Source - LSE Regulatory
RNS Number : 2137Z
Euromoney Institutional InvestorPLC
20 May 2021
 

Euromoney Institutional Investor PLC

 

Half Year Results

20 May 2021

 

Good growth in Pricing and Data & Market Intelligence subscriptions with Asset Management turnaround progressing ahead of plan

 

Euromoney Institutional Investor PLC ("Euromoney" or "The Group"), the global B2B information services provider of price discovery, essential market intelligence and events, announces results for the six months ended 31 March 2021.

 

Financial summary

 

 

 

 

 

2021

2020

Change

Underlying change

 

£m

£m

 

 

Revenue

155.5

186.3

(17%)

(20%)

Statutory operating profit

19.5

37.4

(48%)

 

Adjusted operating profit1

36.8

41.1

(10%)

(15%)

Adjusted operating profit margin1

24%

22%

+2ppt

 

 

 

 

 

 

Statutory profit before tax

17.5

37.4

(53%)

 

Adjusted profit before tax1

35.2

39.3

(10%)

 

Statutory diluted earnings per share

7.6p

37.5p

(80%)

 

Adjusted diluted earnings per share1

26.1p

29.7p

(12%)

 

 

 

 

 

 

Adjusted cash conversion2

133%

75%

+58ppt

 

Net cash1

24.8

8.1

+16.7

 

Half year dividend per share

5.7p

-

na

 

 

Highlights:

·      Group revenue reflects:

Good underlying subscriptions growth in Pricing (+6%) and in Data & Market Intelligence ("DMI") (+5%)

Covid-19 impact on physical events, partly offset by successful delivery of virtual events (40% of H1 2020

events revenue)

·      Increase in adjusted operating margin reflecting good cost control while continuing to invest for future growth

·      Strong cash generation and balance sheet with net cash of £24.8m as at 31 March 2021

·      Interim dividend of 5.7p

·      Building momentum as we continue to execute 3.0 strategy:

Improving subscriptions Book of Business3 ("BoB") year-on-year growth trend: +3.5% at 31 March 2021 (30 September 2020: +0.5%). Good underlying growth in Pricing and DMI subscriptions revenue expected in H2 2021

Highly complementary 3.0 acquisitions within Pricing - The Jacobsen, and People Intelligence - WealthEngine

Asset Management - BCA Research and NDR turnaround progressing ahead of plan

Events - strong community engagement and well positioned for recovery in physical events

 

Andrew Rashbass, CEO, said:

"Our strong, majority-subscription business delivered a resilient performance in the first half. Both Pricing and Data & Market Intelligence delivered good growth in subscriptions driven by increasing demand for our commodity price reporting, essential data and specialist insights. Within Asset Management we are continuing to make good progress with the turnaround of BCA Research and NDR.

"We have managed our costs carefully but also invested organically in each of our businesses. We have also added scale to Fastmarkets Agriculture and People Intelligence, through highly complementary bolt-on acquisitions. The backdrop for events has been challenging but the team has delivered great virtual experiences for our customers. We are well positioned as physical events start to return in the second half of the year and beyond.

"We continue in our progress towards being a fast-growing, high-margin, 3.0, information-services subscription business."

1

Adjusted measures exclude the impact of the amortisation of acquired intangible assets, exceptional items and other adjusting items in accordance with the Group's policy. A detailed reconciliation of the Group's adjusted and underlying results, adjusted cash conversion and net cash is set out on pages 11 to 15 of this statement.

2

Adjusted 12-month rolling cash conversion % as set out on page 14.

3

Book of business ("BoB") is the annual contracted values for subscriptions. Like for like growth is calculated by adjusting prior periods with a constant GBP/$ rate and the pro-forma impact of net M&A.

 

Results presentation

A results presentation and Q&A will be hosted today, at 09.00 (UK time), for analysts and investors. A live audio webcast of the presentation and Q&A will be available via the Investors section of our website at www.euromoneyplc.com, and subsequently available on demand.

 

Our next announcement will be a trading update for the nine months ended 30 June 2021 on 21 July 2021.

 

For further information, please contact:

 

Euromoney Institutional Investor PLC

 

Wendy Pallot, Chief Financial Officer: +44 20 7779 8866; wendy.pallot@euromoneyplc.com

Christian Cowley, Investor Relations: +44 (0)7408 863420; christian.cowley@euromoneyplc.com

 

FTI Consulting

Jamie Ricketts / Tom Blundell / Lucy Highland:  +44 20 3727 1000; euromoney@fticonsulting.com

 

NOTE TO EDITORS

Euromoney Institutional Investor PLC ("Euromoney") is a global B2B information services business providing essential information in 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)

 

Group summary

The Group delivered a resilient performance in the first half of the year against the ongoing backdrop of the global pandemic. We continue to execute our strategy to become a fast-growing, high-margin, 3.0, information-services subscription business.  

Euromoney is a majority-subscriptions business. 73% of Group revenue during the half was generated from subscriptions which grew by 6% on a reported basis and by 2% on an underlying basis. Underlying subscriptions revenue growth in Pricing and DMI was 6% and 5% respectively in the half. Within Asset Management, the turnaround of the Investment Research Division is progressing well and is ahead of plan. Across the Group, our subscriptions revenue continues to achieve high renewal rates.

Events revenue, which accounted for 17% of Group revenue during the half, declined by £38.4m or 60% reflecting the reduction in physical events compared to the prior year period which had not yet experienced severe covid-related disruption. Following our successful introduction of virtual events last year, we hosted 206 virtual events during the period. This has enabled us to stay close to our customers and keep our communities engaged and connected as well as generating revenue. The Group plans to resume physical events in the second half subject to the easing of government and company restrictions and successfully held a physical event in Dubai on 18-19 May.

Overall, Group revenue during the period declined by £30.8m or 17%. The Group benefited during the period from the restructuring and cost-reduction programme announced in September 2020 which mainly focused on our events businesses and delivered £15m of annualised savings, before investment in other areas.

As a result of the good cost control during the period, adjusted operating profit and adjusted pre-tax profit reduced by 10% compared to the revenue decline of 17%. Cash generation and conversion during the period were strong. After the completion of two acquisitions and the payment of the final dividend during the period, net cash at 31 March 2021 was £24.8m (31 March 2020: £8.1m). 

 

Continued progress in delivering 3.0 strategy

Our strategy is to actively manage a portfolio of businesses that provide information services embedded in clients' critical workflow, in markets where information, data and convening market participants are highly valued. We serve markets which are semi-opaque, that is, where information which organisations need to operate effectively exists but is hard to find. These are characterised by resilient and robust recurring subscriptions revenue, and when applied to events, large deal-making events or membership models. The strength of our business model and the resilience of the Group is clear, having been put to the test during the last year.

At the full year results in 2020, the Group identified five priorities to enable the delivery of the 3.0 strategy:

1)    Organic investment in 3.0 businesses to drive growth and improve resilience

2)    Bolt-on acquisitions to accelerate the 3.0 strategy

3)    Returning Investment Research Division ("IRD") to growth

4)    Post covid-19, delivering strong blended events moving to a 3.0 membership model

5)    Supporting scale, efficiency, inclusion and diversity by the roll-out of further standardised platforms and processes

The following section provides updates on each of the five priorities:

 

1)    Organic investment in 3.0 businesses to drive growth and improve resilience

In Pricing following investment in the Fastmarkets platform, we have accelerated the rollout of the platform to Metals and Mining customers. We continue to invest in new products such as short-term forecasts, and market data from commodities exchanges. These products complement our daily price assessments. We also added two cash-settled contracts on the CME: cobalt in March and lithium hydroxide in May. We have four more contracts settled against Fastmarkets' benchmarks due to be launched on exchanges: two China pulp futures on the Norexeco Exchange in June, and a lithium hydroxide and an aluminium premium contract in July on the London Metal Exchange. Since 2017, Fastmarkets has been externally audited for its compliance with the IOSCO Principles for price reporting agencies, with 43 prices accredited this year, up from 32 in FY 2020. In February 2021, Fastmarkets received its authorisation to operate as a benchmark administrator in accordance with the EU Benchmarks Regulation (BMR) authorisation, providing additional assurance about the strength of its methodologies and pricing processes.

In DMI we continued to simplify the organisational structure, invest in sales and marketing and new product (for example in our Insurance Insider business). We have also made further progress with the rollout of our common platforms across the different brands in this segment.

In Asset Management we have invested in sales and marketing, new products and new back-office systems. We appointed our first CEO of Asset Management, Fran Cashman, who will be responsible for Institutional Investor, BCA Research and NDR. Fran joined the business in May 2021 having held senior sales and marketing roles at Legg Mason.

 

2)    Bolt-on acquisitions to accelerate the 3.0 strategy

Acquisitions are a core part of the Group's strategy. We further strengthened our People Intelligence business with the acquisition of WealthEngine in December 2020. WealthEngine is highly complementary to BoardEx, a leader in executive profiling and relationship-mapping which enables cross-sell opportunities, and Wealth-X, the market-leading provider of data-driven intelligence on the world's wealthiest individuals. The acquisition of AgriCensus in March 2020 established Fastmarkets Agriculture, in addition to Fastmarkets Metals and Mining and Fastmarkets Forest Products. The acquisition of The Jacobsen, a price reporting agency, in January 2021 has added further prices to Fastmarkets Agriculture in markets such as animal fats, feeds and vegetable oils as well as low-carbon fuels such as bio-diesel.

 

3)    Returning IRD to growth

We have continued to make good progress with the turnaround of IRD which consists of BCA Research and Ned Davis Research. The rate of decline in the Asset Management BoB improved by 7.0 percentage points over the last 12 months to -2.1% at 31 March 2021 (non-vote IRD BoB improved by 6.3 percentage points to -1.2% over the same period). The improvement was driven by a higher renewal rate following investment in the sales team and in auto-renewals, integration of sales teams to drive cross-selling and new research products. We maintain our target to return the non-vote IRD subscription BoB to growth by the end of the full year 2022, which will result in revenue growth during 2023. We continue to see further opportunities for our Asset Management businesses to work more closely together.

 

4)    Post covid-19, delivering strong blended events moving to a 3.0 membership model

We believe the future of events will be blended with physical and virtual elements complementing one another. We expect to host a number of physical events in H2 2021 and through the virtual events we have hosted over the last year we have been able to reach an even wider audience. We are also using more of our data and insights to engage with our specialist communities.

At Institutional Investor we already have a successful events membership model, where members pay an annual fee to attend a number of events of their choice over the course of a year. By increasing the value and the number of engagement opportunities with customers (such as data and industry insights, networking and peer intelligence), we are beginning to introduce the membership model more widely in the Group. In Fastmarkets for example, we plan to launch a series of content-rich networked customer communities to drive new membership-based revenue and support the adoption and usage of our prices.

 

5)    Supporting scale, efficiency, inclusion and diversity by the roll-out of further standardised platforms and processes

We continue to use the Group's scale to support our businesses by rolling out standardised platforms. During the half we continued our implementation of cloud-based solutions such as NetSuite, Salesforce and Cvent (events management software). In addition, we have launched our event operations centre of excellence which will centralise procurement, logistics and other shared event activities in the future.

 

Our ESG focus areas are integral to our strategy

Euromoney is a people and data business and our ESG focus areas reflect this and are integral to our strategy. We are committed to embedding ESG frameworks into our business during FY2021, focusing on the following four areas:

1)    Workforce inclusion, diversity and well-being

2)    Data and information security and privacy

3)    Transparency, ethics, governance, and risk management

4)    Encouraging strong ESG practices in the markets we serve

Alongside these focus areas we are working towards being carbon neutral and remain committed to high standards in our supply chain.  

Outlook

Demand for price reporting and essential market intelligence remains strong with good visibility for Pricing and DMI subscriptions. In Asset Management, the turnaround of IRD is progressing ahead of plan. The Group BoB, which is a key leading indicator for our subscriptions revenue, improved to 4.4% at 30 April 2021 (30 September 2020 restated*: 0.5%) and included Pricing BoB growth of 10.2%.

We expect physical events to return but the exact timing is uncertain, and it will vary by geography. In H2 2021 we are planning to host physical events though they will be regional and national rather than international events. We expect events revenue to be about £40m in H2 2021, however if physical events do not return, events revenue will be similar to H1 2021. We have identified cost mitigation measures to limit the impact of any cancellations on the FY 2021 profit outturn. There is further summary guidance for FY 2021 on page 9.

* See explanation of recategorised Institutional Investor's events-based membership in Note 2 to the Condensed Consolidated Interim Financial Statements

 

Operating and financial review

When reviewing performance, the Board considers a number of adjusted performance measures, as set out on pages 11 to 15.

 

The Group reports under three segments: Pricing, Data & Market Intelligence and Asset Management. In the Asset Management segment, we have recategorised Institutional Investor's events-based memberships from subscriptions to events revenue. This simplifies reporting and aligns it more closely with the substance of those events revenues. The vast majority of the remaining subscriptions revenue within Asset Management now relates to BCA Research and Ned Davis Research which gives greater visibility on the turnaround of these businesses.

 

For our underlying growth measures in events we will continue to adjust for material events that move across reporting dates, material biennial events, currency and M&A but are no longer adjusting for cancellations or new events, given the difficulty in making those assessments following the proliferation of events formats as result of the covid-19 pandemic. The new methodology also aligns reported and underlying metrics more closely.

