Half-year Report 2020

Euromoney

Institutional

Investor PLC

Half Year Report 2020

Euromoney Institutional Investor PLC

("Euromoney")

Half Year results

4 June 2020

Strongly positioned in challenging environment

Euromoney, the international information business providing essential B2B information to global and specialist markets, announces results for the six months ended 31 March 2020.

1 A detailed reconciliation of the Group's adjusted and underlying results is set out on pages 6 to 9 of this statement.

2 Underlying measures are 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 event and publication timing differences.

Strategic and operational highlights

Financial highlights

Andrew Rashbass, CEO, 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".

Operating Review

The first half of the year saw growth in revenue of 1%, reflecting the performance of our Pricing and Data & Market Intelligence segments and the contribution from acquisitions, partially offset by the impact of covid-19 on events and the performance of our Asset Management businesses. On an underlying basis revenue was flat, with growth in both Pricing and Data & Market Intelligence, offset by continued headwinds in Asset Management. Towards the end of this period, Euromoney experienced disruption to its business across much of the world as a result of covid-19. Commencing in February, we started to cancel or postpone live events as a result of covid-19, as governments and corporations placed restrictions on travel and face-to-face meetings. Events cancelled and postponed as a result of covid-19 reduced revenue growth by 5ppt and operating margin by 2ppt. We have already run 44 virtual events during the covid-19 affected period. During these unprecedented times Euromoney's priority has been the health and wellbeing of employees, customers and business partners.

Euromoney's 3.0 strategy of focusing on content embedded in the workflow meeting critical customer needs is more relevant than ever. Over time the strategy will increase the proportion of revenues derived from recurring subscriptions, which was 68% in the period. Aligned with this strategy, Euromoney made two highly complementary acquisitions in the half year. On 25 November 2019, Euromoney announced the acquisition of Wealth-X for $21.4 million. Wealth-X is the market-leading provider of data-driven intelligence on the world's wealthiest individuals and is a strong strategic fit with BoardEx, the executive profiling and relationship mapping business. On 9 March 2020, Euromoney acquired Census Commodity Data, which primarily operates through its brand AgriCensus and serves as a Price Reporting Agency (PRA) for the global agricultural commodity markets.

On 30 April 2020, Euromoney announced the conclusion of the strategic review of its Asset Management businesses, which consist of Institutional Investor, BCA Research and NDR. Following an extensive review process, we concluded that the best outcome for shareholder value is for Euromoney to remain the long-term owner of all three businesses, which have high levels of recurring subscription revenue, attractive profit margins and strong market positions. Euromoney is pursuing a strategy aimed at returning the Asset Management segment to growth, based on continued investment in sales and marketing; increased cross-selling of products; closer alignment of the businesses and new product development opportunities. In the period the business experienced an encouraging strengthening in renewal rates.

Revenue increased 1% to £186.3m. Underlying revenue was flat with 4% underlying growth from Data & Market Intelligence and 3% from Pricing, offset by Asset Management, where underlying revenue declined 5%. Subscription revenue increased by 1% on an underlying basis. Pricing subscription revenue grew 8% and Data & Market Intelligence subscription revenue grew 6%, offsetting a 6% decline in the Asset Management segment. Events revenue, which represent 24% of total revenue, declined by 3% on an underlying basis. Events in the Data & Market Intelligence segment were flat on an underlying basis but events in the Asset Management and Pricing segments both declined. Advertising and other revenue, which represented 8% of total revenue, grew by 3% on an underlying basis.

On an underlying basis adjusted operating profit increased 1%, with growth in Pricing and lower central costs partly offset by a decline in Asset Management. Adjusted operating profit of £41.1m declined by 11% primarily as a result of events cancelled or postponed as a result of covid-19. The adjusted operating profit margin declined by 3ppt compared to last year mainly due to events cancelled or postponed as a result of covid-19 and acquisitions. Adjusted profit before tax declined 15%, reflecting lower operating profit and higher interest costs, which was mainly due to the adoption of IFRS 16. Adjusted diluted earnings per share declined 13% to 29.7p (2019: 34.3p). Statutory profit before tax was £37.4m (2019: £49.3m).

