Euromoney Institutional Investor PLC

Interim Report 2006
May 18th 2006

Contents

Chairman's Statement

Group Income Statement

Group Balance Sheet

Group Cash Flow Statement

Group Statement of Changes in Equity

Notes to the Unaudited Interim Report

Auditors' Independent Review Report

Directors & Advisors

Print Version

• perating profit† up 17% to record £17.6m
• Performance driven by robust organic growth across all business divisions
• Revenue exceeds £100m for first time
• Further evidence of Capital Appreciation Plan benefits
• Impact of IFRS and CAP expense as expected

HIGHLIGHTS

Euromoney Institutional Investor PLC, the international publishing, events and electronic information group, reports an increase in operating profit before goodwill impairment and share option expense to £17.6 million for the six months to March 31 2006, a record, against £15.0 million for the previous year.  Diluted earnings a share were 10.8p, against 10.5p in 2005, and the board has approved an interim dividend of 5.4p, against 5.2p, to be paid to shareholders on June 23 2006.

Revenue in the first half exceeded £100m for the first time and strong organic growth helped drive record first half results.  Encouragingly, all divisions increased operating profits†, and subscription revenues from the group’s print and electronic products increased at their highest rate for some time. 

The adoption this year of International Financial Reporting Standards (IFRS), together with a first time non-cash expense of £2.3 million for the group’s Capital Appreciation Plan (CAP), restricted the increase in profit before tax to 5% to £13.5 million.  These items were in line with management expectations, and consistent with the comments and guidance that the company has provided to shareholders. 

Commenting on the results, Padraic Fallon, Chairman, said:

“Although the first half is usually less significant than the second for the year’s results, we're pleased with a record performance in both revenue and operating profit†. This reflects further progress towards the target of growing profit* to £50m by 2008, against £21m reported in 2003.  We hope to drive continued growth through new and existing products; diversify our revenue base while improving the operating margin†; and invest in acquisitions to strengthen the Company’s market position.”

TRADING BACKGROUND

First half revenue increased by 18% to £103m against a background of strong financial markets, positive economic indicators and further periods of record profitability for global financial institutions.  All of the group’s divisions increased revenues and operating profits†. Trading has followed a similar pattern to 2005, with revenue growth coming predominantly from the event businesses, and only limited growth in advertising.
The most encouraging aspect is the 11% increase in subscription revenues from print and electronic products, the highest growth rate for several years.

† Before goodwill impairment, share option expense and joint venture profit as set out in the group income statement.
* Operating profit less net finance costs (excluding CAP expense and imputed interest on acquisition option commitments).

Consistent with management’s strategy, most of the 17% growth in operating profit† has been generated organically.  On the events side, the growth has come from both volume and margin improvements with a number of successful new events launched, particularly in the hedge fund, real estate and legal sectors.  Publishing profits† also improved significantly due to a combination of the profit flow through on additional advertising and the reward from past investment in subscription marketing. 

The operating margin† was unchanged at 17% reflecting the increased investment in new products, particularly in the conference and training businesses.  

BUSINESS REVIEW

Profits† from Financial Publishing increased by 36% to £4.5 million.  After a slow first quarter, advertising revenues picked up in the second with titles such as Euromoney and Euroweek performing well.  While advertising markets remain tough despite the favourable trading conditions, the outlook for subscription products has improved and the group continues to invest heavily in subscription marketing.  As a result, total revenues from Financial Publishing increased by 9%.

Business Publishing achieved similar increases in advertising and subscription revenues, with legal and energy the strongest sectors.  Profits† improved by 38% to £2 million, again benefiting from the operational leverage on the additional revenues. 

Profits† from Conferences and Seminars increased by 33% to £10.2 million with improvements across all the event businesses.  Euromoney Conferences, Euromoney Seminars and Institutional Investor Conferences all achieved significant revenue growth through the launch of new events, while the strategy of investing in building existing events continued to help drive margin improvements.  Member numbers and renewal rates hit record levels at Institutional Investor Memberships, helped by the recent launch of new institutes for hedge fund executives and European institutional marketing directors.   

The Training businesses achieved strong revenue growth (+22%), largely as a result of an increase in the number of courses offered.  However, new courses are invariably less profitable and this, combined with an increase in the cost base at the beginning of the year following the significant revenue growth in 2005, reduced the operating margin†, and first half operating profits† increased by 6% to £2.8 million.

Profits† from Databases and Information Services improved by 26% to £2.2 million, driven by the continued strong performance of ISI, the emerging markets information provider.  The number of ISI customers, information sources and data providers all increased during the period and subscription revenues continue to grow at a rate of just under 20%.  CEIC, a joint venture acquired in March 2005 which provides valuable time series economic data for the Asia region, has been integrated with ISI and CEIC revenue and profits† continue to grow at a faster rate than the forecasts made at the time of acquisition.

CASH FLOW AND NET DEBT

The level of debt traditionally increases in the first half, following payment of the final dividend (£9.8 million) and year end profit shares (£6.9 million) in January.  In addition, during the first half the company invested £3 million in the acquisition of a 47.5% interest in Asia Business Forum, and made further payments of £9.3 million under earn-out agreements for the acquisitions of IMN and ISI.  Positive operating cash flows helped significantly to offset the impact of these payments and net debt at March 31 2006 was £75.5 million, an increase of only £9.1 million since year end.