 

The following segmental analysis reflects these changes and revenue restatements for FY 2020, H1 2020, FY 2019 and H1 2019 are provided on pages 16 to 17.

 

Pricing: 26% of Group Revenue

 

Pricing consists of Fastmarkets, Euromoney's price reporting agency. Fastmarkets provides commodity price benchmarks and analysis critical for our clients' business processes and workflows as well as commodity-related events. Fastmarkets is active in the metals and mining, forest-products and agriculture sectors. Pricing is a 3.0 business and its business model benefits from high barriers to entry. It operates in markets with significant opportunity for long-term growth.

 

 

2021

2020

Change

Underlying1 change

Revenue

£m

£m

 

 

Subscriptions

37.6

36.1

+4%

+6%

Events

1.3

6.4

(80%)

(79%)

Advertising & other

1.3

1.8

(28%)

(28%)

Total

40.2

44.3

(9%)

(8%)

Adjusted operating profit1

15.2

17.3

(12%)

(7%)

Adjusted operating profit margin %1

38%

39%

(1ppt)

 

 

Pricing revenue declined by 9% on a reported basis with a good performance in subscriptions offset by the covid-19 impact on events. On an underlying basis revenue decreased by 8%.

 

Subscriptions revenue, which is 94% of segment revenue, grew by 4% on a reported basis and 6% on an underlying basis, from good data-licensing sales during the first half. The subscription BoB, which is a key leading growth indicator, grew by 8.2% year-on-year at 31 March 2021. This represents a strong improvement on the 4.2% year-on-year growth at 30 September 2020.

 

Events revenue, which is 3% of segment revenue declined 80% on a reported and 79% on an underlying basis, reflecting the impact of covid-19. Advertising and other revenue, which is 3% of segment revenue, declined 28% on a reported and underlying basis.

 

Adjusted operating profit reduced by 12% and by 7% on an underlying basis reflecting the impact of the decrease in events revenue, depreciation of investment in the Fastmarkets platform, and investment in new products.

 

The Pricing segment continues to invest in future growth through the roll-out of the new Fastmarkets technology platform which is delivering enhanced value to customers with a better customer interface. The acquisition of AgriCensus in March 2020 established agricultural commodities as Fastmarkets' third commodity vertical (Fastmarkets Agriculture), in addition to its leading market position in forest products and metals and mining. The acquisition of The Jacobsen in January 2021 has added further scale to Fastmarkets Agriculture in markets such as animal fats, feeds and vegetable oils as well as low-carbon intensive fuels such as bio-diesel.   

 

Data & Market Intelligence (DMI): 38% of Group Revenue

 

Data & Market Intelligence brings together complementary brands that deliver market intelligence, embedded workflow solutions, including deal-making events, and business development services. We continue to invest in growth including product management and sales and marketing to create efficiency and scale across the segment. To improve organisational efficiency within the segment, the Telecoms division was merged into the Financial & Professional Services ("FPS") division from 1 October 2020. The FPS division has four pillars: People Intelligence, NextGen, Derivatives, and Events.

 

 

2021

2020

Change

Underlying1 change

Revenue

£m

£m

 

 

Subscriptions

41.4

33.6

+23%

+5%

Events

9.1

33.9

(73%)

(75%)

Advertising & other

7.8

8.6

(9%)

(7%)

Total

58.3

76.1

(23%)

(31%)

Adjusted operating profit1

9.5

13.4

(29%)

(42%)

Adjusted operating profit margin %1

16%

18%

(2ppt)

 

 

DMI revenue decreased by 23% on a reported basis and by 31% on an underlying basis driven by the impact of covid-19 on physical events.

 

Subscriptions revenue, which is 71% of segment revenue, increased by 23% on a reported basis helped by the acquisitions of WealthEngine and Wealth-X. On an underlying basis revenue increased by 5%, benefiting from good growth in the People Intelligence and NextGen pillars, including brands such as Insurance Insider. Renewal rates for the segment remained high during the period at around 90%, demonstrating the essential nature of the data, specialist insight and solutions we provide. The subscription BoB grew by 4.2% year-on-year at 31 March 2021 or by 6.2% excluding WealthEngine.

 

Events revenue, which is 16% of segment revenue, was down 73% on a reported basis. DMI ran 142 virtual events during H1 2021 in comparison with 118 physical events in H1 2020. Major virtual events during the period included Capacity Europe, ABS East, Single Family Rental Investment (West), Metro Connect, the Central & Eastern European Forum and SRP Europe Conference. Other revenue, which consist of advertising, consultancy and thought leadership, and is 13% of segment revenue decreased by 9% on a reported basis.

 

Adjusted operating profit reduced by 29% and by 42% on an underlying basis, mainly due to the reduction in events revenue, continued investment in the business, partly offset by the benefits of the restructuring announced in H2 2020, and further good cost control during the period.

 

We have further strengthened our People Intelligence business with the acquisition of WealthEngine in December 2020. WealthEngine is a SaaS platform providing datadriven intelligence and predictive analytics to wealth managers, luxury brands and notforprofit organisations. Revenue is derived predominantly from subscriptions, which attract high renewal levels.

 

WealthEngine is highly complementary to BoardEx, a leader in executive profiling and relationship-mapping and Wealth-X, the market-leading provider of data-driven intelligence on the world's wealthiest individuals.

 

Asset Management: 36% of Group revenue

 

Asset Management includes our brands and businesses that serve the global asset management industry: BCA Research, Ned Davis Research and Institutional Investor. This segment provides independent research that enables our clients to make informed investment decisions, runs networks and conferences that bring asset allocators and asset managers together in an effective and efficient way and provides news and data that are critical for the industry to stay informed and make deals.

 

 

2021

2020

Change

Underlying1 change

Revenue

£m

£m

 

 

Subscriptions

33.9

36.9

(8%)

(5%)

Events - restated*

15.4

23.9

(36%)

(35%)

Advertising & other

6.7

5.6

+20%

+31%

Total

56.0

66.4

(16%)

(13%)

Adjusted operating profit1

22.8

26.1

(13%)

(9%)

Adjusted operating profit margin %1

41%

39%

+2ppt

 

* See explanation of recategorised Institutional Investor's events-based membership in Note 2 to the Condensed Consolidated Interim Financial Statements

 

Asset Management revenue declined 16% on a reported basis and by 13% on an underlying basis, driven largely by the reduction in events revenue.

 

Subscriptions revenue, which is 61% of segment revenue, decreased by 8% on a reported basis and by 5% on an underlying basis. This was an improvement compared to FY 2020 when subscriptions revenue declined by 8% on an underlying basis. The turnaround of IRD, which consists of BCA Research and Ned Davis Research, is progressing ahead of plan, with subscriptions renewal rates continuing to improve during the half. The 12-month moving average renewal rate as at 31 March 2021 was 89% (31 March 2020: 85%).

The rate of decline in the Asset Management BoB improved by 7.0 percentage points over the last 12 months to -2.1% at 31 March 2021 (non-vote IRD BoB improved by 6.3 percentage points to -1.2% over the same period). The improvement was driven by a higher renewal rate following investment in the sales team and in auto-renewals, integration of sales teams to drive cross-selling and new research products.

IRD Investment Solutions, which embeds our data and intellectual property into investment decision making processes, has continued to grow its assets under advisement (AUA) to $1.6bn as at 31 March 2021 (31 March 2020: $1.1bn).

 

Events revenue, which is 27% of segment revenue decreased by 36%, reflecting the impact of covid-19 but also the relative resilience of the Institutional Investor brand and its events based-membership model. Advertising and other revenue, which is 12% of segment revenue, grew strongly driven by Institutional Investor research reports and media.

 

Asset Management adjusted operating profit fell 13% and by 9% on an underlying basis driven by the decrease in revenue partly mitigated by good cost control.  

 

Group adjusted operating profit and pre-tax profit

 

 

2021

2020

Change

Underlying1 change

Adjusted operating profit

£m

£m

 

 

Pricing

15.2

17.3

(12%)

(7%)

Data & Market Intelligence

9.5

13.4

(29%)

(42%)

Asset Management

22.8

26.1

(13%)

(9%)

Segmental adjusted operating profit

47.5

56.8

(16%)

(18%)

FX gains/(losses) on forward contracts

1.0

(0.5)

 

 

Central costs

(11.7)

(15.2)

+23%

 

Group adjusted operating profit1

36.8

41.1

(10%)

(15%)

Group adjusted operating profit margin %1

24%

22%

+2ppt

 

Associates and JVs

0.1

(0.3)

 

 

Net finance costs

(1.7)

(1.5)

 

 

Adjusted pre-tax profit

35.2

39.3

(10%)

 

 

Group adjusted operating profit decreased by 10% to £36.8m and by 15% on an underlying basis, driven by the £38.4m reduction in events revenue which was partly offset by growth in Pricing and DMI subscriptions, strong cost control and lower central costs. Adjusted profit before tax declined 10% to £35.2m, reflecting lower operating profit and higher interest costs. Adjusted diluted earnings per share declined 12% to 26.1p (H1 2020: 29.7p). Statutory profit before tax was £17.5m (H1 2020: £37.4m).

 

In September 2020, the Group announced a restructuring and cost reduction programme, mainly focused on our events businesses. We remain on track to deliver the gross savings, before investment in other areas of approximately £15m in a full year.  During 2021, we continue to invest in growth opportunities focused on the 3.0 subscription businesses. These investments include an additional £5m in people and increased technology spend (FY 2021: capex forecast £13m). New technology will result in a £2m increase in depreciation in FY 2021. In H2 2021 we also expect increases in staff costs as a result of pay increases and higher bonuses, and travel and expense costs. Central costs during the period included the benefit of a one-off £2.5m insurance claim as well as lower travel and expenses costs, so are expected to be higher in H2 2021.    

 

Other financial items

Exceptional items

For the period ended 31 March 2021, exceptional items include £2.3m of costs from the major restructuring across the Group at the beginning of the period. 

Net foreign exchange losses of £1.2m on quasi-equity loans and net investment hedging that had been deferred to equity in previous years have been recognised in exceptional items as the entities they relate to are no longer part of the Group.

Other exceptional costs of £4.5m consist of expenditure associated with the acquisition of Wealth-X, AgriCensus, WealthEngine and The Jacobsen, which is treated as exceptional due to its magnitude. The recognition of the earn-out payments for the acquisitions of AgriCensus are treated as compensation costs and included in exceptional items. Also included are costs incurred to support the strategic review of Asset Management. 

Tax

The adjusted effective tax rate for the period ended 31 March 2021 is 20% (31 March 2020: 19%) 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 currently expect it to be 19% for the full year ending 30 September 2021.

The Group's statutory effective tax rate is 53% for the period ended 31 March 2021 compared to -8% in the first half of 2020. The increase is largely driven by a £4m deferred tax charge in respect of the transfer of certain intangible assets from Singapore to the US, a related write off for tax losses in Singapore and disallowable costs in relation to acquisitions made in the first half. Excluding the impact of these, the group statutory rate is approximately 27%.

The basis for the calculation of both effective tax rates and further information can be found in note 6.

During the period the Group has progressed several outstanding tax matters: 

·      As previously noted, we have resolved all historical Canadian tax issues relating to the exposure identified in 2020 and a tax refund of C$10.5m (£6.1m) was received in May 2021.

·      The Group has historically provided for a £12.3m UK tax exposure relating to the disposal of an investment in the "Capital Data" business during the year ended 30 September 2015. The Group received a favourable judgement from the first-tier tax tribunal hearing held in May 2020, which HM Revenue and Customs ("HMRC") intend to appeal at the Upper Tier Tribunal. We do not consider the initial judgement to have sufficiently changed our view of the potential future cash flows to the extent necessary to warrant any adjustment to the provision at this time.

·      In the 2020 Annual Report the Group disclosed a contingent tax liability of £8.9m in relation to the European Commission investigation into the UK Controlled Foreign Company legislation. HMRC have now confirmed that this matter is now closed and therefore there is no longer any contingent liability.

Dividend

The Board has declared an interim dividend of 5.7p per share (H1 2020: no dividend) reflecting the strong balance sheet, cash generative nature of the business and confidence in the future. This follows the final dividend for the financial year 2020 of 11.4 pence per share. Our dividend policy is to pay out approximately 40% of full year adjusted diluted earnings per share, subject to the capital needs of the business. 

Net cash and cash flow

A reconciliation of free cash flow, an alternative performance measure, and cash generated from operations and net cash flow, the nearest statutory measures, is set out below:

 

2021

2020

Change

 

£m

£m

£m

Cash generated from operations

42.3

27.0

15.3

Capex

(5.7)

(6.1)

0.4

Leases and interest

(5.3)

(3.2)

(2.1)

Taxation

(1.2)

(10.4)

9.2

Free cash flow

30.1

7.3

22.8

Dividends paid

(12.3)

(24.0)

11.7

Net M&A

(20.2)

(24.1)

3.9

 

(2.4)

(40.8)

38.4

Opening net cash

28.1

50.1

(22.0)

Currency translation

(0.9)

(1.2)

0.3

Closing net cash

24.8

8.1

16.7

Net cash at 31 March 2021 was £24.8m, excluding lease liabilities, compared with £28.1m as at 30 September 2020. This decrease in net cash for the half year largely reflects payments for acquisitions in the year totalling £20.2m and the payment of the 2020 final dividend of £12.3m. Strong operating cash flows of £42.3m were underpinned by significant improvements in working capital reflecting the growth in subscriptions and strong collections. Free cash flow increased by £22.8m to £30.1m.

