Full Year Results

Euromoney Institutional Investor PLC

('Euromoney')

Full Year Results

21 November 2019

Strong underlying profit growth

Euromoney Institutional Investor PLC (Euromoney), the global B2B information services provider of essential information to global and specialist markets, announces results for the year ended 30 September 2019.

Strategic and operational highlights

·; Continued progress towards building a 3.0 business model

o Fastmarkets, the price reporting agency, was selected as the LME partner to develop the lithium benchmark

o Launch of new Fastmarkets platform for customers

·; Active portfolio management to drive higher growth

o BoardEx and The Deal integrated, performing well and supporting evolution of other Group companies

o Disposal of Mining Indaba

·; Strategic review of Asset Management segment continues

Financial highlights

·; Results slightly above Board expectations

·; Continuation of recent trends: Price, Data & Market Intelligence ('PDMI') grew strongly; Asset Management declined

·; Statutory revenue up 5% primarily due to the impact of acquisitions, revenues flat on an underlying basis

·; Fastmarkets underlying subscription revenue growth of 10%

·; Good profit growth: Underlying profit before tax of +9%, reflecting PDMI subscription revenue growth, lower central costs and interest expense

·; Statutory profit before tax reduced due to the non-recurring gain on the disposal of Dealogic in 2018

·; Highly cash generative: strong underlying cash conversion of 98%

·; Total dividend up 2%

·; Strong balance sheet with net cash from continuing and discontinued operations of £50.1m

Andrew Rashbass, CEO, said:

"We continue to evolve towards a 3.0 information-services business. Our performance in the 2019 financial year reflects a continuation of recent trends in our businesses, with good momentum for our pricing, data and market intelligence products offset by conditions in Asset Management markets. We were pleased that Fastmarkets was selected as the London Metal Exchange's partner to develop the lithium benchmark. We are continuing the strategic review of our Asset Management business.

We have a clear strategy, focused on services that are firmly embedded in the workflow of customers. The acquisition of BoardEx is a good example of this. We look forward to further progress in the year ahead."

1Adjusted measures include the results of continuing and discontinued operations and exclude the impact of the amortisation of acquired intangible assets, exceptional items and other adjusting items in accordance with the Group’s policy. 2018 excludes the results of discontinued operations relating to GMID. A detailed reconciliation of the Group’s adjusted and underlying results is set out on pages 6 to 11 of this statement.

2The 2018 comparatives have been restated to reflect the two prior year tax exposures and discontinued operations relating to Asset Management as outlined in

note 1.

3Underlying measures are the adjusted results stated at constant exchange rates, including pro forma prior year comparatives for acquisitions and new business launches and excluding disposals, business closures and significant event and publication timing differences.

Operating Review

Euromoney delivered strong underlying profit growth in the financial year, reflecting continued growth in PDMI revenue and good cost management. On an underlying basis, strong revenue growth in the Group's businesses that are 3.0 (or approaching 3.0) was offset by the ongoing challenges in our Asset Management businesses.

Euromoney has a well-established strategy to transition towards a 3.0 business-to-business information services Group, which is reflected in the Company's capital allocation. A 3.0 business is typically one which is embedded in its customers' workflows, providing significant operating leverage from "create one, sell many" services, in semi-opaque markets, with low capital requirements and high cash flow conversion.

M&A activity during the year was driven by this strategy, including the disposal of Mining Indaba and acquisition of BoardEx and The Deal. In this context, on 10 September 2019, Euromoney announced that it is conducting a strategic review of Asset Management, which is made up of Institutional Investor, BCA Research and NDR. Although still at a relatively early stage, the strategic review is progressing well. The segment is presented as discontinued operations and held for sale.

Total revenue for the year increased by 3% to £401.7m, supported by the contribution from the acquisition of BoardEx and The Deal. Statutory revenue from continuing operations, which excludes the Asset Management segment, increased by 5% to £256.1m. Underlying revenue was flat, with growth of 4% from the Pricing, Data & Market Intelligence ("PDMI") segment offset by continued challenges in the Asset Management segment. We continue to see the impact of the structural and cyclical issues facing the Asset Management segment, where underlying revenue declined by 4%. Revenue from Banking & Finance, which makes up 15% of the Group's total revenue, declined by 1% on an underlying basis.

Subscription revenue, which makes up 60% of total revenue, was unchanged year on year on an underlying basis, with continued strong growth of 8% in PDMI mainly offset by declines in the Asset Management segment.

Events revenue, which is 31% of total revenue, increased 2% on an underlying basis. Growth from events in the Asset Management and Banking & Finance segments was offset by the lack of growth in PDMI events due to the previously flagged delegate marketing challenges in the first half, although these events did return to growth in the second half. Advertising and other revenues, which represent only 10% of total revenue, declined by 4% on an underlying basis. 

Adjusted operating profit of £105.4m increased by 5% on an underlying basis reflecting good cost management and subscription revenue growth in PDMI. The adjusted operating profit margin was 26%, a 1ppt increase compared to last year, on an underlying basis. Strong underlying growth in adjusted profit before tax of 9% reflects adjusted operating profit growth and lower interest costs. Adjusted diluted earnings per share increased by 5% to 77.6p (2018: 73.6p). Statutory operating profit was £30.6m (2018: £107.9m) and statutory profit before tax was £29.5m (2018: £106.8m), the decrease was mainly due to the gain on the disposal of Dealogic in the prior year.

Segmental Review

Adjusted results for the twelve months ended 30 September 2019

1Values shown above are adjusted, growth percentages underlying and are compared to the restated 2018 results. Adjusted and underlying measures are explained on pages 6 to 11 of this statement.

Pricing, Data & Market Intelligence

The Group's PDMI businesses (49% of total revenue) generated underlying revenue growth of 4% and underlying operating profit growth of 5%. Subscription revenue, which accounts for the majority of PDMI revenue, increased by 8% on an underlying basis. In Fastmarkets, our price reporting agency, a number of factors helped drive adoption and increased use of our pricing benchmarks: including close engagement of the business with its clients and market; Fastmarkets being selected as the London Metals Exchange partner to develop the lithium benchmark; and the launch of the new Fastmarkets platform for customers. Our strong value proposition enabled us to reflect this through increased data licensing sales, which has resulted in excellent underlying subscription revenue growth in Fastmarkets of 10%.