Segmental Review

As previously announced, for the current financial year Euromoney is reporting under three new segments: Asset Management; Pricing; and Data & Market Intelligence. Fastmarkets, the PRA, is reported as a separate Pricing segment. Data & Market Intelligence is made up of the Telecoms division and the Financial & Professional Services division, which delivers workflow solutions, market intelligence and business development services, primarily to financial and professional services customers.

Adjusted results for the six months ended 31 March 2020

1 Values shown above are adjusted, and growth percentages underlying and compared to the first half last year. Underlying and adjusted measures are explained on pages 6 to 9 of the appendix to this statement.

Asset Management

Asset Management revenue (35% of total revenue) decreased 6% on an adjusted and statutory basis and was down 5% on an underlying basis, with continued declines in subscriptions, down 6%, in line with the performance in the last financial year. Advertising and other revenue grew, driven by strong sales in Institutional Investor media and research. In the Investment Research Division (IRD) renewal rates progressively increased during the period. IRD new sales have improved since September 2019, up until the impact of covid-19, benefiting from the investment in sales and marketing and higher client demand for high quality independent research. The combination of stronger renewal rates and improved new business is targeted to return the non-vote subscription Book of Business1 to growth by the end of financial year 2022. Book-of-business will earn out into subsequent revenue growth which is targeted for the financial year 2023.

Asset Management adjusted operating profit decreased 11% and 10% on an underlying basis, driven by the decline in subscriptions at IRD.

Following the conclusion of the strategic review, Asset Management is no longer reported as discontinued operations and held for sale in the Condensed Consolidated Interim Financial Statements.

Pricing

Revenue in the Pricing segment (24% of total revenue) declined 1%, with operating profit growing 1%. On an underlying basis revenue grew 3%, with underlying profit growth of 6%. Subscription revenue, which accounts for 81% of total segment revenue, grew 8% underlying, with continued strong data-licensing sales. During the course of the half year Pricing experienced some impact on new sales and renewals from Asia focused clients as a result of Asia being affected by covid-19 earlier than the rest of the world. Events revenue, which account for 14% of segment revenue, declined on an underlying basis, continuing the soft trend previously disclosed at the Q1.

The Pricing segment continues to invest in future growth. The roll-out of the new Fastmarkets platform continued and is delivering enhanced value to customers. Fastmarkets is increasing the number of prices that go through the rigorous IOSCO assurance process, with a total now of 21. Following the acquisition of AgriCensus, agricultural commodities have become Fastmarkets' third commodity vertical in addition to its leading market position in forest products and metals and mining. AgriCensus provides much-needed price discovery in opaque, global and increasingly sophisticated markets and is leveraging Fastmarkets' established reputation in pricing and access to its global PRA infrastructure.

Data & Market Intelligence

The Data & Market Intelligence segment (41% total revenue) includes the newly formed Financial & Professional Services division, which brings together complementary brands that deliver domain expertise and relevance for clients via embedded workflow solutions and events. We are investing in technology and product management to create efficiency and scale across the division.

DMI segment revenue increased 9% on an adjusted and statutory basis, with underlying revenue growth of 4% and benefit from acquisitions partly offset by events cancelled and postponed as a result of covid-19. Subscription revenue, which accounts for 45% of segment revenue, increased by 6% on an underlying basis, benefiting from strong growth in our People Intelligence and Next Gen pillars. Renewal rates remained high during the period, demonstrating the stickiness of solutions embedded in clients' workflow. Events revenue was flat on an underlying basis.

The acquisition of Wealth-X, the market-leading provider of data-driven intelligence on the world's wealthiest individuals complements BoardEx, a leader in executive profiling and relationship mapping. These businesses delivered combined underlying revenue growth of 11%.

