Interactive Investor

ii view: Euromoney events hit by Covid-19

A one-third drop in the share price year-to-date raises interest, but outlook uncertainty persists.

4th June 2020 16:03

Keith Bowman from interactive investor

A one-third drop in the share price year-to-date raises interest, but outlook uncertainty persists.

Half-year results to 31 March 2020

  • Revenue up 1% to £186.3 million
  • Adjusted pre-tax profit down 15% to £39.3 million
  • No interim dividend payment

Chief executive Andrew Rashbass said:

"Euromoney's 3.0 strategy delivers must-have, embedded content. This strategy has never been more relevant and drives the momentum we see across our businesses. We have underlying growth in two of our three segments; strong performance in Pricing, and good growth in Data & Market Intelligence following our investment in that segment; and we see promising signs that our turnaround plan for our Asset Management businesses is working. 

We have taken swift action to address and manage the impact of covid-19, which creates short-term uncertainty in our business, particularly our events. We are ready to run our market-leading events when restrictions on face-to-face gatherings are lifted; until then, we will run virtual events where they deliver value to clients. Our strong balance sheet and resilient renewal rates in our subscription businesses, which make up two thirds of revenues, give us confidence that we will emerge strongly from the current global crisis".

ii round-up:

Business information provider Euromoney Institutional Investor (LSE:ERM) today reported half-year results dented by Covid-19 as the pandemic hit its face-to-face events business. 

Cancelled investor events under government restrictions left group sales to the end of March up only 1%. Missed revenues due to lost events also contributed to a 15% fall in profits, along with falling subscriptions for research generated by its Asset Management business. 

A review of the Asset Management business recently 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. The division generates around one third of group sales. 

But elsewhere, its Price, or price discovery, business enjoyed a 3% and 6% increase in underlying sales and profits respectively, aided by an 8% increase in subscription revenues. A recent acquisition has added agricultural commodity prices to its Fastmarkets platform. The division accounts for one fifth of the publisher’s total sales.

While its Data & Market Intelligence division, generating two-fifths of Euromoney sales, cheered a 6% improvement in subscription sales. Wealth-X, the market-leading provider of data-driven intelligence on the world's wealthiest individuals was recently added to its armoury.

Euromoney Institutional Investor shares rose by 12% in afternoon UK trading having fallen by nearly a third year-to-date. Shares for fellow events organiser Informa (LSE:INF) are down by more than 40% during 2020, while education focused publisher Pearson (LSE:PSON) shares have dropped by 20%. 

Under measures to battle Covid-19, and given its use of the government’s job retention scheme, Euromoney announced back in late April that it would not pay an interim dividend. 

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. Subscription revenues account for the lion’s share group sales at two-thirds of the total, events comes in next at around a quarter and advertising the balance. 

For investors, moves to turnaround 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 at around two-thirds of the company’s total also offer resilience compared to a continual search for new sales. But for now, with the company yet to fire on three cylinders, investors will be watching for signs that the Covid-19 cloud casting a shadow over its events business is clearing.

Positives: 

  • Product & geographical diversity
  • Subscription revenue two thirds of total

Negatives:

  • Asset Management business underperforming
  • Dividend payment suspended

The average rating of stock market analysts:

Buy

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