The Group's adjusted cash conversion for the 12 months to 31 March 2021 was 133% (2020: 75%). See page 14 for the calculation. The Group has a strong and consistent record of high cash conversion reflecting the robust nature of the Group's subscription businesses and the relatively capital light business model.

Management of balance sheet and liquidity risk and financing

The Group regularly reviews the level of cash and debt facilities required to fund its activities. In May 2021, the Group refinanced and increased its existing bank facility. It now has a committed multi-currency revolving credit facility of £190m which is available to the Group until May 2024, with two additional one-year extension options available. An additional £130m uncommitted accordion facility also remains available.

Currency

The Group generates approximately 75% of its revenue in US dollars, including approximately 40% of its UK revenue and c.70% of the Group's operating profit. The exposure to US dollar revenue in the 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 2021 was $1.34 (2020: $1.29). This reduced headline revenue growth rates for the half year by approximately two percentage points and adjusted profit before tax by £1.2m. Each one cent movement in the US dollar rate has an impact on translated profits, net of UK revenue hedging, of approximately £0.6m on an annualised basis. The Group also translates its non-sterling denominated balance sheet items, which resulted in a loss in 2021 of £0.1m (2020: £0.2m gain).

Definitions

Adjusted measures exclude the impact of amortisation of acquired intangible assets, exceptional items and other adjusting items in accordance with the Group's policy. A detailed reconciliation of the Group's adjusted and underlying results is set out on pages 11 to 15 of this statement.

 

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

 

Summary of guidance for FY 2021

 

Income statement:

·      Revenue outlook

-       Pricing and DMI subscriptions - continued good underlying growth expected in H2 2021

-       Asset Management - continued progress in the rate of decline at IRD

-       Events revenue in H2 2021 expected to be c.£40m (including II events memberships) assuming physical events return

 

·      Costs

-       September 2020 restructuring benefits on track (annualised savings of c.£15m)

-       £5m increase in people costs reflecting investment to drive subscriptions growth;

£2m increase in depreciation reflecting investment in technology

-       H2 2021 cost weighting reflecting pay increases, bonuses, travel and expenses

-       Central costs in H1 2021 included one-off £2.5m insurance claim

-       Cost mitigation measures identified if physical events do not return in H2 2021

 

·      Tax rate

-       Group adjusted effective tax rate expected to be c.19% (FY 2020: 20%)

 

Cash flow:

-       Capital expenditure - capex of £13m reflecting continued investment in technology

-       Tax - £6.1m refund received in H2 2021 in relation to the closure of a Canadian tax enquiry (previously announced in 2020)

 

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 2021

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.

 

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.

 

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 2020 Annual Report.

 

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 are excluded as these items are adjusted in accordance with Group policy. Adjustments in respect of prior years are also removed from the adjusted tax expense as they do not relate to current year underlying trading.

 

Further analysis of the adjusting items is presented in notes 2, 4, 5, 6, and 10 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.

 

 

 

 

 

Unaudited six months ended

Unaudited six months ended

 

 

31 March 2021

31 March 2020

 

 

 

 

 

 

 

 

 

 

Statutory

Adjustments

Adjusted

Statutory

Adjustments

Adjusted

 

Notes

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

Revenue

2

155,495

-

155,495

186,277

-

186,277

 

 

 

 

 

 

 

 

Adjusted operating profit

2

36,825

-

36,825

41,073

-

41,073

Acquired intangible amortisation

11

(9,401)

9,401

-

(12,091)

12,091

-

Exceptional items

4

(7,974)

7,974

-

8,416

(8,416)

-

 

 

 

 

 

 

 

 

Operating profit

 

19,450

17,375

36,825

37,398

3,675

41,073

Operating profit margin

 

13%

-

24%

20%

-

22%

 

 

 

 

 

 

 

 

Share of results in associates and joint ventures

10

(74)

151

77

(191)

(82)

(273)

 

 

 

 

 

 

 

 

Finance income

5

18

-

18

2,083

(1,830)

253

Finance expense

5

(1,890)

175

(1,715)

(1,884)

167

(1,717)

Net finance (expense)/income

5

(1,872)

175

(1,697)

199

(1,663)

(1,464)

 

 

 

 

 

 

 

 

Profit before tax

 

17,504

17,701

35,205

37,406

1,930

39,336

Tax (expense)/income on profit

6

(9,316)

2,390

(6,926)

2,873

(10,278)

(7,405)

Profit for the period

 

8,188

20,091

28,279

40,279

(8,348)

31,931

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Equity holders of the parent

 

8,188

20,091

28,279

40,358

(8,380)

31,978

Equity non-controlling interests

 

-

-

-

(79)

32

(47)

 

 

8,188

20,091

28,279

40,279

(8,348)

31,931

 

 

 

 

 

 

 

 

Diluted earnings per share

8

7.6p

 

26.1p

37.5p

 

29.7p

 

 

 

 

 

 

Audited year ended 30 Sept 2020

 

 

 

 

 

 

 

 

Statutory

Adjustments

Adjusted

 

 

Notes

£000

£000

£000

 

 

 

 

 

 

 

Revenue

 

335,256

-

335,256

 

 

 

 

 

 

 

Adjusted operating profit

 

61,481

-

61,481

 

Acquired intangible amortisation

11

(23,039)

23,039

-

 

Exceptional items

4

(4,811)

4,811

-

 

 

 

 

 

 

 

Operating profit

 

33,631

27,850

61,481

 

Operating profit margin

 

10%

                       -  

18%

 

 

 

 

 

 

 

Share of results in associates and joint ventures

10

(495)

154

(341)

 

 

 

 

 

 

 

Finance income

5

4,141

(3,850)

291

 

Finance expense

5

(4,368)

307

(4,061)

 

Net finance expense

5

(227)

(3,543)

(3,770)

 

 

 

 

 

 

 

Profit before tax

 

32,909

24,461

57,370

 

Tax expense on profit

6

(2,125)

(9,432)

(11,557)

 

Profit for the year

 

30,784

15,029

45,813

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Equity holders of the parent

 

30,978

14,968

45,946

 

Equity non-controlling interests

 

(194)

61

(133)

 

 

 

30,784

15,029

45,813

 

 

 

 

 

 

 

Diluted earnings per share

8

28.8p

 

42.7p

 

 

 

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:

 

·     

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

·     

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

·     

including adjustments for events which run in one of the current or comparative periods due to changes in the event date. For example, this means we adjust for biennial events; and

·     

including proforma prior year adjustments for the application of new accounting standards.

 

Underlying measures previously also excluded events and publications which took place in the comparative period but did not take place in the current period (for example due to cancellations or changes in event format); with events and publications which took place in the current period but did not take place in the comparative period, being added into the comparative period at the same amount. The covid-19 pandemic has changed the event industry, with virtual and blended events now firmly established, as a result of the restrictions on holding physical events. This proliferation of formats means that it is significantly more difficult to assess whether an event is new or cancelled compared with the event that ran in the comparative period. The new methodology also aligns reported and underlying metrics more closely.

 

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:

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

 

 

2021

2020

 

 

Total

Total

Change %

 

£000

£000

 

 

 

 

 

Statutory revenue

155,495

          186,277

(17%)

Net M&A and closed businesses

-

              7,099

 

Timing differences

-

              4,310

 

Foreign exchange

-

(3,652)

 

Underlying revenue

155,495

194,034

(20%)

 

 

 

 

Statutory operating profit

19,450

            37,398

(48%)

Adjustments1

17,375

              3,675

 

Adjusted operating profit

36,825

            41,073

(10%)

Net M&A and closed businesses

-

                  324

 

Timing differences

-

              3,094

 

Foreign exchange

-

(1,203)

 

Underlying operating profit

36,825

43,288

(15%)

 

 

 

 

Statutory profit before tax

17,504

            37,406

(53%)

Adjustments1

17,701

              1,930

 

Adjusted profit before tax

35,205

            39,336

(11%)

Net M&A and closed businesses

-

                  430

 

Timing differences

-

              3,094

 

Foreign exchange

-

(1,190)

 

Underlying profit before tax

35,205

41,670

(16%)

 

 

1 Adjustments methodology detailed on page 11.

 

Cash conversion

Cash conversion measures the percentage by which cash generated from operations covers adjusted operating profit. Cash conversion is a measure of the quality of the Group's earnings.

 

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

 

 

 

 

Adjusted operating profit

36,825

41,073

61,481

 

 

 

 

Cash generated from operations

42,290

27,005

57,368

Exceptional items

9,099

9,934

14,646

Capital expenditure

(5,701)

(6,147)

(10,570)

Adjusted cash generated from operations

45,688

30,792

61,444

 

 

 

 

Adjusted 12-month rolling cash conversion %

133%

75%

100%

 

Adjusted cash generated from operations is after adjusting for the cash impact relating to exceptional items and capital expenditure. For the period ended 31 March 2021, exceptional cash payments largely consist of integration and transaction costs of newly acquired businesses and to support the restructure and cost reduction programme announced in September 2020. For the period ended 31 March 2020 and year ended 30 September 2020, exceptional cash payments largely consisted of integration and transaction costs of acquired businesses and to support the strategic review of Asset Management. At the half year, an adjusted 12-month cash conversion percentage is used to eliminate any seasonality.

 

Net cash

 

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

 

 

 

 

Net cash at beginning of period

28,093

50,078

50,078

Net increase/(decrease) in cash and cash equivalents

47,657

27,101

(19,601)

(Increase)/decrease in borrowings

(50,000)

(67,857)

880

Effect of foreign exchange rate movements

(939)

(1,240)

(3,264)

Net cash at end of period

24,811

8,082

28,093

 

 

 

 

Net cash comprises:

 

 

 

Cash at bank and short-term deposits

74,811

76,656

28,093

Borrowings

(50,000)

(68,574)

-

Total cash and cash equivalents net of borrowings

24,811

8,082

28,093

Net cash

24,811

8,082

28,093

Average exchange rate adjustment

1,168

(328)

619

Adjusted net cash

25,979

7,754

28,712

 

 

 

 

 

12-month

12-month

12-month

 

rolling

rolling

rolling

 

31 March

31 March

30 Sept

 

2021

2020

2020

 

£000

£000

£000

 

 

 

 

Adjusted operating profit

57,233

100,297

61,481

Share of results in associates and joint ventures

9

(306)

(341)

Add back:

 

 

 

Intangible amortisation of licences and software

3,761

2,071

2,860

Depreciation of property, plant and equipment

2,598

2,847

2,908

Depreciation and impairment of right of use assets

8,198

2,902

7,785

Share of associates interest, depreciation and amortisation

241

-

163

IFRS 16 adjustments

(8,282)

(3,554)

(7,711)

M&A annualised adjustment

1,098

(23)

(136)

Adjusted EBITDA

64,856

104,234

67,009

Adjusted net cash to EBITDA ratio

0.40

0.07

0.43

 

 

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 covenants required the Group's net debt to be no more than three times adjusted EBITDA and required 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.

 

Segment reporting change

 

From the 1 October 2020, the Group has simplified revenue reporting, to align with the Group's strategic objectives, and within Asset Management has re-categorised Institutional Investor's events-based memberships from subscriptions to events revenue. In addition, there has been a reclassification of some revenues in Data & Market Intelligence from subscriptions to advertising & other revenue, to reflect the primary nature of the revenue type.

The tables below reflect the comparative financial information for these changes, for the six months ended 31 March 2020 and 2019, and the full year ended 30 September 2020 and 2019. They are provided for information and are unaudited.

These restatements do not impact the total reported historical consolidated results of the Group.