As previously flagged, underlying events revenue declined by 4% in the first half of the year due to delegate marketing challenges, but recovered to grow by 1% for the year. There were strong performances from Coaltrans Asia, Capacity Europe and the Legal Media Group, which were offset by increased competitive pressure on our Real Asset Finance portfolio and a lack of growth at our flagship telecoms event in the US, ITW, which changed location in the year to Atlanta.

Following the $93.4m acquisition in February 2019 of BoardEx and The Deal, BoardEx, the executive profiling and relationship mapping platform, and The Deal, a source of data, news and intelligence on mergers and acquisitions, are now fully integrated and firmly aligned to our 3.0 strategy. BoardEx generated underlying growth of 11% in the year on a proforma basis.

New segmental structure

From 1 October 2019, Fastmarkets will be reported as a separate Pricing segment and the remainder of PDMI will combine with the Banking & Finance segment and be reported as the Data & Market Intelligence segment. For the next financial year, the Group will report under three new segments: Asset Management; Pricing; and Data & Market Intelligence.

Asset Management

Following the announcement of the strategic review in September 2019 and the update earlier in November 2019, Asset Management is reported as discontinued operations and held for sale in the Consolidated Financial Statements for the year.

Asset Management revenue (36% of total revenue) was down 4% on an underlying basis, in line with last year's decline, as growth in events (up 6%) and advertising (up 2%) was more than offset by continued decline in subscriptions (down 6%). Asset Management remains affected by structural and cyclical challenges and, whilst new sales in Europe continued to be impacted by uncertainty around the UK's exit from the EU, there was strong new sales growth in Asia. In addition, underlying revenues for Institutional Investor, where revenues are sourced from asset-management marketing rather than research budgets were flat year on year. The investment in professionalising sales and marketing in Investment Research continued with the new sales structure in place by the year end.

In response to continued market and performance challenges, Institutional Investor management took the decision to reshape the senior management and global sales teams, and close the Centre for Continuing Education ("CIE", an investment forum for asset management firms) at the end of 2019. As a result, CIE is shown as a closed business in the year.

Asset Management adjusted operating profit was flat on an underlying basis with adjusted operating profit margins increasing by 2ppt to 43%, reflecting the benefit of prior year restructuring and careful cost control, while investing in extra sales and marketing resource. As outlined at our capital markets event in July 2019, this investment is part of a four stage programme to support an improvement in our short and medium term performance, and position Asset Management for long-term growth through innovation and development of 3.0 products. 

Banking & Finance

Revenue within Banking & Finance (15% of total revenue) declined by 1% on an underlying basis. A strong performance from IMN across 13 new events and key repeat events helped to offset the decline in Euromoney and Global Capital events. The global backdrop of trade and geopolitical tensions as well as financial market volatility put pressure on subscriptions and advertising revenues which both declined by 6% on an underlying basis in the year, although the decline in advertising revenue was, in part, offset by successful Euromoney @50 and Asiamoney @30 campaigns.

During the year, the Banking & Finance segment consolidated its structure into three brands, Global Capital, Euromoney and IMN, supported by an operational pillar, to deliver logistics and production efficiencies. Investment in employee costs relating to the new operating structure, together with investment in new events, drove a decline in underlying operating profit of 8%. 

From 1 October 2019, Banking & Finance has been merged with the Specialist Information division to form the new Financial & Professional Services division, bringing together complementary markets and customers across financial and professional services. In addition, the annual ABS East event, which generated £3.3m revenue in the year, will move from September to October for 2020 onwards to reduce the risk of impact from hurricanes in Florida. 

Other Financial Items

Exceptional items

An exceptional credit of £3.9m in the year principally comprises £17.0m of profit on disposal of Mining Indaba, as previously announced, offset, in part, by an impairment charge of £2.4m resulting from the closure of CIE, recognition of earn-out payments of £2.5m and acquisition related costs of £5.4m. In addition, it includes £2.5m for discontinued operations relating to costs for major restructuring within Asset Management and costs to engage with advisors in connection with the strategic review of the segment. Full details are included in note 3.

Tax

The adjusted effective tax rate is 20% (restated 2018: 21%) which is based on adjusted profit before tax and excludes deferred tax effects of intangible assets and goodwill, tax on exceptional items and prior year items. The tax rate in each year depends mainly on the geographic mix of profits and applicable tax rates. We expect that the adjusted effective tax rate for the next financial year will be in line with the current year rate.

The Group's statutory effective tax rate, which excludes discontinued operations, decreased to 32% compared to 39% in 2018. The rate in 2018 was largely driven by one-off items such as tax on disposal of shares in GMID and non-recoverable foreign withholding tax which did not recur in 2019. The rate in 2019 relates largely to expenses that are capital in nature and therefore not deductible for tax purposes. Significant reconciling items between the adjusted and statutory tax expense include tax on profit on disposal of Mining Indaba and prior year items.

The Group continues to have a number of uncertain tax positions, primarily the Canadian and UK exposures which have been highlighted in previous periods for which the maximum exposures are explained in note 5.

Dividend

The Group's dividend policy targets a dividend pay-out ratio of approximately 40% of adjusted diluted earnings per share, with the half year dividend based on 33% of the previous year's total dividend, subject to the capital needs of the Group. The Directors are recommending a final dividend of 22.3 pence per share, which is subject to Shareholder approval at our AGM on 28 January 2020 and, if approved, will be paid on 13 February 2020 to shareholders on the register at the close of business on 29 November 2019. Together with the interim dividend, this makes a total dividend for the year ended 30 September 2019 of 33.1 pence per share, a 2% increase on the 32.5 pence dividend for the year ended 30 September 2018.

Net cash and cash flow

Net cash from continuing and discontinued operations at 30 September 2019 was £50.1m, compared with £78.3m at 30 September 2018. The Group had strong underlying operating cash inflows of £103.5m. The overall decrease in net cash largely reflects a £67.8m net outflow from the acquisition of BoardEx and The Deal partially offset by the sale of Mining Indaba. Further outflows included dividend payments of £35.6m and net tax payments of £38.4m, which included a one-off non-recoverable withholding tax payment of £14.6m, as previously announced.

