basis. Completion of the transaction is subject to Elbit Medical shareholder approval and other conditions. The company expects to use the proceeds of this transaction to repay its debt, fund corporate expenses and use the remaining cash from the transaction to buy back stock through a tender offer.