Interim Results

Euromoney

Institutional

Investor PLC

Interim Financial Report 2016

Euromoney Institutional Investor PLC

Interim results

Strategic Initiatives Underway

May 19, 2016

· First-half results reflect, as expected, the continuation of the headwinds experienced in the second half of last year.

· Results helped by a strong dollar compared to last year.

· Total revenues down 2%, underlying1 revenues (excluding timing) down 6%.

· Adjusted profit before tax down 12% to £47m.

· Strong cash conversion further strengthens the balance sheet with net cash at March 31 of £56m.

· New strategy presented in March, implementation has begun including disposal of Gulf Publishing / Petroleum Economist for $18m in April.

· Interim dividend unchanged at 7p.

· Full-year performance expected to be in line with the Board's expectations.

1 Underlying revenues exclude the impact of acquisitions, disposals and currency movements.

Commenting on the results, Andrew Rashbass, CEO, said:

"The first-half results continue to reflect the headwinds we saw in the second half of last year and revenue and profit declined as expected in line with last year's second-half trends. We are beginning to implement the new strategy we presented in March, for instance in launching new products, actively managing the portfolio and in how we price our products. Early signs of its impact are encouraging. Although headwinds remain for us and our customers, the progress we are seeing gives us some confidence in the outcome for the full year."

Strategy

Euromoney Institutional Investor PLC needed to revise its strategy because of challenges to the business model of some of its businesses and changing dynamics within its markets. The performance in the first half of the year reflects these challenges.

The group's new strategy is actively to manage a portfolio of businesses in asset management and other sectors where information, data and convening market participants are valued. We deliver products and services that are critical to our customers' business.

The group has always been careful with its investments, but financial performance in future will come from a more rigorous allocation of capital, in line with the following quadrants:

This leads to three pillars of strategic activity:

1. Investing around big themes such as the information and services to support the asset management industry, price discovery and others. Our existing asset management-related brands - Institutional Investor, BCA and Ned Davis - provide an excellent platform, as do other businesses in specialist finance areas like aircraft finance and insurance as well as price discovery businesses such as Metal Bulletin.

2. Introducing an effective operating model that marries the best of the company's entrepreneurial culture (closeness to customers, passion for brands, knowledge of products and accountability for revenue and profit) with a new emphasis on modern marketing techniques, group-wide talent management, seeking economies of, and opportunities from, scale and adopting a more strategic approach to developing each business.

3. Actively managing the portfolio, disinvesting in businesses where the market is weak and the business model structurally challenged and investing where the businesses are structurally strong and there are market tailwinds.

These pillars result in many streams of activity. For example:

· The businesses which presented at the Investor Day have accelerated their product development and we have launched new products in the first half of the year including:

o Research reports and analysis from BCA on US equities and on the technology sector (US Equity Trading Strategy, US Technology Sector Strategy)

o New RIA and European Alternative Investment institutes from Institutional Investor

o All-America Trading Team survey and rankings from Institutional Investor Research

o Ned Davis Research Data Solutions (access to all NDR's data and charts) and Explorer (interactive content distribution)

o AirFinance Fleet Analyst (database and fleet analysis tools)

· We have completed the sale of Gulf Publishing and Petroleum Economist for $18m.

· A number of our larger businesses are revamping their pricing policies to better align with the value we deliver.

Outlook

The challenging market conditions we experienced in the last 12 months continue. Nonetheless, there are early signs of progress from the strategic actions we are taking, the comparatives are becoming less challenging and currency is on our side at the moment. We therefore expect, subject to currency movements, to deliver a second-half performance similar to last year's and a full-year performance in line with the Board's expectations.

Operating and Financial Review

Trading Review

Total revenue for the period fell by 2% to £194.2m. Underlying1 revenue fell by 4%, and by 6% after adjusting for event timing differences, consistent with the trend experienced since the start of the second half of 2015.

Underlying1 subscription revenues increased by 1% in the half, although the rate of growth in the second quarter was less than 1% compared to 2% in the first quarter. This reflects some tightening of budgets in the asset management sector since the start of the calendar year. Institutional Investor's memberships continue to perform strongly with double digit top line growth, while both BCA and NDR are showing signs of returning to growth after a challenging 2015.

Underlying1 advertising fell by 13% and underlying1 event revenues by 7% (by 12% excluding a biennial event) reflecting a further deterioration in the energy sector and commodity markets. This weakness in energy dependent economies (including Saudi Arabia, Nigeria and Indonesia) has had a knock-on effect on banking and capital market activities in those areas, particularly in events and training. Many of these businesses were included in the bottom left quadrant at the recent Investor Day, and the significant drag on the first half results is illustrated by the fact that revenues from the businesses in the bottom left quadrant fell by 27% in the period and contributed nearly 70% of the decline in total revenue.