The Group is highly cash generative, with underlying operating cash conversion for the 12 months to September 2019 being 98% (2018: 102%). The slightly lower cash conversion rate largely resulted from timing differences associated with transitioning from a subscription to a data licensing model within Fastmarkets and falling subscription revenue in Asset Management.

Currency

The Group generates approximately 75% of its revenues in US dollars, including approximately 40% of its UK revenues and two thirds of the Group's operating profits. The exposure to US dollar revenues in our UK businesses is partially hedged using forward contracts to sell US dollars, which delays the impact of movements in exchange rates for at least a year.

The average sterling-US dollar rate for the year to 30 September 2019 was $1.28 (2018: $1.35). This improved headline revenue growth rates for the year by approximately three percentage points and adjusted profit before tax by £4.1m. Each one cent movement in the US dollar rate has an impact on translated profits, net of UK revenue hedging, of approximately £0.7m on an annualised basis. The Group also translates its non-sterling denominated balance sheet items resulting in a loss in 2019 of £0.6m (2018: £1.5m).

Impact of adopting new accounting standards

The adoption of IFRS 9 from 1 October 2018 has led to an increase to opening equity by £0.4m. In addition, the Group has adopted IFRS16 from 1 October 2019. As a result, major building leases and lease liabilities have come onto the balance sheet. We estimate this will reduce profits before tax by £1m for the year ending 30 September 2020.

Restatements

The financial statements include three areas of restatement, as detailed in note 1. As a result of the ongoing strategic review of Asset Management, this segment has been disclosed as discontinued operations and as held for sale. The other two restatements have arisen due to significant prior year tax exposures, which internal processes identified during the year. One is an under-payment of PAYE and NI to HMRC in respect of contractors. The second is in respect of the treatment of VAT on intra-group transactions. Management took immediate steps to improve controls as a result of these issues.

Outlook

We expect weakness in our Asset Management segment into 2020 but continued good growth in the Pricing segment. Euromoney continues to make progress towards a 3.0 business model guided by our clear strategy, underpinned by a strong balance sheet and excellent cash flow conversion.

Definitions

Total revenue includes the revenues of continuing and discontinued operations, but excludes the discontinued operations relating to GMID in 2018.

The 2018 comparatives have been restated to reflect the two prior year tax exposures as outlined in note 1 as well as the impact of Asset Management being reported as discontinued operations.

Adjusted measures include the results of continuing and discontinued operations and exclude the impact of amortisation of acquired intangible assets, exceptional items and other adjusting items in accordance with the Group's policy. 2018 excludes the results of discontinued operations relating to GMID. A detailed reconciliation of the Group's adjusted and underlying results is set out on pages 6 to 11 of this statement.

Underlying measures include the adjusted results stated at constant exchange rates, including pro forma prior year comparatives for acquisitions and new business launches and excluding disposals, business closures and significant event and publication timing differences.

The adjusted effective tax rate is based on the adjusted profit before tax and excluding deferred tax movements on intangible assets, prior year items, tax on exceptional items and other tax adjusting items, in accordance with the Group's policy.

END

For further information, please contact:

Euromoney Institutional Investor PLC

Wendy Pallot, Chief Financial Officer: +44 20 7779 8866; [email protected]

Sarah Cooke, Head of Investor Relations: +44 20 7779 7363; [email protected]

FTI Consulting

Charles Palmer / Jamie Ricketts / Amy Hurnell / Jamille Smith: +44 20 3727 1000; [email protected]

NOTE TO EDITORS

Euromoney is a global information business providing essential B2B information to global and specialist markets. Euromoney provides discovery, market intelligence and events across our segments. Euromoney is listed on the London Stock Exchange and is a member of the FTSE 250 share index. (www.euromoneyplc.com)

CAUTIONARY STATEMENT

This Preliminary Statement ("Statement") is prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents and advisers accept and assume no liability to any person in respect of this Statement save as would arise under English law. Statements contained in this Statement are based on the knowledge and information available to the Group's Directors at the date it was prepared and therefore facts stated and views expressed may change after that date.

This document and any materials distributed in connection with it may include forward-looking statements, beliefs, opinions or statements concerning risks and uncertainties, including statements with respect to the Group's business, financial condition and results of operations. Those statements and statements which contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning, reflect the Company's Directors' beliefs and expectations and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and which may cause results and developments to differ materially from those expressed or implied by those statements and forecasts. No representation is made that any of those statements or forecasts will come to pass or that any forecast results will be achieved. You are cautioned not to place any reliance on such statements or forecasts. Those forward-looking and other statements speak only as at the date of this Statement. The Group undertakes no obligation to release any update of, or revisions to, any forward-looking statements, opinions (which are subject to change without notice) or any other information or statement contained in this Statement. Furthermore, past performance of the Group cannot be relied on as a guide to future performance.

No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per Euromoney Institutional Investor PLC share for the current or future financial years would necessarily match or exceed the historical published earnings per Euromoney Institutional Investor PLC share.

Nothing in this document is intended to constitute an invitation or inducement to engage in investment activity. This document does not constitute or form part of any offer for sale or subscription of, or any solicitation of any offer to purchase or subscribe for, any securities nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract, commitment or investment decision in relation thereto. This document does not constitute a recommendation regarding any securities.

LEI Number: 213800PZU2RGHMHE2S67

Appendix to Preliminary Statement

Reconciliation of Consolidated Income Statement to adjusted results for the year ended 30 September 2019.

The Directors believe that the adjusted measures provide additional useful information for shareholders to evaluate and compare the performance of the business from period to period. These measures are used by management for budgeting, planning and monthly reporting purposes and are the basis on which executive management is incentivised. The non-IFRS measures also enable the Group to track more easily and consistently the underlying operational performance by separating out exceptional income, charges and non-cash items.

Total and segment revenue represents the combined reported revenue from continuing operations and discontinued operations revenue for Asset Management.