Adjusted operating profit declined 30%, mainly due to cancellation and postponement of events. Underlying operating profit declined 1% as a result of previously announced investment to drive revenue growth.

Other Financial Information

Tax

The Group's statutory effective tax rate is -8% for the period ended 31 March 2020 compared to 28% in the first half of 2019. The decrease is driven by large current and deferred tax credits in respect of amendments to US corporate state income tax filings and the recognition of state tax losses respectively, which was partially offset by a tax charge arising on exceptional items. The basis for the calculation of the effective tax rate and further details relating to the US state income tax adjustment can be found in note 7.

The adjusted effective tax rate for the period ended 31 March 2020 is 19% (2019: 20%) which is based on adjusted profit before tax and excludes deferred tax movements on intangible assets, tax on exceptional items, prior year items and other tax adjusting items as described below. The tax rate in each year depends mainly on the geographic mix of profits as well as on applicable tax rates and although the tax charge involves a level of estimate, we expect it to be 20% for the full year ending 30 September 2020. The adjusted effective tax rate for the full year is slightly higher as a shift in the geographic mix of profits, which will result in a higher proportion of profits being taxed in jurisdictions with higher corporation tax rates, is anticipated to occur largely in the second half of the year.

The Group has made a number of successful tax settlements in the first half of the year:

1 Book of business is the annual contracted values for subscriptions and is shown at constant GBP/$ rate adjusted for net M&A (%).

More details on these are included in notes 2, 5, 6 and 7.

Exceptional items

The exceptional credit of £8.4m relates to the release of the provisions referred to above for UK VAT and payroll taxes, partially offset by other acquisition related exceptional costs and the cost of the Asset Management strategic review.

Dividend

As previously announced, the Board is adopting a prudent approach to shareholder distributions and will not declare an interim dividend payment for the financial year 2020, resulting in a cash saving of approximately £12m. The Board will consider the final dividend in November 2020, when it has better visibility on the business environment.

Net cash and cash flow

Net cash at 31 March 2020 was £8.1m, excluding lease liabilities, compared with net cash of £50.1m at 30 September 2019. The overall decrease in net cash largely reflects a £24.0m outflow for the acquisition of Wealth-X and AgriCensus and dividend payments of £24.0m. The Group's underlying operating cash conversion for the 12 months to 31 March 2020 was 87% (2019: 98%). The lower cash conversion rate resulted from continuing weakness in Asset Management and the impact of covid-19 on cancelled or postponed events.

In April 2020 the Group's committed bank facility was extended to December 2022 and the limit was reduced to £188m. As at 31 March 2020 the Group had drawn down £68m of this facility. The £130m uncommitted accordion facility is also still available. On 11 May 2020 Euromoney was confirmed in principle as an eligible issuer for the Covid Corporate Financing Facility with an issuer limit of £125m.

Currency

The Group generates approximately 75% of its revenues in US dollars, including approximately 40% of its UK revenues in its UK-based businesses. Approximately two thirds of its operating profits are US dollar-denominated. 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 six months to 31 March 2020 was $1.289 (2019: $1.294). This improved headline revenue growth rates for the year by approximately half a percentage point and adjusted profit before tax by £1.5m. 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, which resulted in a gain of £0.2m (2019: £0.6m loss) in the period.

Outlook

The short-term outlook for face-to-face events remains uncertain due to government and client companies' restrictions on travel and meetings. Due to Euromoney's nimble events execution, we expect to return to running face-to-face events rapidly when restrictions are lifted.

Our strategy of focusing on 3.0 businesses, where content is deeply embedded in customers' workflow, is more relevant than ever. However, as previously disclosed, the effect of covid-19 on broader economic activity is likely to result in customers delaying purchasing decisions. Trading in April and May has been substantially in line with recent trends.

We are committed to our growth plan for the Asset Management segment and encouraged by the pre-covid-19 signs of improvement following our investment in that business. We are targeting to return IRD's non-vote Book of Business to growth by the end of FY22 (IRD's non-vote revenue accounted for 51% of segment revenue in FY19) which should lead to subsequent revenue growth as the Book of Business earns out into revenue.

