A quality Events business to be swallowed by Informa
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.
15 Mar 18
Ahead of a wedding with Informa!
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.
17 Jan 18
Final year of the three-year plan
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).
10 Aug 17
A pure-play events business which is delivering
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.
27 Feb 17
Acquiring a pure-play events business
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.
27 Dec 16
N+1 Singer - UBM - In-line trading update
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.
10 Nov 16
Focus remains on “Events First” implementation
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.
30 Aug 16
N+1 Singer - MS - Media - BREXIT Potential Impacts and Thoughts
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.
UBM Informa Plc
24 Jun 16
PRN disposal closed!
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.
17 Jun 16
First year of implementing the Events First Strategy
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.
22 Mar 16
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.
25 Feb 16
PRN sold at last….
UBM has sold PRN for a headline price of $841m (11.9x N1Se FY15 EBITDA estimate). Immediate net cash proceeds will be c£498m of which the company proposes returning £245m via a special dividend to investors. The remainder will be retained to drive its Events First strategy. This is likely to prove to an attractive price for investors in the long term. We expect a positive response from the market to UBM finally (and effectively) becoming the pure play that investors desire. There is an investor call at 8.30am which should provide more information. Our forecasts and rating go under review at this stage.
15 Dec 15
ADVANCED MEDICAL SOLUTIONS GROUP (AMS LN) In line trading update | CRANEWARE PLC (CRW LN) Market change prompts new approach | ENTERTAINMENT ONE LTD (ETO LN) Volatility likely to persist | IMAGINATION TECHNOLOGIES GROUP (IMG LN) Interims results weak | UBM PLC (UBM LN) PRN sold at last….
UBM AMS CRW ETO IMG
15 Dec 15
The brief statement indicates that trading has continued in line with expectations for the year to date and that the “outlook for the profitability of the group in 2015 remain unchanged”. Overall while we may trim Events revenue slightly (<1% of group revenue) we are comfortable with our profit estimates. The Events business performance looks a little soft on revenue but on track at the profit level due to the larger events superior profitability. It is possible that there may be some further weakness if China continues to slow. PR Newswire and Marketing Services are both indicated to be on track. The integration of Advanstar is also on track and the business is performing in line with Company expectations. Discussions re a disposal of PRN are ongoing. We recognise that while trading is in line at the profit level revenues are slightly soft. However the modest bounce in the stock since late September is supported by a statement that should provide some relief. On valuation stock is a dull Hold.
10 Nov 15
Liontrust Asset Management (LIO LN) On track to hit FY expectations | Mobile Streams (MOS LN) Trading update | Oxford Instruments (OXIG LN) Guidance reiterated | Redcentric (RCN LN) Steady as she goes | Speedy Hire (SDY LN) Interims confirm early signs of improvement from remedial measures | Trifast (TRI LN) Strong H1 growth; guidance reiterated | UBM (UBM LN) Trading update
UBM LIO MOS OXIG RCN SDY TRI
10 Nov 15
Successfully implementing a convincing growth strategy
Disappointing first reading for UBM's H1 15 results with underlying revenue down 4% and adjusted operating margin down 250bp to 21.7% from 24.2%. But the H1 organic decline appears to be linked to the slower growth profile of the group's H1 events (phasing impact) and portfolio pruning (rationalisation of Events and Other Marketing Services): adjusting for these non-recurring items, revenue organic growth was +0.6% (Events: +3.3%). Regarding the operating margin, the H1 14 OP included £11m non-recurring central gains, which implies a 50bp gain in profitability over the period. The full-year outlook is unchanged and the group says it is making progress on its "Events First" strategy (portfolio rationalisation and targeted acquisitions), with the Advanstar integration also being well on track. A flat 5.3p interim dividend will be paid on 9 October.
31 Jul 15
Interims – On track
A solid H1 and encouraging outlook in events that will allay concerns about trading conditions in EM and particularly China should help the shares bounce. The company is maintaining its full year outlook. Advanstar cost savings are being delivered faster than expected and its underlying growth rate is encouraging. Events margin now expected to improve YoY. The shares have recently marginally drifted into Buy territory and we would expect a positive response today from the reassurance provided.
31 Jul 15