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Interim Financial Report 2018

Euromoney Institutional Investor PLC

Interim Results

17 May 2018

· Strategy on track, good first-half performance

· Total revenues up 3%, underlying revenues up 4%

· Adjusted profit before tax up 6% to £52.0m

· Statutory profit before tax reflects an exceptional credit of £86.8m (primarily profit on disposal of businesses)

· Benefits from prior year strategic actions driving growth across the Group, particularly in pricing, data & market intelligence.

· Strong growth from events businesses across all sectors, mainly from large, annual events

· Weak asset management performance, largely driven by clients' reduction in research spend and accelerated by MiFID II

· Significant reduction in net debt since year-end, reflecting the impact of M&A activity and continued strong operating cash flows

· Global Markets Intelligence Division disposal in April expected to generate further net cash of £103m in the second half

· Active portfolio management continues:

o Secured two acquisitions: TowerXchange and Extel

o Completed five disposals: Adhesion, World Bulk Wine Exhibition, Dealogic minority stake, Institutional Investor Journals and Global Markets Intelligence Division

· Interim dividend increased by 16% to 10.2p in line with the new dividend policy announced last year

1 Adjusted measures include the results of continuing and discontinued operations and exclude the impact of amortisation of acquired intangible assets, exceptional items, share of associates' and joint ventures' acquired intangibles amortisation, exceptional items and the tax effects of these items, and net movements in deferred consideration and acquisition commitments.

2 Underlying measures reported in 2017 included the adjusted results of continuing and discontinued operations and are stated at constant exchange rates, including pro forma prior year comparatives for acquisitions and excluding disposals and significant event timing differences. In 2018, the underlying measures are on the same basis but exclude discontinued operations. This means that the 2018 underlying measures reflect the performance of the continuing businesses.

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

"These interim results demonstrate further progress with implementing our strategy: investing around big themes; creating a best-of-both-worlds operating model; and active portfolio management. Our continued investment in price discovery has been one of the drivers of growth in the period, both organically in Metal Bulletin and through the successful integration of RISI. Improved banking and commodity markets together with our focus on large events have helped to mitigate the impact of the challenges facing our investment research businesses, particularly BCA. We continued to sell businesses where we believe we are not the best owners, including the Global Markets Intelligence Division, and secured two bolt-on acquisitions. Overall, we have delivered a good first half performance and the progress we are seeing gives us confidence that we will meet the Board's expectations for the full year."

Strategy

Our strategy is to manage a portfolio of businesses in markets where information, data and convening market participants are valued. We deliver products and services that support our clients' critical activities.

Our strategy is designed to develop the businesses we own and deliver strategic, timely and well-executed acquisitions and disposals. We aim to allocate and recycle capital efficiently to good organic and inorganic opportunities via our 'best-of-both-worlds' operating model. Our ambition is to generate consistent and meaningful returns for our shareholders at relatively low risk.

Operating and Financial Review

Total revenue for the period increased by 3% to £209.6m, and underlying revenue increased by 4%, largely due to the strong performance of the events portfolio. The adverse impact of the weakness of the US dollar was largely offset by net M&A activity.

Statutory revenue, which excludes discontinued operations, increased by 4% to £189.1m.

* Figures are total revenues for the period; percentages are underlying growth rates compared to the same period in 2017.

The Group's businesses focussed on pricing, data & market intelligence performed strongly, benefitting from the strategic actions taken last year. The commodity events and banking & finance segments also performed well, reflecting the Group's focus on building large, high margin events. The asset management segment continued to be a drag on the Group's performance, largely driven by the reduction in clients' research spend which has been accelerated by the MiFID II regulations.

The second quarter's performance closely followed that of the first, with the events businesses being the main driver of growth.

ῼ 2017 and 2018 percentages include other revenues but exclude revenues from sold/closed businesses. In 2018 only, discontinued operations are excluded from percentages for both quarters.

Underlying subscriptions and content revenues increased by 1% in the first half. As highlighted in the first quarter trading update, the divergence in subscriptions growth rates between the pricing, data & market intelligence and asset management segments has continued. Pricing, data & market intelligence subscription revenues increased by an underlying 12%, mainly due to excellent performances from Metal Bulletin and Insurance Insider, and strong growth from RISI since its acquisition in April 2017. The headwinds facing the asset management segment from the reduction in clients' research spend have been accelerated by MiFID II, particularly for BCA, and resulted in subscription revenues from this segment declining by 6% on an underlying basis. Strategic actions are underway to tackle these challenges. The 5% decline in underlying advertising revenues during the period is consistent with the recent trend.

