Euromoney revenues hit record high

Thursday 15 November 2007

Euromoney Institutional Investor

Preliminary announcement

Revenue has surged to a record £305.2 million for international publishing, events and electronic information group Euromoney Institutional Investor in the year ending September 30th, with pre-tax profits up 17% to £41.1 million.

Results for year to September 30 2007

Record profits and dividend in 2007

*see glossary

Results reflect strong organic growth and successful integration of acquisitions

• Revenues up 38% to £305.2 million, a record
• Adjusted profit before tax up 50% to £55.5 million, the highest yet
• City profit before tax* £65.7 million, exceeding CAP target a year earlier than expected
• Strong growth across all divisions and revenue streams
• Subscription revenues up 88%, now a third of turnover
• Adjusted operating margin improved from 20% to 26%
• Net debt reduced by £35.0 million since half year - operating cash conversion 115%
• Metal Bulletin integration successfully completed and synergies ahead of expectations
• Final dividend increased by 12% to 13p making total for the year of 19p
• Limited impact to date from global credit market crisis

Commenting on the results, chairman Padraic Fallon, said:

'The new financial year has begun reasonably well, although growth is slower. The full year may be testing if financial markets deteriorate further, but the 2007 results provide a strong platform to launch new products and to make more acquisitions on the back of strong cash flows. We beat every target we set ourselves, integrated Metal Bulletin and successfully increased the emphasis on subscription revenues and profits from electronic publishing. The future is more opaque than usual, but the company is stronger than ever'.

Highlights

Euromoney Institutional Investor PLC, the international publishing, events and electronic information group, achieved adjusted operating profit for the year to September 30 2007 of £78.6 million, against £43.8 million in 2006. Adjusted profit before tax increased by 50% to £55.5 million and adjusted diluted earnings a share increased from 28.6p to 32.7p. The directors recommend a 12% increase in the final dividend to 13p, making a total for the year of 19p.

These record results reflect the continued success of the group's strategy to drive profit growth and build a more robust subscription-driven business. Revenue and profit growth were achieved across all divisions; subscription revenues increased sharply and now account for more than a third of group revenues; the adjusted operating margin improved from 20% to 26%; the integration of Metal Bulletin, acquired in October 2006, was completed ahead of time and its performance has surpassed that projected at the time of acquisition; and record net operating cash flows helped reduce net debt at year end to £204.6 million compared with £239.6 million at the half year.

The group operating margin improved sharply and all divisions achieved strong organic growth, based on:

• subscription revenues for both print and electronic products continuing to show double digit growth;
• advertising revenues increasing at the highest rate for some time;
• a successful strategy for growing existing events complemented by the launch of new events;
• continuing strong volume growth in the training businesses; and
• the benefit of earlier investment in marketing and new products.

The problems in global credit markets, which began in early August, did not affect the group's profits in the final quarter of the year. However, the continued volatility in financial markets which has triggered significant asset write-downs and job cuts among the global investment banks clearly casts uncertainty over the outlook for 2008.

Current trading is in line with the board's expectations. October profits from continuing operations were ahead of last year, helped by strong performances from two of the group's flagship events: the annual Coaltrans coal conference and Institutional Investor's MARHedge Global Hedge Fund Summit in Bermuda. Forward revenues for the first quarter are ahead of the same time last year. While there is evidence of some slowing in advertising and sponsorship bookings, sales for the last three months are also ahead of the same period last year. The first quarter is traditionally the least significant of the financial year and, as usual at the time of the preliminary results, visibility into the second quarter is limited.

Trading Background

These results have been achieved on the back of the positive conditions in the markets experienced throughout 2007, fuelled by record levels of liquidity, low interest rates and easy credit. Growth has been achieved across all geographies and sectors, and emerging markets, which account for more than a third of group revenues, remained strong even during the credit market troubles.

The group's strategy of investing in premium subscription products, particularly those delivered electronically, has delivered strong organic growth over the past two years. The investment in subscription marketing and new products has been stepped up. Subscription revenue, which includes Metal Bulletin's BCA research business, nearly doubled to £104 million and is now the largest revenue stream in the group.

Global financial institutions continue to invest in new products and markets, driving increased demand for quality business information through a variety of media. Technology has opened up opportunities for new electronic information services and nearly £2 million was invested in new products during the period.

Business Review

Financial Publishing: Revenues, which comprise both advertising and subscriptions, increased by 16% to £75.2 million. Advertising continued the positive trend seen in the first half and titles such as Euromoney and the international edition of Institutional Investor, which derive a significant proportion of their advertising from emerging markets, achieved advertising growth rates in excess of 15%, their best performance for many years. The profit flow through on advertising revenues helped improve the adjusted operating margin from 20% to 26% and adjusted operating profits increased by 44% to £19.0 million.