MANAGEMENT INCENTIVE

These results reflect further evidence of the benefits of the Capital Appreciation Plan, the incentive plan introduced to drive profit* to a target of £50m by 2008 against a base of £21m in 2003.  Approximately 150 managers participate in this highly geared equity incentive scheme which directly rewards each participant for the profit† growth achieved by their business.

† Before goodwill impairment, share option expense and joint venture profit as set out in the group income statement.
*  Operating profit less net finance costs (excluding CAP expense and imputed interest on acquisition option commitments).

As disclosed previously, the non-cash cost of the CAP is being expensed over the life of the plan.  This expense was first recorded in the second half of 2005.  The charge in the first half of 2006 of £2.3m therefore affects reported profit before tax at the interim stage for the first time.

IFRS

This is the first time the Company has reported its results under IFRS.  As disclosed in its IFRS announcement in March, the adoption of IFRS represents an accounting change only, and does not affect the underlying trading or cash flows of the group.  The most significant impact of IFRS on these results is the requirement to charge imputed interest on future acquisition payments under option agreements (IAS 39).  This additional finance cost reduced first half profit before tax by £0.5m, with no equivalent cost in 2005.

OUTLOOK

The positive trends of the first half have continued into the third quarter and forward bookings for advertising, sponsorship and delegates are all ahead of the same time last year. The second half results will be affected by timing differences on certain events, which will probably move operating profits† of approximately £2.5 million from the fourth quarter into the first quarter of the next financial year.  These timing differences had previously not been scheduled to arise until financial year 2007.

The company believes that these trading results flow from the focus on organic growth and on selected acquisitions. In general, the outlook remains positive.

Padraic Fallon
Chairman
May 17 2006

END

NOTE TO EDITORS

About Euromoney Institutional Investor PLC

Euromoney Institutional Investor PLC is listed on the London Stock Exchange and a member of the FTSE-250 share index. It is a leading international business-to-business media group focused primarily on the international finance sector. It publishes more than 100 magazines, newsletters and journals, including the leading financial market titles Euromoney and Institutional Investor. It also runs an extensive portfolio of conferences, seminars and training courses and is a leading provider of electronic information and data covering international finance and emerging markets. Its main offices are in London, New York and Hong Kong and nearly half its revenues and profits are managed from the United States.

For further information please contact:

Euromoney Institutional Investor
Padraic Fallon Chairman 020 7779 8556 pfallon@euromoneyplc.com
Richard Ensor Managing Director 020 7779 8845 rensor@euromoneyplc.com
Colin Jones Finance Director 020 7779 8556 cjones@institutionalinvestor.com

Luxtal
Alex Money or Tom Allison 020 7936 9790 amoney@luxtal.com
Or visit our website at www.euromoneyplc.com

† Before goodwill impairment, share option expense and joint venture profit as set out in the group profit and loss account.

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Group Income Statement
for the six months ended March 31 2006

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Group Balance Sheet
as at March 31 2006

† Before goodwill impairment, share option expense and joint venture profit as set out in the group income statement.
* Operating profit less net finance costs (excluding CAP expense and imputed interest on acquisition option commitments).

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Group Cash Flow Statement
for the six months ended March 31 2006

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Group Statement of Changes in Equity
for the six months ended March 31 2006

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Notes to the Unaudited Interim Report

1. Basis of preparation

This interim report was approved by the board of directors on May 17 2006. The group has previously prepared its financial statements under UK Generally Accepted Accounting Principles (“UK GAAP”).  From October 1 2005 the group is required to prepare its annual consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and implemented in the UK.  This interim report has been prepared using IFRS accounting policies consistent with those that the group expects to use in the preparation of its first annual report and financial statements under IFRS for the year ending September 30 2006. These accounting policies were included in the group’s “Adoption of International Financial Reporting Standards - Preliminary restatement of 2005 financial information” document which was published on March 22 2006, and is available on the group’s website at www.euromoneyplc.com/reports/IFRS_Restatement_2005.pdf.  The reconciliations of profit and shareholders’ equity from UK GAAP to IFRS required by IFRS 1 “First time adoption of IFRS” are also included within this document.

As permitted by IFRS 1 the group elected to defer implementation of IAS 32 “Financial Instruments: Presentation and Disclosure” and IAS 39 “Financial Instruments: Recognition and Measurement” until the year ending September 30 2006. The adjustments required for the adoption of IAS 32 and IAS 39 as at October 1 2005 are detailed in note 7 of this report.

The financial information contained in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and should be read in conjunction with the 2005 annual report and the IFRS restatement document. The comparative financial information is based on the interim results for the six months ended March 31 2005 as amended in the IFRS restatement document.
 
The figures for the year to September 30 2005 are an abridged statement from the group’s accounts, which have been delivered to the Registrar of Companies, and amended by the IFRS restatement document.  The auditors’ report on those accounts was unqualified and did not contain a statement under section 237(2) or 237(3) of the Companies Act 1985.

2. Segmental analysis

2. Segmental analysis continued

3.Tax on profit on ordinary activities

4. Net debt

Net debt comprises cash at bank and in hand, bank overdrafts, banks loans and other borrowings.

5. Dividends