The adjusted operating margin fell by 1.4% to 24.1%, due partly to the first-quarter impact of last year's higher property costs and the Dealogic transaction, as well as the margin impact of the significant decline in advertising and event revenues from businesses in the bottom left quadrant. Costs continue to be managed tightly, with the headcount down 32 to 2,265 people since September 30, 2015.

Adjusted operating profit fell by 7% to £46.8m, with the decline in revenues and margin partially offset by favourable currency movements. The strength of the US dollar had a positive impact on the results with an average sterling-US dollar rate falling to $1.47 (2015: $1.56). This improved the first-half reported revenue growth rate by three percentage points and adjusted operating profit by approximately £3m. Each one cent movement in the US dollar rate has an impact on profits on translation of approximately £0.6m on an annualised basis.

The 12% fall in adjusted profit before tax to £46.9m and adjusted earnings per share to 29.9p is higher than the 7% drop in adjusted operating profit due to a one-off share option credit of £2.5m included in last year's results.

Financial Review

The adjusted profit before tax of £46.9m is higher than the statutory profit before tax of £23.4m due to adjustments (as reconciled in the appendix to this statement) for an exceptional impairment charge of £12.9m relating to Mining Indaba and acquired intangible amortisation of £7.9m. While we remain committed to building the Mining Indaba event, the continued challenging market conditions and the depreciation of the South African Rand have had a significant impact on the long-term outlook for this business and we have therefore taken a further impairment to goodwill in addition to the £10.7m charge recognised at year-end.

Last year's statutory profit before tax of £93.3m included a significant exceptional credit of £45.8m, largely arising from one-off profits from the disposals of businesses and property.

Adjusted net finance costs fell by £0.3m to £0.6m due to a decrease in interest payable on the group's committed borrowing facility, reflecting the repayment of the debt in September 2015. Reported net finance costs of £1.4m (2015: credit of £3.0m) include a charge of £0.8m (2015: credit of £3.8m) for changes in non-cash acquisition liabilities.

The adjusted effective tax rate for the first half was 19% (2015: 19%) and for the full year is expected to be slightly lower at 18% (2015: 18%). The reported tax rate of 26% (2015: 14%) has increased due to changes in the mix of profits, the impact of exceptional items and prior year adjustments. The tax rate in each period depends mainly on the geographic mix of profits and applicable tax rates. The group continues to benefit from reductions in the UK corporate tax rate but this is being offset by the impact of higher taxes in other jurisdictions. The reported tax rate of 26% is higher than the adjusted effective tax rate of 19% due to the corporation tax impact of deductible goodwill and intangible amortisation and prior year adjustments.

Net Cash, Cash Flow and Dividend

Net cash at March 31 was £55.9m compared with net cash of £17.7m at year end and net debt of £10.6m at March 31, 2015. This strong balance sheet position reflects the group's excellent operating cash flows, and also includes proceeds of £14.4m in January from the redemption of preference shares as part of the Dealogic transaction. A further $15m ($18m consideration net of escrow and working capital adjustments) was received in April following the sale of Gulf Publishing and The Petroleum Economist.

The group's underlying operating cash conversion in the first half was 114% (2015: 105%), the increase largely reflecting the impact of the energy and commodity markets slowdown on event bookings at the end of the first half of 2015, combined with better working capital management in the first half of 2016.

The group has a US$160m (£111m) dedicated multi-currency borrowing facility from Daily Mail and General Trust plc, the group's parent. This facility was due to expire on April 28, 2016 but has now been extended to November 28, 2018 on similar terms. The group has no significant outstanding acquisition commitments for the second half.

The company's policy is to distribute a third of its after-tax earnings by way of dividends, with approximately one third of the total paid as an interim dividend. Although adjusted diluted earnings a share have decreased by 12% to 29.9p (2015: 34.1p), in view of its strong balance sheet and operating cash flows the board has decided to approve an unchanged interim dividend of 7p a share, to be paid on June 23 to shareholders on the register on May 27.

Further trading updates

Further coverage of these half-year results will be provided to analysts at a presentation starting at 9am on May 19 at the offices of UBS. The group intends to provide a brief third-quarter trading update on July 21.

END

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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. This 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 global banking, asset management and commodities sectors. It owns more than 70 brands including Euromoney, Institutional Investor and Metal Bulletin, and is a leading provider of economic and investment research and data under brands including BCA Research, Ned Davis Research, and the emerging market information providers, EMIS and CEIC. It also runs an extensive portfolio of events for the financial and commodities markets. The group's main offices are in London, New York, Montreal, Hong Kong and Sofia, and more than a third of its revenues are derived from emerging markets.