Net cash at 30 April 2020 was £8.3m. Euromoney has taken rapid action to reduce costs and preserve cash including minimising non-contractual spend, postponing capex, making cuts in salary and fees for Directors and not declaring an interim dividend. We expect to make net cash cost savings of approximately £20m in the second half of the current financial year, with net P&L cost savings of approximately £7m. These actions further support our robust balance sheet and allow us to maintain investment in future growth and continue with small acquisitions.

END

 For further information, please contact:

Euromoney Institutional Investor PLC

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

Chris Collett, Investor Relations:+44 (0)20 7779 8636; [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 price 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 Half Year Report ("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 Half Year Report

Reconciliation of Condensed Consolidated Income Statement to adjusted results for the six months ended 31 March 2020

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 the following types of exceptional income, charges and non-cash items.

In the 2019 Annual Report and Accounts adjusted results included continuing operations and discontinued operations for Asset Management. As outlined in note 2, Asset Management no longer meets the discontinued operations classification and all of the results are presented as continuing operations in the 2020 Half Year Report.

Adjusted figures are presented before the impact of amortisation of acquired intangible assets (comprising trademarks and brands, databases and customer relationships); exceptional items; share of associates' and joint ventures' acquired intangibles 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 as being 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 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. The accounting policy for exceptional items can be found in note 1 to the Group's 2019 Annual Report.

During the second half of 2019, the Group provided for a potential payroll taxes liability of £8.2m in respect of off-payroll workers. In February 2020, a settlement was agreed with HMRC of £1.2m and the remaining provision was released. The Group also provided for a VAT exposure of £11.3m relating to the understatement of UK VAT on intra-group transactions in respect of the four years ended 30 September 2018. During the first half of 2020, the Group engaged with HMRC on the matter and on 11 May 2020, was notified by HMRC that no VAT was due on these transactions. The provision was therefore released in full as an adjusting post balance sheet event (note 18). The release of the provisions for the payroll taxes and VAT have been classified as exceptional items and the related interest has been treated as adjusted finance income because these items are not expected to recur.

Adjusted finance costs exclude interest arising on any uncertain tax provisions, as these provisions are not in the ordinary course of business and relate to tax adjusting items.

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 £6.2m release of a provision recognised in the year ended 30 September 2019 in relation to liabilities for payroll taxes for off payroll staff and of the release of a provision held for potential VAT liabilities on UK intercompany payments which HMRC have determined are not due. Prior year items primarily relate to amendments made to the US corporate state income tax filings in New York and New York City, which changed the basis of filing from entity by entity to combined reporting. 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 3, 5, 6, 7, 11 and 12 to the Condensed Consolidated Interim Financial Statements.

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 Condensed Consolidated Income Statement that the Directors consider necessary to provide useful and comparable information about the Group's adjusted trading performance.

1 In the 2019 Annual Report and Accounts the results for the year ended 30 September 2019 were split between continuing and discontinued operations. As outlined in notes 1 and 2, Asset Management no longer meets the classification criteria of discontinued operations and all of the results are presented as continuing operations in the 2020 Half Year Report.

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 adjusted results and are stated:

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 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 period ended 31 March 2020, exceptional items largely consist of cash paid in the acquisition of new business and to support the strategic review of Asset Management, offset by a release of a provision for payroll taxes and VAT liabilities (note 5). For the period ended 31 March 2019 and year ended 30 September 2019 exceptional items largely consisted of cash payments for acquisition and disposal costs and deferred compensation costs in relation to acquisitions. The other working capital movements in 2019 were largely the result of the landlord's contribution to the fit-out of the New York office which was being amortised over the period of the lease and the rent-free period of the London and New York offices. At the half year, an underlying 12-month cash conversion percentage is used to eliminate any seasonality.