Adjusted results include continuing operations and discontinued operations for Asset Management. The discontinued operations for Asset Management have been included in the adjusted results as it was owned and managed as part of the Group for the entire period and to aid year-on-year comparability of the Group's results. This treatment is consistent with that of Global Markets Intelligence Division (GMID) when the strategic review was announced for that disposal in September 2017. In the period of the disposal and upon the chief operating decision maker (CODM) not considering the discontinued operation in the review of the business, the discontinued operation will then be excluded from the adjusted results.

The discontinued operations in 2018 relating to the disposal of GMID have been excluded in the adjusted results to reflect the basis on which the CODM reviews the business. The comparatives have been updated to reflect this change in management's adjusted measures in order to provide a more like-for-like view of continuing operations.

In December 2018, the Group engaged external advisors to undertake an independent review of the Group's compliance with the off-payroll working rules. As a result of the review, the Group has identified an underpayment of payroll taxes to HMRC for the years ended 30 September 2013 to 30 September 2018. A restatement has been made to recognise the historical exposure, consisting of payroll taxes underpaid, interest and penalties. These restatements are not excluded from adjusted measures as the costs incurred are in the ordinary course of business and will recur.

Adjusted figures are presented before the impact of amortisation of acquired intangible assets (comprising trademarks and brands, customer relationships, databases and software); exceptional items, share of associates' and joint ventures' acquired intangible asset amortisation and exceptional items; net movements in deferred consideration and acquisition commitments; fair value remeasurements; related tax items and other adjusting items described below.

The amortisation of acquired intangible assets is adjusted as the premium paid relative to the net assets on the balance sheet of the acquired business is classified as either goodwill or as an intangible asset arising on a business combination and is recognised on the Group's balance sheet. This differs to organically developed businesses where assets such as employee talent and customer relationships are not recognised on the balance sheet. Impairment and amortisation of intangible assets and goodwill arising on acquisitions are excluded from adjusted results as they are balance sheet items that relate to historical M&A activity rather than the trading performance of the business.

Exceptional items are items of income or expense considered by the Directors to be significant, non-recurring and not attributable to underlying trading. It is Group policy to treat as exceptional significant earn-out payments required by IFRS to be recognised as a compensation cost. IFRS requires that earn-out payments to selling shareholders retained in the acquired business for a contractual time period are treated as a compensation cost. Given that these payments are in substance part of the cost of an investment and will not recur once the earn-out payments have been made, they have been excluded from adjusted profit.

During the second half of the year, the Group discovered a VAT exposure relating to the understatement of VAT on intra-group transactions in respect of the four years ended 30 September 2018. This VAT exposure is considered by the Directors as being material and non-recurring. A restatement has been made to recognise the historical exposure and related interest. The 2018 VAT expense has been classified as an exceptional item and the related interest for 2018 and 2019 has been treated as an adjusted finance expense because these charges are not expected to recur.

Adjusted finance costs exclude interest arising on the uncertain tax provisions, as the provisions relate to tax adjusting items. In addition, for the year ended 2018, adjusted finance costs exclude a net gain realised on the close-out of interest rate swaps of £1.2m following the repayment of the Group's term-loan. The net gain had been excluded from adjusted finance costs as it would not have crystallised had the disposal of GMID not completed.

For the 2018 reporting period, adjusted share of results in associates and joint ventures excludes the share of exceptional items that relates to restructuring and earn-out costs in Dealogic, which was sold in December 2017.

In respect of earnings, adjusted amounts reflect a tax rate that includes the current tax effect of goodwill and intangible assets. Many of the Group's acquisitions, particularly in the US, give rise to significant tax savings as the amortisation of goodwill and intangible assets on acquisition is deductible for tax purposes. The Group considers that the resulting adjusted effective tax rate is therefore more representative of its tax payable position. Tax on exceptional items relates primarily to the gain that arose on the disposal of Mining Indaba which is fully taxable and nondeductible costs relating to the acquisition of BoardEx and The Deal. Prior year items primarily reflect true-up of deferred tax items. These items are excluded from the adjusted tax expense as they do not relate to current year underlying trading.

Further analysis of the adjusting items is presented in notes 2, 3, 4, 5, 8, 9 and 10 in the notes to the Preliminary Statement. Further details of the restatements are included in note 1 of the notes to the Preliminary Statement.

The Group has applied these principles in calculating adjusted measures and it is the Group's intention to continue to apply these principles in the future.

The reconciliation below sets out the adjusted results of the Group and the related adjustments to the statutory Income Statement that the Directors consider necessary to provide useful and comparable information about the Group's adjusted trading performance.

Underlying measures

When assessing the performance of our businesses, the Board considers the adjusted results. The year-on-year change in adjusted results may not, however, be a fair like-for-like comparison as there are a number of factors which can influence growth rates but which do not reflect underlying performance.

Underlying results include the adjusted results of continuing operations and discontinued operations for Asset Management and are stated:

·; At constant exchange rates, with the prior year comparatives being restated using current year exchange rates;

·; Including pro forma prior year comparatives for acquisitions and new business launches and excluding all results for disposals or business closures;

·; Excluding events and publications which took place in the comparative period but did not take place in the current period and, including in the comparative period at the same amount events and publications which took place in the current period but did not take place in the comparative period.

For example, this means we adjust for:

·; Biennial events;

·; Events which run in one of the current or comparative periods due to changes in the event date; and

·; Cancelled events that did not take place in the current year.

The Group's adjusted and underlying measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with IFRS. The adjusted and underlying measures used by the Group are not necessarily comparable with those used by other companies. 

The 2018 comparatives have been restated to reflect the two prior year tax exposures and discontinued operations as outlined in note 1 of the notes to the Preliminary Statement.

The following table sets out the reconciliation from statutory to underlying for revenue, operating profit and profit before tax:

Cash conversion

Cash conversion measures the percentage by which cash generated from operations covers adjusted operating profit.

The underlying basis is after adjusting for significant timing differences affecting the movement on working capital and exceptional items. For the year ended 30 September 2019, exceptional items largely consist of cash payments for acquisition and disposal costs and deferred compensation costs in relation to acquisitions. For the year ended 30 September 2018, exceptional items largely consist of restructuring payments and cash payments for the legal and professional fees in relation to acquisitions and disposals, net of the favourable settlement of a legal dispute. The other working capital adjustments in 2019 and 2018 are largely the result of the landlord's contribution to the fit-out of the New York office which will be amortised over the period of the lease and the rent-free period of the London and New York offices, there is a further adjustment for payroll taxes in 2018.

