ii view: Euromoney confirms pandemic effect

Business events have been cancelled, but this media group is looking online.

Nine-month trading to 30 June

• Revenue down 13.7% to £255.4 million
• Net cash up 67% to £13.9 million

Management said:

"The action we have taken to reduce costs and preserve cash supports our robust balance sheet. This, together with our high level of subscriptions, allows us to maintain investment in future growth. In addition, it will allow us to make further small acquisitions and supports the return to paying dividends, as soon as the Board considers it can do so prudently."

ii round-up:

Business information provider Euromoney Institutional Investor (LSE:ERM) today reported a 13.7% fall in nine-month sales, hit by Covid-19, as the pandemic cancelled its face-to-face business events.

But recent acquisitions had been performing strongly, while cash held had risen from £8.3 million at the end of the first half to £13.9 million. 

Euromoney shares rose by more than 2% in afternoon UK trading, having fallen by more than a third year-to-date. Shares for fellow events organiser Informa (LSE:INF) have nearly halved in 2020, while shares for advertising company WPP (LSE:WPP) are down by just over 40%.

A move to virtual or online events was helping to partly offset some of the lost face-to-face business. Cancelled and postponed events due to the pandemic had reduced revenue growth by 16%. 

On an adjusted basis, group revenues had fallen by 2%. Continued growth for its Pricing and Data & Market Intelligence segments were offset by ongoing challenges at its Asset Management business.

A previous review of Asset Management had concluded that it should be kept and not sold given its high levels of recurring subscription revenue, attractive profit margins and strong market positions. A return to growth is being pursued via continued investment in sales and marketing and increased cross-selling of products. Divisional underlying revenue fell by 9%.

For the Price or price discovery business, adjusted sales rose by 2%, hindered by weakness in advertising. For Data & Market Intelligence, it reported a 1% rise in adjusted revenues. Wealth-X, the market-leading provider of data-driven intelligence on the world's wealthiest individuals was recently added to its armoury.

At the half-year stage, Euromoney reported a 15% fall in adjusted pre-tax profit to £39.3 million, with no interim dividend declared. 

ii view:

Euromoney is a global provider of market intelligence, price discovery and events. Group sales are generated from a combination of publication subscriptions, paid advertising across its publications and events. 

For investors, moves to turn around the underperforming Asset Management division offer reassurance, while opportunities to add growth via acquisition such as its buy of Wealth-X continue to be found. Subscription revenues, as the largest segment of revenues, offer resilience compared to a continual search for new sales. But for now, with hard evidence of recovery yet to be seen, and Covid-19 still casting a shadow over its events business, there appears to be no rush to add to any existing holdings.  

Positives: 

• Product & geographical diversity
• Net cash increased

Negatives:

• Asset Management business underperforming
• Dividend payment suspended

The average rating of stock market analysts:

Buy