Net cash

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

The bank covenant ratio uses an average exchange rate in the calculation of net debt and includes discontinued operations 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 bank covenant ratio is adjusted to remove the impact of IFRS 16. This means that the adjusted EBITDA for covenant compliance calculations includes an entry for the rental expense which would have been recognised for the Group's leases had the transition to IFRS 16 not taken place. To be consistent with the bank covenant calculations, net cash is defined to exclude lease liabilities.

Principal risks and uncertainties

An overall increasing risk trend

The principal risks and uncertainties that affect the Group are described in detail on pages 43 to 52 of the 2019 Annual Report available at www.euromoneyplc.com. They are:

(1) Downturn in key geographic region or market sector

(2) Product and market transformation/disruption

(3) Exposure to US dollar exchange rate

(4) Information security breach resulting in challenge to data integrity

(5) A failure to comply with law, regulation or contractual obligations resulting in financial loss and/or reputational damage

(6) Material disruption to business operations, resulting in financial loss or reputational damage

(7) Failure to execute acquisitions or disposals in line with strategy

(8) Uncertain tax liabilities

(9) Failure to implement the strategy effectively due to failure to attract or retain staff

(10) Business risks arising from the global geopolitical environment

(11) Under-investment in products and technology

Although the Group still considers these to be the most relevant risks and uncertainties, the Board's view is that, because of covid-19, the overall risk trend for the Group is increasing.

Covid-19 is impacting the Group's staff, customers, shareholders and suppliers as well as the Group's financial performance. Capital is generally less available and therefore preserving cash is a priority. Our investors are impacted both through share price volatility as well as the decision not to pay an interim dividend at the half-year. As a result, the risk trend for certain of the Group's Principal Risks is trending upwards. These are: (1) (Downturn in key geographic region or market sector), (2) (Product and market transformation/disruption), (4) Information security breach resulting in challenge to data integrity), (6) (Material disruption to business operations) and (7) (Failure to execute acquisitions or disposals in line with strategy).

Disruption to business operations (Risk 6)

Like most businesses, irrespective of size or location, covid-19 is significantly and adversely disrupting the Group's general business operations. For example, most of our offices are closed; most of our staff are working from their homes; and we cannot travel to visit our customers in most countries.

This general impact on business operations has a knock-on effect on other specific principal risks.

Downturn and disruption in the events sector (Risks 1 and 2)

A significant percentage of the Group's revenue and profit is generated by its event businesses. We have reported that, given governments' restrictions on travel and attending gatherings, we have postponed or cancelled the majority of events originally scheduled to take place from March up to and including September. This is having a material impact on the Group's financial performance since it is currently not possible to put physical events on for customers irrespective of size or location. We are taking steps to mitigate the impact of this by planning for, and hosting, virtual events as well as planning for the future safe operation of physical events by employing social distancing measures. However, the impact of these mitigating actions is far outweighed by the impact on the Group's inability to operate its events as anticipated at the start of the year. The disruption extends more widely than events as our subscriptions and advertising businesses adapt to new ways of working and interacting with their customers. Our customers are facing their own disruption which in turn may impact their ability to buy the Group's services.

Potential slow-down in M&A activity (Risk 7)

It is likely that that this risk is increasing. One of the Group's three strategic pillars is to 'Actively manage the portfolio' and, in the short-term at least, the Group will need to balance portfolio management with the preservation of cash. In addition, the current environment does not lend itself to necessarily selling assets at optimum value, therefore making it more challenging to recycle capital.

Information security risk also on the increase (Risk 4)

Covid-19 is also resulting in an upward trend for Risk (4) (Information security breach) since phishing attacks, criminal cyber-activity and other scams are reportedly increasing as home-workers are targeted. Staff are also less used to managing confidential information and personal data from home. This is particularly the case for staff working in house-shares and without secure areas to work in their homes. However, we have strengthened our controls in this area, by providing online training and guidance on how to securely work from home for all staff. Senior management, including the CEO, CIO and CISO, continue to monitor this closely. Therefore, while the trend is increasing, we do not believe the upward trend is sufficiently large to require a change to our positioning of this risk on the Group's risk matrix.