As cash generated from operations in the Consolidated Statement of Cash Flows includes those from discontinued operations of Asset Management and GMID, the statutory cash conversion rate has not been provided as it would not give a fair indication of the Group's cash conversion performance.

The 2018 comparatives have been restated to reflect the two prior year tax exposures and discontinued operations as outlined in note 1 of the notes to the Preliminary Statement.

Net cash

The Group's borrowing facilities have covenants requiring the Group's net debt to be no more than three times adjusted EBITDA and minimum levels of interest cover of three times on a rolling 12-month basis. The amounts and foreign exchange rates used in the covenant calculations are subject to adjustments as defined under the terms of the arrangement.

The bank covenant ratio uses an average exchange rate in the calculation of net debt and includes discontinued operations of Asset Management and GMID and an annualised adjustment attributable to acquisitions and disposals in the calculation of adjusted EBITDA. When businesses are acquired after the beginning of the financial year, the calculation of adjusted EBITDA includes EBITDA attributable to the business as if the acquisition had been completed on the first day of the financial year. The calculation excludes the EBITDA of any businesses disposed of during the year.

The 2018 comparatives have been restated to reflect the two prior year tax exposures and discontinued operations as outlined in note 1 of the notes to the Preliminary Statement.

Consolidated Income Statement

for the year ended 30 September 2019

A detailed reconciliation of the Group's statutory results to the adjusted and underlying results is set out on pages 6 to 11.

The 2018 Income Statement has been restated as detailed in note 1. 

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2019

Consolidated Statement of Financial Position

as at 30 September 2019

Consolidated Statement of Financial Position

as at 30 September 2019 continued

The Consolidated Statements of Financial Position at 1 October 2017 and 30 September 2018 have been restated as detailed in note 1.

Approved by the Board of Directors on 21 November 2019. 

Consolidated Statement of Changes in Equity

for the year ended 30 September 2019

Consolidated Statement of Changes in Equity

for the year ended 30 September 2019 continued

The other reserve represents the share premium arising on the shares issued for the purchase of Metal Bulletin plc in October 2006.

The investment in own shares is held by the Euromoney Employees' Share Ownership Trust and Euromoney Employee Share Trust.

The trusts waived the rights to receive dividends. Interest and administrative costs are charged to the profit and loss account of the trusts as incurred and included in the Consolidated Financial Statements.

Consolidated Statement of Cash Flows

for the year ended 30 September 2019

Consolidated Statement of Cash Flows

for the year ended 30 September 2019 continued

This statement includes discontinued operations (note 8). 

Notes to the Preliminary Statement

1. Basis of Preparation

While the financial information contained in this Preliminary Statement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as adopted by the European Union and interpretations issued by the IFRS Interpretations Committee (IFRS IC), this announcement does not itself contain sufficient information to comply with IFRS.

The information for the year ended 30 September 2019 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. A copy of the accounts for the year ended 30 September 2018 has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The accounts for the year ended 30 September 2019 have been audited and finalised on the basis of the financial information presented by the Directors in this Preliminary Statement and will be delivered to the Registrar of Companies following the Annual General Meeting.

Accounting Policies

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments.

The same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in the Group's 2018 annual audited financial statements, except as described below.

·; IFRS 9 'Financial Instruments' - the mandatory effective date of implementation is 1 January 2018

·; IFRS 15 'Revenue from Contracts with Customers' - the mandatory effective date of implementation is 1 January 2018

The adoption and impact of these new pronouncements from 1 October 2018 have been disclosed within this note.

Certain changes to IFRS will be applicable to the Group Financial Statements in future years. Set out below are those which are considered to be most relevant to the Group.

Relevant new standards, amendments and interpretations issued but effective subsequent to the year end:

·; IFRS 16 'Leases' - the mandatory effective date of implementation is 1 January 2019

·; Amendment to IFRS 2 'Share-based Payments' - the mandatory effective date of implementation is 1 January 2019

·; IFRIC 22 'Foreign Currency Transactions and Advance Consideration' - the mandatory effective date of implementation is 1 January 2019

·; IFRIC 23 'Uncertainty over Income Tax Treatments' - the mandatory effective date of implementation is 1 January 2019

·; Amendments to IAS 28 'Investments in Associates' - the mandatory effective date of implementation is 1 January 2019

·; Amendments to IAS 19 'Employee Benefits' - the mandatory effective date of implementation is 1 January 2019

As at 30 September 2019, the following standards have not been endorsed by the European Union:

·; Amendment to definition of a business in IFRS 3 'Business Combinations' - the mandatory effective date of implementation is 1 January 2020

·; Amendments to Interest Rate Benchmark Reform - 'Financial Instruments' - IFRS 9, IAS 39 and IFRS 7 - the mandatory effective date of implementation is 1 January 2020

·; Amendments to IAS 1 'Presentation of Financial Statements'- the mandatory effective date of implementation is 1 January 2020

·; Amendments to IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' - the mandatory effective date of implementation is 1 January 2020

·; Amendments to the Conceptual framework - the mandatory effective date of implementation is 1 January 2020

IFRS 9 'Financial Instruments'

The Group adopted IFRS 9 'Financial Instruments' on 1 October 2018. Differences in the carrying amount of financial assets and liabilities resulting from the adoption of IFRS 9 have been recognised in opening reserves as at 1 October 2018 and comparatives have not been restated.

1 Basis of Preparation continued

Classification and measurement of financial assets

Under IFRS 9, financial assets are required to be measured at either amortised cost, fair value through other comprehensive income (FVTOCI) or fair value through profit or loss (FVTPL).

The impact of IFRS 9 on the Group's financial assets are as follows:

·; The Group has elected to classify as FVTOCI the equity financial asset which was previously classified as available-for-sale held at cost less any identified impairment losses in accordance with IAS 39. IFRS 9 allows for an irrevocable election on an instrument-by-instrument basis to classify equity financial assets as either FVTOCI or FVTPL. As a result, fair value movements are now recorded in other comprehensive income. Gains or losses will not be recycled to the income statement on disposal of the investments. The classification of future purchases of equity financial investments will be considered on an individual basis based on their merits. A fair value loss of £0.4m on transition has been recognised in opening fair value reserves.