Year ended 30 September 2020, restated and unaudited

 

 

 

 

 

 

 £m

Subscriptions

Events

Advertising & Other

Total

Pricing

73.9

7%

6.6

(57%)

3.2

(45%)

83.7

(7%)

Data & Market Intelligence

71.2

5%

41.3

(56%)

21.6

(9%)

134.1

(28%)

Asset Management

74.4

(8%)

33.1

(39%)

11.3

14%

118.8

(18%)

Sub-total

219.5

0%

81.0

(50%)

36.1

(8%)

336.6

(20%)

FX loss on forward contracts

 

 

(1.3)

 

(1.3)

 

Adjusted Revenue

219.5

 

81.0

 

34.8

 

335.3

 

 

 

 

 

 

 

 

 

 

Six months ended 31 March 2020, restated and unaudited

 

 

 

 

 

 

 £m

Subscriptions

Events

Advertising & Other

Total

Pricing

36.1

8%

6.4

(26%)

1.8

(33%)

44.3

(1%)

Data & Market Intelligence

33.6

5%

33.9

(18%)

8.6

12%

76.1

(6%)

Asset Management

36.9

(9%)

23.9

(3%)

5.6

16%

66.4

(5%)

Sub-total

106.6

1%

64.2

(14%)

16.0

5%

186.8

(5%)

FX loss on forward contracts

 

 

(0.5)

 

(0.5)

 

Adjusted Revenue

106.6

 

64.2

 

15.5

 

186.3

 

 

 

 

 

 

 

 

 

 

Year ended 30 September 2019, restated and unaudited

 

 

 

 

 

 

 £m

Subscriptions

Events

Advertising & Other

Total

Pricing

68.9

10%

15.4

(4%)

5.7

2%

90.0

7%

Data & Market Intelligence

52.1

3%

91.9

2%

23.6

(6%)

167.6

1%

Asset Management

80.8

(8%)

54.0

1%

10.8

2%

145.6

(4%)

Sub-total

201.8

0%

161.3

2%

40.1

(4%)

403.2

0%

FX loss on forward contracts

 

 

(3.5)

 

(3.5)

 

Sold/closed businesses

 

2.0

 

 

 

2.0

 

Adjusted Revenue

201.8

 

163.3

 

36.6

 

401.7

 

 

 

 

 

 

 

 

 

 

 

Six months ended 31 March 2019, restated and unaudited

 

 

 

 

 

 

 

Subscriptions

Events

Advertising & Other

Total

Pricing

33.3

12%

8.6

(6%)

2.7

10%

44.6

8%

Data & Market Intelligence

22.3

1%

40.1

4%

7.5

(16%)

69.9

0%

Asset Management

40.5

(8%)

24.6

3%

5.5

9%

70.6

(3%)

Sub-total

96.1

0%

73.3

2%

15.7

(5%)

185.1

1%

FX loss on forward contracts

 

 

(1.3)

 

(1.3)

 

Sold/closed businesses

 

1.1

 

                       -  

 

1.1

 

Adjusted Revenue

96.1

 

74.4

 

14.4

 

184.9

 

 

 

 

 

 

 

 

 

 

Percentages represent underlying year on year change

 

 

 

 

 

 

 

Principal risks and uncertainties

 

An overall stable risk trend

The principal risks and uncertainties that affect the Group are described in detail on pages 42 to 56 of the 2020 Annual Report available at www.euromoneyplc.com. They are:

(1)        Covid-19 continues to have a significant impact on the Group's business activities, particularly events

(2)        Recession or poor business economic conditions in major markets hinder organic revenue growth

(3)        Compliance and Controls: complex global regulations and a litigious environment causes reputational, legal or financial damage

(4)        Inability to execute M&A strategy or integrate acquisitions successfully into the Group on a timely basis prevents delivery of the strategy

(5)        Geopolitical upheaval has a major impact on the business environment

(6)        Cyber security and information security threats compromise data integrity or result in a loss of key data

(7)        Inadequate investment in technology creates competitor risk and slows execution of the 3.0 strategy

(8)        Inadequate ability of the business to manage talent churn effectively results in the loss of key personnel in critical roles

(9)        Uncertain tax liabilities lead to material cash outflows

(10)     Existing and emerging competitor activity creates product and pricing pressures, as well as potentially eroding margins

(11)     Support systems implementations and obsolescence do not meet business needs, resulting in inefficiencies and increased cost

(12)     Exposure to USD exchange rate leads to unexpected swings in reported results

(13)     Changing customer needs, new technology, or disruptive new entrants into the market cause structural changes in markets, reducing the value delivered by our products and services

 

Covid-19 continues to impact the Group's staff, customers, shareholders and suppliers as well as the Group's financial performance. While capital is generally more available than this time last year at the start of the pandemic, borrowing costs have increased and the Group's revenues have reduced, therefore cash management remains a priority. Our investors continue to be impacted through share price volatility.

While covid-19 and its consequences mean that the Company continues to operate in a heightened risk environment than pre-pandemic, the mitigating actions taken by the Company combined with the length of time for which the Company has operated in this environment means that the overall risk trend for the Group is stable.

Disruption to business operations, coupled with downturn and disruption in the events sector

The impact of the covid-19 pandemic continues to disrupt business operations, particularly in events, although the subscription businesses have shown resilience during this period. Despite effective vaccines being manufactured and distributed around the world, the roll-out of vaccination programs is inconsistent across countries, resulting in further localised lockdowns, and continued restrictions on both large gatherings and travel. It is anticipated that these restrictions will be lifted once a critical mass of the population is vaccinated, with travel passports or other compulsory proof of immunity, or negative testing being required to restart large-scale international travel again.

Therefore, the majority of in-person events continue to be cancelled or postponed until restrictions are lifted, causing a material impact on the Group's performance, despite an increase in digital or blended events. The covid-19 pandemic has changed the event industry, with virtual and blended events now firmly established but the long-term split between virtual, blended and physical event forms is currently uncertain.

Euromoney staff continue to substantially work from home, with a handful of offices being reopened partially or in full, only if permissible by local regulations and following a thorough risk assessment.

Ability to manage key employee attrition

As the major markets start to slowly recover from the impact of the pandemic, there is a latent risk of higher than average attrition of employees, as staff begin to see restrictions loosened and consider changes in employer or work location, to improve flexibility and better fit personal needs. There is a risk that critical personnel may choose to leave the business, resulting in a loss of institutional knowledge and a gap in certain specialisms. The risk is being managed by ensuring that there is succession planning for key roles, as well as more work-related flexibility for staff.

Information security risk also on the increase

 

Covid-19 resulted in an upward trend for Risk (6) (Information security breach) with phishing attacks, criminal cyber-activity and other scams reportedly increasing as home-workers are targeted.  Controls were strengthened in this area at the start of the pandemic, primarily through online training and guidance on how to securely work from home, as well as frequent online training on cyber and information security risks for all staff. Senior management, including the Chief Executive Officer, Chief Information Officer and Chief Information Security Officer, continue to monitor this closely. Therefore, while the trend is increasing, we do not believe it is sufficiently large to require a change in the position of this risk on the Group's risk matrix.

Reduction in unforeseen tax risks

The potential impact of tax risks having a material impact on cash outflows has significantly reduced. The Group has reduced potential tax liabilities by £8.9m as a result of the positive outcomes of certain tax proceedings and assessments. In addition, the Group has implemented an improved controls environment in this area. While governments may raise tax rates in the future to fund pandemic-related expenditure, sufficient notice is usually provided and therefore the risk is manageable.

The Board continues to prioritise the management of risk

The Board is focused on taking the steps necessary to navigate the Company through this crisis and mitigating its impact, which will include a regular and robust assessment and management of the Company's risks.

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 and shows the relative likelihood of the principal risks crystallising and their potential impact on the Group, and highlights changes made to the matrix at the half-year point for two of the Group's principal risks. The risks are shown as post-mitigation residual risks.

The risk matrix can be accessed here
http://www.rns-pdf.londonstockexchange.com/rns/2137Z_1-2021-5-19.pdf

Condensed Consolidated Income Statement

for the six months ended 31 March 2021

 

 

 

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

 Audited
 year
 ended
 30 Sept

 

 

2021

2020

2020

 

Notes

£000

£000

£000

 

 

 

 

 

Revenue

2

155,495

186,277

335,256

 

 

 

 

 

Operating profit before acquired intangible amortisation and exceptional items

2

36,825

41,073

61,481

Acquired intangible amortisation

11

(9,401)

(12,091)

(23,039)

Exceptional items

4

(7,974)

8,416

(4,811)

 

 

 

 

 

Operating profit

2

19,450

37,398

33,631

Share of results in associates and joint ventures

10

(74)

(191)

(495)

 

 

 

 

 

Finance income

5

18

2,083

4,141

Finance expense

5

(1,890)

(1,884)

(4,368)

Net finance (expense)/income

5

(1,872)

199

(227)

 

 

 

 

 

Profit before tax

2

17,504

37,406

32,909

Tax (expense)/income on profit

6

(9,316)

2,873

(2,125)

Profit for the period

2

8,188

40,279

30,784

 

 

 

 

 

Attributable to:

 

 

 

 

Equity holders of the parent

 

8,188

40,358

30,978

Equity non-controlling interests

 

-

(79)

(194)

 

 

8,188

40,279

30,784

 

 

 

 

 

Earnings per share

 

 

 

 

Basic

8

7.6p

37.5p

28.8p

Diluted

8

7.6p

37.5p

28.8p

 

 

 

 

 

Dividend per share (including proposed dividends)

7

5.7p

-

11.4p

 

 

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 11 to 13.

 

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2021

 

 

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

 

 

 

 

Profit for the period

8,188

40,279

30,784

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

Change in fair value of cash flow hedges

4,489

(282)

1,838

Transfer of (gains)/losses on cash flow hedges from fair value reserves to Income Statement:

 

 

 

   Foreign exchange (gains)/losses in revenue

(980)

473

1,300

   Foreign exchange (gains)/losses in administrative expenses

(133)

81

523

Net exchange differences on translation of net investments in overseas subsidiary undertakings

(26,867)

(2,427)

(17,437)

Net exchange differences on foreign currency loans

34

(1,209)

(3,781)

Translation reserves recycled to Income Statement

1,183

-

-

 

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

Actuarial gains on defined benefit pension schemes

2,109

4,623

3,005

Tax charge on actuarial gains on defined benefit pension schemes

(401)

(763)

(468)

 

 

 

 

Other comprehensive (expense)/income for the period

(20,566)

496

(15,020)

 

 

 

 

Total comprehensive (expense)/income for the period

(12,378)

40,775

15,764

 

 

 

 

Attributable to:

 

 

 

Equity holders of the parent

(12,378)

40,854

15,958

Equity non-controlling interests

-

(79)

(194)

 

(12,378)

40,775

15,764

 

 

 

 

Condensed Consolidated Statement of Financial Position

as at 31 March 2021

 

 

 

 

 

Unaudited
 as at
 31 March

Audited
 as at
 30 Sept

 

 

2021

2020

 

Notes

£000

£000

Non-current assets

 

 

 

Intangible assets

 

 

 

Goodwill

11

448,367

456,343

Other intangible assets

11

199,155

201,713

Property, plant and equipment

 

12,864

14,454

Right of use asset

12

50,134

53,404

Investment in associates and joint ventures

10

8,762

8,836

Deferred tax assets

 

3,510

4,018

Retirement benefit asset

 

1,066

566

Other non-current assets

 

259

422

Derivative financial instruments

 

264

307

 

 

724,381

740,063

Current assets

 

 

 

Trade and other receivables

 

67,902

71,428

Contract assets

 

2,211

1,454

Current income tax assets

 

7,264

10,602

Cash and cash equivalents (excluding bank overdrafts)

 

74,811

28,093

Derivative financial instruments

 

3,507

782

 

 

155,695

112,359

Current liabilities

 

 

 

Acquisition commitments

 

(54)

(15)

Trade and other payables

 

(31,747)

(27,885)

Lease liabilities

13

(9,331)

(9,142)

Current income tax liabilities

 

(15,812)

(15,824)

Accruals

 

(44,127)

(44,013)

Contract liabilities

 

(137,089)

(132,615)

Derivative financial instruments

 

(298)

(914)

Provisions

 

(3,217)

(7,272)

 

 

(241,675)

(237,680)

Net current liabilities

 

(85,980)

(125,321)

Total assets less current liabilities

 

638,401

614,742

 

 

 

 

Non-current liabilities

 

 

 

Borrowings

15

(50,000)

-

Lease liabilities

13

(56,376)

(60,999)

Other non-current liabilities

 

(203)

(216)

Contract liabilities

 

(2,205)

(1,936)

Deferred tax liabilities

 

(31,523)

(28,104)

Retirement benefit obligation

 

(1,075)

(3,130)

Derivative financial instruments

 

(52)

(134)

Provisions

 

(2,919)

(2,848)

 

 

(144,353)

(97,367)

Net assets

 

494,048

517,375

 

                                                                                                                                                            

Condensed Consolidated Statement of Financial Position continued

as at 31 March 2021

 

 

 

Unaudited
 as at
 31 March

Audited
 as at
 30 Sept

 

 

2021

2020

 

Notes

£000

£000

Shareholders' equity

 

 

 

Called up share capital

16

273

273

Share premium account

 

104,636

104,636

Other reserve

 

64,981

64,981

Capital redemption reserve

 

56

56

Own shares

 

(14,101)

(14,592)

Reserve for share-based payments

 

38,524

38,686

Fair value reserve

 

(19,646)

(23,528)

Translation reserve

 

96,236

122,427

Retained earnings

 

223,089

224,436

Total equity

 

494,048

517,375

 

 

 

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2021

 

 

 

 

 

 

 

Reserve

 

 

 

 

 

 

 

 

 

 

 

 

for

 

 

 

 

 

 

 

Called

 

 

Capital

 

share-

 

 

 

 

Non-

 

 

 up

Share

 

redemp-

 

based

Fair

Trans-

 

 

control-

 

 

share

premium

Other

tion

Own

pay-

value

lation

Retained

 

ling

 

 

capital

account

reserve

reserve

shares

ments

reserve

reserve

earnings

Total

interests

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 October 2019

273

104,306

64,981

56

(19,682)

40,120

(27,087)

143,243

216,806

523,016

1,043

524,059

Profit for the year

-

-

-

-

-

-

-

-

30,978

30,978

(194)

30,784

Other comprehensive income/(expense) for the year

-

-

-

-

-

-

3,661

(21,218)

2,537

(15,020)

 

(15,020)

Total comprehensive income for the year

-

-

-

-

-

-

3,661

(21,218)

33,515

15,958

(194)

15,764

Share-based payments

-

-

-

-

-

(729)

-

-

2,992

2,263

-

2,263

Cash dividend paid

-

-

-

-

-

-

-

-

(23,994)

(23,994)

-

(23,994)

Exercise of acquisition option commitments

-

-

-

-

-

-

-

-

849

849

(849)

-

Exercise of share options

-

330

-

-

5,090

(705)

-

-

(4,385)

330

-

330

Reclassification of reserves

-

-

-

-

-

-

(102)

