Euromoney Institutional Investor (LON:ERM): The interim figures show a mixed picture of head- and tailwinds, but with a definite improvement in Q217 over Q117, particularly in the events business. The loosening of the DMGT relationship is facilitating a faster implementation of the strategy to drive profit growth, with the benefit set to show more strongly in FY18. We have adjusted our forecasts to reflect the RISI acquisition in April, with underlying trading in line. The step-up in the dividend payout reflects the group’s strong underlying cash generation.
Benefits (and costs) of independence
The reduction of DMGT’s shareholding has had various impacts, with the share buyback element earnings enhancing, but with higher financing costs. ERM is now managing its own balance sheet and has had to establish ‘normalised’ corporate banking relationships. It has also had to take on some of the corporate services previously shared, such as tax, treasury and internal audit, and boost its resource in M&A, HR, legal, etc. This cost £1m in H117, with £3m expected for current year, and £4m in FY18. Corporate decision-making has been speeded up, facilitating the recycling of capital into group companies and acquisitions fitting most closely to its strategic objectives (like RISI, which clearly fits with the price discovery segment). Euromoney has also now acted on its earlier promise to review the dividend payout ratio. Our forecast dividend for the current year now stands at 30.0p, from 26.5p.
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