Euromoney Institutional Investor

On the money
Euromoney’s recent finals were a touch ahead of consensus, with a steady flow of smaller acquisitions bolstering the top line and good central cost control driving greater pre-tax gains. With only modest organic increases likely in pricing and penetration, further substantive progress depends on deals (for which a new $160m debt facility is in place) and on leveraging the new content management platform, Project Delphi. The premium rating is justified by the balance street strength and earnings record.

Acquisitions giving incremental growth
Top-line progress of 3% was around half attributable to the recent additions to the group, with a better Q4 for advertising revenues and subscriptions compensating for weaker performance earlier in the year. The new debt facility, again from DMGT, is smaller than that it replaces but on slightly more advantageous terms at the lower end. Without any further purchases, Euromoney should move into a net cash position during the current financial year (despite deferred payments and the recent Infrastructure Journal purchase), but this outcome would be disappointing given the corporate expansion strategy. Larger acquisitions would be considered subject to sensible pricing, with funding potentially supplemented by more conventional debt. The group has built an enviable record on deal execution and integration, with five purchases in the last 12 months at a combined cost of around £60m.

Infrastructure investment
The new content management platform, Project Delphi, adds potential to further leverage the IP and data library, with BCA the first group company to transfer across. The total cost of £9.4m over three years implies a higher amortisation charge, but should allow for higher margin and more flexible products that can facilitate more advantageous pricing while also delivering added value for clients. The group’s strong cash flow profile easily supports this investment without compromising the ability to fund the normal investment and acquisition programmes as well as fund the payment of a progressive dividend.

Valuation: Justifiable premium
The B2B media sector has performed strongly over the last year as some of the economic clouds have started to lift. Euromoney’s shares trade at the top end of the peer group at a 16% P/E premium to the peer group CY13 adjusted average and at a 19% premium on EV/EBITDA. We feel this is justified on the basis of the strong balance sheet, the so far-successful transition to a digital delivery model and management’s consistent record of delivering on market expectations.

To Read the Entire Report Please Click on the pdf File Below.