402

(300)

-

-

-

Tax relating to items taken directly to equity

-

-

-

-

-

-

-

-

(1,047)

(1,047)

-

(1,047)

At 30 September 2020

273

104,636

64,981

56

(14,592)

38,686

(23,528)

122,427

224,436

517,375

-

517,375

Profit for the period

-

-

-

-

-

-

-

-

8,188

8,188

-

8,188

Other comprehensive income/(expense) for the period

-

-

-

-

-

-

3,882

(26,191)

1,743

(20,566)

-

(20,566)

Total comprehensive income/(expense) for the period

-

-

-

-

-

-

3,882

(26,191)

9,931

(12,378)

-

(12,378)

Share-based payments

-

-

-

-

-

213

-

-

-

213

-

213

Cash dividend paid

-

-

-

-

-

-

-

-

(12,318)

(12,318)

-

(12,318)

Exercise of share options

-

-

-

-

491

(375)

-

-

(116)

-

-

-

VAT on share buyback

-

-

-

-

-

-

-

-

532

532

-

532

Tax relating to items taken directly to equity

-

-

-

-

-

-

-

-

624

624

-

624

At 31 March 2021

273

104,636

64,981

56

(14,101)

38,524

(19,646)

96,236

223,089

494,048

-

494,048

 

 

 

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2020

 

 

 

 

 

 

Reserve

 

 

 

 

 

 

 

 

 

 

 

 

for

 

 

 

 

 

 

 

Called

 

 

Capital

 

share-

 

 

 

 

Non-

 

 

up

Share

 

redemp-

 

based

Fair

Trans-

 

 

control-

 

 

share

premium

Other

tion

Own

pay-

value

lation

Retained

 

ling

 

 

capital

account

reserve

reserve

shares

ments

reserve

reserve

earnings

Total

interests

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 October 2019

273

104,306

64,981

56

(19,682)

40,120

(27,087)

143,243

216,806

523,016

1,043

524,059

Profit for the period

-

-

-

-

-

-

-

-

40,358

40,358

(79)

40,279

Other comprehensive income/(expense) for the period

-

-

-

-

-

-

272

(3,636)

3,860

496

-

496

Total comprehensive income/(expense) for the period

-

-

-

-

-

-

272

(3,636)

44,218

40,854

(79)

40,775

Share-based payments

-

-

-

-

-

(241)

-

-

-

(241)

-

(241)

Cash dividend paid

-

-

-

-

-

-

-

-

(23,994)

(23,994)

-

(23,994)

Exercise of share options

-

330

-

-

-

-

-

-

-

330

-

330

Tax relating to items taken directly to equity

-

-

-

-

-

-

-

-

(171)

(171)

-

(171)

At 31 March 2020

273

104,636

64,981

56

(19,682)

39,879

(26,815)

139,607

236,859

539,794

964

540,758

 

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

 

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

 

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

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

Number of shares held:

 

 

 

Euromoney Employees' Share Ownership Trust

58,976

58,976

58,976

Euromoney Employee Share Trust

1,139,807

1,593,198

1,179,662

Total

1,198,783

1,652,174

1,238,638

Nominal cost per share (p)

0.25

0.25

0.25

Historical cost per share (£)

11.76

11.91

11.78

Market value (£000)

11,436

13,383

9,946

 

 

Condensed Consolidated Statement of Cash Flows

for the six months ended 31 March 2021

 

 

 

 

 

 

 

 

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

 

2021

2020

2020

 

Notes

£000

£000

£000

Cash flow from operating activities

 

 

 

 

Operating profit

 

19,450

37,398

33,631

Long-term incentive expense/(credit)

 

213

(241)

2,261

Acquired intangible amortisation

11

9,401

12,091

23,039

Licences and software amortisation

 

2,087

1,186

2,860

Depreciation of property, plant and equipment

 

1,160

1,470

2,908

Depreciation and impairment of right of use assets

 

3,315

2,902

7,785

Loss on disposal of property, plant and equipment

 

1

2

115

Impairment charge

4

-

-

1,727

Recycling of foreign exchange

4

1,183

-

-

(Decrease)/increase in provisions

 

(3,908)

(320)

6,389

Operating cash flows before movements in working capital

 

32,902

54,488

80,715

Decrease/(increase) in receivables

 

2,038

(1,485)

1,752

Increase/(decrease) in payables

 

7,350

(25,998)

(25,099)

Cash generated from operations

 

42,290

27,005

57,368

Income taxes paid

 

(1,702)

(10,420)

(7,139)

Net cash generated from operating activities

 

40,588

16,585

50,229

 

 

 

 

 

Investing activities

 

 

 

 

Interest received

 

12

260

310

Purchase of intangible assets

 

(5,481)

(4,650)

(9,110)

Purchase of property, plant and equipment

 

(220)

(1,497)

(1,967)

Proceeds from disposal of property, plant and equipment

 

-

1

507

Purchase of business/subsidiary undertaking, net of cash acquired

9

(20,171)

(24,046)

(23,999)

Receipt of deferred consideration

 

-

176

176

Payment of deferred consideration

 

-

-

(134)

Net cash used in investing activities

 

(25,860)

(29,756)

(34,217)

 

 

 

 

 

Financing activities

 

 

 

 

Dividends paid

7

(12,318)

(23,994)

(23,994)

Interest paid

 

(517)

(611)

(2,130)

Capital element of lease repayments

 

(3,855)

(2,278)

(6,071)

Interest element of lease repayments

 

(913)

(926)

(1,985)

Issue of new share capital

16

-

330

330

Increase in borrowings

15

50,000

67,857

67,857

Repayment of borrowings

 

-

-

(68,737)

Recovery of VAT on share buy-back costs

 

532

-

-

Purchase of additional interest in subsidiary undertakings

9

-

(106)

(883)

Net cash used in financing activities

 

32,929

40,272

(35,613)

Net increase/(decrease) in cash and cash equivalents

 

47,657

27,101

(19,601)

Cash and cash equivalents at beginning of period

 

28,093

50,078

50,078

Effect of foreign exchange rate movements

 

(939)

(523)

(2,384)

Cash and cash equivalents at end of period

 

74,811

76,656

28,093

 

 

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 19 May 2021.

 

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 2020 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 Statements 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 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.

 

Going concern, debt covenants and liquidity

 

At 31 March 2021, the Group's unlevered, net cash position excluding lease liabilities was £24.8m comprising cash and cash equivalents, less amounts borrowed through the Group's revolving credit facility. At 31 March 2021, the Group had access to a committed £188m multi-currency revolving credit facility, of which £50m had been drawn down, and available until December 2022. On 11 May 2021, the Group refinanced and increased its existing bank facility. It now has a committed multi-currency revolving credit facility of £190m which is available to the Group until May 2024, with two additional one-year extension options available. The facility's covenants require the Group's net debt to be no more than three times adjusted 12-month EBITDA though this can increase to three and a half times for certain periods in the event of an acquisition and requires minimum levels of interest cover of three and a half 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 uncertainty as to the future impact on the Group of the 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.

 

Taking into account reasonably possible changes in trading performance, the Group's forecasts and projections, out to the going concern assessment period of at least 12 months from the date of signing this Half Year Report, show that the Group should be able to operate within the level and covenants of its current and available borrowing facilities.

 

In making the going concern assessment, the Directors have also modelled a severe but plausible downside that assumes no physical events in the year ending 30 September 2022 and a fall of 10% in non-events businesses versus the plan. Under this scenario, the Group maintains sufficient liquidity and is projected to satisfy covenants required by the RCF after taking measures to preserve cash.

 

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 Segmental analysis

 

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

 

Revenues generated in the Pricing segment are primarily from subscriptions. Data & Market Intelligence and Asset Management revenues consist mainly of subscriptions and events. A breakdown of the Group's revenue by type is set out below.

 

From the 1 October 2020, the Group has simplified revenue reporting, to align with the Group's strategic objectives, and within Asset Management has re-categorised Institutional Investor's events-based memberships from subscriptions to events revenue. In addition, there has been a reclassification of some revenues in Data & Market Intelligence from subscriptions to advertising & other revenue, to reflect the primary nature of the revenue type. The comparative split of segmental revenues and revenue by type have been restated to reflect these reclassifications. Refer to page 16 for a summary of the segment reporting change.

 

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.

 

 

Subscriptions

Events

Advertising and other

Total revenue

2021

£000

£000

£000

£000

Revenue

 

 

 

 

by segment and type:

 

 

 

 

Pricing

37,640

1,322

1,282

40,244

Data & Market Intelligence

41,379

9,099

7,805

58,283

Asset Management

33,916

15,388

6,684

55,988

 

112,935

25,809

15,771

154,515

Foreign exchange gains on forward contracts

-

-

980

980

Segment Revenue 

112,935

25,809

16,751

155,495

 

 

 

Events revenue of £13.0m (2020: £45.1m) and print advertising of £2.5m (2020: £4.8m) are recognised at a point in time. The remaining subscription, events-based memberships and online advertising revenue is recognised over time.

 

Restated1 subscriptions

Restated1 events

Restated1 advertising and other

Total revenue

2020

£000

£000

£000

£000

Revenue

 

 

 

 

by segment and type:

 

 

 

 

Pricing

36,161

6,368

1,776

44,305

Data & Market Intelligence

33,618

33,926

8,495

76,039

Asset Management

36,897

23,952

5,558

66,407

 

106,676

64,246

15,829

186,751

Foreign exchange losses on forward contracts

-

-

(474)

(474)

Segment Revenue 

106,676

64,246

15,355

186,277

                         

 

 

1 For the six months ended 31 March 2020, £19.1m of revenue previously classified as subscriptions within Asset Management has been reclassified as events revenue. In addition to this, £0.8m of subscriptions revenue previously reported within Data & Market Intelligence has been reclassified as advertising and other revenue. The reclassification has not changed total revenue for the period.

2 Segmental analysis continued

 

 

Unaudited six months ended 31 March

 

United Kingdom

North America

Rest of World

Eliminations

Total

 

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

 

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

by segment and source:

 

 

 

 

 

 

 

 

 

 

 

Pricing

17,927

19,800

21,607

22,237

773

2,337

(63)

(69)

40,244

44,305

 

Data & Market Intelligence

39,878

57,503

18,369

18,545

3,788

4,442

(3,752)

(4,451)

58,283

76,039

 

Asset Management

-

-

55,990

66,433

-

-

(2)

(26)

55,988

66,407

 

Sold/closed businesses

-

-

-

-

-

-

-

-

-

-

 

Foreign exchange gains/(losses) on forward contracts

980

(474)

-

-

-

-

-

-

980

(474)

 

Segment revenue 

58,785

76,829

95,966

107,215

4,561

6,779

(3,817)

(4,546)

155,495

186,277

 

Statutory revenue by destination

24,255

28,100

83,821

95,587

47,419

62,590

-

-

155,495

186,277

 

                               

 

 

 

Unaudited six months ended 31 March

 

United Kingdom

North America

Rest of World

Total

 

2021

2020

2021

2020

2021

2020

2021

2020

 

£000

£000

£000

£000

£000

£000

£000

£000

Adjusted operating profit1

 

 

 

 

 

 

 

 

by segment and source:

 

 

 

 

 

 

 

 

Pricing

6,979

8,866

11,382

10,737

(3,160)

(2,302)

15,201

17,301

Data & Market Intelligence

6,776

11,378

5,261

4,066

(2,503)

(2,061)

9,534

13,383

Asset Management

-

-

22,781

26,105

-

-

22,781

26,105

Sold/closed businesses

-

-

-

-

-

(42)

-

(42)

Unallocated corporate costs

(10,236)

(15,073)

(102)

(252)

(353)

(349)

(10,691)

(15,674)

Adjusted operating profit/(loss)1

3,519

5,171

39,322

40,656

(6,016)

(4,754)

36,825

41,073

Acquired intangible amortisation2 (note 11)

(2,079)

(2,343)

(7,303)

(9,730)

(19)

(18)

(9,401)

(12,091)

Exceptional items (note 4)

(4,217)

13,877

(3,757)

(5,461)

-

-

(7,974)

8,416

Operating (loss)/profit

(2,777)

16,705

28,262

25,465

(6,035)

(4,772)

19,450

37,398

Share of results in associates and joint ventures (note 10)

 

 

 

 

 

(74)

(191)

Finance income (note 5)

 

 

 

 

 

 

18

2,083  

Finance expense (note 5)

 

 

 

 

 

 

(1,890)

(1,884)

Profit before tax

 

 

 

 

 

 

17,504

37,406

Tax (expense)/income on profit (note 6)

 

 

 

 

 

 

(9,316)

2,873

Profit for the period

 

 

 

 

8,188

40,279

 

 

 

1 Operating profit before acquired intangible amortisation and exceptional items. 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 11 to 13.

2 Acquired intangible amortisation represents amortisation of acquisition-related non-goodwill assets such as trademarks and brands, customer relationships, databases and software (note 11). Following a review of balances, the comparatives have been represented to correct the geographic areas classification, moving £0.5m of the total amortisation from United Kingdom to North America.

