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EUROMONEY INSTITUTIONAL INVESTOR PLC

(ERM)
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Euromoney Institutional Investor : sites/euromoney/files/reports and presentation/transcript 2021.pdf

05/28/2021 | 05:17am EDT

Euromoney Results for the Half Year ending 31st March 2021

Thursday, 20th May 2021

Transcript produced by Global Lingo

London - 020 7870 7100

www.global-lingo.com

Euromoney Results for Half Year ending 31st March 2021

Thursday, 20th May 2021

Opening Remarks

Andrew Rashbass

CEO, Euromoney Institutional Investor PLC

Building momentum and proven resilience

Good morning everyone. We are going to take you through Euromoney's half year results for the period to 31st March 2021. A good period for us, a resilient performance, led by very good growth in subscriptions in both the Pricing and the Data and Market Intelligence segments. A strong virtual events performance. BCA Research and NDR, our investment research businesses turnaround ahead of plan. Good progress with our 3.0 strategy, both organic and two strategic acquisitions. We have the ability to do that because of the very, very strong cash generation that our business continues to have during Covid. That allows us to make the investments that we have made, to continue to make those investments and of course to pay dividends. Those are the very, very high-level headlines and now I will hand over to Wendy to take you through the results in more detail.

Half Year Results

Wendy Pallot

CFO, Euromoney Institutional Investor PLC

Half Year financial highlights

Good morning everyone. On slide 6, you can see that total revenue, which was down 17% in the first half, saw a good subscription performance offset by the Covid-19 impact on events revenue. Of course what we are comparing to here is the six months last year that was relatively unaffected by Covid-19. Subscriptions have been resilient, growing on an underlying basis and boosted by the acquisitions of WealthEngine and The Jacobsen in the period. The reported revenue drop also includes the impact of currency changes which was minus 2 percentage points, reflecting a weaker dollar versus sterling.

The overall £31 million reduction in revenue only reduced operating profit by about £4 million as a result of good cost control, with the operating profit margin up by two percentage points compared to the first half last year. Our cash generation and cash conversion during the period was strong, resulting in a net cash position of almost £25 million, £16 million higher than the first half last year despite the full impact of Covid over the last 12 months, the continued investment in the business we have made, two completed acquisitions and the payment of a final dividend. Finally, the Board has declared an interim dividend of 5.7 pence per share for this period.

Simplifying our reporting

Before we look in more detail at the key movements in the half there are two changes we have made to simplify our reporting, both of which relate to events. Neither of these changes has had any impact on total reported revenues or profits. Firstly, recategorising Institutional Investor's (II) events-based membership from subscriptions to events revenue. This aligns our reporting more closely with the substance of II's events business. It also aligns with our strategy of moving other events revenue to memberships over time. It is simpler because all our events revenues are now reported in one place. It results in a £12.8 million transfer of

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Euromoney Results for Half Year ending 31st March 2021

Thursday, 20th May 2021

revenue in the first half, as you can see here in the graph. II is in our Asset Management segment so this also means that the vast majority of Asset Management subscriptions revenue now relates to BCA Research and NDR, which gives you greater visibility on a recovery of those businesses.

The second change we have made is to our underlying growth measures relating to events, where we no longer adjust for cancellations or new events. For example, for a new event previously we would have added in a prior year pro forma so it did not create an underlying uplift in the year the event started. However, now that new event would create underlying growth and vice versa for cancellations. In the events world today we have of course got a number of formats now, virtual or blended and physical. It is very difficult to assess whether a new virtual or blended event is actually the equivalent of a historical physical event or whether it is a new event. With virtual events here to stay now it is easier and indeed more reflective of our business model to make this change to how we do underlying and not adjust for new events or cancellations.

Everything else in the calculation is unchanged and basically what this means is in the absence of material M&A or significant FX movements our underlying gross measures now for events are much more closely aligned with our reported results. We have given you restatements for the prior period in the appendix.

