- Events revenues race back
- Inflation risk has to be managed
Few firms were as badly hit by the pandemic as Euromoney Institutional Investor (ERM), as the publishing and events company suddenly found itself without the ability to generate a significant portion of its income. However, judging by these half-year results, the bounce-back in activity in the events sector, combined with the basic defensiveness of its subscription-based institutional information services division, mean that Euromoney has the breathing space it needs to reorganise the business.
Not cutting back on most of its fixed costs during the pandemic was viewed as a controversial move by some in the market, but that decision was partially vindicated by how quickly the company was able to rescale its activity once the opportunity allowed. For instance, revenue generated by events leapt by more than 65 per cent in the half to £42.4mn, driven by the easing of Covid-19 restrictions and pent-up demand from clients that were willing to meet again in person.
The highly specialist nature of Euromoney’s information offering has always meant that the company tends to have an edge on the traditional publishing world, and there was no fundamental change in that position in these results. Subscription revenue rose by an underlying 8 per cent to £127mn.
Particularly interesting was the stabilisation of the investment research asset management business, where revenues were essentially flat at £55mn, representing a turnaround on what had been a long-term decline. Euromoney did book £20mn in exceptional costs, related to a reorganisation of the company’s property estate to accommodate more flexible working arrangements and the subletting of floors in its London building.
One of the persistent doubts over the business is whether there is enough pricing power to offset the huge rise in inflation. Management argued that the way data licences are managed mean it can raise prices by an average of 10 per cent. However, that pricing flexibility isn’t as apparent in events, where Euromoney was only able to raise the price per delegate by 5 per cent as the segment recovered. That might reflect the lumpy performance in the business as, depending on location and delegate type, conferences are running in the range of 80-120 per cent attendance rates based on 2019 numbers.
Euromoney is a solid business, but that is reflected in the price/earnings valuation of 19, according to broker Numis’s forecasts for this year. The shares may have some defensive appeal, but with a skinny dividend there are others who offer better income. Hold.
Last IC view: Hold, 1,066p, 18 Nov 2021
|EUROMONEY INSTITUTIONAL INVESTOR (ERM)|
|ORD PRICE:||1,078p||MARKET VALUE:||£1.18bn|
|TOUCH:||1,078-1,082p||12-MONTH HIGH:||1,124p||LOW: 810p|
|DIVIDEND YIELD:||1.7%||PE RATIO:||110|
|NET ASSET VALUE:||458p*||NET DEBT:||12%|
|Half-year to 31 Mar||Turnover (£mn)||Pre-tax profit (£mn)||Earnings per share (p)||Dividend per share (p)|
|*includes intangible assets of £667mn, or 610p a share|