 

2 Segmental analysis continued

 

 

 

Unaudited six months ended 31 March

 

Acquired intangible

Exceptional

Depreciation and

 

amortisation

items

amortisation

 

2021

2020

2021

2020

2021

2020

 

£000

£000

£000

£000

£000

£000

Other segmental information

 

 

 

 

 

 

by segment:

 

 

 

 

 

 

Pricing

(3,346)

(3,345)

(1,340)

(178)

(1,128)

(594)

Data & Market Intelligence

(3,803)

(3,459)

(3,244)

(1,646)

(1,006)

(478)

Asset Management

(2,252)

(5,190)

(475)

(3,932)

(265)

(414)

Unallocated corporate costs

-

(97)

(2,915)

14,172

(4,163)

(4,072)

Total

(9,401)

(12,091)

(7,974)

8,416

(6,562)

(5,558)

 

                                    

The closing net book value of goodwill, other intangible assets, property, plant and equipment, right of use assets and investments is analysed by geographic area as follows1:

 

 

United Kingdom

North America

Rest of World

Total

 

Unaudited
 six months
 ended
 31 March

Restated audited
 year
 ended
 30 Sept

Unaudited
 six months
 ended
 31 March

Restated audited
 year
 ended
 30 Sept

Unaudited
 six months
 ended
 31 March

Restated audited
 year
 ended
 30 Sept

Unaudited
 six months
 ended
 31 March

Restated audited
 year
 ended
 30 Sept

 

 

2021

2020

2021

2020

2021

2020

2021

2020

 

 

£000

£000

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

 

 

 

Goodwill

110,974

110,972

332,920

340,601

4,473

4,770

448,367

456,343

 

Other intangible assets

44,110

43,277

154,642

157,988

403

448

199,155

201,713

 

Property, plant and equipment

3,814

4,109

8,629

9,756

421

589

12,864

14,454

 

Right of use assets

20,490

21,906

26,895

28,632

2,749

2,866

50,134

53,404

 

Investments

8,762

8,836

-

-

-

-

8,762

8,836

 

Non-current assets

188,150

189,100

523,086

536,977

8,046

8,673

719,282

734,750

 

Additions to property, plant and equipment

(27)

(251)

(26)

(1,886)

(508)

(446)

(561)

(2,582)

 

Additions to right of use assets

-

(1,914)

-

(1,860)

(530)

(789)

(530)

(4,564)

 

                         

 

1 Following a review of balances, the comparatives have been represented to correct the geographic areas classification. This resulted in the reclassification of £15.9m of non-current assets from United Kingdom to North America (£13.7m) and Rest of World (£2.2m). Of the £15.9m, £14.0m of other intangible assets were reclassified from United Kingdom to North America.

 

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

 

3 Seasonality of results

 

The Group's results are usually not materially affected by seasonal or cyclical trading. For the year ended 30 September 2020, the Group earned 56% of its revenue and 67% of its adjusted operating profits in the first six months of the year (2019: 46% of its revenue and 44% of its adjusted operating profit in the six months of the year). However, as covid-19 led to a number of event cancellations in the second half of the 2020, a higher proportion of that year's profits were earned in the first half, compared to recent years.

 

4 Exceptional items

 

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

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

 

2021

2020

2020

 

Notes

£000

£000

£000

 

 

 

 

 

Restructuring

a

(2,257)

-

(8,954)

Recycling of foreign exchange

b

(1,183)

-

-

Other exceptional costs

c

(4,534)

(8,384)

(10,906)

Release of provision for VAT

d

-

10,633

10,633

Release of provision for payroll taxes

e

-

6,167

6,143

Impairment charges

f

-

-

Exceptional items

 

(7,974)

8,416

(4,811)

 

 

 

a.    

For the period ended 31 March 2021, costs of £2.3m (September 2020: £9.0m) as a result of the major restructuring across the Group are included in exceptional items. The costs comprise severance costs and professional costs associated with the restructuring. Normal restructuring costs of £0.1m (September 2020: £0.6m) are not treated as exceptional items.

 

b.    

For the period ended 31 March 2021, £1.2m of foreign exchange gains/losses were recycled from equity to exceptional items. This relates to foreign exchange gains/losses on quasi-equity loans and net investment hedging that had been deferred to equity in previous years. These amounts have been recycled because the net investment or party to the quasi-equity loan is no longer part of the Group. As these items are not material, no restatement has been made.

 

c.    

For the period ended 31 March 2021, other exceptional costs of £4.5m consist of expenditure associated with acquisition related costs, mainly for Wealth-X, AgriCensus, WealthEngine (note 9) and The Jacobsen (note 9), treated as exceptional due to the magnitude of the costs. Also included are costs incurred to support the strategic review of Asset Management. The recognition of the earn-out payments for the acquisitions of AgriCensus are treated as compensation costs and included in exceptional items. A recovery of VAT is also included relating to a reclaim in respect of share buy-back related expenditure previously recorded in exceptional items.

 

For the periods ended 31 March 2020 and 30 September 2020, other exceptional costs consisted of expenditure associated with the acquisition of BoardEx and The Deal, Wealth-X and AgriCensus, treated as exceptional due to the magnitude of the costs. Also included are costs incurred to support the strategic review of Asset Management as well as significant costs associated with an acquisition that did not complete. The recognition of the earn-out payments for the acquisitions of Site Seven Media Ltd (TowerXchange) and AgriCensus are treated as compensation costs and included in exceptional items.

 

d.    

For the periods ended 31 March 2020 and 30 September 2020, the Group released a provision of £10.6m originally recognised in the 2019 Financial Statements in respect of UK VAT on supplies between UK Group companies for the four years ended 30 September 2018. The potential exposure was identified during the second half of 2019 financial year and after discussing the matter with HMRC during the first half of 2020, the Group was notified on 11 May 2020 by HMRC that no VAT was due on these supplies.

 

e.    

For the periods ended 31 March 2020 and 30 September 2020, the Group released £6.1m of the £8.2m provision held in respect of payroll taxes with an additional £0.6m release for interest as an adjusted finance item (note 6). This provision was originally recognised in the 2019 Annual Report and Accounts with a restatement for previously unidentified liabilities for payroll taxes covering the six years to 30 September 2019. Following a meeting with HMRC in February 2020, a settlement amount of £1.2m was agreed in April 2020 and the Group incurred £0.3m of professional fees.

 

f.

For the period ended 30 September 2020, an impairment of £1.7m was recognised relating to the customer relationships of Broadmedia and Layer123 due to lower than expected retention rates.

 

 

5 Finance income and expense

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

Finance income

 

 

 

Interest receivable from short-term investments

18

253

291

Movements in acquisition commitments

-

428

1,728

Fair value remeasurements

-

130

130

Interest on tax

-

1,256

1,988

Movements in deferred consideration

-

16

4

 

18

2,083

4,141

Finance expense

 

 

 

Interest payable on borrowings

(617)

(698)

(1,813)

Interest on lease liabilities

(913)

(926)

(1,985)

Net interest expense on defined benefit pension liability

(67)

(48)

(136)

Movements in acquisition commitments

(39)

-

-

Interest on tax

(254)

(212)

(434)

 

(1,890)

(1,884)

(4,368)

 

 

 

 

Net finance (expense)/income

(1,872)

199

(227)

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

Reconciliation of net finance (expense)/income in the Income Statement to adjusted net finance expense

 

 

 

Net finance (expense)/income in the Income Statement

(1,872)

199

(227)

Add back:

 

 

 

Movements in acquisition commitments

39

(428)

(1,728)

Movements in deferred consideration

-

(16)

(4)

Fair value remeasurements

-

(130)

(130)

Interest on tax

136

(1,089)

(1,681)

 

175

(1,663)

(3,543)

Adjusted net finance expense

(1,697)

(1,464)

(3,770)

 

 

 

The reconciliation of net finance (expense)/income in the Income Statement has been provided since the Directors consider it necessary in order to provide an indication of the adjusted net finance expense.  Refer to the appendix to the Half Year Report for a detailed reconciliation of the Group's statutory results to the adjusted results.

 

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

 

During the year ended 30 September 2020, the Group's convertible loan note asset was measured at fair value through profit or loss (FVTPL), until it was converted to equity. The fair value remeasurement was an adjusting item as it relates to historical M&A activity rather than the current trading performance and is as a result of the revaluation of the convertible loan note as at 30 September 2019 and up to its conversion on 24 January 2020.

 

Interest on tax excluded from the adjusted net finance expense consist of an interest charge of £0.1m (31 March 2020: £0.2m charge; 30 September 2020: £0.5m income) for movements in respect of uncertain tax positions. At 31 March 2020 and 30 September 2020, finance income of £1.2m from the release of a provision for interest on payroll taxes amounting to £0.6m and interest on VAT liabilities of £0.6m were excluded as the related charge is not expected to recur.

 

6 Tax expense on profit

 

 

 

Unaudited six months ended 31 March 2021

Unaudited six months ended 31 March 2020

Audited year ended 30 September 2020

 

£000

£000

£000

 

 

 

 

Current tax expense

 

 

 

UK corporation tax expense

76

1,662

2,121

Foreign tax expense

4,355

5,443

8,254

Adjustments in respect of prior periods

-

(8,088)

(6,859)

 

4,431

(983)

3,516

Deferred tax expense/(credit)

 

 

 

Current year

5,025

(1,694)

(2,594)

Impact of change in rate on deferred tax

-

(278)

(30)

Adjustments in respect of prior periods

(140)

82

1,233

 

4,885

(1,890)

(1,391)

Total tax expense/(income) in Income Statement

9,316

(2,873)

2,125

Effective tax rate

53%

(8%)

6%

 

 

 

Unaudited six months ended 31 March

2021

Unaudited six months ended 31 March
 2020

Audited year ended 30 Sept 2020

 

£000

£000

£000

Reconciliation of tax expense/(income) in Income Statement to adjusted tax expense

 

 

 

Total tax expense/(income) in Income Statement

9,316

(2,873)

2,125

Add back:

 

 

 

Tax on acquired intangible amortisation

1,434

2,042

4,011

Tax on exceptional items

860

(3,210)

76

Other tax adjusting items

7

4,296

1,408

Transfer of deferred tax liabilities

(1,526)

-

-

Derecognition of deferred tax assets

(2,600)

-

-

Deferred tax on goodwill and intangible amortisation

(720)

(774)

(1,624)

Share of tax on profits of associates and joint ventures

15

(82)

(65)

Adjustments in respect of prior periods

140

8,006

5,626

 

(2,390)

10,278

9,432

Adjusted tax expense

6,926

7,405

11,557

 

 

 

 

Adjusted profit before tax (refer to the appendix to the Half Year Statement)

35,205

39,336

57,370

Adjusted effective tax rate

20%

19%

20%

         

 

 

 

 

 

Factors affecting the tax expense

 

The statutory effective tax rate for the period ended 31 March 2021 is 53% compared with -8% for the period ended 31 March 2020. The forecast statutory effective tax rate for the 2021 full year is 41% (2020 full year: 6%). 

 

As set out in note 30 to the 2020 Annual Report and Accounts, the current year effective rate includes a deferred tax charge of £1.5m arising on the transfer on 1 October 2020 of intangible assets from Wealth-X Pte Limited (Singapore) to its direct subsidiary, Wealth-X LLC (USA). The tax charge arises due to the higher corporation tax rate in the US.

 

The effective tax rate also includes a £2.6m charge arising in Singapore on the derecognition of deferred tax assets held on tax losses that were offsetting the above deferred tax liabilities as it is not probable that the tax losses will be utilised in the future. As a result of the derecognition of these losses, the Group now has unrecognised deferred tax assets arising from Singapore trading losses of SGD 30m (£16.5m). These assets are not recognised because it is not probable that appropriate taxable profits will be generated to enable the Group to utilise these losses.

6 Tax expense on profit continued

 

Following the Group's change to filing combined state tax returns in New York City (NYC) and New York State (NYS) in the prior year, a tax enquiry was opened during the current year by the NYS Department of Taxation and Finance. In March 2021, the Group received a proposed offer of settlement, which has now been accepted. This has resulted in the derecognition of $7.6m (£5.4m) of recognised NYS State tax losses (resulting in a $0.4m (£0.3m) deferred tax charge) and the forfeit of $90m (£64m) of unrecognised NYS tax losses.

 

As a result of improved forecasted results, the group has also recognised additional state tax losses of $10m (£6m) in NYC, resulting in a £0.5m deferred tax credit as it is now probable that the Group will be able to be utilise these losses.

 

As at 31 March 2021, the Group has state tax losses carried forward in New York City and New York State of £84m (30 September 2020: £174m) of which £80m (30 September 2020: £169m) expires in 2025 and £4m (30 September 2020: £5m) expires in 2037. The amount of state losses on which a deferred tax asset is recognised is £47m (30 September 2020: £56m) and on which a deferred tax asset is not recognised is £37m (30 September 2020: £118m). Taking into account state rates and apportionment factors, the value of the amount recognised is £3.0m (30 September 2020: £3.2m).

 

On 6 April 2021, the State of New York Senate passed the 2022 Budget and announced the corporate tax rate in NYS would increase from 6.5% to 7.25% for accounting periods starting on or after 1 January 2021. The legislation to implement the revised rates was not substantively enacted on the balance sheet date and therefore this has not been reflected in the recognised deferred tax assets as at 31 March 2021. The legislation will result in a £0.2m deferred tax credit in the second half of the year, and a net £0.2m additional recognised deferred tax asset in NYS.

