Euromoney Institutional Investor
KEY DEVELOPMENTS
- Resilient performance due to successful subscription-driven diversification strategy.
- Profits* maintained by tight control of costs and focus on high quality, high margin products.
Euromoney increased its operating profit*
by 1% despite a 4% fall in revenues due
to cost savings and the benefit of foreign
exchange movements.
KEY FIGURES††
These results continue to highlight the success of Euromoney's strategy to build a more resilient and better focused global information business. Subscription revenues increased by 24%, in sharp contrast to the declines in other revenue streams, and now account for 47% of total revenues against 37% in 2008. Similarly, the profits* from databases and information services, which include some of the highest margin products in Euromoney and are derived mostly from subscription products, accounted for 36% of its operating profits*, compared to 21% a year ago.
The performance of Euromoney's various revenue streams reflects the timing of the reaction of its customers to the global credit crisis. For the past three quarters, the year-on-year declines in advertising and sponsorship (-20%) and delegate revenues (-30%) have been running at similar rates. In contrast, subscription revenues grew by a third in the first half, and have continued to grow in the second half, although the rate of growth has slowed rapidly.
Emerging markets, which account for nearly half of Euromoney’s revenues, were less exposed to the excess leverage and complex financial products that have characterised the credit problems in North America and Europe, and have come through the credit crisis well.
Tight control of costs and focus on high quality, high margin products was critical to Euromoney's success in 2009. Operating margin* improved as cost cuts were implemented early in the year, leading to exceptional restructuring costs of £11 million, low margin products were eliminated quickly, and continued product investment ensured the growth in higher margin electronic publishing products was maintained.
FINANCIAL PUBLISHING
Revenues, which comprise a mix of advertising and subscriptions, fell by 10% to £75 million. Advertising revenues are heavily dependent on the marketing spend of global financial institutions and fell by 20%. Many U.S. and European institutions stopped advertising altogether, whereas advertising from emerging markets held up well. In contrast, subscription revenues increased by 7% as Euromoney continued to invest in migrating its print products to a higher value web-first publishing model with an emphasis on subscriptions over advertising.
Year 1 Launch of AR, Euromoney’s latest print and online offering.
AR
In a market where closures are outpacing launches in the publishing sector, Euromoney this year debuted its latest print and online offering.
Covering the fast-growing U.S. and global hedge fund sector, AR combines the strengths of Alpha and Absolute Return. September’s launch – and its authoritative hedge fund rankings, as determined by size and investor opinion respectively – received national coverage in print and on television.
The title positions itself as a must-read thought-leader delivering the most insightful, entertaining and comprehensive industry content, both as a monthly magazine and constantly updated website.
BUSINESS PUBLISHING
Euromoney’s activities outside finance are in sectors traditionally less volatile, and which follow different cycles. Revenues increased by 6% to £56 million and operating margin* improved. Among the sectors covered, metals, minerals and mining under the Metal Bulletin brand, telecoms under TelCap’s Capacity brand, and legal publishing all achieved good growth; only the energy sector was weak.
TRAINING
Revenues are derived largely from paying delegates. Training is a discretionary spend for most customers, at least in the short term, and revenues fell sharply from the start of the second quarter, with an immediate negative effect on margins. Some of the revenue decline was self-inflicted as course volumes were cut deliberately in the second half which, combined with the impact of early cost cuts, helped the margin recover a little. Training revenues for the year fell by 22% to £32 million and adjusted operating margin declined.
CONFERENCES AND SEMINARS
Revenues comprise a roughly equal mix of sponsorship and paying delegates. Like Training, delegate revenues fell sharply from the start of the second quarter as customers cut back on travel and event attendance. Sponsorship revenues tend to follow similar trends to advertising, and have been declining at a more gradual rate but from an earlier starting point. In difficult markets there is inevitably a shift to the bigger, more established events, and the market contracts as many of the smaller events are cut.
Euromoney’s strategy for its event businesses reflects this experience, and during the year it focused on maintaining the market leading positions of its bigger events, at the same time shrinking volumes by eliminating many of the smaller, low margin events. Revenues fell by 15% to £75 million and the adjusted operating margin declined.
DATABASES AND INFORMATION SERVICES
This was the best performing division by some way. Revenues grew by 32% to £88 million and the adjusted operating margin improved. Revenues and profits* from this division are predominantly subscription-based and U.S. dollar-denominated, and the decrease in the sterling-U.S. dollar rate was a significant factor in this year’s growth.
In volatile and challenging markets the demand for high quality information and data tends to hold up well, particularly for products that are an integral part of companies’ information flows and work processes, and have built up a strong brand loyalty. The main driver of growth from Databases and Information Services in 2009 was BCA: demand for its high quality, independent macro-economic research has proved robust despite the shrinking of the asset management industry. ISI, the emerging markets information business, experienced a more difficult time as many financial institutions cut investment and resources in this area, although CEIC, its emerging market data subsidiary, continued to grow as it expands its data coverage from Asia to other markets.
OUTLOOK
Generally, markets seem to have stabilised after an exceptionally volatile and difficult period and the outlook among our customers is more positive than it has been for some time. The return to profitability of most global financial institutions should be a positive factor for trading in 2010.
However, the cuts in headcount and the restrictions on discretionary spend on marketing, training and information buying are not expected to be relaxed quickly, so that Euromoney’s revenues will continue to decline in the first quarter, a view which is supported by current levels of sales and forward bookings.
Euromoney’s clear, well-established strategy, combined with the strength of its brands and the diversity of its sectors, customers and geographic markets, means that it is well positioned to return to growth as soon as markets improve.
* Adjusted operating profit (before exceptional items and amortisation and impairment of intangible assets).
† Underlying revenue or profit* is revenue or profit* on a like-for-like basis, adjusted for acquisitions and disposals made in the current and prior year and at constant exchange rates.
†† Percentages are calculated on actual numbers to one decimal place.