Euromoney Institutional Investor — On the money

Euromoney Institutional Investor — On the money

Euromoney’s H118 results show that all the KPIs are moving broadly in the right direction, with revenues ahead by 3%, adjusted PBT up 6% and reduced net debt. The picture shown by the moving parts is more complex, with income streams from asset management remaining under pressure but good growth from Pricing, Data and Market Intelligence and a strong performance in Events. The completion of the GMID disposal since the period end has bolstered the balance sheet by a further net £103m, giving plenty of scope for the pursuit of further acquisitions to support growth.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Euromoney Institutional Investor

On the money

Half-year results

Media

18 May 2018

Price

1,338.00p

Market cap

£1,460m

Net debt (£m) at 31 March 2018

37.0

Shares in issue

109.1m

Free float

50.8%

Code

ERM

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.0

12.8

19.6

Rel (local)

(1.3)

5.8

14.6

52-week high/low

1346.0p

1046.0p

Business description

Euromoney Institutional Investor (ERM) is an international B2B information and events group. Its portfolio of over 50 specialist businesses spans macroeconomic data, investment research, news and market analysis, industry forums and institutes, financial training and excellence awards.

Next events

Q3 trading update

19 July 2018

Final results

22 November 2018

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5700

Euromoney Institutional Investor is a research client of Edison Investment Research Limited

Euromoney’s H118 results show that all the KPIs are moving broadly in the right direction, with revenues ahead by 3%, adjusted PBT up 6% and reduced net debt. The picture shown by the moving parts is more complex, with income streams from asset management remaining under pressure but good growth from Pricing, Data and Market Intelligence and a strong performance in Events. The completion of the GMID disposal since the period end has bolstered the balance sheet by a further net £103m, giving plenty of scope for the pursuit of further acquisitions to support growth.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/16

403.1

102.5

66.6

23.4

20.1

1.7

09/17

428.4

106.5

76.4

30.6

17.5

2.3

09/18e

405.0

103.5

72.8

30.6

18.4

2.3

09/19e

410.0

105.0

74.6

31.5

17.9

2.4

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Net positives

Management’s internal view was that the weakness in Asset Management related to the impact of MiFID II. It is now regarded as a longer-term structural problem around overall industry costs and the value obtained from spending on research. This is prompting a different strategy at BCA, to protect profits and invest in sales and marketing. Institutional Investor, which also sells into the asset management sector, draws more from marketing budgets and is running ahead of the prior year. Pricing, Data and Market Intelligence has been growing well, with subscriptions and events both delivering revenues up 9%, with a stronger profit performance (+13%) with the first benefits from last year’s investment. Events had a particularly strong Q2, with more banking-oriented events in the US and China, and a good turnaround at Mining Indaba. Our forecasts are adjusted for the disposal impact, which is dilutive to EPS (-4% FY18e, -7% FY19e) until the proceeds are redeployed.

Back in net cash on the balance sheet

As at the end of March, net debt was £37m (from £155m at the year-end), with rolling 12-month underlying cash conversion of 108% and net M&A proceeds of £95m. This mostly reflects the disposal of the Dealogic minority stake, along with some smaller deals, offset by the purchase of the 15% outstanding minority in Ned Davis Research. The GMID deal (flagged at the year-end) has released another $145m (£103m), leaving the group with a meaningful cash resource. The term loans put in place at the time of the share buyback/DMGT sell-down have been rolled into the existing, lower-cost RCF, giving an undrawn facility of £240m.

Valuation: Discounting opportunities

The group continues to trade at a discount to peers (we estimate this at around 5% based on a mixture of multiples), reflecting concerns over the outlook for the asset management sector. However, the group has strong cash flow characteristics and capacity for earnings-enhancing M&A, with a reverse DCF showing that the current valuation implies just 2% medium-term revenue growth on stable EBITDA margins.

Exhibit 1: Financial summary

£m

2016

2017

2018e

2019e

30-September

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

403.1

428.4

405.0

410.0

Cost of Sales

0.0

0.0

0.0

0.0

Gross Profit

403.1

428.4

405.0

410.0

EBITDA

 

 

104.3

110.3

109.4

110.3

Operating Profit (before amort. and except.)