Appendix to Interim Statement

Reconciliation of Consolidated Income Statement to adjusted results for the six months ended March 31 2016

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 underlying trading performance.

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 acquired intangibles amortisation and exceptional items, tax in associates and joint ventures, and net movements in deferred consideration and acquisition commitments. 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.

Further analysis of the adjusting items is presented in notes 4, 5, 6, 8, 10 and 11 to the Consolidated Condensed Interim Financial Report.

Condensed Consolidated Income Statement

for the six months ended March 31 2016

A detailed reconciliation of the group's statutory results to the adjusted results is set out in the appendix to the Interim Statement on page 5.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended March 31 2016

Condensed Consolidated Statement of Financial Position

as at March 31 2016

Condensed Consolidated Statement of Changes in Equity

for the six months ended March 31 2016

Condensed Consolidated Statement of Changes in Equity

for the six months ended March 31 2015

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.

Condensed Consolidated Statement of Cash Flows

for the six months ended March 31 2016

Cash and cash equivalents include bank overdrafts.

Note to the Condensed Consolidated Statement of Cash Flows

Net Cash/(Debt)

The group has a dedicated multi-currency borrowing facility from Daily Mail and General Trust plc (DMGT). The total maximum borrowing capacity is US$160m (£111.3m). The facility expired on April 28 2016 and has been extended and now expires on the November 28 2018. Interest is payable on this facility at a variable rate of between 1.35% and 2.35% 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 three 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 2016, the group's net (cash)/debt to adjusted EBITDA was (0.52) times (March 2015: 0.09 times, September 2015: (0.15) times) and the committed undrawn facility available to the group was £111m (March 2015: £89m, September 2015: £106m). The loan was repaid by year-end September 2015 and has not been utilised to March 2016.

Notes to the Condensed Consolidated Interim Financial Report

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 Interim Financial Report was approved by the board of directors on May 18 2016.

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 2015 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.

The trade debtors and other receivables in the Condensed Consolidated Statement Financial Position as at March 31 2015 and September 30 2015 has been re-presented to reflect a reclassification of preference shares as a separate line item having previously been included in trade and other receivables.

The Condensed Consolidated Statement of Financial Position as at March 31 2015 has been re-presented to net down certain balances within trade receivables of £8.3m, accrued income of £4.4m and deferred income of £12.7m, consistent with the presentation adopted in the 2015 Consolidated Financial Statements.

Deferred income balances have been re-presented to reflect a reclassification of deferred income recognisable after more than one year.

These reclassifications have no impact on the net assets.

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.

Retirement benefit schemes

The company operates the Metal Bulletin plc Pension Scheme, a defined benefit scheme which is closed to new entrants. The assumptions for the discount rate and mortality rates have been reviewed and adjusted to reflect the latest market rates increasing the net pension deficit from £2.0m at September 30 2015 to £3.3m at March 31 2016.

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 Interim Statement on pages 1 to 4.

The financial position of the group, its cash flows and liquidity position are set out in detail in this Condensed Consolidated Interim Financial Report. At March 31 2016 the group's net cash position was £55.9m. The group has a deposit agreement with Daily Mail and General Trust plc (DMGT) to place excess operating funds on deposit with DMGT at a LIBID plus 0.5%. The group has a dedicated US$160m multi-currency borrowing facility with DMGT. This facility was due to expire on April 28 2016 but has now been extended to on November 28 2018 on similar terms. The group has not utilised the facility since year-end September 30 2015. 

The group's forecasts and projections, looking out to September 2019 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. 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 14 to 21 of the 2015 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 cyber security;

- Hazard risk affecting a significant office;

- Published content risk;

- Securing and retaining key staff;

- Failure of key technology;

- Acquisition and disposal risk;

- Failure of product 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 four business divisions: Research and data; Financial publishing; Business publishing; Conferences, seminars and training. Research and data consists primarily of subscription revenue. Financial publishing and Business publishing consist primarily of advertising and subscription revenue. Conferences, seminars and training consists of both sponsorship income and delegate revenue, as well as subscription revenue for membership institutes. 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.

The directors have re-categorised one of the group's profit centres from Conferences, seminars and training to Financial Publishing to more accurately reflect their operations following development of their products. As a result the comparative split of divisional revenues (£0.9m) and operating profit (-£0.1m) have been re-presented. The total revenue and operating profit by source remain unchanged.

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