CEO Andrew Rashbass has been in place since October 2015 and has now set out his plans for stimulating the group’s growth. His strategic review points to an evolutionary honing of the better-placed existing portfolio products and brands, rather than a drastic group reshaping. The changes are targeted at enhancing Euromoney’s (ERM’s) credentials in B2B digital information, with asset management and price discovery markets key areas of focus. It has strong brands, high underlying levels of cash conversion and a good acquisition and integration record. Clear sight on driving the top line should enable ERM to regain its traditional sector premium.
The recent capital markets day gave both Andrew Rashbass and the brand managers the chance to set out their vision and strategy. No new financial information was given, nor corporate activity announced, and we have not changed our forecasts. ERM is a portfolio of relatively small businesses, important in their individual marketplaces. The review identified which have sound structural and cyclical positioning that will gain most from drawing on the group’s capital resource, data strengths and journalistic heritage. It has also clarified key areas of focus. These include data products and services for asset managers, where AuM in both traditional and novel vehicles continue to build. There are good opportunities in price discovery, a faster-growing segment of the global business information market. Management also wants to build the group’s positions in adjacent financial markets such as risk and compliance, telecoms, fintech and insurance. More active management of the portfolio will mean that some divestments will also be likely.
There is no respite in sight from the storm clouds overhanging ERM’s core financial sector client base. However, the group has the advantage of being able to adjust its operational levers on investment and mix while generating enviable cash flow and with a growing cash pile to fund acquisitions to supplement a return to organic revenue growth.
ERM has traditionally traded at a premium to other quoted B2B media companies, reflecting its quality and consistency of earnings (itself a reflection of its well-known brands), strong balance sheet and cash conversion. The weakness of the markets of its customers has undermined these advantages and the valuation currently sits at a discount of 9% on calendar 2016 P/E and around par on EV/EBITDA.