Euromoney Institutional Investor PLC Interim Financial Report 2017 - PDF document

Euromoney Institutional Investor PLC Interim Financial Report 2017

Euromoney Institutional Investor PLC Interim results Strategy on track May 18 2017 Highlights H1 2017 H1 2016 Change Total revenue m m 5% £203.2 £194.2 Adjusted results • Adjusted operating profit £49.0 m m 5% £46.8 • Adjusted profit before tax m m 5% £49.1 £46.9 • Adjusted diluted earnings a share 32.7 p 29.9 p 9% Statutory results m • Operating profit £15.6 £26.0 m • Profit before tax £15.6 m £23.4 m • Diluted earnings a share 11.4 p 13.4 p m Net (debt)/cash (£83.6) £55.9 m (£139.5m) Interim dividend 8.8 p 7.0 p 26% A detailed reconciliation of the group's adjusted results is set out in the appendix to this statement. • Strategy on track in this year of transition. The recent DMGT sell-down has allowed us to accelerate the strategy. • First-quarter revenues reflected, as expected, the continuation of the headwinds experienced last year. Second quarter shows some signs of the business turning. • Total revenues up 5%, underlying 1 revenues down 2%. • Adjusted profit before tax up 5% to £49.1m. • Results continued to be boosted by a strong dollar compared to last year. • Statutory profit before tax reflects exceptional items of £24.6m and acquired intangible amortisation of £8.8m. • Net debt at March 31 of £83.6m, from net cash position at year-end, following the £193.6m share buyback in January. • Strong 12-month cash conversion of 120% (2016: 107%) continues to strengthen the balance sheet. • Active portfolio management continues. Four businesses sold and one acquisition made in first half together with two more acquisitions in April, including the US$125m purchase of RISI. • New dividend policy: interim dividend increased by 26% to 8.8p. 1 Underlying revenues are at constant exchange rates, including pro forma prior year comparatives for acquisitions and excluding disposals and significant event timing differences as reconciled on page 8. Commenting on the results, Andrew Rashbass, CEO, said: “The first-half results reflect good progress with our strategy: investing in strategic themes; creating a best-of-both-worlds operating model which combines Euromoney’s well-known entrepreneurial culture with the benefits of a more corporate approach; and active portfolio management. DMGT’s sell-down has helped us accelerate this strategy. We are already seeing payback from our investments last year. During the first half we continued to invest for growth and to address the drag from cyclically and structurally challenged businesses. Although headwinds remain for our customers and therefore for us, particularly in asset management, the commodities and banking & finance markets are showing signs of improving. The progress we are seeing gives us confidence that we will meet the board’s expectations for the full year. It is in this context that the board has changed its dividend policy to increase the dividend to approximately 40% of adjusted earnings each year.” 1

Strategy Our strategy is to manage a portfolio of businesses in markets where information, data and convening market participants are valued. We deliver products and services that support our clients’ critical activities. In particular, we look to serve markets which are semi-opaque; that is, where there is information which organisations need in order to operate effectively but the information is hard to find. Price discovery is a good example. B2B 3.0: How information markets are evolving We characterise the business models of B2B information companies into three generations, which we call B2B Media 1.0, 2.0 and 3.0. Their characteristics are typically as follows: Euromoney has been successful in becoming a 2.0 business over the past 10 or more years. We are becoming a 3.0 business, pacing the transition to meet and anticipate our customers’ needs. Quadrants: As we manage our portfolio to achieve our strategy, we categorise our businesses into four quadrants: Three pillars of strategic activity This analysis results in three pillars of strategic activity: 1. Invest around big themes. These include price discovery, post-trade activities, asset management and telecoms. Some examples from the half year: a. Price discovery: Following the acquisition of FastMarkets in September 2016 which confirmed Metal Bulletin as a leading metals price reporting agency, we purchased RISI in April 2017 for US$125m. RISI is the leading price reporting agency for the global forest-products market. b. We continue to invest in new products at, for instance, CEIC, BCA and Institutional Investor. 2

2. Transform the operating model. There are two aspects to our model. One is our target business model: The second is what we call a “best-of-both-worlds” operating model. Euromoney is known for its entrepreneurial culture – our people are creative, action-oriented, close to their customers, passionate about their brands, knowledgeable about the industries they serve and accountable for their results. Over the past six months, we have reorganised the business into seven divisions: price reporting, investment research, Institutional Investor, banking and finance, specialist information, events and data. Alongside, we are building strong central functions to support the businesses and to ensure we take advantage of Euromoney’s scale, share best practice, operate strategically and create career paths for staff across the whole company. 3. Actively manage the portfolio . Acquisitions have always been, and remain, an important part of Euromoney’s strategy. We have a record of identifying good businesses where our ownership adds value. In many cases, we buy founder-run businesses; and those founders often stay and grow their business within Euromoney. So far this year we have acquired the small telecoms events businesses BroadGroup (49% in March 2017) and Layer123 (61% in April 2017), as well as RISI (100% in April 2017) We also sell businesses where we believe we are not the best owners, and to generate funds (alongside our strong cash-flows and debt capacity) to invest in the themes discussed above. During the period, we sold four businesses: HedgeFund Intelligence (December 2016), II Intelligence (December 2016), Euromoney Indices (March 2017) and LatinFinance (March 2017) for a combined exceptional profit on disposal of £4.8m. Strategy overall. Our strategy is designed to develop the businesses we own and deliver strategic, timely, and well-executed acquisitions and disposals. We aim to allocate and recycle capital efficiently to good organic and inorganic opportunities via our “best-of-both-worlds” operating model. Our ambition is to generate consistent and meaningful returns for our shareholders at relatively low risk. Outlook The outlook for the commodities and banking markets is improving whereas the asset management sector is now facing headwinds. Currency remains a tailwind at the moment and we are seeing good progress from the strategic actions we are taking. Therefore, we expect to deliver a full year performance in line with the board’s expectations. 3