Euromoney is a simpler, majority-subscriptions business

Moving to slide 8, where is Euromoney today? We are a majority subscriptions business. Subscriptions were 73% of Group revenues during the period and we have three roughly similar sized business segments. Today we are a simpler and a stronger business than we were five years ago when subscriptions were approximately 50% of Group revenues and we had four reporting segments.

Subscriptions growth improving

Moving to slide 9, let us look at those subscription revenues. They have been extremely resilient during the pandemic, as Andrew said, and we continue to generate high subscription renewal rates and high margins. During the first half subscription revenue grew by 6% on a reported basis, driven by good growth in DMI and Pricing. As Andrew mentioned, the turnaround of our research businesses within Asset Management is progressing well and we are ahead of our plan. While their reported revenue declined during the period, it is on an improving underlying trend. In total on an underlying basis, Group subscription revenues have improved, growing by 2% in the period compared to being flat in the 12 months last year.

Improving Book of Business growth trend in H1 2021

Moving to slide 10, this is the leading indicator for those subscriptions that I have just talked about. The chart shows the growth in our Book of Business, or BoB as we call it, which measures the annual contracted value for our subscriptions on a like-for-like basis. What you can see here in the middle of the page is at last year end and on the right-hand side is where we were at the end of April this year. As you can see, the trends are all looking extremely positive.

Particularly, I would like to pick out for you the acceleration in the Pricing BoB which was up at 10.2% at the end of April, getting back to that double-digit growth we have delivered in

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Euromoney Results for Half Year ending 31st March 2021

Thursday, 20th May 2021

the past. DMI improved 4.6% compared to the year end position in September of 3.1%. Both these numbers include the impact of our recent acquisition of WealthEngine. If you exclude that, DMI was at 6.2% growth in April compared to 4.9% at last year end. Andrew is going to talk about our acquisition of WealthEngine later on which we bought for about 1.0x sales in December.

The Asset Management BoB, the bottom line here, is of course now excluding the impact of II event membership sales. The BoB is at -1.9% in April so there has been a 6.6 percentage point improvement over the last 12 months alone. The non-vote BoB at IRD, shown here as a grey dotted line, is about 95% of the total Asset Management BoB. It is a key driver of the improving trend in Asset Management and was the basis of the target that we set in this area.

Events - virtual performing well

Slide 11 looks at the performance of our events businesses which has of course been significantly impacted by Covid. Event revenues declined by £38.4 million year-on-year. All of the events we hosted during this period were virtual against a comparative where all of our events were physical. The good news here is that the virtual events have performed well. We hosted 206 virtual events, achieving 40% of H1 2020 reported revenues when we hosted 118 which were all physical events. This 40% conversion is made up of II membership revenues which were 67% of H1 last year and our non-membership event revenue which were 29% of last year. A good conversion rate which really highlights the strength of that membership model at Institutional Investor. The impact of the reduction in events revenues has also been partly mitigated by the higher gross margin of our virtual events which was around 80% in the period, including II, and typically about 15 percentage points higher than our physical events.

Pricing

Now moving to slide 12 and on to our segments, starting with Pricing which consists of our price reporting agency Fastmarkets. Pricing delivered good growth in subscription revenue, up 6% on an underlying basis driven by good data licensing sales. The volatility in commodity prices in the period such as lumber has also been helpful as buyers and sellers look for price transparency. Profits were down though with the subscriptions growth being outweighed by lower event revenues, about £0.5 million more depreciation in the period following our investment in the Fastmarkets platform, which we told you about last year, and our continued P&L investment in the segment throughout this period to drive growth, which Andrew will talk to you about in a moment.

As you know, last year we saw the Pricing BoB annual growth level reduce, reflecting some turmoil in the underlying commodities as a result of Covid. We did say that we had confidence this would bounce back and as you have seen, that is exactly what has happened. The acceleration of the Subscription BoB to 10.2% growth points to a stronger revenue growth in the second half this year. In early February we announced the acquisition of The Jacobsen which adds some scale to Fastmarkets Agriculture.

