UBM produced satisfactory FY 17 results with total revenue up 16.2% on a reported basis (reflecting the Allword integration) to £1,002.9m in line with recent guidance of about £1bn. Revenues were up +4.1% underlying, driven by annual events, up 5.3% organically (guidance was for at least +5%) compared to +3.1% in FY16.
Adjusted OP reached £294.2m (AV: £281m), reflecting a solid 210bp margin improvement to 29.3% and ahead of our own c.28% forecast.
Diluted adjusted EPS increased by 34.5% to 53.4p (+29.7% at CER) compared to AlphaValue’s at 49.4p and the board announced a final dividend of 18p (FY16: 16.6p), bringing the total dividend for the year to 23.5p, up 6.8%.
Regarding the FY18e guidance, management only highlighted a “good momentum so far” as, being in an offer period, it is restricted on talking more about the outlook at this stage.
Informa (£6bn market capitalisation) has just officially announced a bid for rival and competitor UBM (£3bn capitalisation) whose shareholders will each be offered 1.083 Informa shares and 163p in cash. Informa will hold 65.5% of the new firm, with UBM owning 34.5%. Note that Informa has said that the Boards of the two companies are expected to approve the deal. The latter will create an events giant as UBM is the world no.2 events organiser behind RELX.
UBM reported H1 17 revenue of £448.4m, up by 18% or +8.3% at CER. Organic growth reached +1.9%, of which +2.7% for Events and -2.1% for Online and Marketing Services 5OMS). The consolidated adjusted OP rose by 19.6% to £111.7m, i.e. a margin improving by 30 bps to 24.9% from 24.6% (note that the medium term goal is for 30% i.e. 280bps above the FY16 level).
Adjusted earnings were 23.6% higher at £77.5m, with diluted adjusted EPS rising by 37.3% to 19.5p (+27.5% at CER).
FCF pre-dividend improved to c.£141m, compared to c.£82m a year earlier. The interim dividend per share was set at 5.5p (+1.9%), in line with our expectations and management said that the Board will review the dividend policy ahead of the full-year results (aimed at growing the FY17 dividend at a faster rate than in recent years when it was +1% to +2%).
UBM reiterated its FY17e guidance for higher underlying revenue growth, supported by the Allworld acquisition (completed in January 2017; integration on track and even ahead) and the positive impact of biennial events. A further improvement in the margin and continued strong cash generation are also expected, helped by synergies and costs savings.
Note that, due to a phasing impact (many of the group’s fastest-growing major annual events occur over H2), organic growth and profitability are expected to accelerate over the second part of the year. To date this has been confirmed by the current forward bookings (all events anticipated to grow except for Fashion, with a weak performance in North America, suffering from the reshaping of the supply chain due to online developments).
The top 20 companies using the CF Growth Profile beat the bottom 20 by 16% pa over last two years
UBM produced satisfactory FY 16 results with continuing revenue up 12.1% to £863m, more or less in line with our forecasts (£858m) with Events up 3.1% underlying. Total revenues were boosted by a significant forex impact (+£92m or 11.9%; sterling weakness linked) as well as £26.1m or 3.4% coming from the perimeter impact and were nearly flat at CER (+0.1%).
Continuing adjusted OP rose by 19.2% to £234.8m (+£37.m after +£31.3m from forex and -£12.3m due to the down biennial year impact at Events), reflecting a solid 160bp margin improvement to 27.2% when we had expected 26.9%.
Continuing diluted adjusted EPS increased by 31% to 39.7p (+12% at CER) compared to AlphaValue’s at 35.4p and the board announced a final dividend of 16.6p (FY15: 16.3p), bringing the total distribution for the year to 22p (versus 21.6p for the previous year; +1.9%).
Note that FY16 was highly impacted by forex moves, linked to sterling’s weakness in the aftermath of the Brexit vote. 72% of UBM’s revenue is indeed denominated in dollars or in currencies linked to the dollar and the tailwind was 11.9% on total revenues and 15.9% on OP (higher drop through to profit reflecting the larger cost base in the UK). Far from being negligible…
Regarding the FY17e guidance, management expects higher underlying revenue growth, supported by the Allworld acquisition and the positive impact of biennial events. A further improvement in the margin and continued strong cash generation are also expected, helped by synergies and cost savings.