101.5

107.1

107.1

108.0

Intangible Amortisation

(16.8)

(20.8)

(24.0)

(24.0)

Exceptionals

(37.3)

(31.3)

(0.1)

0.0

Capital Appreciation Plan

0.0

0.0

0.0

0.0

Operating Profit before ass's & fin. except'ls

47.4

55.1

83.1

84.0

Associates

2.2

3.3

(0.1)

0.0

Net Interest

(1.1)

(4.0)

(3.6)

(3.0)

Exceptional financials

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

102.5

106.5

103.5

105.0

Profit Before Tax (FRS 3)

 

 

48.4

54.4

79.5

81.0

Tax

(18.1)

(19.8)

(21.3)

(24.4)

Profit After Tax (norm)

84.5

86.6

80.7

80.6

Profit After Tax (FRS 3)

30.4

34.6

58.2

56.7

Average Number of Shares Outstanding (m)

126.5

112.5

107.3

107.3

EPS - normalised (p)

 

 

66.6

76.4

72.8

74.6

EPS - (IFRS) (p)

 

 

23.8

30.3

53.8

52.4

Dividend per share (p)

23.4

30.6

30.6

31.5

EBITDA Margin (%)

25.9

25.8

27.0

26.9

Operating Margin (before GW and except.) (%)

25.2

25.0

26.5

26.3

BALANCE SHEET

Fixed Assets

 

 

601.9

648.8

391.6

366.5

Intangible Assets

551.1

594.0

370.7

345.9

Tangible Assets

14.9

24.4

16.9

16.5

Investments

35.9

30.4

4.1

4.1

Current Assets

 

 

170.3

127.8

333.3

335.5

Stocks

0.0

0.0

0.0

0.0

Debtors

78.6

64.5

68.7

70.8

Cash

84.2

4.4

206.2

206.2

Other

7.5

58.9

58.5

58.5

Current Liabilities

 

 

(249.4)

(267.5)

(239.2)

(248.0)

Creditors

(249.0)

(267.5)

(239.2)

(248.0)

Short term borrowings

(0.4)

0.0

0.0

0.0

Long Term Liabilities

 

 

(45.3)

(212.3)

(167.4)

(121.8)

Long term borrowings

0.0

(168.9)

(110.5)

(65.0)

Other long term liabilities

(45.3)

(43.4)

(56.8)

(56.8)

Net Assets

 

 

477.5

296.8

318.4

332.2

CASH FLOW

Operating Cash Flow

 

 

103.8

118.2

104.2

108.4

Net Interest

(0.4)

(1.5)

(3.7)

(0.4)

Tax

(16.7)

(21.8)

(18.6)

(19.0)

Capex

(3.2)

(10.9)

(5.5)

(5.5)

Acquisitions/disposals

(3.8)

(99.9)

207.3

(3.0)

Equity Financing / Other

10.6

(193.0)

0.0

0.0

Dividends

(29.9)

(31.3)

(33.4)

(34.3)

Net Cash Flow

60.3

(240.2)

250.2

46.1

Opening net debt/(cash)

 

 

(17.7)

(83.8)

154.6

(95.6)

Redemption of pref

7.8

0.0

0.0

0.0

Other

(2.0)

1.8

0.0

0.0

Closing net debt/(cash)

 

 

(83.8)

154.6

(95.6)

(141.7)

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2018. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2018. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: Metals & Mining

Wheaton Precious Metals — Serene start

Wheaton Precious Metals’ (WPM) silver streams outperformed our expectations in Q118, while its gold streams performed closely in line. However, after demonstrating the traditional ‘flush through’ effect in Q417, sales of silver and gold in Q118 reverted to close to their long-term trends, with an (albeit temporary) 14.6% under-sale of silver and a 12.2% under-sale of gold relative to production. Nevertheless, adjusted net earnings of US$69.9m and EPS of 16 cents were within 10% of our previous expectations of US$77.0m and our forecasts for FY18 remain, to all intents and purposes, unchanged (see page 7).

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