Underlying event revenues increased by 11% (sponsorship by 15% and delegates by 7%), with strong growth across all segments, particularly from large 'must attend' annual events. The Group's largest event, Mining Indaba, and events run by the wholesale telecoms business, TelCap, and structured and real estate finance business, IMN, performed particularly well.

Adjusted results

The adjusted operating margin increased from 24.1% to 25.5%, largely due the improved events performance and a favourable currency mix. This improvement was partly offset by the impact, mostly in the first quarter, of the Group's investment in central functions following the DMGT sell down in January last year.

Adjusted operating profit increased by 9% to £53.5m. Adjusted profit before tax grew by 6% to £52.0m, reflecting the increased financing costs following last year's DMGT sell down. Adjusted diluted earnings per share increased by 17% to 38.4p (2017: 32.7p), including an additional quarter's benefit from the reduction in the number of shares in issue following last year's share buyback.

The Group's Global Markets Intelligence Division (GMID) has been treated as a discontinued operation in these results. The disposal of this business, which was first announced in February 2018, was completed at the end of April. Further details of this disposal and its impact on the Group's adjusted results are set out in note 9 to this statement.

Statutory results

The statutory profit before tax of £121.1m is significantly higher than the adjusted profit before tax, largely due to an exceptional credit of £86.8m reflecting the profits from the disposals in the period of Adhesion, World Bulk Wine Exhibition, Institutional Investor Journals and the associate investment in Dealogic. The statutory profit before tax excludes the profit before tax of GMID, which is reported as a discontinued operation. The disposal of GMID incurred exceptional costs of £2m in the first half, with further exceptional costs of £5m expected to be incurred in the second half. A detailed reconciliation of the Group's adjusted and statutory results is set out in the appendix to this statement.

Tax

The adjusted effective tax rate for the first half was 20% (2017: 21%) and the full-year rate is expected to be 20% (2017:19%). The Group continues to benefit from reductions in the UK corporate tax rate and the tax effects of acquisitions in the US. The tax rate in each year depends mainly on the geographic mix of profits and applicable local tax rates. The Group's statutory effective tax rate reduced to 12% compared to 13% in 2017. The breakdown of tax expense on profit, a description of the Group's uncertain tax positions and a description of the impact of US Tax Reform for the first half of 2018, are all set out in note 6 to this statement.

US Tax Reform is not expected to have a material impact on the adjusted effective tax rate for 2018. However, a number of legislative changes, including the anti-hybrid legislation and new interest restriction rules enacted as part of US Tax Reform are expected to increase the adjusted effective tax rate for the Group by approximately 3% from 2019.

Net debt and cash flow

Net debt at 31 March was £37.0m compared with net debt of £154.6m at year end. This decrease in net debt largely reflects the impact of net M&A activity in the period, including the disposal of the minority equity stake in Dealogic, the sales of Adhesion, World Bulk Wine Exhibition and Institutional Investor Journals, the acquisitions of TowerXchange and Extel, and the purchase of the remaining 15% minority interest in Ned Davis Research.

The Group's underlying operating cash conversion rate for the 12 months to 31 March 2018 was 108% (2017: 120%). The decrease from a year ago largely reflects the prior year benefit from the recovery in event revenues and one-off improvement in working capital management.

Following last year's share buyback, the Group arranged new five-year external borrowing facilities comprising term-loans of US$100m and £40m and a £130m multi-currency revolving credit facility (RCF). The term-loans and drawings under the RCF bear interest charged at LIBOR plus a margin, the applicable margin being based on the Group's ratio of adjusted net debt to EBITDA. At 31 March 2018, the Group's ratio of adjusted net debt to EBITDA was 0.31 times and the committed undrawn facility available to the Group was £130m.

On 15 May 2018, the Group repaid its term-loans of US$100m and £40m, and transferred the funding commitment into the existing, lower cost, RCF. This has increased the committed undrawn facility available to the Group to £240m.

Dividend

Last year, the Board announced a new, progressive dividend policy including an increase in the dividend pay-out ratio from 33% to 40% and an interim dividend based on 33% of the previous year's total dividend, subject to the capital needs of the Group. The increase in the pay-out ratio combined with the benefit from last year's share buyback has enabled the Board to approve a 16% increase in the interim dividend to 10.2p (2017: 8.8p), to be paid to shareholders on 21 June 2018.

Currency

The Group generates approximately three-quarters of both its revenues, including approximately a third of its UK revenues, and operating profits in US dollars. The exposure to US dollar revenues in its UK businesses is hedged using forward contracts to sell US dollars, which delays the impact of movements in exchange rates for at least a year. However, the Group does not hedge the foreign exchange risk on the translation of overseas profits.