As rates rise, "yieldy" stocks require careful consideration. Sustainability/track record key.
UBM announced in mid-December the acquisition of Allworld Exhibitions, a leading privately-owned Asian exhibitions business (250 employees) for a cash consideration valuing the business at US$485m. The deal will be fully debt-funded with existing credit facilities and a new $365m bridge facility to be replaced with new longer term debt in due course.
In a short trading update UBM confirms it has continued to perform in line with expectations. Major event performances since the Interims appear to be on trend and acquisitions are also on plan. The company signals no change to the trading outlook. In our last comment we highlighted the immediate value in the stock and it has performed well (+11.4%) as expected. We also commented that there was further upside to forecasts if FX rates held (our existing estimates are based on $1.32 vs spot of c1.25 and Euro 1.20 vs spot of 1.14). While this may edge up our Target Price potentially it isn’t enough to support a Buy rating and hence we move back to Hold. Speculation on the acquisition of a material Far East focused business has edged the stock back from recent peak at 744p. We doubt investors are hugely keen on substantially increasing exposure to this region (without a very strong case) given the push to expand North American exposure. In combination with the new uncertainty in the US this may result in a slowdown in acquisitions.
Reporting its H1 16 results at end-July, UBM confirmed that the full-year trading outlook was unchanged, except for the positive forex impact linked to sterling’s weakness (only 10% of total revenues in the UK), with more coming through over the important H2 period. Beyond currency, management expects little direct impact from Brexit on its businesses.
The group otherwise produced satisfactory H1 16 results with continuing revenue up 8% to £380m (after a +6.5% impact from forex) and +1% organically for the adjusted figure (Events: +1.3%, Other Marketing Services or OMS: -0.4%) as there was some phasing impact (£2.1m revenue moved into H2).
Continuing adjusted OP rose by 24.5% to £93.4m (c.11% due to the forex impact), reflecting a solid 330bp margin improvement to 24.6%. This was slightly helped by reduced strategic opex relating to the Events First transformation plan (£1.7m down from £4.6m). The operating margin was up 240bp before strategic opex.
Continuing diluted adjusted EPS increased by 31.5% to 14.2p and the interim dividend was raised by c.2% to 5.40p per share.
Note that following PR Newswire’s disposal (net cash proceeds of £490m) a £243.7m special dividend was paid to shareholders on 8 July.
There are two main issues to consider for the Media sector, UK recession and currency. Large and mid-cap B2B is likely to be a net beneficiary of sterling weakness as they are heavily exposed to US$, while exposure amongst small cap B2Bs is typically modest but may well be enough to offset any domestic weakness. B2B looks a good safe haven and Informa (TP690p, Hold) and UBM (TP605p, Buy) look good value. Marketing Services is a barbell subsector; WPP’s might overseas and in its offering will probably outweigh its still significant UK operation. At the smaller end individual client mandates will be more important, client losses are hard to predict and potentially UK expertise could look cheap to overseas businesses. Consumer media looks more vulnerable. A mix of high domestic exposure, cyclical exposure and high operational gearing looks poisonous. ITV, Rightmove and Autotrader look likely to suffer.
Companies: Informa Plc UBM
UBM today released the final details regarding the return to shareholders in the aftermath of the PRNewswire disposal (please refer to our 22 March 2016 Latest) to Cision, controlled by GTCR Canyon Holdings Cayman L.P.
Redcentric (RCN LN) Core holding which will keep on delivering | UBM (UBM LN) PRN disposal closed!