·; The Group classified the convertible loan note asset as FVTPL as the contractual cash flows are not solely payments of principal and interest on the principal amount outstanding. This asset was previously measured at cost less any identified impairment losses in accordance with IAS 39. At the date of transition, there was no difference between the fair value and carrying value of the asset.

·; The Group has classified its investments in money market funds included in cash and cash equivalents as FVTPL as the contractual cash flows are not solely payments of principal and interest on the principal amount outstanding. These assets were previously classified as amortised cost financial assets under IAS 39. At the date of transition, there was no difference between the fair value and carrying value of the asset.

Trade debt provisions

IFRS 9 introduces a new impairment model which requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses, which was the case under IAS 39. The IFRS 9 impairment model recognises anticipated losses evidenced by both historical recovery rates and forward-looking indicators. The Group has applied the simplified approach for trade receivables and contract assets and recognised the loss allowance at an amount equal to lifetime expected credit losses. The reduction in expected credit loss allowance of £0.8m at 1 October 2018 has been recognised against opening retained earnings. Deferred consideration receivables are considered to have low credit risk and the loss allowance is therefore limited to 12 months expected losses and is not considered material.

Hedge accounting

IFRS 9 introduces a new hedge accounting model with a principles-based approach designed to align the accounting result with the economic hedging strategy. The Group uses cash flow hedge relationships to hedge its exposure to US dollar and euro revenues in its UK businesses and the operation's Canadian dollar cost base in Canada. The Group confirms that its existing hedge relationships continue to qualify as hedges upon the transition to IFRS 9.

Differences between the previous carrying amount and the restated carrying amount at 1 October 2018 are disclosed in the restatement table on page 24.

IFRS 15 'Revenue from Contracts with Customers'

The Group adopted IFRS 15 'Revenue from contracts with customers' on 1 October 2018 and adopted the modified retrospective method. This method recognises the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance sheet in the period of initial application and comparative periods will not be adjusted. There is no material impact on the timing of revenue recognition arising from the implementation of IFRS 15.

Vote revenue and best efforts revenue are treated as variable consideration under IFRS 15. This requires the Group to include an estimate of the variable consideration in the transaction price to the extent that it is highly probable that the related revenue, if recognised, would not be reversed. Any incremental amounts would be included in the transaction price once the confirmation of the vote or the best efforts revenue is given. The assessment of whether an amount of revenue is highly probable may require significant judgement. In some instances, the amount may not be highly probable until the Group has received specific notification of the amount from the customer or has received the payment. In other cases, established relationships, past patterns of behaviour or informal correspondence with the customer may provide sufficient evidence that at least an element of revenue is highly probable before the amount is formally confirmed.

Where multiple services are bundled within one contract, revenue is allocated to the different performance obligations on a relative standalone selling price basis and recognised separately when the performance obligation is satisfied. Where this occurs, the Group's treatment under IAS 18 was consistent with that under IFRS 15.

IFRS 15 requires revenue to be recognised over time where research is unique to a specific customer and where the customer is obligated to pay for the work performed should it terminate the contract. Limited cases of customised research are performed across the Group whereby revenue is recognised over time in line with the stage of completion.

1. Basis of Preparation continued

The Group recognises all costs and commissions to obtain contracts with a term of one year or less when incurred. Commissions which relate to multi-year contracts are recognised as an asset and amortised in line with the proportion of the contract's revenue recognised in the period. The Group does not have significant costs and commissions to obtain contracts with a term of more than one year.

The Group does not adjust the amount of consideration for the effects of a significant financing component if it expects that the period between when the customer pays and when the Group transfers the promised good or service will be one year or less.

Amounts recoverable on contracts relating to accrued income of £1.5m, previously included within trade and other receivables, have been reclassified to contract assets net of the loss allowance. Deferred income has been reclassified as a contract liability as at 1 October 2018.

Accounting policy for revenue

Revenue represents income from subscriptions, advertising, sponsorship and delegate fees, net of value added tax.

·; Subscription revenues for print and online publications and memberships are recognised in the Income Statement on a straight-line basis over the period of the subscription and the satisfaction of the performance obligation, reflecting the pattern over which the customer receives benefits. These revenues are due in advance on a monthly or annual basis.

·; Advertising revenues represent the fees that customers pay in advance to place an advertisement in one or more of the Group's publications, either in print or online, to commission ad hoc consulting and thought leadership projects and to purchase survey reports. Advertising revenues for print publications are recognised in the Income Statement when the publications have been delivered which is when the performance obligation is satisfied. This is the time at which the benefit becomes available to the customer. Revenue for online advertising is recognised on a straight-line basis over the period that the advert is run, reflecting the period over which the customer receives benefit.

·; Events revenues are received in advance and recognised in the Income Statement over the period the event is run.

·; Variable consideration is included in the transaction price to the extent that it is highly probable that the related revenue, if recognised, would not be reversed.

Revenues invoiced but relating to future periods are deferred and treated as contract liabilities in the Statement of Financial Position. The Group does not have individual long-term revenue contracts that are material.

Amounts recoverable on contracts relating to accrued income have been classified to contract assets net of any loss allowance.

IFRS 16 'Leases'

IFRS 16 comes into effect for accounting periods starting on or after 1 January 2019. Therefore for the Group, the standard will be applied from 1 October 2019.

The new standard will change the way in which leases will be recognised and disclosed in the Group's Financial Statements. It also brings into scope contracts which would not previously have been accounted for as leases. The Group also enters into agreements which gives it the rights to specific technology assets that in the future could be accounted for as leases under the new standard. This change in accounting policies will result in the recognition of 'right of use' assets and lease liabilities on the Statement of Financial Position, as well as having an impact on the Group's Income Statement, by replacing rental expense with depreciation and introducing a finance expense where the discount on lease liabilities is unwound.