The Board continues to prioritise the management of risk

The Board is focused on taking the steps necessary to navigate the Group through this crisis and mitigating its impact, which will include a regular and robust assessment and management of the Group's risks. Both the Board and management are mindful that risk trends may change quickly as the covid-19 landscape changes, for example litigation risk may potentially increase as market participants consider litigation as a potential avenue for recovering their covid-19 losses.

A number of these risks and uncertainties could have an impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ from expected and historical results.

The risk matrix is available from the link below (updated to illustrate the impact of covid-19), it shows the relative likelihood of the principal risks crystallising and their potential impact on the Group. The risks are shown as post-mitigation residual risks.

http://www.rns-pdf.londonstockexchange.com/rns/8933O_1-2020-6-3.pdf

Condensed Consolidated Income Statement

for the six months ended 31 March 2020

1 In the 2019 Annual Report and Accounts the results for the year ended 30 September 2019 were split between continuing and discontinued operations. As outlined in notes 1 and 2, Asset Management no longer meets the classification criteria of discontinued operations and all of the results are presented as continuing operations in the 2020 Half Year Report.

A detailed reconciliation of the Group's statutory results to the adjusted results is set out in the appendix to the Half Year Report on pages 6 to 8.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2020

Condensed Consolidated Statement of Financial Position

as at 31 March 2020

Condensed Consolidated Statement of Financial Position continued

as at 31 March 2020

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2020

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2019

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 (ESOT) and Euromoney Employee Share Trust (EEST).

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.

Condensed Consolidated Statement of Cash Flows

for the six months ended 31 March 2020

Notes to the Condensed Consolidated Interim Financial Statements

1 Basis of preparation

Euromoney Institutional Investor PLC (the 'Company') is a company incorporated in the United Kingdom.

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group') and equity-account the Group's interest in joint ventures and associates.

This Half Year Report was approved by the Board of Directors on 3 June 2020.

These condensed consolidated interim financial statements have been prepared in accordance with the disclosure and transparency rules of the Financial Conduct Authority and using accounting policies consistent with International Financial Reporting Standards as adopted by the European Union and in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting'.

The financial information for the year ended 30 September 2019 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.

Changes of accounting policies

IFRS 16 'Leases'

On 1 October 2019 the Group adopted IFRS 16, 'Leases', using the modified retrospective transition method. As permitted under the specific transitional provisions in the Standard, comparatives for 2019 have not been restated and the cumulative impact on the Group's financial statements has been applied by adjusting the relevant opening balances on 1 October 2019.

On adoption of IFRS 16, the Group recognised liabilities for a number of leases for office premises, which had previously been classified as operating leases, in accordance with IAS 17, 'Leases'. These have been measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate (IBR) determined for each lease. The weighted average IBR applied to the leases on transition at 1 October 2019 was 2.77%. The Group did not have any leases which would have been classified as finance leases, under IAS 17. The right of use (ROU) assets were recognised using a mixture of the 'simplified' and 'asset' transition 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 calculated as if IFRS 16 had always been applied.

A reconciliation of the operating lease commitments disclosed in the 2019 Annual Report and Accounts to the lease liabilities on transition to IFRS 16 is as follows:

1 Commitments for access to shared workspaces where it has been determined that 'right of use' criteria specified in IFRS 16 have not been met.

The change in accounting policy affected the following items in the balance sheet on 1 October 2019:

2 All of the right of use assets relate to property.

The carrying value of ROU assets at 31 March 2020 was £57.9m. This is disclosed within Property, plant and equipment on the Condensed Consolidated Statement of Financial Position. The carrying value of the lease liabilities at 31 March 2020 was £8.9m in current liabilities and £64.8m in non-current liabilities.

Under the previous accounting treatment, lease expenses were charged to the Income Statement on a straight-line basis as an operating expense. Under IFRS 16, a depreciation charge is recognised on the right of use assets and a finance expense recognised arising from the lease liability. While the total expense over the life of the lease will be consistent, the charge in any one year could be different.

The change in accounting policy for the leases on transition will reduce the Group's earnings per share by 0.4p in 2020.

The Group has taken advantage of the following practical expedients when implementing IFRS 16, as allowed by the standard:

Following transition, the Group has also applied 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.

Leases accounting policy:

The Group recognises all leases on the Statement of Financial Position, apart from in cases where the lease is for a period of less than 12 months or is for an asset with a low value. Lease liabilities are recognised at the present value of future lease payments, determined using the implicit interest rate in the lease where available, or using an incremental borrowing rate appropriate to the subsidiary and lease term where an implicit interest rate is not available or appropriate.

A corresponding right of use asset is recognised, equivalent to the value of the lease liability which is depreciated in a straight line over the shorter of the useful economic life of the asset and the lease term. The depreciation is recognised as an administrative expense within overheads.

The unwinding of the discount on the present value of the lease liability is recognised as a finance charge over the lease term. Rent payments are used to reduce the lease liability and are disclosed as debt repayments in the Statement of Cash Flows.

Lease terms include any options to extend when it is more likely than not that the extension will be taken.

Low value and short-term leases continue to be charged to the Income Statement on a straight-line basis.

The Group's leases relate to property, mainly offices.

Accounting policies

The Condensed Consolidated Interim Financial Statements has been prepared under the historical cost convention, except for the revaluation of certain financial instruments.

Apart from the aforementioned amendments and interpretations adopted in 2020, the same accounting policies, presentation and methods of computation are followed in these condensed consolidated interim financial statements as were applied in the Group's latest annual audited financial statements.

Taxes on income in the half year are accrued using the tax rate that would be applicable to expected total annual profit or loss.

Restatements

Following the conclusion of the strategic review of Asset Management, as outlined in note 2, the segment no longer meets the classification criteria of discontinued operations and held for sale. As a result, the Income Statement will no longer be split into continuing and discontinued operations, for either 2019 or 2020. The assets and liabilities on the Statement of Financial Position remain classified as held for sale at 30 September 2019 as the business was held for sale at that point.

The balances disclosed as held for sale at 30 September 2019 were as follows:

Going concern, debt covenants and liquidity

The financial position of the Group, its cash flows and liquidity position are set out in detail in this Half Year Report. At 31 March 2020, the Group's net cash position was £8.1m, comprising of cash and cash equivalents, less amounts borrowed through the Group's revolving credit facility. At 31 March the Group had access to a committed £240m multi-currency revolving credit facility, available until December 2021. The facility's covenant requires the Group's net debt to be no more than three times adjusted 12-month EBITDA and requires minimum levels of interest cover of three times on a 12-month basis. The values and foreign exchange rates used in the covenant calculations are subject to adjustments from the statutory numbers as defined under the terms of the facility agreement. The Group drew down on its revolving credit facility in March 2020 by £67.9m. At 31 March 2020, the Group's net cash to adjusted EBITDA covenant was 0.07 times and the committed undrawn facility available was £171m.

Since 31 March 2020, the Group's revolving credit facility was extended to December 2022 and the limit on the facility has been reduced to £188m (note 18).

The uncertainty as to the future impact on the Group of the recent covid-19 outbreak has been considered as part of the Group's adoption of the going concern basis. The Group has not identified any material uncertainties in its going concern assessment. As previously announced the Group has cancelled the majority of its events up to and including September 2020 and the effect of covid-19 on broader economic activity could impact the ability to generate new sales.

The Group has taken swift and decisive action to reduce costs and preserve cash, while supporting employees, serving customers and protecting the long-term health of the business. The Group has already taken steps to minimise non-contractual spend, postpone capital expenditure, freeze pay, limit new hires, utilise the furlough scheme, swapping an element of salaries for shares, run virtual events and not declaring an interim dividend.

Taking into account reasonably possible changes in trading performance, the Group's forecasts and projections, out to September 2021, show that the Group should be able to operate within the level and covenants of its current and available borrowing facilities.

Based on the Group's cash flow forecasts and projections, the Board is satisfied that the Group will be able to operate for a period extending to at least 12 months from the date of signing of this Half Year Report, including the impact of any potential transactions that are planned or expected to complete within this period. For this reason, the Group continues to adopt the going concern basis in preparing its financial statements. 

2 Key judgements and estimates

The key judgement areas and estimates adopted in preparing this Half Year Report are consistent with that of the disclosure in note 2 of the 2019 Annual Report and Accounts, apart from the following:

Discontinued operations and disposal groups classified as held for sale

In the 2019 Annual Report and Accounts the Asset Management segment was classified as a discontinued operation and held for sale, in accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations'. The 2019 results were disclosed separately from continuing operations in the Income Statement and its assets and liabilities were reported in a single line on the Statement of Financial Position, within current assets and current liabilities respectively. As at 31 March 2020, the progress of the strategic review meant that the sale was no longer highly probable. This was confirmed by the conclusion of the strategic review on 30 April 2020, whereby it was announced that the Group is to remain the long-term owner of Asset Management. Therefore, the segment no longer meets the classification criteria of discontinued operations and assets held for sale.

Goodwill and other intangibles impairment

At 31 March 2020, the Group has £672.7m of goodwill and acquired intangible assets (30 September 2019: £659.0m including Asset Management). The Group assesses, at each reporting period, whether there is an indication that an asset might be impaired, and if such indication exists, an estimate of the asset's recoverable amount is determined. The recoverable amount is the higher of an asset's value in use or fair value less costs of disposal.

The covid-19 pandemic has resulted in the cancellation or postponement of the majority of the Group's events from March up to and including September. More widely, the Group's subscriptions and advertising businesses are adapting to new ways of working and interacting with their customers. These factors, combined, have been identified as indicators of potential impairment. Key assumptions in calculating the net present value are the forecast cash flows, the long-term growth rate of the applicable groups of cash generating units and the discount rate applied to those cash flows. The methodologies applied and key assumptions are disclosed in note 12. The cash flow forecasts have been updated to reflect the current assumptions of the impact of covid-19 which are dependent on the length and shape of the global market recovery. The impairment assessments indicated that the net assets of each group of cash generating units are recoverable and no impairment at 31 March 2020 has been recognised. 

Retirement benefit schemes

The Group operates the Metal Bulletin plc Pension Scheme (MBPS) and participates in the Harmsworth Pension Scheme (HPS), both of which are defined benefit schemes that are closed to new entrants. The financial assumptions have been reviewed and adjusted to reflect the latest market rates, reducing the net pension deficit from £6.2m at 30 September 2019 to £1.1m at 31 March 2020 across the two schemes, as shown below:

The covid-19 pandemic has already led to considerable volatility in corporate bond yields, this may continue and cause significant changes in scheme liabilities over the 2020 and 2021 financial years. The fair value of plan assets is also expected to be volatile in the short term due to uncertain market conditions. The composition of the plan assets in the respective schemes is consistent with that disclosed in the 2019 Annual Report and Accounts. The discount rate used to value the plan assets was 2.2%. A 0.1% decrease in the discount rate would increase the MBPS net pension deficit by £1.0m and reduce the HPS net pension surplus by £0.4m. 

Taxation

US corporations are required to file state income tax returns for New York and New York City (NY and NYC) on a combined basis if they conduct a unitary business and have common ownership or control. All US entities within the Group are under common control, however, whether the entities conduct a unitary business is a matter of judgement for the Group. There is no single test under US tax law for determining whether a unitary business exists and each case must be considered on its own unique facts. The Group judges that the US Group entities have conducted a unitary business since FY16 and therefore the NY and NYC income tax returns should be filed on a combined basis. Further details are disclosed in note 7.