Companies: Redcentric Plc UBM
After 6 months of delays the disposal is finally closed. Investors will see half of the £490m net proceeds returned via a special dividend of 55.3p per share (register date 24th June, ex-dividend date 27th June and paid 8 July). The shares will then be consolidated (8 for 9), UBM will now have a much purer profile with Events (mostly trade exhibitions) being the key proposition. On a cum dividend basis the stock trades on 12.1x FY16 and 9.6x FY17 EV/EBITDA or just under 11x average for theFY16/17 biennial cycle. We indicated that the stock should command a higher rating with this improved growth focus and have increased our TP rating to 12x. This makes the stock worth c605p cum special dividend and c550p ex. We adjust our TP accordingly and this pushes the stock into Buy territory hence we upgrade.
UBM produced FY15 results globally in line with revenues for continuing operations (PRN newswire treated as a discontinued operation) amounting to c.£770m (comparable FY14: £550.5m), down 2% on an underlying basis (up c.£219m reported on a comparable basis after +c.£180m net acquisitions impact, +c.£27m biennial impact and +c.£26m forex). The adjusted operating margin for continuing improved to 25.6% compared with 24.5% on a comparable basis a year earlier, despite £7.4m of strategic opex and £5.9m headwinds from corporate costs, offset by the Advanstar integration, biennial events and forex.
The Board announced a final dividend of 16.3p (FY14: 16.0p), bringing the total dividend for the year to 21.6p, up 1.4% from the previous year.
2015 results (revenues and operating profit) for the continuing business (PRN disposal announced but still not completed) are better than expected. Revenue was a marginal £1m ahead in the events unit while OMS (Other Marketing Services) was c5% better. Profitability was ahead at both the core Events business (c82% of continuing revenues) and OMS unit. The outlook statement reads confidently in the context of current macro uncertainties with an expectation of “Good growth”. This will be tempered by the planned rationalisation program. Events growth was 1% or 3.9% excluding rationalisation. Advanstar integration synergies are running ahead of plan ($6.1m in 2015 and $10m annualised run rate run rate). The disposal of PRN is still awaiting US clearance and the Company is guiding to the sale completing at the end of Q1 2016. There may be some concern that the risk of deal failure has risen given UBM is selling a business whose revenues are inextricably linked to market conditions through the volumes of announcements. The shares should respond positively to good results but after running on and the Emerging Market and Global macro risks in mind upside looks limited.
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Total advertising revenue dropped by 43% in Q2 20 and ITV Studios was affected by the stop in production. The adjusted EBITA margin collapsed to 14% of revenue (-8pts yoy) despite the reduction in the cost of programmes by £77m and overheads cost savings of £51m over £60m targeted in 2020. There is no guidance for Q3 20 and FY2020. The negative trend in advertising was reduced in July 2020 (-23%). ITV Studios restarted production in June 2020.
Companies: ITV Plc
In its trading update, management indicated that it expects H120 revenues in excess of US$110m, with adjusted EBITDA of at least US$15m. Cash increased to US$27.6m at 30 June 2020, while net debt fell marginally to US$76.4m. This would indicate relatively strong Q2 revenues of US$53.6m (Q1: US$56.4m), but a fall in Q2 adjusted EBITDA to US$6.9m (Q1: US$8.1m), meaning lower Q2 margins of 12.9% (Q1: 14.4%). On this basis, revenues would be c 11% ahead of our H120 estimates (US$99.1m), but EBITDA only c 2.7% ahead (US$14.6m) with H120 margins of 13.6% vs our estimate of 14.7%. At this stage, with limited visibility on the performance of the underlying businesses and with no forward guidance, we intend to leave our forecasts unchanged, pending review after the interim results on 1 September 2020.
Companies: CentralNic Group Plc
CentralNic provided an H1 trading update that demonstrated strong organic revenue growth and solid EBITDA performance. The company continues to generate cash although currency movements may have hindered its net debt progress. Despite the strong top line performance, we leave our forecasts unchanged until Interim Results on 1 September. The company’s solid outlook reinforces the attractiveness of CentralNic’s earnings multiples and FCF yield.
This morning's results from FOUR starkly reflect the impact of the pandemic on the company's mid-sized US corporate customer base and on demand generally in the US economy, with gross margins eroding from 32.5% to 29.1% and underlying PBT of $US0.25m a fraction of the H1-19A $US19.8m. Just shy of half a million orders processed in the first half compares with nearly 800,000 in the comparative period in 2019. All of this said, however, these results reflect both the start of improving trends during the latter part of the period and, more importantly, vigorous action by management to preserve cash and manage the cost-base effectively. On the former point, order counts, which stood at 20% of the prior year during the most intense phase of the lockdown in the US, have now moved through 50%, while showing steady upwards progress.
Companies: 4imprint Group Plc
CentralNic’s capital markets day (CMD) on 24 June 2020 introduced the divisional management team and provided insight on each of the three key segments as they will report in FY20: Indirect (Wholesale, Registry); Monetisation (Team Internet); and Direct (Retail, Corporate). We have picked out what we believe are the four key themes from the CMD: FY20 performance, COVID-19 and seasonality; organic growth; M&A; and, pulling it all together, the benefit of scale. CentralNic continues to trade on an FY20 EV/EBITDA of 9.1x and a P/E of 15.8x, a material discount to its peer group, with our DCF indicating further share price upside. M&A could bring CentralNic’s multiples down further.
We have knitted together the impact on the investment companies from what is now widely considered to be the most severe pandemic in a century. The collapse in asset prices over the latter part of March, brought the curtain down on an up-market that lasted more than ten years. In amongst this, there were pockets, such as the technology sector, that held up well. For many industries, the worst is still to come, as we brace ourselves for the sharpest contraction to global growth since the US great depression.
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CentralNic's CMD gave us new positive insights into the company's investment case. CentralNic's organic growth is stronger than we thought, the Direct division generates high ROI, the monetisation market was shown to be critical to the domain name market, Team Internet's market leadership was further reinforced and acquisition opportunities were shown to be larger than anticipated. These investment views are not reflected in CentralNic's low valuation multiples, in our view.
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Interim results confirm several positives for GlobalData. It has reported significant organic growth in key metrics. This should continue given the increase in deferred revenue, much of which will contribute to H2. Integration of the recent acquisitions (MEED and RVL) appears to be going well, bringing new addressable markets to bear. Finally, cashflow dynamics are positive, supporting the ability to make further acquisitions in a sector with scope for consolidation. The Group's growth status is reflected in relatively high short-term ratios. However, on longer term cashflow analysis, theoretical values are all higher than the current level.
Companies: GlobalData Plc
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De La Rue remains challenged. New management has to navigate a difficult Currency market and consequent concern over its finances. The swift response in terms of a turnaround programme is a positive start, accelerating cost cutting initiatives and cash management measures, including suspension of the dividend. Restoring stability and rebuilding confidence in the investment case is likely to take some time.
Companies: De La Rue Plc
Tremor has reported a strong set of FY19 results and announced a prudent $10m buyback. The results are in line with January’s trading update, and demonstrate strong growth in Digital Video and Connected TV (CTV) advertising. Tremor has also seen a solid start to FY20, but COVID-19 could markedly affect a number of its clients. The management and board highlight that it is too early to fully assess the impact of COVID-19 on Tremor’s FY20 outlook, and we consequently leave our FY20 estimates broadly unchanged at this point. In this report we also explain Tremor’s investment case in depth, and highlight that Tremor is excellently positioned to capitalise on the major growth in Video and CTV advertising, and can see further upside from M&A and the resolution of the Uber case.
Companies: Tremor International Ltd.
The company announced several appointments that have strengthened the management team after seven acquisitions over the past two calendar years. We believe this investment in management should form a strong foundation for the company’s next phase of growth. Alex Siffrin, the company’s largest shareholder, has stepped down from the board to focus on personal priorities
CentralNic's business is resilient in the current environment. The company has mostly repeatable revenues and sells mission-critical products, diversified across many customers and countries. Market growth is robust, benefiting from the recent surge in online activity and regulated price increases. Competitively, the company is well positioned, dominating its core markets. Financially, the company has adequate financing and has not experienced any increase in late payments. CentralNic’s resilience is reflected in a confident trading update this morning.
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