Euromoney Institutional Investor: Steady Progress
Edison | Feb 02, 2014 01:25AM ET
Steady progress
Euromoney Institutional Investor's, (ERM) IMS showed 4% constant currency growth in Q114 revenues, with a particularly good performance from FY13’s acquisitions. We have made minor adjustments to our forecasts to reflect the shift in the sterling to US dollar rate in translation, given that over half of the operating profits are generated in dollars. ERM’s new content management system, Project Delphi, is progressing to plan and should drive growth and profits by leveraging the extensive data library and content across platforms, migrating titles online and reducing exposure to the structural decline in print advertising. The shares trade at a justified premium to the sector.
Acquisitions boost subs, sponsorship and delegates
Progress was made in constant currency in all the group’s business categories and at headline levels for four of five. The headline increase of 5% (6% at constant currency) in the largest element, subscriptions, was buoyed by acquisitions, with underlying growth at 2%. The 9% revenue growth in sponsorship income was also boosted by additions to the group. Melbourne-based Asset Management Forum, CIE, 75%-bought in April 2013, was singled out as having done better than expected at the time of acquisition. The strong balance sheet and cash flow support the continued strategy of growth through both organic development and acquisition.
Project Delphi Phase I to complete Q2
A further £2m has been spent on Project Delphi in Q114. It is on schedule, with the first products (including an integrated online research facility for BCA) already in advanced testing. As well as improving speed to market of new products and services, the platform’s flexibility should add value for subscribers, unlocking the value of the underlying data. The aim is to have all editorial products on the Delphi platform by end 2015, with key websites and 14 mobile apps already available. The additional cost and amortisation push down operating margin, but the longer-term cost of not implementing such a programme could potentially be a lot higher.
Valuation: Justified premium
The last year’s performance of B2B media stocks has varied notably with some company-specific factors offsetting the generally improving economic backdrop. ERM has been at the top end of the performance range, with the shares now trading at a 24% P/E premium to the CY13 adjusted peer group average; 29% on EV/EBITDA. For CY14, these ratios both come in at 19%, which we feel is justified by the group’s strong balance sheet, good progress in transition to a digital delivery model and consistent record of delivering on market expectations.
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Euromoney Institutional Investor
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