Data and Market Intelligence

Moving to slide 13, Data and Market Intelligence also delivered good growth in subscriptions with reported revenues up 23% driven by good underlying growth in People Intelligence and NextGen and the impact of the acquisitions of WealthEngine and Wealth-X. Underlying

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Euromoney Results for Half Year ending 31st March 2021

Thursday, 20th May 2021

revenue growth in subscriptions was 5%. This growth was more than offset by the reduction in events revenue though so adjusted operating profit was down 29%. However, about £18 million of revenue reduction fell through to only about £4 million of profit reduction, reflecting the cost reduction benefits of the Group restructuring announced last September, combined with further good cost control during the half. Looking forward the subscription BoB improved during the half and was at 4.2% growth at the end of March.

Asset Management

On slide 14, Asset Management consists of Institutional Investor and our investment research business, BCA Research and Ned Davis Research. The turnaround of BCA and NDR is progressing ahead of our plan with segment underlying subscription revenues down 5% during the half compared to an 8% decline in the last full year. This is mainly driven by our investment in sales and marketing which has led to a four percentage point uplift in the 12 months in the moving average renewal rate to 89%. The non-vote IRD BoB was -1.2% at the end of March and -0.9% at the end of April, which is a 6.3 percentage point improvement year-on-year. While this is very encouraging, we are not assuming a linear recovery and we continue to target sustained growth from September 2022.

Events revenues were relatively resilient at only two-thirds of last year because it is mainly made up of those II memberships. Advertising and other revenues grew strongly, mainly because of the high demand for II's research reports. On an underlying basis the total Asset Management revenues declined by 13% with adjusted operating profit down by 9%, again reflecting the good cost control.

H1 2021 segmental summary

Pulling that all together on slide 15 you can see a summary of our segmental results and revenues by type, most of which I have already touched on. I will just highlight a few things here. The chart on the left-hand side shows the importance of subscriptions to the Group. Both subscriptions and advertising and other revenues saw underlying growth with just events declining year-on-year, although mitigated by those strong virtual event revenues. We have already talked about the good cost control in the half. You can also see that here on the right-hand side in central costs which were 25% less than last year. They were £3.5 million lower year-on-year, reflecting the benefit of a one-off £2.5 million insurance claim and other lower costs, for example in travel and expenses and in property.

Strong cash generation

On to slide 16 and cash generation which was very strong during the period. We generated just over £50 million of cash from operations with working capital benefitting from the growth in subscriptions and strong collections. Free cash flow after capex was £30 million and after paying the final dividend of £12 million and spending £20 million on acquisitions, we finished the year with net cash of almost £25 million, broadly similar to September's number and almost £17 million higher than the end of March last year. Finally we have a strong liquidity position with significant financial headroom available through our new £190 million bank facility which runs out to at least May 2024.

Strong balance sheet with a clear approach to capital allocation

Moving to slide 17, we have a strong balance sheet and our cash generation is key to this. We have the resources to allocate capital to fund organic investment in the business, to

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This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Euromoney Institutional Investor plc published this content on 28 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 May 2021 09:16:02 UTC.


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Sales 2021 323 M 440 M 440 M
Net income 2021 25,4 M 34,6 M 34,6 M
Net cash 2021 12,1 M 16,5 M 16,5 M
P/E ratio 2021 42,6x
Yield 2021 1,74%
Capitalization 1 087 M 1 484 M 1 482 M
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Nbr of Employees 2 420
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Number of Analysts 6
Last Close Price 1 006,00 GBX
Average target price 1 148,50 GBX
Spread / Average Target 14,2%
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Managers and Directors
Andrew Rashbass Chief Executive Officer & Executive Director
Wendy Pallot Chief Financial Officer & Executive Director
Philippe Leslie van de Walle Non-Executive Chairman
Andrew Pieri Chief Information Officer
Janice May Babiak Senior Independent Non-Executive Director
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