Canaccord reiterates 'buy' and raises target price for Euromoney

Euromoney Institutional Investor has reported a weak first half but the results were in line with expectations and the company’s full year guidance was maintained, Canaccord Genuity said on Thursday.

Canaccord reiterated a ‘buy’ rating and raised its target price to 1,128p from 1,100p, citing signs of progress and a strong net cash position in Euromoney's interims.

Euromoney reported a drop in first half pre-tax profits to £23.4m from £93m, reflecting a slump in advertising revenues and weak energy and commodities markets.

Revenues fell to £194.2m from £197.7m. Underlying advertising fell by 13% and underlying event revenues by 7%.

Adjusted operating profit fell by 7% to £46.8m, with the decline in revenues and margin partially offset by favourable currency movements. The strength of the US dollar had a positive impact on the results with an average sterling-US dollar rate falling to $1.47 (2015: $1.56).

“The challenging market conditions we experienced in the last 12 months continue. Nonetheless, there are early signs of progress from the strategic actions we are taking, the comparatives are becoming less challenging and currency is on our side at the moment,” the company said.

“We therefore expect, subject to currency movements, to deliver a second-half performance similar to last year's and a full-year performance in line with the board's expectations.”

Canaccord noted that the company’s cash flow was better than expected in the first half. Net cash of £56m, before proceeds of recent disposals, compared to a £35m forecasts.

As a result, the broker upgraded its full year net cash forecast to £91.4m from a previous estimate of £67m. Canaccord also retained its pre-tax profit forecast of £100.9m and earnings per share prediction of 62.2p.

“The shares have had a good recent run, up by 10% since the beginning of March, but they still trade on a calendarised 2017 PER of 15.0x and EV/Ebitda of 10.1x, which represents a material discount to the UK professional publishing peer group, despite Euromoney's significantly superior cash position and much higher percentage of revenues coming from high quality subscription products,” said Canaccord analyst Simon Davies.

“We also view the business as an attractive Brexit hedge, given its significant exposure to US$ revenues.”

Shares fell 1.11% to 984p at 1050 BST.