Upon transition, the Group will apply the modified retrospective adoption of the standard. The right of use assets for the leases will be calculated using a mixture of the 'simplified' and 'asset' methods. Under the 'simplified' method the right of use asset is equal to the present value of future lease payments. Under the 'asset' method the right of use asset is estimated as if IFRS 16 had always been applied. The following practical expedients will be applied on transition:

·; On initial application, IFRS 16 will only apply to contracts that would have previously been classified as leases under IAS 17 'Leases';

·; The Group has relied on its onerous lease assessment instead of performing an impairment review; and

·; Initial direct costs will be excluded from the measurement of the right of use asset at the date of initial application

Following transition the Group will also apply the practical expedient to expense to the Income Statement leases with a term of 12 months or less; and for assets that would have cost less than $5,000.

1. Basis of Preparation continued

Based on the relevant contracts in place at 1 October 2019, an estimate of IFRS 16's impact on the Group's financial statements for the year ended 30 September 2020 is as follows:

Restatements

Discontinued operations

Following the Group's decision to explore the strategic options for Asset Management, the segment has met the recognition criteria of discontinued operations under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' and is therefore presented as such throughout this report. In order to comply with this presentation, the 2018 Income Statement disclosures have been re-presented.

IFRS 9 'Financial Instruments'

The Group has adopted IFRS 9 using the modified retrospective approach. The adjustment on transition has therefore been recognised in opening reserves at 1 October 2018. The Group has applied the simplified approach for trade receivables and contract assets and recognised the loss allowance at an amount equal to lifetime expected credit losses. The reduction in the expected credit loss allowance of £0.8m at 1 October 2018 has been recognised against opening retained earnings. The Group has elected to classify as FVTOCI the equity financial asset which was previously classified as available-for-sale held at cost less any identified impairment losses in accordance with IAS 39. A fair value loss of £0.4m on transition has been recognised in opening fair value reserves. Further details for the adoption of IFRS 9 are on pages 20 and 21.

Payroll taxes

In December 2018, the Group engaged external advisors to undertake an independent review of the Group's compliance with the off-payroll working rules. As a result of the review, the Group has identified an underpayment of payroll taxes to HMRC for the six years to 30 September 2019. A restatement has been made to recognise a historical exposure of £6.6m prior to the current financial period, consisting of £5.4m of payroll taxes underpaid, £0.4m of interest and £0.8m of penalties. The Group notified HMRC that a voluntary disclosure will be made with respect to the Group's Pay as You Earn (PAYE) and National Insurance Contribution (NIC) obligations. This restatement is not excluded from adjusted measures, as defined on page 6, as the related charges are expected to recur.

Value Added Tax (VAT)

During the second half of the year, the Group discovered a VAT exposure in the UK relating to the understatement of VAT on supplies made between entities within the Group in respect of the four years ended 30 September 2018. Based on the current assessment, the exposure at the end of 2018 is £11.0m, consisting of £10.7m of VAT and £0.3m of interest. A further £0.3m of interest accrued in 2019. The 2018 VAT expense has been classified as an exceptional item and the interest has been treated as an adjusted finance expense. As a result, this restatement is excluded from adjusted measures, as defined on page 6, because these charges are not expected to recur.

1. Basis of Preparation continued

The below is a summary of the restatements:

Restatements

1 At 1 October 2017, the Group's net deferred tax liabilities were split between deferred tax assets of £1.6m and deferred tax liabilities of £23.4m. The restatements increased the Group's deferred tax asset from £1.6m to £3.0m. At 30 September 2018, the Group's previously reported net deferred tax liabilities were split between deferred tax assets of £1.3m and deferred tax liabilities of £28.5m. Included within the Group's deferred tax liabilities at 30 September 2018 were UK deferred tax liabilities of £0.9m. The restatements resulted in a restated UK deferred tax asset of £0.8m. The Group's restated deferred tax assets and deferred tax liabilities at 30 September 2018 are £2.2m and £27.6m respectively.

Going concern

Having assessed the principal risks and the other matters discussed in connection with the viability statement, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing this Preliminary Statement.

2. Segmental analysis

Segmental information is presented in respect of the Group's segments and reflects the Group's management and internal reporting structure. The Group is organised into three segments: Asset Management; Pricing, Data & Market Intelligence; and Banking & Finance.

Revenues generated in the Asset Management and Pricing, Data & Market Intelligence segments are primarily from subscriptions. Banking & Finance revenues consist mainly of sponsorship income and delegates revenue. A breakdown of the Group's revenue by type is set out below.

Following the disposal of Mining Indaba (note 11) during the year, the Commodity Events segment has been incorporated into the Pricing, Data & Market Intelligence segment. The segment information for the Mining Indaba business has been reclassified as a sold business.

As a result of the closure of Centre for Investor Education (CIE), the segment information for this business has been reclassified from Asset Management to closed businesses.

Euromoney Financing Events and Thought Leadership have been moved from Banking & Finance to the Pricing, Data & Market Intelligence segment. Global Investor has also moved from Asset Management to the Pricing, Data & Market Intelligence segment. These movements are due to the realignment of how the businesses are managed internally.

The comparative split of segmental revenues, revenue by type, operating profits, acquired intangible amortisation, exceptional items and depreciation and amortisation has been restated to reflect Commodity Events, Euromoney Financing Events, Thought Leadership and Global Investor being incorporated into the Pricing, Data & Market Intelligence segment and Mining Indaba and CIE being reclassified as a sold/closed business.

The Asset Management segment has been classified as discontinued operations (note 8), therefore it is presented as such throughout this report and the 2018 Income Statement disclosures have been re-presented. In 2018, the Global Markets Intelligence Division (GMID) was classified as a discontinued operation and disposed of on 30 April 2018 and is therefore presented as such throughout this report.

Events revenue consists of sponsorship and delegates revenue.

Analysis of the Group's three main geographical areas is also set out to provide additional information on the trading performance of the businesses.

Inter-segment sales are charged at prevailing market rates and shown in the eliminations columns.

2. Segmental analysis continued

Continuing events revenue of £115.5m and print advertising of £13.2m are recognised at a point in time. The remaining subscription and online advertising revenue is recognised over time.

2. Segmental analysis continued

1 Operating profit including discontinued operations of Asset Management before acquired intangible amortisation and exceptional items. A detailed reconciliation of the Group's statutory results to the adjusted and underlying results is set out on pages 6 to 11.

2 Acquired intangible amortisation represents amortisation of acquisition-related non-goodwill assets such as trademarks and brands, customer relationships, databases and software (note 9).

