Adjusted operating profits of Euromoney Institutional Investor, the separately listed international publishing, conference and training group of which the Group holds 71%, fell by 18% to £23.8 million. Turnover fell from £180 million to £159 million, largely as a result of the fall in financial advertising, particularly in the US. The results demonstrate the group’s continued resilience in tough markets.
Euromoney operated in a most difficult business environment during 2003. The war in Iraq, a significant fall in the numbers of people travelling on business, a declining US dollar, and the scare over SARS contributed to an already unfavourable business climate as financial institutions cut advertising, subscriptions, sponsorship and training. Throughout, Euromoney maintained its commitment to position itself for growth, to remain as profitable as possible, and to continue to seek acquisitions. In August, it completed its first significant acquisition for two years, paying up to £16.5 million for HedgeFund Intelligence Limited.
The results of the financial publishing businesses depend heavily on the advertising of global financial institutions, and Wall Street investment banks in particular. Both have suffered significant cuts over the past couple of years. As a result, financial advertising revenues fell £4.1 million to £32.8 million and profits fell £3.4 million to £10.4 million. The Institutional Investor titles, with their focus on the pensions and asset management world, suffered most, with advertising revenues down 24%. Asiamoney and Latin Finance also suffered falls in advertising revenues but were able to compensate for this through the launch of new products.
In contrast, Euromoney magazine, with its debtand emerging markets focus, proved more robust. The September issue, published to coincide with the annual IMF/World Bank meeting, achieved revenues close to their highest for five years. This excellent performance helped the magazine achieve advertising revenues for the year close to 2002’s level.
Business publishing experienced contrasting performances across its different sectors. Profits fell £2.5 million to £3.8 million after a 12% fall in advertising revenues. The travel titles, which cover the aviation, shipping, business travel and duty-free sectors, accounted for most of this fall and there is little sign of any recovery in this sector. In pharmaceuticals, advertising revenues weakened after a strong first half although the profit impact was mitigated by continued growth in subscription revenues. Both the energy and legal publishing businesses had excellent years, increasing profits and continuing to grow through the launch of new products. Gulf Publishing, acquired in August 2001 when it was lossmaking, made a good contribution. The strategy of growing the business through the roll-out of new products such as events and handbooks under the World Oil and Hydrocarbon Processing brands is proving successful.
In contrast to publishing, both the events and training sides of the business have held up well. Sponsored conferences and the Institutional Investor memberships were the best performers, emphasising the value of the group’s high quality face-to-face meeting businesses. Events profits fell £1.7 million to £6.7 million in 2003, although half of this was due to the absence of Vinisud, the biennial wine exhibition run by our French business meeting subsidiary. Of the other four key annual conferences run by the group, three managed to increase revenues.
The training businesses performed well after a difficult 2002. Profits fell 10% to £4 million despite suffering from the continued constraints of cuts in company training budgets, and travel fears following the unrest in the Middle East and the SARS outbreak in Asia. Business in Asia has picked up post-SARS and there are also signs of a recovery at MIS, our Boston based audit and information security subsidiary.
Profits from the database and information services businesses increased 55% to £2.7 million. After heavy investment in building ISI’s emerging market database in 2000 and 2001, the business reached breakeven in September 2002. It has remained profitable and continued to grow throughout 2003, adding new revenues of US$1.2 million – nearly twice the pace it achieved in 2002 – improving its retention rate and significantly reducing its dependence on the financial sector. ISI revenues have more than doubled to US$16.2 million since its acquisition in 1999. The Dealogic capital markets database joint ventures experienced a slight fall in subscription revenues, but continue to make a significant contribution despite the cuts in customer headcount.
Two small businesses were sold for a cash consideration of £0.7 million generating an exceptional gain of the same amount. Euromoney also completed a review of its past acquisitions with a view to better positioning the business for growth. As a result, certain businesses have been merged and others restructured, and the associated goodwill is no longer separately identifiable. This has led to a non-cash goodwill impairment charge of £7.8 million in respect of acquisitions made before 1997.
In spite of a strong September performance, first quarter advertising revenues may be flat or slightly lower, although there are more cheerful signs in the company’s training and event businesses. Two thirds of the group’s revenues are in dollars, and continued weakness of the US currency would affect first half revenues. In general, the financial outlook has improved and we believe that the strength of the group’s titles, its operational gearing and strong cash flows, and its investment in new products will drive profits as the business climate improves.