 

Other drivers of the effective tax rate for the period were tax charges arising on legal and professional fees incurred in respect of the acquisition of WealthEngine in December 2020 and The Jacobsen in January 2021 (note 9). On acquisition, a deferred tax asset of $1.3m (£1.0m) was recognised for US tax losses brought forward with a gross value of $6m (£4m). In addition to the recognised tax losses, WealthEngine also had unrecognised losses of $17m (£12m) as at the date of acquisition. These losses are not recognised due to restrictions in place on a change of ownership which means that it is not probable that the losses will be used before they expire

 

Reconciliation of tax expense in Income Statement to adjusted tax expense

 

The adjusted effective tax rate for the 2021 half year is 20% (2020: 19%). The forecast adjusted effective tax rate for the 2021 full year is 19% (2020: 20%).

 

Tax on exceptional items are excluded as these items are adjusted in accordance with Group policy. Adjustments in respect of prior years are also removed from the adjusted tax expense as they do not relate to current year underlying trading. Share of tax on profits of associates and joint ventures is calculated on the adjusted profits of associates and joint ventures and excludes tax on exceptional items consistent with the Group's approach and policy.

 

The Group excludes the deferred tax impact of amortisation of intangibles and goodwill as any deferred tax on these items would only crystallise in the event of a disposal and that is not the current intention. The Group also excludes the tax impact of the transfer of the Singapore intangible assets as this relates to group restructuring activities and not current year underlying trading.

 

Factors affecting the tax expense in future years and other tax matters

 

On 3 March 2021, the UK Government announced the UK Corporation Tax rate would increase from 19% to 25% on 1 April 2023. The legislation to implement the revised rates was not substantively enacted on the balance sheet date and therefore there are no changes to the UK deferred tax assets and liabilities as at 31 March 2021. It is expected that the legislation will be substantively enacted during the second half of the year which, based on the estimated deferred tax assets and liabilities as at 1 April 2023, will result in a £0.2m deferred tax credit, comprising a £1.9m deferred tax charge and a £2.1m deferred tax credit.

 

The Group holds a full provision in respect of a UK tax exposure relating to an enquiry by HMRC into the tax treatment of the disposal of an investment in the "Capital Data" business during the year ended 30 September 2015. This has a maximum exposure of £10.7m, plus estimated interest of £1.6m. Following a first-tier tax tribunal (FTT) hearing held in May 2020, the Group received a judgement in its favour allowing its appeal on 4 March 2021. HMRC intend to appeal this judgement at the Upper Tier Tribunal and the Group currently anticipates that the case will be held in early to mid-2022. The Group's assessment after seeking professional advice is that there has been no change to the likelihood of HMRC ultimately prevailing and therefore no adjustment to the provision is being made at this time.

Following the Canada Revenue Agency's acceptance in 2020 of the Group's appeal against a previously disclosed, but not provided for, Canadian tax exposure, on 6 May 2021 a repayment of C$10.5m (£6.1m) was received from the Canada Revenue Agency.

7 Dividends

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

Amounts recognisable as distributable to equity holders in period

 

 

 

Final dividend for the year ended 30 September 2020 of 11.4p (2019: 22.30p)

12,459

24,362

24,362

No interim dividend for year ended 30 September 2020

-

-

-

 

12,459

24,362

24,362

Employee share trust dividends waived

(141)

(368)

(368)

 

12,318

23,994

23,994

 

 

The final dividend for the year to 30 September 2020 was approved by shareholders at the AGM held on 11 February 2021 and paid on 16 February 2021.

 

It is anticipated that the half year dividend of 5.7p (2020: no interim dividend) per share will be paid on 24 June 2021 to shareholders on the register on 28 May 2021. It is expected that the shares will be marked ex-dividend on 27 May 2021. The half year dividend has not been included as a liability in this Half Year Financial Statement in accordance with IAS 10 'Events after the Reporting Period'.

 

8 Earnings per share

 

 

 

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

 

 

 

 

Profit for the period

8,188

         40,279

         30,784

Non-controlling interest

-

79

194

Total earnings

8,188

         40,358

         30,978

Adjustments

20,091

(8,380)

14,968

Total adjusted earnings

28,279

31,978

45,946

 

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

Number

Number

Number

 

000

000

000

 

 

 

 

Weighted average number of shares

109,289

109,261

109,275

Shares held by the employee share trusts

(1,216)

(1,652)

(1,605)

Weighted average number of shares

108,073

107,609

107,670

Effect of dilutive share options

199

62

-

Diluted weighted average number of shares

108,272

107,671

107,670

 

 

 

 

 

Pence

Pence

Pence

Earnings per share

 

 

 

Basic

                 7.6

             37.5

             28.8

Diluted

                 7.6

             37.5

             28.8

 

 

 

 

Adjusted earnings per share

 

 

 

Basic

               26.2

             29.7

             42.7

Diluted

               26.1

             29.7

             42.7

 

 

The adjusted earnings per share figures have been disclosed since the Directors consider it necessary in order to give an indication of the adjusted trading performance reflecting the performance of the Group. A detailed reconciliation of the Group's statutory results to the adjusted results is set out in the appendix to the Half Year Report.

 

9 Acquisitions and disposals

 

PURCHASE OF BUSINESS

 

WealthEngine

                                               

On 4 December 2020, the Group acquired 100% of the equity share capital of WealthEngine Inc and its subsidiary for $16.3m (£12.3m). WealthEngine is a SaaS platform providing data-driven intelligence and predictive analytics to wealth managers, luxury brands and not-for-profit organisations. It is a workflow tool which profiles US individuals and is used by its clients for prospecting potential donors or customers. WealthEngine is included in the Data and Market Intelligence segment.

 

The acquisition accounting is set out below and is provisional pending final determination of the fair value of the assets and liabilities acquired:

 

 

 

Fair value

Provisional

 

Book value

adjustments

fair value

 

£000

£000

£000

 

 

 

 

Intangible assets

-

12,238

12,238

Right of use assets

1,543

-

1,543

Trade and other receivables

1,918

-

1,918

Trade and other payables

(902)

-

(902)

Lease liabilities

(1,543)

-

(1,543)

Deferred tax liabilities

(1)

(2,231)

(2,232)

Contract liabilities

(6,459)

873

(5,586)

Cash and cash equivalents

1,287

-

1,287

 

(4,157)

10,880

6,723

 

 

 

 

Net assets acquired (100%)

 

 

6,723

Goodwill

 

 

5,533

Total consideration

 

 

12,256

Consideration satisfied by:

 

 

 

Cash

 

 

10,895

Working capital adjustments

 

 

1,361

 

 

 

12,256

Net cash outflow arising on acquisition:

 

 

 

Cash consideration

 

 

12,256

Less: cash and cash equivalent balances acquired

 

 

(1,287)

 

 

 

10,969

 

Intangible assets represent customer relationships of $11.3m (£8.5m), brands of $1.6m (£1.2m), a technology platform of $3.0m (£2.3m) and databases of $0.4m (£0.3m) for which amortisation of $0.8m (£0.6m) has been charged for the period ended 31 March 2021. The intangible assets will be amortised over their respective expected useful economic lives; customer relationships of 7 years, brand of 10 years, technology platform of 5 years and database of 10 years.

                                               

Goodwill arises from the anticipated future operating synergies from integrating the acquired operations within the Group and the acquired workforce.                                                           

                                               

The $1.2m (£0.9m) fair value adjustment to contract liabilities relates to an adjustment to reduce the deferred revenue balance. The fair value adjustment to deferred tax of $3.0m (£2.2m) represents the deferred tax impact of the acquisition accounting, most significantly the recognition of acquired intangible assets.

                                                               

WealthEngine contributed £3.5m to the Group's revenue and £0.2m to the Group's operating profit and profit before tax between the date of acquisition and 31 March 2021. If the acquisition had been completed on the first day of the financial year, WealthEngine would have contributed £6.0m to the Group's revenue and £1.1m to the Group's operating profit and profit before tax.

 

9 Acquisitions and disposals continued

 

By-Products Interactive (The Jacobsen)

 

On 29 January 2021, the Group acquired 100% of the equity share capital of By-Products Interactive, Inc. for $12.7m (£9.3m). The Jacobsen is a Price Reporting Agency that produces news and price assessments on agricultural feedstocks for biofuels, animal fats, feed, vegetable oils, hides and leather. It is predominantly a subscriptions business with some additional consulting and events revenue. The Jacobsen is included in the Pricing segment.

The acquisition accounting is set out below and is provisional pending final determination of the fair value of the assets and liabilities acquired:

 

 

 

Fair value

Provisional

 

Book value

adjustments

fair value

 

£000

£000

£000

 

 

 

 

Intangible assets

-

1,483

1,483

Trade and other receivables

75

-

75

Trade and other payables

(25)

-

(25)

Deferred tax liabilities

-

(415)

(415)

Contract liabilities

(691)

-

(691)

Cash and cash equivalents

67

-

67

 

(574)

1,068

494

 

 

 

 

Net assets acquired (100%)

 

 

494

Goodwill

 

 

8,775

Total consideration

 

 

9,269

Consideration satisfied by:

 

 

 

Cash

 

 

9,269

 

 

 

9,269

Net cash outflow arising on acquisition:

 

 

 

Cash consideration

 

 

9,269

Less: cash and cash equivalent balances acquired

 

 

(67)

 

 

 

9,202

 

Intangible assets represent customer relationships of $2.0m (£1.5m), for which amortisation of $0.1m (£0.1m) has been charged for the period ended 31 March 2021. The intangible asset will be amortised over its expected useful economic life of 10 years.

Goodwill arises from the anticipated future operating synergies from integrating the acquired operations within the Group and the acquired workforce. The fair value adjustment to the deferred tax liability of $0.6m (£0.4m) relates to the deferred tax liability recognised on the acquired intangible asset.                                                

The Jacobsen contributed £0.3m to the Group's revenue and £0.1m to the Group's operating profit and profit before tax between the date of acquisition and 31 March 2021. If the acquisition had been completed on the first day of the financial year, The Jacobsen would have contributed £1.0m to the Group's revenue and £0.1m to the Group's operating profit and profit before tax.  

10 Investments

 

 

 

Investment

 

in associates

 

£000

 

 

At 1 October 2019

5,271

Additions

4,060

Share of losses after tax

(495)

At 30 September 2020

8,836

Share of losses after tax

(74)

At 31 March 2021

8,762

 

 

The above investment in associates is accounted for using the equity method in these condensed consolidated interim financial statements.

 

 

Unaudited
 six months
 ended
 31 March

Unaudited
 six months
 ended
 31 March

Audited
 year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

 

 

 

 

Reconciliation of share of results in associates and joint ventures in Income Statement to adjusted share of results in associates and joint ventures

 

 

 

Total share of results in associates and joint ventures in Income Statement

(74)

(191)

(495)

Add back:

 

 

 

Share of tax on profits

(15)

(82)

(212)

Share of acquired intangible amortisation

166

-

366

 

151

(82)

154

Adjusted share of results in associates and joint ventures

77

(273)

(341)

 

 

The reconciliation of share of results in associates and joint ventures in the Income Statement has been provided since the Directors consider it necessary in order to provide an indication of the adjusted share of results in associates and joint ventures.  Refer to the appendix to the Half Year Report.

 

10 Investments continued

 

Information on investment in associates, investment in joint ventures and other equity investments:

 

 

 

Year

Date of

Type

Group

Registered

 

Principal activity

ended

acquisition

of holding

interest

office

Investment in associates

 

 

 

 

 

 

Zanbato, Inc (Zanbato)

Private capital placement and workflow

30 Sept

Sept 2015

Preferred

11.8%

715 N Shoreline Boulevard, Mountain View CA, 94043, United States

Investment in joint ventures

 

 

 

 

 

 

Sanostro Institutional AG (Sanostro)

Hedge fund manager trading signals

31 Dec

Dec 2014

Ordinary

50.0%

Allmendstrasse 140, 8041 Zurich, Switzerland

Other equity investments

 

 

 

 

 

 

Estimize, Inc (Estimize)

Financial estimates platform

31 Dec

July 2015

Ordinary

10.0%

43 West 24th Street, New York , NY 10010, United States

 

The Group's investment holding in Zanbato decreased from 12.3% to 11.8% during the period due to changes to Zanbato's total diluted shareholding. The Group interests in the remaining investments were unchanged since their respective dates of acquisition.

 

11 Goodwill and other intangibles

 

There was a decrease in goodwill in the six months to 31 March 2021 of £8.0m. This movement relates to exchange differences of £22.3m offset by increases of £5.5m arising on the acquisition of WealthEngine and £8.8m on the acquisition of The Jacobsen (note 9). Acquired intangible assets reduced by £5.6m due to exchange differences of £9.9m and £9.4m of amortisation, offset by new acquisitions in the period amounting to £13.7m (note 9).

 

The net carrying value of goodwill and other intangible assets is as follows:

 

 

Unaudited
 as at
31 March

Audited
as at
 30 Sept

 

2021

2020

 

£000

£000

 

 

 

Goodwill

448,367

456,343

 

 

 

Trademarks and brands

81,132

88,649

Customer relationships

79,594

77,783

Databases and software

17,033

16,937

Total acquired intangible assets

177,759

183,369

Internally generated intangible assets

21,396

18,344

Total intangible assets

199,155

201,713

 

 

 

Total

647,522

658,056

 

 

 

Intangible assets, other than goodwill, have a finite life and are amortised over their expected useful lives at the rates set out in the accounting policies in note 1 of the 2020 Annual Report and Accounts.

 

Acquired intangible amortisation for the period ended 31 March 2021 is £9.4m (March 2020: £12.1m; September 2020: £23.0m).