2. Segmental analysis continued

The closing net book value of goodwill, other intangible assets, property, plant and equipment and investments is analysed by geographic area as follows:

The Group has taken advantage of paragraph 23 of IFRS 8 'Operating Segments' and does not provide segmental analysis of net assets as this information is not used by the Directors in operational decision making or monitoring of business performance.

3. Exceptional items

Exceptional items are items of income or expense considered by the Directors as being significant, non-recurring and which require additional disclosure in order to provide an indication of the underlying trading performance of the Group.

For the year ended 30 September 2019, the Group recognised a continuing operations exceptional credit of £6.4m.

The Group sold Mining Indaba for a profit of £17.0m (note 11).

3. Exceptional items continued

The impairment charge relates to goodwill of £2.4m resulting from the closure of Centre for Investor Education (CIE). Costs associated with this closure are included in the other exceptional costs and restructuring.

The Trustees of the Metal Bulletin plc Pension Scheme, which is a defined benefit scheme, changed the scheme rules for the underlying index of deferred revaluation from RPI to CPI, which resulted in a £1.2m reduction in the net pension deficit.

Other exceptional (costs)/income consist of the recognition of the earn-out payments of £2.5m for the acquisitions of Site Seven Media Ltd (TowerXchange) and Random Lengths which are treated as compensation costs. It is Group policy to treat, as exceptional, significant earn-out payments required by IFRS to be recognised as a compensation cost. The acquisition-related costs of £5.4m for Random Lengths, BoardEx and The Deal (note 11) are treated as exceptional due to the magnitude of the costs associated with the acquisitions. Significant costs associated with an acquisition project that did not complete of £1.2m are treated as exceptional items. The remaining costs are as a result of a strategic review undertaken for the major restructuring of CIE have been treated as exceptional items. Normal restructuring costs are not treated as exceptional items.

The Group's tax charge includes a related tax charge on the continuing operations exceptional items of £2.8m (note 5).

The discontinued operations have incurred exceptional costs, including engaging with advisors to assist with the strategic review of Asset Management. These exceptional costs of £1.7m have been disclosed separately (note 8). The exceptional items incurred by the discontinued operation relate to a strategic review undertaken for the major restructuring of certain businesses. The Group's tax charge includes a related tax credit on the discontinued operations exceptional items of £0.2m (note 5).

For the year ended 30 September 2018, the Group recognised a continuing operations exceptional credit of £79.9m.

The Group sold Adhesion (profit £9.8m), World Bulk Wine (profit £0.9m) and Institutional Investor Journals (profit £4.4m) which resulted in a net profit of £15.1m. The disposal of the associate investment in Dealogic resulted in a profit of £71.7m.

The impairment charge related to a goodwill impairment of £3.0m for Layer123 Events and Training Limited (Layer123). The impairment of Layer123 was a result of its disappointing financial performance post acquisition.

Other exceptional (costs)/income consisted of restructuring costs, earn-out payments treated as compensation costs and acquisition related costs offset by the favourable settlement of the legal dispute with the previous owners of CIE. The acquisition related costs of Random Lengths were treated as exceptional due to the magnitude of the costs associated with the acquisition. Acquisition costs for smaller acquisitions were not treated as exceptional.

The 2018 exceptional charge has been restated for the VAT underpayment of £5.3m (note 1).

The Group's tax charge included a related tax charge on the continuing operations exceptional items of £12.1m (note 5).

The Asset Management discontinued operations exceptional items related to costs as a result of a strategic review undertaken for the major restructuring of certain businesses. Normal restructuring costs are not treated as exceptional items.

4. Finance income and expense

The 2018 finance expense has been restated for the payroll taxes (£0.2m) and VAT underpayments (£0.2m) to reflect the estimated interest related to these exposures as detailed in note 1.

The reconciliation of net finance costs in the Income Statement has been provided since the Directors consider it necessary in order to provide an indication of the adjusted net finance costs (page 7).

Charges and credits relating to the movements in acquisition commitments and deferred consideration reflect future payments and receipts expected on historical transactions that do not directly relate to the current year results.

The Group's convertible loan note asset is measured at fair value through profit or loss (FVTPL) (note 1). The fair value remeasurement is an adjusting item as it relates to historical M&A activity rather than the current trading performance and is as a result of the revaluation of the convertible loan note as at 30 September 2019.

Other items in the adjusted net finance costs consist of interest income of £0.2m (September 2018: £0.6m charge) for movements in respect of uncertain tax positions. Finance costs of £0.3m (2018: £0.2m) as a result of the VAT underpayment are excluded as the related charge is not expected to recur. In addition, at 30 September 2018, the other items included a gain realised on the close-out of the interest rate swaps of £2.1m offset by the write-off of capitalised borrowing costs of £0.9m following the repayment of the Group's term loan. The net gain was excluded from adjusted finance costs as it would not have crystallised had the disposal of GMID not completed.

5 Tax expense on profit

The adjusted effective tax rate for the year is set out below:

The Group presents the above adjusted effective tax rate reconciliation to help users of this report better understand its tax charge. In arriving at this rate, the Group removes the tax effect of exceptional and adjusting items that reconcile statutory to adjusted profit. A detailed reconciliation of the Group's statutory results to the adjusted and underlying results is set out on pages 6 to 11. The Group excludes the deferred tax effects of intangible assets and goodwill, as the Group considers that this more accurately reflects its expected cash tax payable position. The deferred tax effects on goodwill and intangible items would only crystallise in the event of a disposal and that is not the current intention.

5. Tax expense on profit continued

Tax on exceptional items are excluded as exceptional items are adjusted in terms of the Group policy. For the year ended 30 September 2019, tax on exceptional items relates largely to tax on gain on the disposal of Indaba of £3.2m. Adjustments in respect of prior years are excluded on the basis that they relate mainly to finalisation of US tax reform related items which are one off in nature. Share of tax on profits of associates and joint ventures is calculated on the adjusted profits of associates and joint ventures and excludes tax on exceptional items consistent with the Group's historical approach and policy.

The actual tax expense for the year is different from the UK blended rate of 19% of profit before tax for the reasons set out in the following reconciliation: