Interim Results 2013

May 16 2013

EUROMONEY INSTITUTIONAL INVESTOR PLC

INTERIM FINANCIAL REPORT FOR THE SIX MONTHS TO MARCH 31 2013

Chairman's Statement

·; Revenues down 1% to £187.3m, as expected

·; Revenues excluding event timing differences up 1%

·; Subscriptions return to growth in second quarter

·; Adjusted profit before tax up 8% to £52.4m

·; Adjusted operating margin unchanged at 30%

·; Increased investment in new products and digital migration

·; Net debt remains at historically low levels and less than 0.5x EBITDA

·; Four bolt-on acquisitions announced since January

·; Interim dividend maintained at 7p a share

·; Second half trading in line with board's expectations

Commenting on the first half results, chairman Richard Ensor said:

"The group's strategy of building a focused global online information business has underpinned the company's bottom line growth despite the challenging markets. We have continued to invest in technology and new products to drive organic growth, and have made acquisitions from which we expect to drive future revenue synergies. Overall, trading remains in line with the board's expectations. "

Highlights

Euromoney Institutional Investor PLC, the international online information and events group, achieved an adjusted profit before tax of £52.4m for the six months to March 31 2013, against £48.6m for the same period in 2012. Adjusted diluted earnings a share increased by 7% to 31.9p (2012: 29.7p) and the board has approved an unchanged interim dividend of 7p a share to be paid to shareholders on June 27 2013.

As indicated in the pre-close trading update on March 22, total revenues for the period fell by 1% to £187.3m. Underlying revenues, after adjusting for timing differences on events, increased by 1%. Subscriptions returned to growth after a decline in the first quarter; event revenues were broadly flat after adjusting for timing differences; and advertising remained weak but only accounts for 12% of total revenues.

Costs, particularly headcount, have been tightly controlled. As the group has continued to invest in technology and new products at a time when revenue growth has been difficult to achieve, inevitably the operating margins in some divisions have come under pressure, but savings in central costs have helped maintain the group adjusted operating margin at 30%.

Net debt at March 31 was £38.1m compared with £30.8m at year end. The increase in net debt reflects acquisition spend of £17.1m (net of cash acquired), the payment of £7.5m under the group's long-term incentive plan, and the cancellation last year of the scrip dividend alternative. Underlying cash flows remain strong and there is plenty of headroom for the group to pursue its selective acquisition strategy.

The uncertainties over the Eurozone remain and financial institutions continue to cut costs, particularly people, and restructure their businesses in order to rebuild their balance sheets and satisfy tougher capital requirements imposed by regulators. The recent strong performance of equity markets masks tougher trading conditions for our customers and low expectations for a return to economic growth. Sentiment for US markets is more positive, while emerging markets continue to be an important driver of growth.

Strategy

The group's strategy remains the building of a robust and tightly focused global online information business with an emphasis on emerging markets. This strategy is being executed through increasing the proportion of revenues derived from electronic subscription products; investing in technology to drive the online migration of the group's products as well as developing new electronic information services; building large, must-attend annual events; maintaining products of the highest quality; eliminating products with a low margin or too high a dependence on print advertising; maintaining tight cost control at all times; retaining and fostering an entrepreneurial culture; and using a healthy balance sheet and strong cash flows to fund selective acquisitions.

Driving revenue growth from existing as well as new products is a key part of the group's strategy and the group has continued to invest heavily in technology and content delivery platforms as well as new digital products as part of its transition to an online information business. The level of expense in the period increased to approximately £6m (2012: £5m) and is expected to continue at a similar level in the second half. In addition, the project to build a new digital platform for authoring, storing and delivering the group's content is progressing well. The expected capital cost of this project is approximately £8m, of which £2.5m has been spent to date, although amortisation of the investment cost will not begin until the first phase of the project is completed at the start of 2014. The new platform will improve the quality of existing subscription products and facilitate the launch of new online information services, with BCA Research and the group's capital markets titles the first to benefit.

Acquisitions remain a key part of the group's strategy. Three bolt-on acquisitions have been announced since January 2013 including TTI/Vanguard, the California-based private membership organisation for executives who lead technology innovation in global organisations; Insider Publishing, a leading information source and events provider for the international insurance and reinsurance markets, based in London; and the Centre for Investor Education (CIE), the leading Australian provider of investment forums for senior executives of superannuation funds and global asset management firms. In addition, in April the group signed a binding agreement with HSBC to acquire its index calculation operation, Quantitative Techniques (QT). Completion of the sale is expected to take place in approximately six months and gives Euromoney the opportunity to build a new business providing independent index compilation services.

These businesses are all relatively small but high quality providers of specialist information services and complement the group's existing activities. Each acquisition also provides an opportunity to leverage the group's marketing expertise and international reach, especially in emerging markets, to drive further revenue growth. With its strong cash flows and balance sheet, the group is comfortable with a net debt to EBITDA ratio of up to two times and has significant funding capacity for further acquisitions.

Trading Review

As expected, total revenues for the period fell by 1% to £187.3m. Underlying revenues, excluding the impact of event timing differences, increased by 1%. Although the group derives a significant proportion of its revenues in foreign currencies, movements in exchange rates had no material impact on underlying revenues in this period.

Headline subscription revenues were flat but returned to growth after a weak first quarter, and still account for more than 50% of the group's revenues. The positive second quarter trend was partly helped by the acquisition of TTI/Vanguard and the launch of new products, both of which should help sustain subscription growth in the second half.

The weakness in advertising since the start of 2012 has persisted, particularly from debt capital market activity, reflecting the efforts of global financial institutions to cut marketing spend at times when they are also restructuring their businesses. The one notable exception was the energy sector where the group's three titles all achieved strong growth.

The first half trends in revenues from delegate attendance and event sponsorship have improved, reflecting new events added to the portfolio as well as reductions in capacity in the second half of last year. The second quarter decline in delegate revenues is attributable to event timing differences, particularly biennial events not run this year, and underlying delegate revenues for the quarter were flat.

Costs have remained tightly controlled and permanent headcount increased by just eight to 2,141 people including 28 people from acquisitions. As the group has continued to invest in technology and new products at a time when revenue growth has been difficult to achieve, inevitably the operating margins in some divisions have come under pressure, but savings in central costs have helped maintain the group adjusted operating margin at 30%.

Business Review

Financial Publishing: revenues fell by 13% to £31.8m and adjusted operating profits by 22% to £8.6m. Both revenues and margins have felt the impact of reductions in advertising and subscriptions spend which, combined with increased investment in digital products, has reduced the first half margin to 27% from 30%.

Business Publishing: as in 2012, the group's activities in the non-financial sectors of the market have proved more robust, partly because they are less dependent on print advertising. Revenues increased by 5% to £28.9m and adjusted operating profits by 6% to £9.8m, with the energy sector driving most of the growth, while the first half margin was unchanged at 34%.

Conferences and Seminars: events are a key part of the group's strategy and the performance has improved since the second half of last year. Networking events remain important in difficult markets and are less vulnerable to spending cuts at global institutions as they themselves search for new business opportunities. Event revenues increased by 1% to £47.2m, despite timing differences on biennial events, helped by a number of successful new launches. However the impact of the timing differences was felt in adjusted operating profits which fell by 7% to £14.7m.

Training: revenues fell by 7% to £14.1m and adjusted operating profits by 19% to £2.4m. The training business has a high exposure to financial markets and delegate attendance has suffered from the tight control of costs among global financial institutions.

Research and Data: while retention rates for most of the group's research and data products have remained high, it has been difficult to generate new sales at a time when budgets for information buying are being tightly controlled. As a result, subscription revenues fell by 2% to £64.7m and adjusted operating profits from £28.3m to £26.5m. The independent research businesses BCA and NDR have both continued to maintain a high renewal rate reflecting the strong customer loyalty to their products while continued growth has come from CEIC, the emerging market data provider.

Financial Review

The adjusted profit before tax of £52.4m compares to a statutory profit before tax of £42.7m. The statutory profit before tax is usually lower than the adjusted profit before tax because of the impact of acquired intangible amortisation. A detailed reconciliation of the group's adjusted and statutory results is set out in the appendix to this statement.

Adjusted net finance costs for the group's committed borrowing facility fell by £2.2m to £1.1m, consistent with the rapid reduction in net debt in the second half of last year. Headline net finance costs of £3.3m (2012: £3.8m) include a £2.2m charge for increases in acquisition option commitment values.

The adjusted effective tax rate for the first half was 22%, against 24% for the same period in 2012. The adjusted effective tax rate for the full year is also expected to be 22%. The tax rate in each period depends mainly on the geographic mix of profits and continues to benefit from reductions in UK corporate tax rates.

The group continues to generate nearly two thirds of its revenues, including approximately 30% of its UK revenues, and more than half of its operating profits in US dollars. The average sterling-US dollar rate for the six months to March 31 was $1.59 (2012: $1.58) and therefore the impact of exchange rate movements on headline revenues and on the translation of overseas profits was not significant. The average US dollar rate in the second half of financial year 2012 was $1.58 and each one cent variation from last year's rate has a translation impact of approximately £0.5m on an annualised basis.

Net Debt, Cash Flow and Dividend

Net debt at March 31 was £38.1m compared with £30.8m at year end. The increase in net debt reflects acquisition spend of £17.1m (net of cash acquired), a cash payment of £7.5m under the group's long-term incentive plan, and the cancellation last year of the scrip dividend alternative.

The group's operating cash flows are traditionally weighted in favour of the second half due to the payment of annual profit shares and incentives in the first half. This means the cash conversion rate is usually less than 100% in the first half, and in excess of 100% in the second. In addition, this year the vesting of the first tranche of options under the CAP triggered a £7.5m cash outflow in the first half for which the expense was accrued in previous years. This reduced further the first half operating cash conversion rate to 76%, against 87% in the first half of 2012.

The group's debt is provided through a US$300m (£198m) multi-currency committed facility from Daily Mail and General Trust plc (DMGT), the group's parent, which expires in December 2013. The group has an option to take up a new facility with DMGT of up to US$300m for the period from January 2014 through April 2016 should it be required. The group expects to take up this option before the end of the year, although the actual amount of facility secured will depend on expected acquisition activity.

The company distributes a third of its after-tax earnings by way of dividends each year, with approximately one third of the total dividend paid as an interim. In 2011, the earlier than expected achievement of the CAP profit target triggered an accelerated CAP expense of £6.6m which was not charged against earnings for dividend purposes. As previously explained, this CAP expense is instead being charged against earnings for dividend purposes over the period to which it originally related. Accordingly, the adjusted diluted earnings a share figure used for setting future dividends will be reduced by £4m in 2013 and £1.5m in 2014 and is reflected in the board's decision to approve an unchanged interim dividend of 7p a share, to be paid on June 27 to shareholders on the register on May 24.

Capital Appreciation Plan (CAP)

The CAP is the group's long-term incentive scheme designed to retain and reward those who drive profit growth and is an integral part of the group's successful growth and investment strategy.

The CAP performance test required an adjusted profit before tax (and before CAP expense) of £105m to be achieved. This profit target was achieved a year earlier than expected, following which the first 50% of CAP 2010 awards vested in February 2013 and was satisfied by the issue of approximately 1.75m new shares and cash payment of £7.5m. The second 50% of awards is subject to an additional performance test and, if satisfied, is expected to lead to the issue of a similar number of shares and cash distribution in February 2014.

The long-term incentive expense for the period was only £2.1m against £5.0m in 2012, reflecting the unwinding of the charge as the CAP options vest. No significant expense is expected for the second half (2012: £1.3m). The board believes the CAP should remain a key part of its incentive arrangements and, subject to shareholder approval, expects to put a new CAP in place from 2014. At this point the long-term incentive expense will return to an average level of at least £6m a year.

Outlook

The uncertainties over the Eurozone remain and financial institutions continue to cut costs, particularly people, and restructure their businesses in order to rebuild their balance sheets and satisfy tougher capital requirements imposed by regulators. The recent strong performance of equity markets masks tougher trading conditions for our customers and low expectations for a return to economic growth. Sentiment for US markets is more positive, while emerging markets continue to be an important driver of growth.

Cash subscription sales have improved since January which, with more new products being launched, should help drive subscription growth in the second half. Advertising sales remain weak, but recent sales of sponsorship and delegates show signs of improvement and the outlook for the events businesses, for which the third quarter is the most important, is encouraging. In the second half, the group will continue to invest in technology and new products and this is expected to continue to put pressure on operating margins at a divisional level. Overall, trading remains in line with the board's expectations.

The group intends to maintain its successful strategy of building a robust, tightly focused online information and events business with an emphasis on emerging markets, investing in digital publishing to drive organic growth, and using its strong balance sheet and cash flows to fund further acquisitions.

Richard Ensor

Chairman

May 15 2013

END

For further information, please contact:

Euromoney Institutional Investor PLC

Richard Ensor, Chairman: +44 20 7779 8845; [email protected]

Christopher Fordham, Managing Director: +44 20 7779 8057; [email protected]

Colin Jones, Finance Director: +44 20 7779 8666; [email protected]

FTI Consulting

Charles Palmer: +44 20 7269 7180; [email protected]

CAUTIONARY STATEMENT

This Interim Financial Report (IFR) has been prepared solely to provide additional information to shareholders to assess the Euromoney group's results and strategy and the potential for that strategy to succeed. The IFR should not be relied on by any other party for any other purpose.

The IFR contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

NOTE TO EDITORS

Euromoney Institutional Investor PLC (www.euromoneyplc.com) is listed on the London Stock Exchange and is a member of the FTSE-250 share index. It is a leading international business-to-business media group focused primarily on the international finance, metals and commodities sectors. It publishes more than 70 titles in both print and on-line format including Euromoney, Institutional Investor and Metal Bulletin, and is a leading provider of electronic research and data under the BCA Research, Ned Davis Research and ISI Emerging Markets brands. It also runs an extensive portfolio of conferences, seminars and training courses for financial markets. The group's main offices are in London, New York, Montreal and Hong Kong and more than a third of its revenues are derived from emerging markets.

Appendix to Chairman's Statement

Reconciliation of Consolidated Income Statement to adjusted results for the six months ended March 31 2013

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 in order to provide an indication of the adjusted trading performance.

Adjusted figures are presented before the impact of amortisation of acquired intangible assets (comprising trademarks and brands, databases and customer relationships), restructuring and other exceptional operating costs, movements in acquisition deferred consideration, and net movements in acquisition option commitment values. The adjusted tax expense includes the current tax effect of the goodwill and intangible assets.

Further analysis of the adjusting items is presented in notes 4, 5, 6, 8, and 10 to the Consolidated Condensed Interim Financial Report.

Condensed Consolidated Income Statement

for the six months ended March 31 2013

A detailed reconciliation of the group's statutory results to the adjusted results is set out in the appendix to the Chairman's Statement on page 7.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended March 31 2013

Condensed Consolidated Statement of Financial Position

as at March 31 2013

A reconciliation of net debt is set out in the note to the Condensed Consolidated Statement of Cash Flows on page 14.

Condensed Consolidated Statement of Changes in Equity

for the six months ended March 31 2013

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

Condensed Consolidated Statement of Changes in Equity

for the six months ended March 31 2012

Condensed Consolidated Statement of Cash Flows

for the six months ended March 31 2013

Cash and cash equivalents include bank overdrafts.

Note to the Condensed Consolidated Statement of Cash Flows

Net Debt

The group's debt is provided through a dedicated US$300 million (£198 million) multi-currency borrowing facility from Daily Mail and General Trust plc (DMGT). The facility is divided into US dollar and sterling funds and matures in December 2013. The total maximum borrowing capacity is US$250 million (£165 million) and £33 million. Interest is payable on this facility at a variable rate of between 1.4% and 3.0% above LIBOR dependent on the ratio of adjusted net debt to EBITDA. The facility's covenant requires the group's net debt to be no more than four times adjusted EBITDA on a rolling 12 month basis. Failure to do so would result in the group being in breach of the facility, potentially resulting in the facility being withdrawn or impediment of management decision making by the lender. Management regularly monitor the covenant and prepare detailed cash flow forecasts to ensure that sufficient headroom is available and that the covenants are not close or potentially close to breach. At March 31 2013, the group's net debt to adjusted EBITDA was 0.31 times (March 2012: 0.76 times, September 2012 0.27 times) and the committed undrawn facility available to the group was £143.1 million (March 2012: £89.0 million, September 2012: £144.7 million).

In the absence of any significant acquisitions, the group has no pressing requirement to arrange new finance before the facility expires in December 2013. In addition, the group has agreed terms with DMGT that provide it with access to additional funding should the group require it during the period from December 2013 through April 2016. There is a risk that the undrawn portion of the facility, or that the additional funding, may be unavailable or withdrawn if DMGT experience funding difficulties themselves. However, if DMGT were unable to fulfil its funding commitment to the group, the directors are confident that the group would be in a position to secure adequate external borrowing facilities, although probably at a higher cost of funding.

The group's strategy is to use excess operating cash to pay down its debt. The group generally has an annual cash conversion rate (the percentage by which cash generated from operations covers operating profit before acquired intangible amortisation, long-term incentive expense and exceptional items) of 100% or more due to much of its subscription, sponsorship and delegate revenue being paid in advance. However, the group's operating cash flows are weighted in favour of the second half due to the payment of annual profit shares and incentives in the first half. This means the cash conversion rate is usually less than 100% in the first half, and in excess of 100% in the second. In addition the vesting of the first tranche of options under the CAP triggered a £7.5 million cash outflow in the first six months of this financial year, for which the expense was accrued in previous years, giving an operating cash conversion rate of 76% for the first half (March 2012: 87%).

Notes to the Condensed Consolidated Interim Financial Report

1 Basis of preparation

This Interim Financial Report was approved by the board of directors on May 15 2013.

These condensed consolidated 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 September 30 2012 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.

Accounting policies

The Condensed Consolidated Interim Financial Report has 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 condensed financial statements as were applied in the group's latest annual audited financial statements, except as described below.

·; Presentation of Items of Other Comprehensive Income (Amendments to IAS 1), effective for accounting periods beginning on or after July 31 2012. This amends IAS 1, 'Presentation of Financial Statements' to revise the way other comprehensive income is presented.

·; Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12) amends IAS 12 'Income Taxes' to provide a presumption that recovery of the carrying amount of an asset measured using the fair value model in IAS 40 'Investment Property' will, normally, be through sale. As a result of the amendments, SIC-21 'Income Taxes - Recovery of Revalued Non-Depreciable Assets' would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is accordingly withdrawn. The amendment has no impact on the group's results in this financial period.

Going concern, debt covenants and liquidity

The results of the group's business activities, together with the factors likely to affect its future development, performance and financial position, are set out in the Chairman's Statement on pages 2 to 6.

The financial position of the group, its cash flows and liquidity position are set out in detail in this Condensed Consolidated Interim Financial Report. The group meets its day-to-day working capital requirements through a dedicated US$300 million multi-currency borrowing facility with Daily Mail and General Trust plc (DMGT). The facility is divided into US dollar and sterling funds with a total maximum borrowing capacity of US$250 million (£165 million) and £33 million respectively and matures in December 2013. The facility's covenant requires the group's net debt to be no more than four times adjusted EBITDA on a rolling 12 month basis. At March 31 2013 the group's net debt to adjusted EBITDA covenant was 0.31 times and the committed undrawn facility available to the group was £143.1 million. In addition, the group has agreed terms with DMGT that provide it with access to US$300 million of funding should the group require it during the period from December 2013 through April 2016.

The group's forecasts and projections, looking out to September 2015 and taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level and covenants of its current and available borrowing facilities.

After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing this Condensed Consolidated Interim Financial Report.

Principal Risks and Uncertainties

The principal risks and uncertainties that affect the group are described in detail on pages 18 to 24 of the 2012 annual report available at www.euromoneyplc.com. In summary, they include: 

- Downturn in economy or market sector;

- Travel risk;

- Compliance with laws and regulations;

- Data integrity, availability and security;

- London, New York, Montreal or Hong Kong wide disaster;

- Published content risk;

- Incorrect circulation or audience claims;

- Loss of key staff;

- Failure of central back-office technology;

- Acquisitions and disposal risk;

- Failure of online strategy;

- Treasury operations;

- Unforeseen tax liabilities.

These are still considered to be the most relevant risks and uncertainties at this time. 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. Where a risk that was disclosed in the annual report is unchanged, or is not expected to have a specific impact in the remaining period, further disclosure in this report is considered unnecessary.

2 Segmental analysis

Segmental information is presented in respect of the group's business divisions and reflects the group's management and internal reporting structure. The group is organised into five business divisions: Financial publishing; Business publishing; Training; Conferences and seminars; and Research and data. Financial publishing and Business publishing consist primarily of advertising and subscription revenue. The Training division consists primarily of delegate revenue. Conferences and seminars consist of both sponsorship income and delegate revenue. Research and data consists of subscription revenue. A breakdown of the group's revenue by type is set out below.

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 below.