ERM.L Share News (ERM)

(Sharecast News) - Euromoney updated the market on both its asset management strategic review and the impact of the Covid-19 coronavirus pandemic on Thursday, confirming it would not be paying an interim dividend as the full impact on its events business remained uncertain.
The FTSE 250 company had announced a strategic review of its asset management businesses on 10 September, including Institutional Investor, BCA Research and NDR.

It said that during an "extensive process", the board considered a range of options, including continued ownership and a potential sale of all or part of the segment.

On Wednesday, the board said it concluded that the best outcome for shareholder value would be for Euromoney to remain the long-term owner of all three businesses, which had high levels of recurring subscription revenue and attractive profit margins.

The asset management businesses would no longer be reported as discontinued operations and as assets held for sale.

Looking at the impact of the coronavirus crisis, on 11 March the firm updated shareholders on the impact on its events businesses until the end of June, given governments' restrictions on travel and attending gatherings.

Its assessment of the potential financial impact on the events businesses in the period to June had not materially changed, the board said.

As a result of the continued global disruption caused by the pandemic, and its impact on business activity, the company had now taken the decision to postpone or cancel the majority of events originally scheduled to take place from July up to and including September, which is the firm's fourth quarter.

"At this stage it is not possible to determine exactly how many events will take place in the fourth quarter and, if events are held, what the impact of Covid-19 related disruption could be on attendance and sponsorship," the board said in its statement.

It said the financial profile of the 173 events originally scheduled in the fourth quarter was revenue of around ?34m, made up of ?6m in July, ?2m in August and ?26m in September.

The gross profit from those events was expected to be around ?18m.

Euromoney said the larger events had around ?7m of committed costs already incurred, and therefore the gross profit impact of running no events in the fourth quarter would be about ?25m.

"Euromoney has taken swift and decisive action to reduce costs and preserve cash, while supporting employees, serving customers and protecting the long-term health of the business," the board said.

"We have already taken steps to minimise non-contractual spend, postpone capital expenditure, freeze pay and limit new hires.

"We are exploring government support schemes to further protect jobs and prioritise liquidity."

The company had placed some UK employees - mainly those involved in events - on temporary furlough under the UK government's Coronavirus Job Retention Scheme, and was taking advantage of similar schemes in other countries.

From 1 May, all directors would take a temporary 25% reduction in their salaries or fees, except for chief executive Andrew Rashbass, who would take a 40% cut.

Additionally, the board said it was adopting a prudent approach to shareholder distributions, and would not declare an interim dividend payment for the 2020 financial year, resulting in a cash saving of approximately ?12m.

The board said it would consider the 2020 total dividend in November, when it had better visibility on the business environment.

Euromoney said it was still benefiting from the relative predictability of subscriptions, which accounted for 60% of total revenue in the 2019 financial year.

However, it warned that the effects of Covid-19 on broader economic activity were likely to result in customers delaying purchasing decisions, and restrictions on face-to-face sales meetings could impact its ability to close new sales.

The firm said its financial position remained "strong", noting that it recently extended its bank facilities, with committed funding of ?188m available through to December 2022.

Net cash at the end of March totalled ?8m.

Interim results for the six months ended 31 March were now scheduled to be announced on 4 June, the company said.

As it had previously announced, for the current financial year,the group would report under three new segments - asset management, pricing, and data and market intelligence.

"In the face of the unprecedented challenges created by Covid-19, we continue to prioritise the health and wellbeing of our employees, customers and business partners," said chief executive officer Andrew Rashbass.

"Although our event businesses face short-term uncertainties, we have taken rapid action to contain our costs and protect our financial position.

"We have a robust balance sheet and strong brands that position us well for the long term."

Rashbass added that, after conducting a "thorough strategic review" of the asset management businesses, the board had concluded that Euromoney remained the best long-term owner of those assets.

"We will continue to position them for a return to sustained growth."

At 0937 BST, shares in Euromoney Institutional Investor were down 0.94% at 866.82p.