Subscriptions, which account for one third of Financial Publishing revenues, increased by 21%. This reflects both volume increases in print subscriptions as well as the gradual migration of print products to electronic platforms. The group's investment in new products is targeted at niche financial information services with real-time news, unique data and sophisticated search engine technology, as well as upgrading individual print subscriptions to enhanced electronic products sold as site licences.

New products launched in the year have included Total Securitisation, The Cover (news and data for the covered bond market), FiX (Euromoney's weekly commentary on the foreign exchange markets) and the Euromoney Business Library, with more planned for 2008. The initial market response to these new products has been very positive and we expect to launch more in 2008.

Business Publishing: Following the acquisition of Metal Bulletin, and the disposal of Engel Publishing, the pharmaceutical marketing business, this division is now focussed on three sectors - metals, energy and legal - and derives nearly half its revenues from subscription products. All three sectors benefited from buoyant markets, in particular high energy and commodity prices. The Metals, Minerals and Mining (MMM) business of Metal Bulletin is the largest component of this division and its performance improved in the second half as the benefits of the post-acquisition restructuring and investment in marketing started to come through. The inclusion of the MMM business helped adjusted operating profits from Business Publishing more than double to £14.0 million on the back of a 91% increase in revenues to £40.7 million.

Conferences and Seminars: The strong growth achieved over the past few years continued with revenues up 28% to £98.2 million. The strategy of building large, must-attend annual events in key sectors, as well as launching new events to exploit market trends and hot topics, helped the margin improve from 26% to 30% and adjusted operating profits increased by 47% to £29.8 million. Institutional Investor's subscription-based membership business continues to achieve excellent growth with member numbers increasing by 15%, helped by new launches for the research, legal and tax markets, and a renewal rate of 90% which emphasises the quality of this business.

Training: The Training division extended the excellent results achieved over the previous 12 months, with revenues increasing by 21% to £35.2 million. The growth has been driven by a combination of more targeted marketing to improve the delegate attendance rate, and new courses offered, particularly in emerging markets. Adjusted operating profits from the Training division increased by 41% to £9.8 million.

Databases and Information Services: This division largely comprises three businesses which share similar characteristics: subscription-only products delivering high quality data and information in electronic-only format and with renewal rates in excess of 90%. The inclusion of BCA in this division means that revenues more than doubled to £52 million and adjusted operating profits increased from £5.1 million to £18.7million.

BCA subscription sales improved significantly during the second half with average monthly new sales more than 40% ahead of 2006. This performance was helped by the launch of a new Commodities and Energy research product and the benefits of being part of the Euromoney group which accelerated the addition of sales resource in the group's offices in New York, Hong Kong, Sydney and Buenos Aires.

ISI, the emerging markets information business, also achieved strong growth. Net new subscription sales over the second half were the highest ever, and the business has invested heavily in new products including the roll out of the CEIC economic data business to new markets in 2008.

Acquisition of Metal Bulletin

The acquisition of Metal Bulletin plc, the company's largest transaction, was completed at the start of the financial year and the integration of its businesses within the Euromoney Institutional Investor group was concluded ahead of time.

Annualised cost savings from the elimination of duplicate functions and the restructuring of under performing businesses are expected to exceed £5 million, of which £3.5 million were realised in 2007. Exceptional costs of £5.9 million were charged against profits in 2007 to cover the costs of restructuring and onerous property leases. The process of disposing of non-core Metal Bulletin businesses, including EIC, Atalink and Systematics was completed soon after the half year.

The two key parts of Metal Bulletin, the MMM division, including the eponymous title, and BCA, the independent economic research house, are strong subscription businesses. Both have responded well to Euromoney initiatives to drive revenue synergies. The events business has been restructured and positioned for a sharp increase in the number of new events in 2008, the first Metal Bulletin training courses were run in the last quarter, and the investment in technology has been stepped up with a view to launching publishing products. The acquisition of these Metal Bulletin businesses provides a counter balance to the group's other activities.

Financial Review

The company's Capital Appreciation Plan (CAP) is a five year equity incentive put in place to help drive City PBT from a base of £21 million in 2003 to a target of at least £57 million by 2008. City PBT for the year was £65.7 million meaning the CAP profit target was passed a year earlier than expected. As a result an accelerated share option expense of £3.2 million was charged in the year, and 2.5 million new shares will be issued in February 2008 to satisfy the first vesting under the CAP. The second and third tranches of up to 2.5 million new shares each will be issued in February 2009 and 2010, subject to the performance condition that City PBT remains above the £57 million level.

The acquisition of Metal Bulletin was completed on October 6 2006 for a cash consideration of £240 million, plus assumed debt of £15 million, funded by the issue of 13.8 million new shares for £65 million and borrowings of £175 million. Further investments totalling £26 million were made in a number of the group's associates and subsidiaries during the year, while disposals of non-core businesses generated proceeds of £15 million.