The favourable impact of currency on last year's results has reversed, with an average sterling-US dollar rate for the six months to 31 March 2018 of $1.36 (2017: $1.25). The average sterling-US dollar rate for the second half of 2017 was $1.29 which compares to a current rate of $1.35. Each one cent movement in the US dollar rate has an impact on profits on translation of approximately £0.7m on a rolling 12-month basis. In the first half the unfavourable impact of foreign exchange movements on translation was mitigated by the absence of hedging losses realised in the same period last year. The Group also retranslates its non-sterling denominated balance sheet items, which resulted in a loss of £1.0m (2017: £0.2m gain).

Outlook

We continue to expect a divergence in subscriptions performance between our pricing, data & market intelligence and asset management segments. The outlook for the asset management businesses remains tough, particularly for BCA, and we are taking strategic actions to tackle these challenges. Our events should continue to perform well in the second half, although prior year comparatives will become tougher. The drag from our accelerated investment in central functions following the DMGT sell down last year is expected to slow in the second half. Overall, we have delivered a good first-half performance and the strategic progress we are seeing gives us confidence that we will meet the Board's expectations for the full year.

Board Changes

As announced on 19 April 2018, Wendy Pallot will join the Board as Chief Financial Officer on 16 August 2018. Ms Pallot will succeed Colin Jones, the Company's Finance Director, who is retiring from the Board and the Company on 15 June 2018 after 22 years' service.

Further to the announcement made on 5 March 2018, the Company announces that David Pritchard, Acting Chairman, stepped down from his position as Chair of the Audit Committee on 16 May 2018 and is succeeded by Colin Day, Non-Executive Director. Mr Pritchard will remain a member of the Audit Committee.

Further trading updates

Further coverage of these interim results will be provided to analysts at a presentation starting at 9:00am on 17 May 2018 at the offices of UBS. The Group intends to provide a brief third-quarter trading update on 19 July 2018.

Definitions

Total revenue - includes the revenues of continuing and discontinued operations.

Adjusted measures - include the results of continuing and discontinued operations and exclude the impact of amortisation of acquired intangible assets, exceptional items, share of associates' and joint ventures' acquired intangibles amortisation, exceptional items and the tax effect of these items, and net movements in deferred consideration and acquisition commitments.

Underlying measures - Underlying measures reported in 2017 included the adjusted results of continuing and discontinued operations and are stated at constant exchange rates, including pro forma prior year comparatives for acquisitions and excluding disposals and significant event timing differences. In 2018, the underlying measures are on the same basis but exclude discontinued operations. This means that the 2018 underlying measures reflect the performance of the continuing businesses.

Adjusted effective tax rate - the adjusted effective tax rate is based on the adjusted profit before tax and excluding deferred tax movements on intangible assets, prior year items, exceptional items and US Tax Reform.

END

NOTE TO EDITORS

Euromoney Institutional Investor PLC (www.euromoneyplc.com) is listed on the London Stock Exchange and is a member of the FTSE 250 share index. It is an international business-information Group covering asset management, price discovery, data & market intelligence, and banking & finance under brands including Euromoney, Institutional Investor, BCA Research, Ned Davis Research and Metal Bulletin. The Group also runs an extensive portfolio of events for the telecoms, financial and commodities markets. 

CAUTIONARY STATEMENT

This Interim Financial Report (IFR) 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 IFR save as would arise under English law. Statements contained in this IFR are based on the knowledge and information available to the Company'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 IFR. 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 IFR. 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 Interim Statement

Reconciliation of Consolidated Income Statement to adjusted results for the six months ended 31 March 2018

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.

Total revenue represents the combined reported revenue from continuing and discontinued operations.

Adjusted results include continuing and discontinued operations. The discontinued operations for the Global Markets Intelligence Division (GMID) have been included in the adjusted results as it was owned and managed as part of the Group for the period to 30 April 2018 and to aid year-on-year comparability of the Group's results.

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, exceptional items and tax, and net movements in deferred consideration and acquisition commitments.

The amortisation of acquired intangible assets is adjusted as the premium paid relative to the net assets on the balance sheet of the acquired business is classified as either goodwill or as an intangible asset arising on a business combination and is recognised on the Group's balance sheet. This differs to organically developed businesses where assets such as employee talent and customer relationships are not recognised on the balance sheet. Impairment and amortisation of intangible assets and goodwill arising on acquisitions are excluded from adjusted results as they are balance sheet items that relate to historical M&A activity rather than the trading performance of the business.

Exceptional items are items of income or expense considered by the Directors, either individually or if a similar type in aggregate as being significant. The accounting policy for exceptional items can be found in note 1 to the Group's 2017 Annual Report.

It is Group policy to treat, as exceptional, 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 in substance 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.

Adjusted share of results in associates and joint ventures excludes the share of exceptional items that relates to restructuring and earn-out costs in Dealogic, which was sold in December 2017.

In respect of earnings, adjusted amounts reflect a tax rate that includes the current tax effect of the 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. Since the year-end, there have been changes to US tax rules as a result of US Tax Reform (note 6). The federal tax rate has reduced to 21% from 35% from 1 January 2018, and the US group has a hybrid federal tax rate for the year of 24.5%. As a consequence of this change, the revaluation of the Group's US deferred tax assets and liabilities has resulted in a one-off deferred tax credit of £4.7m that is excluded from adjusted effective tax. In addition, there is a one-time deemed repatriation tax charge of £2.7m related to unremitted foreign earnings, expected to be payable over eight years. As a result of the change in attribution rules that dictate which entities are treated as a controlled foreign corporation (CFC) for US income tax purposes, the disposal of shares in Diamond Topco Limited (Dealogic) crystallised a gain that is subject to US tax. The exceptional tax charge on this gain is £7.0m.

Further analysis of the adjusting items is presented in notes 2, 4, 5, 6, 11 and 12 to the Consolidated Condensed Interim Financial Report.

The Group has consistently applied this definition of adjusted measures, except for the adjustment in respect of US tax reform, as it has reported on its financial performance in the past and it is the Group's intention to continue to consistently apply this definition 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 trading performance.

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.

When calculating underlying growth, adjustments are made to give a like-for-like comparison. For example, the adjusted results in 2018 were adversely impacted from the weakening of the US dollar relative to sterling. To calculate underlying growth, the prior year comparatives are restated using 2018 exchange rates. Similarly, adjustments are made to exclude disposals from both years. In 2018, discontinued operations have been treated the same as a disposal, as the sale of the GMID completes during the current financial year. This is a change from the treatment in 2017 where GMID was included in the underlying results. When businesses are acquired, the prior year comparatives are adjusted to include the acquisition. The timing of events can also be a distortion. To give a fair like-for-like comparison when calculating underlying growth, significant timing event differences are excluded from the year in which they were held. There were no significant event timing differences in the current or prior periods.

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 revenues and profit before tax:

Cash conversion

Cash conversion measures the percentage by which cash generated from operations covers adjusted operating profit.

The underlying basis is after adjusting for significant timing differences affecting the movement on working capital and exceptional items. For the period ended 31 March 2018, exceptional items largely consist of cash payments for the legal and professional fees in relation to acquisitions and disposals net of the favourable settlement of a legal dispute. For the period ended 31 March 2017 and year ended 30 September 2017, exceptional items largely consist of cash payments for the 2016 restructuring costs, legal and professional fees and share buyback costs. The other working capital movements in 2018 and 2017 are largely the result of the landlord's contribution to the fit-out of the New York office which will be amortised over the period of the lease and the rent-free period of the London and New York offices. At the interim period, an underlying 12-month cash conversion percentage is used to eliminate any seasonality.

As cash generated from operations in the Consolidated Statement of Cash Flows includes those from discontinued operations, the statutory cash conversion rate has not been provided as it would not give a fair indication of the Group's cash conversion performance.

Net debt

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

The bank covenant ratio uses an average exchange rate in the calculation of net debt and includes 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.

Condensed Consolidated Income Statement

for the six months ended 31 March 2018

A detailed reconciliation of the Group's statutory results to the adjusted and underlying results is set out in the appendix to the Interim Statement on pages 5 to 8.

Following the Group's decision to dispose of the Global Markets Intelligence Division (GMID), these businesses have met the recognition criteria of discontinued operations under IFRS 5 'Non-current assets held for sale and discontinued operations' and are therefore presented as such throughout this report. In order to comply with this presentation, the Income Statement disclosures for the period ended 31 March 2017 have been re-presented separating continuing and discontinued operations (note 9).

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2018

Movements in cash flow hedges have been reclassified between categories for the period ended 31 March 2017 in order to ensure consistent presentation with the period ended 31 March 2018. This reclassification has been explained in note 1.

Condensed Consolidated Statement of Financial Position

as at 31 March 2018

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2018

Condensed Consolidated Statement of Changes in Equity

for the six months ended 31 March 2017

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

The investment in own shares is held by the Euromoney Employees' Share Ownership Trust (ESOT) and Euromoney Employee Share Trust (EEST). The trusts waived the rights to receive dividends. Interest and administrative costs are charged to the profit and loss account of the trusts as incurred.

Condensed Consolidated Statement of Cash Flows

for the six months ended 31 March 2018