 

The Group assesses, at each reporting period, whether there is an indication that an asset might be impaired, and if such indication exists, estimate the asset's recoverable amount. For the period ended 31 March 2021 the Group considered, amongst other factors, the performance of assets and groups of cash generating units in the first half compared to the forecasts used in the year-end impairment tests as well as the Group's latest expectation of future cash flows. No indicators of impairment were identified.

 

12 Right of use assets

 

Right of use assets recognised by the Group are for leasehold premises, predominately used as office space.

 

The table below shows the movements in right of use assets during the year.

 

 

Leasehold office space

2021

£000

Cost

 

At 1 October 2020

61,174

Balance at acquisition of company

1,543

Additions

530

Disposals

(143)

Exchange differences

(2,388)

At 31 March 2021

60,716

Depreciation and impairments

 

At 1 October 2020

7,770

Depreciation

3,315

Disposals

(148)

Exchange differences

(355)

At 31 March 2021

10,582

Net book value at 31 March 2021

50,134

 

 

Leasehold office space

2020

£000

Cost

 

Transition to IFRS 16 on 1 October 2019

56,732

Additions

3,277

Balance at acquisition of company

1,622

Reassessments

1,287

Exchange differences

(1,744)

At 30 September 2020

61,174

Depreciation and impairments

 

At 1 October 2019

-

Depreciation

6,467

Impairments

1,318

Exchange differences

(15)

At 30 September 2020

7,770

Net book value at 30 September 2020

53,404

 

 

The rent expense recognised in the Consolidated Income Statement in respect of short-term leases was £0.2m.

 

13 Lease liabilities

 

The table below shows the movements in lease liabilities during the year.

 

 

Lease liabilities

 

£000

Transition to IFRS 16 on 1 October 2019

 71,604

Additions

 3,745

Balance at acquisition of company

 1,748

Reassessments

 1,287

Finance charge in year

 1,985

Lease payments in year

(8,056)

Exchange differences

(2,172)

At 30 September 2020

70,141

Balance at acquisition of company

1,543

Additions

527

Finance charge in year

913

Lease payments in year

(4,768)

Exchange differences

(2,649)

At 31 March 2021

65,707

 

The maturity profile of the Group's lease payments is shown below.

 

 

Lease payments

Timing of future lease payments

£000

Within 12 months

9,331

1 - 3 years

22,986

4 - 5 years

14,391

Over 5 years

27,825

 

74,533

Impact of discounting future lease payments

(8,826)

Lease liabilities at 31 March 2021

65,707

 

 

14 Financial instruments

 

The Group's financial assets and liabilities are as follows:

 

 

Unaudited
 as at
31 March

Audited
as at
 30 Sept

 

2021

2020

 

£000

£000

Financial assets

 

 

Fair value through profit or loss (FVTPL) assets

 

 

Derivative instruments

3,771

1,089

Cash and cash equivalents - money market funds

68,736

20,217

Amortised cost

 

 

Trade receivables and other debtors

60,787

61,813

Cash and cash equivalents - amortised cost

6,075

7,876

 

139,369

90,995

Financial liabilities

 

 

Fair value through profit or loss liabilities

 

 

Derivative instruments

(350)

(1,048)

Amortised cost

 

 

Acquisition commitments

(54)

(15)

Lease liabilities

(65,707)

(70,141)

Borrowings and payables

(125,874)

(52,390)

 

(191,985)

(123,594)

 

The Group recorded an expected credit loss of £1.5m (31 March 2020: £1.4m) in the first half as a result of updating the expected credit loss provision for the latest aging and credit loss assumptions.

 

Fair value of financial instruments

The fair values of financial assets and financial liabilities are determined in accordance with IFRS 13 'Fair Value Measurement' as follows:

 

Level 1

·    The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market prices.

 

Level 2

·   The fair value of other financial assets and financial liabilities (excluding derivative instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.

·    Derivative financial instruments comprising foreign currency forward contracts are measured using quoted forward exchange rates and yield  curves derived from quoted interest rates matching maturities of the contracts.

·     Money market funds are valued at the closing price reported by the fund sponsor.

 

Level 3

·    If one or more significant inputs are not based on observable market data, the instrument is included in level 3.

 

 

14 Financial instruments continued

 

Other financial instruments not recorded at fair value

 

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Statements approximate their fair values.

 

The Group classifies its financial instruments into the following categories:

 

Financial instrument category

IFRS 9
measurement category

Fair value measurement hierarchy

Derivative instruments

FVTPL1

                              2

Other equity investments

FVTOCI

3

Convertible loan note

FVTPL

3

Deferred consideration asset

Amortised cost

N/A

Receivables

Amortised cost

N/A

Cash and cash equivalents - cash at bank and short-term deposits

Amortised cost

N/A

Cash and cash equivalents - money market funds

FVTPL

2

Deferred consideration liability

Amortised cost

N/A

Deferred consideration liability

FVTPL

3

Acquisition commitments

Amortised cost

N/A

Borrowings and payables

Amortised cost

N/A

Lease liabilities

Amortised cost

N/A

 

 

 

 

1 Changes in fair value to derivatives designated in cash flow hedging relationships, to the extent that the hedge is effective, are taken to the hedging reserve through other comprehensive income. Any ineffectiveness is recognised in profit or loss.

 

Movements in assets/(liabilities) arising from financing activities:

 

 

 

 

 

 

 

 

As at 30 Sept 2020

Cash flow

Interest
and other
non-cash movements

Foreign exchange

As at 31 March 2021

 

£000

£000

£000

£000

£000

Net cash comprises:

 

 

 

 

 

Cash and cash equivalents

28,093

47,417

240

(939)

74,811

Borrowings

-

(50,000)

-

-

(50,000)

Net cash

28,093

(2,583)

240

(939)

24,811

 

 

 

 

 

 

Analysis of changes in liabilities from financing activities

 

 

 

 

 

Borrowings

-

(50,000)

-

                   -

(50,000)

Other financing items - Prepaid bank fees

776

30

(192)

                   -

614

Interest payable

(2,304)

487

(390)

                   -

(2,207)

Lease liabilities

(70,141)

4,768

(2,983)

          2,649

(65,707)

Acquisition commitments

(15)

-

(39)

                   -

(54)

Total liabilities from financing activities

(71,684)

(44,715)

(3,604)

          2,649

(117,354)

15 Borrowings

 

 

Unaudited
 as at
31 March

Audited
 as at
 30 Sept

 

2021

2020

 

£000

£000

 

 

 

Borrowings - non-current liabilities

50,000

-

 

 

 

The Group's principal source of borrowings was provided through a committed bank facility available to the Group until December 2022. At 31 March 2021 there was £138m available through this facility (30 September 2020: £188m). There was a further accordion facility of £130m should the Group wish to request it. Drawings under the revolving credit facility bear interest charged at LIBOR plus a margin, the applicable margin being based on the Group's ratio of adjusted net debt to EBITDA. On 11 May 2021 the Group agreed a new bank facility which runs to May 2024 (note 19).

 

16 Called up share capital

 

 

Unaudited
 as at
31 March

Audited
as at
 30 Sept

 

2021

2020

 

£000

£000

Allotted, called up and fully paid

 

 

109,289,406 ordinary shares of 0.25p each
(March 2020: 109,289,406 ordinary shares of 0.25p each)
(September 2020: 109,289,406 ordinary shares of 0.25p each)

273

273

 

 

17 Contingent liabilities

 

EC investigation into state aid

In the 2020 Annual Report the Group disclosed, but did not provide for, a contingent tax liability of £8.9m (including interest) in relation to the European Commission (EC) investigation into the UK Controlled Foreign Company legislation. Following the Group's proactive engagement with HMRC, on 26 March 2021 HMRC confirmed that the Group was not a beneficiary of State aid under the EC Decision and therefore this matter is now closed with no additional tax liability or consequences for the Group.

 

18 Related party transactions

 

The Group has not disclosed transactions and balances between its entities that have been eliminated on consolidation. Other related party transactions and balances are detailed below:

 

 

(i)      During the period, dividends were paid to Directors:

 

Unaudited
 six months
 ended
31 March

Unaudited
six months
 ended
 31 March

Audited
year
 ended
 30 Sept

 

2021

2020

2020

 

£000

£000

£000

 

 

 

 

Dividends paid

41

64

64

 

 

 

(ii)     Amounts receivable from joint ventures

 

Unaudited
 six months
 ended
31 March

Unaudited
six months
 ended
 31 March

Audited
year
 ended
 30 Sept

 

2021

2020

2020

 

$000

$000

$000

 

 

 

 

Sanostro International AG

51

51

51

 

19 Events after the balance sheet date

 

The Group holds a £10.7m provision in respect of an ongoing tax enquiry in the UK. Following a judgement issued in the Group's favour, HMRC intend to appeal this judgement at the Upper Tier Tribunal and the Group currently anticipates that the case will be held in early to mid-2022.

 

On 11 May 2021, the Group refinanced and increased its existing £188m bank facility. It now has a committed multi-currency revolving credit facility of £190m which is available to the Group until May 2024, with two additional one-year extension options available.

Responsibility Statement

 

 

We confirm that to the best of our knowledge:

 

(a)

these Condensed Consolidated Interim Financial Statements, which have been prepared in accordance with IAS 34 'Interim Financial Reporting', give a true and fair view of the assets, liabilities, financial position and profit of the Group as required by DTR 4.2.4R;

(b)

this Half Year Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c)

this Half Year Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

 

 

By order of the Board,

 

Andrew Rashbass

Chief Executive Officer

19 May 2021

 

Wendy Pallot

Chief Financial Officer

19 May 2021

 

Independent review report to Euromoney Institutional Investor PLC

 

Report on the condensed consolidated interim financial statements

 

Our conclusion

We have reviewed Euromoney Institutional Investor PLC's condensed consolidated interim financial statements (the "interim financial statements") in the Half Year Report of Euromoney Institutional Investor PLC for the six month period ended 31 March 2021 (the "period").

 

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

What we have reviewed

The interim financial statements comprise:

·     

the Condensed Consolidated Statement of Financial Position at 31 March 2021;

·     

the Condensed Consolidated Income Statement and Condensed Consolidated Statement of Comprehensive Income for the period then ended;

·     

the Condensed Consolidated Statement of Changes in Equity for the period then ended;

·     

the Condensed Consolidated Statement of Cash Flows for the period then ended; and

·     

the explanatory notes to the interim financial statements.

 

The interim financial statements included in the Half Year Report of Euromoney Institutional Investor PLC have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

Responsibilities for the interim financial statements and the review

 

Our responsibilities and those of the directors

The Half Year Report, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Half Year Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

Our responsibility is to express a conclusion on the interim financial statements in the Half Year Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

We have read the other information contained in the Half Year Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

 

PricewaterhouseCoopers LLP

Chartered Accountants

London

19 May 2021

 

Directors

 

 

Executive Directors

Andrew Rashbass (Chief Executive Officer)

Wendy Pallot (Chief Financial Officer)

 

Non-executive Directors

Jan Babiak ‡ (Senior Independent Director)

Colin Day §

India Gary-Martin §†

Imogen Joss †‡

Tim Pennington §†

Leslie Van de Walle ‡† (Chairman)

 

 

† member of the Remuneration Committee

‡ member of the Nominations Committee

§ member of the Audit & Risk Committee

 

 

Board and Committee Composition Changes

Lorna Tilbian stepped down from the Board as a Non-Executive Director on 24 March 2021.

India Gary-Martin was appointed to the Board as a Non-Executive Director on 24 March 2021.

India Gary-Martin was appointed as a member of the Audit & Risk and Remuneration Committees on 25 March 2021.

 

Shareholder Information

 

Financial calendar

 

2021 half year results announcement

Thursday 20 May 2021

Half year dividend ex-dividend date

Thursday 27 May 2021

Half year dividend record date

Friday 28 May 2021

Payment of 2021 half year dividend

Friday 25 June 2021

Trading update

Wednesday 21 July 2021

2021 final results announcement

Thursday 18 November 2021

Final dividend ex-dividend date

Thursday 25 November 2021

Final dividend record date

Friday 26 November 2021*

Trading update

Thursday 27 January 2022*

2022 AGM (approval of final dividend)

Thursday 27 January 2022*

Payment of final dividend

Friday 11 February 2022*

 

* Provisional dates and subject to change

 

Company Secretary and registered office

Tim Bratton

8 Bouverie Street

London

EC4Y 8AX

England registered number: 954730

 

Shareholder enquiries

Administrative enquiries about a holding of Euromoney Institutional Investor PLC shares should be directed in the first instance to the Company's registrars, Equiniti:

 

Telephone: 0371 384 2951 Lines are open 8:30am to 5:30pm (UK time), Monday to Friday, excluding English public holidays.

 

Overseas Telephone: (00) 44 121 415 0246

 

A number of facilities are available to shareholders through the secure online site: www.shareview.co.uk.

 

 

Advisors

Independent Auditor

PricewaterhouseCoopers LLP

1 Embankment Place

London

WC2N 6RH

Brokers

UBS

5 Broadgate

London

EC2M 2QS
 


Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT

Solicitors

Cameron McKenna

Nabarro Olswang LLP

78 Cannon Street

London

EC4N 6AF

 

Freshfields Bruckhaus Deringer LLP

65 Fleet Street

London

EC4Y 1HT

Registrars

Equiniti

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

 

 

 

 

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