The company generates approximately 60% of its revenues in US dollars. The average US dollar exchange rate fell by 9% over the year. The company hedges its US dollar exposure a year forward so the impact on the results of currency fluctuations is delayed accordingly.

Net debt at year end was £204.6 million compared to £239.6 million at the half year. The strong operating cash flows of Metal Bulletin helped increase group cash generated by operations for the year to £90.2 million and generated an adjusted operating profit to cash conversion rate of 115%. The net cost of funding the group's debt increased from £3.6 million to £13.4 million. The net debt:EBITDA covenant was a comfortable 2.9 times at year end, leaving plenty of headroom for further acquisitions.

Adjusted diluted earnings a share increased by 14% to 32.7p, after taking account of the equity dilution from for the new shares issued to fund the acquisition of Metal Bulletin and to be issued under the CAP. A final dividend of 13p has been proposed, an increase of 12%, after a 11% increase in the interim dividend. The final dividend will be paid on February 6 2008.

Strategy

Since the last downturn in our markets, the group has successfully executed a strategy of developing new revenue streams to reduce its dependence on advertising, traditionally a volatile but high margin revenue stream, by building up its events businesses and, more recently, its subscription-based products. The revenue mix is now better balanced: subscriptions account for more than a third of the total, compared to 21% in 2001; the share of advertising has fallen from 37% to 22%; and revenues from training and events have increased from 30% to 39% of the total.

Profitability is also higher as the group has eliminated low margin products and maintained tight cost controls, while increasing the investment in marketing and developing successful new products. Seven of the group's 10 largest businesses are subscription-based and in many cases, such as BCA, ISI and II Memberships, these are fast growing businesses, with high renewal rates and significant scope for launching new products and increasing market penetration, even in more challenging conditions.

In 2008, the group will continue to invest in marketing and new businesses, in particular electronic information services, to drive revenue growth, and the successful integration of Metal Bulletin and strong operating cash flows leave the group well positioned for further acquisitions.

Outlook

The group remains strong despite the uncertainty over the economic outlook in general and global credit markets in particular. The strength and positioning of the group's brands combined with a commitment to investment in marketing and new products provides opportunities for further revenue growth in 2008. The successful integration of Metal Bulletin will generate additional cost savings in 2008 and leaves the group well placed to deliver more revenue synergies. Excellent operating cash flows will continue to reduce debt levels and associated funding costs. In addition, the increased proportion of revenues now derived from high margin subscription products, particularly those delivered electronically, and the reduced exposure to traditionally more volatile advertising revenues, means the group's earnings should be more robust than before.

The board of Euromoney remains confident in its clear long-term strategy to deliver consistent organic growth from new and existing products; to invest in increasing revenues from high quality subscription products, particularly electronic data and information services; to maintain the operating margin; and to make selective acquisitions to strengthen the group's market positions. Overall, the group is well positioned to meet the challenges of a more difficult trading environment.

Padraic Fallon

Chairman
November 14 2007

*Glossary
Adjusted operating profit = Operating profit before acquired intangible amortisation, share option expense, exceptional items and share of results in associates and joint ventures as set out in the income statement.

Adjusted profit before tax = Profit before tax from continuing operations before acquired intangible amortisation, exceptional items, net movements in acquisition option commitment values, imputed interest on acquisition option commitments and foreign exchange loss interest charge on tax equalisation swaps as set out in the income statement and note 4.

City profit before tax (City PBT) = Adjusted profit before tax before share option expense.

Adjusted earnings a share = Diluted earnings a share before acquired intangible amortisation, exceptional items, net movements in acquisition option commitment values, imputed interest on acquisition option commitments, related tax, tax credit on non-recurring intergroup transactions and deferred tax assets recognised as set out in note 7.

Note to editors

About Euromoney Institutional Investor PLC

Euromoney Institutional Investor PLC is listed on the London Stock Exchange and a member of the FTSE-250 share index. It is a leading international business-to-business media group focused primarily on the international finance, metals and commodities sectors. It publishes more than 70 magazines, newsletters and journals, including Euromoney, Institutional Investor, and Metal Bulletin. It also runs an extensive portfolio of conferences, seminars and training courses and is a leading provider of electronic information and data covering international finance, metals and emerging markets. Its main offices are in London, New York and Hong Kong and approximately half its revenues and profits are managed from the United States.

For further information, please contact:

Euromoney Institutional Investor PLC

Padraic Fallon, Chairman: +44 20 7779 8556; pfallon@euromoneyplc.com

Colin Jones, Finance Director: +44 20 7779 8845; cjones@euromoneyplc.com

Richard Ensor. Managing Director 020 7779 8845 rensor@euromoneyplc.com

Financial Dynamics

Charles Palmer: +44 20 7269 7180; charles.palmer@fd.com

Tim Spratt: +44 20 7269 7131; tim.spratt@fd.com

Or visit our website at www.euromoneyplc.com

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