Euromoney Institutional Investor PLC

Preliminary Announcement
September 30 2005

Contents

Chairman's Statement

Group Profit and Loss Account

Group Balance Sheet

Group Cash Flow Statement

Notes to the Group Cash Flow Statement

Group Statement of Total Recognized Gains and Losses

Reconciliation of Movement in Equity Shareholders' Funds

Notes to the Preliminary Announcement

Print Version

• Record profit driven by strong organic growth
• Profits increase across group: publishing, events and electronic information
• Group operating margin improves from 17.5% to 20.5%
• Net cash inflows from operating activities increase by 29% to £43.5m
• Recent acquisitions performing above management expectations
• Record dividend 16.2p
• Results reflect early benefits of Capital Appreciation Plan

RECORD RESULTS
Euromoney Institutional Investor PLC, the international publishing, events and electronic information group, reports a record profit* of £37.1 million for the year to September 30, a 33% increase on the previous 12 months.  Profit before tax rose 42% to £29.1 million.  Adjusted diluted earnings** a share increased 33% to 35.6p and the directors recommend a 10% increase in the final dividend to11p, making a total for the year of 16.2p, a record.

These results reflect the key elements of the company’s strategy for growing profits* towards a target of £50m by 2008: driving top line growth from both new and existing products; reducing the dependence on advertising by building more robust subscription and repeat revenues; a focus on improving the operating margin; and acquisitions to strengthen the company’s market position in key areas.    

Commenting on the results, Padraic Fallon, Chairman said:
“These results reflect excellent progress against the company’s strategy to achieve target profits* of £50m by 2008, compared to the £21m reported in 2003. Our focus remains on driving organic growth though new and existing products; diversifying our revenue base while improving operating margin; and strategic acquisitions that strengthen the company’s market position.”    

TRADING BACKGROUND
Turnover increased 12% to £196 million.  This improvement comes against a robust trading background.  Strong financial markets have generated record profits for the global financial institutions and emerging markets remain attractive to capital flows and investment.  While the company’s key customers continue to hold back advertising spend, many are refocusing their marketing efforts on face-to-face events, a key growth area for the group.  Moreover, the financial success of these customers is driving an increase in demand for training and information.  The events and training businesses now contribute more than 53% of operating profits* compared to 37% three years ago.

ORGANIC GROWTH
The company’s focus on organic growth has been a key driver in increasing turnover.  This organic growth comes largely from launching new products under existing brands and the geographical extension of existing products.  Some of the successes during the year have included Euromoney’s coverage of real estate, the Institutional Investor hedge fund institute, new conference and seminar businesses in Asia, and expansion of ISI into 18 sub-Saharan Africa countries.

The focus with events is on quality rather than quantity.  The group now has more than 10 market-leading annual events with revenues in excess of $1 million, and the strategy is to continue to grow these events by both investing in the content and building new revenue streams such as vendor exhibitions, awards dinners and business meetings.  In addition successful new events were launched covering such diverse areas as Native American finance, condo hotels, renewable energy and inflation-linked bonds as well as conferences in London and New York bringing together investors targeting key emerging markets such as China, India and Russia.

MARGIN
The company’s operating margin improved from 17.5% to 20.5%.  The company has traditionally maintained a policy of tight cost control and the margin improvement in 2005 reflects the high operational gearing of the business.  The headcount, excluding acquisitions, was largely unchanged year-on-year.  Although this positive gearing effect is likely to moderate in future, the company’s focus remains the building of high margin, repeat annual revenues and the elimination of low margin products.  During the year the group closed or folded several magazines and newsletters and in May it sold the loss-making Business Traveller group of titles, generating an exceptional loss on disposal of nearly £1 million.

ACQUISITIONS
The company’s acquisition programme concentrates on small, specialised media companies which fill gaps in or enhance its own product/sector offering, preferably with entrepreneurial management who wish to remain with and grow their business under earn-out arrangements.   Often these businesses have reached a stage in their development where they would benefit from the branding, marketing and infrastructure benefits of being part of a larger group.  The recent acquisitions of the niche hedge fund publisher, HedgeFund Intelligence (“HFI”), and Information Management Network (“IMN”), the world leader in conferences for the securitisation and indexation sectors, demonstrate the success of this strategy, where both have exceeded growth expectations since acquisition.

In September, the company completed the acquisition of a 40% interest in TelCap at a cost of £2.1 million.  TelCap is the publisher of Capacity, the leading wholesale telecommunications, and also runs nine annual conferences in the sector.  In addition, the group has targeted a number of information businesses which fit well with its existing data products and in March the acquisition of a 49% interest in CEIC was completed at a cost of £4.0 million.  CEIC is one of the leading providers of time-series macro-economic data for Asia and provides an excellent fit with ISI’s emerging markets information service.    

MANAGEMENT INCENTIVE
In February, shareholders approved a new long-term incentive plan to replace the company’s executive share option scheme.   The Capital Appreciation Plan (“CAP”) is a highly geared equity incentive designed to drive the company’s profits* towards a target of £50 million by 2008, compared to £21 million in the base year 2003.  Almost 150 managers participate in the CAP.  The incentive will directly reward each participant for the profit growth achieved by his or her business and has been a significant factor this year in motivating senior managers to drive organic growth and launch new products.  If the £50 million CAP profit* target is achieved in 2008, it will lead to the issue of up to 7.5 million new shares in the company between 2008 and the end of 2010. Under UITF 17 the cost of the CAP will be amortised over the life of the plan, and this year’s results include a charge of £1.3 million.

BUSINESS REVIEW
Revenues and profits from publishing improved by 5% and 10% respectively.  In general advertising markets remain tough as customers, particularly the global financial institutions, continue to withhold marketing spend on traditional display advertising.  Nevertheless, advertising revenues increased by 6%, helped by the launch of new products such as roundtables, polls and research, as well as a focus on specialized areas such as hedge funds, private banking, real estate and project finance.  Euromoney, Asiamoney and Euroweek all achieved above average increases in advertising revenues.

The fastest growing part of the business is events, including conferences, seminars and awards dinners.  Revenues increased by 31% to £67.3 million and profits* by 55% to £18.8 million.  This growth underpins the company’s strategy of reducing its exposure to advertising and developing more robust revenue streams from sponsored conferences and membership organizations.  With the exception of Adhesion (where the biennial wine exhibition Vinisud next runs in 2006), all of the group’s event businesses increased profits through a combination of new products and a continued focus on building high margin, market leading events for their various sectors.  IMN was particularly successful in both growing its market-leading securitization conferences as well as launching new events, and its performance since acquisition has significantly exceeded expectations.  IMN’s results also benefited from the timing of its ABS East conference which was moved from October to September for 2005 and 2006. 

Training continued the strong growth seen in 2004 with revenues up 13% and profits increasing 25%.  In general the improvement was driven by growth in the volume of courses delivered, particularly in emerging markets, helped by increased demand for new hires in the financial sector.  In addition, new legislation and compliance requirements in the United States helped MIS, the Boston-based audit and information security business, to grow. 

Profits from databases and information services increased 15% to £3.9 million.  The main driver of the growth was ISI’s Emerging Markets Information Service where gross sales were the highest since launch.  ISI’s subscription revenues increased by 20% to $22.1 million and the revenue retention rate improved to an all-time high of 91%.  In addition, CEIC, which was acquired in March, has performed ahead of expectations.  CEIC is benefiting from operating in ISI’s global sales environment while the cross-selling of both ISI’s and CEIC’s products has exceeded expectations.  

CASH FLOW
Net debt at September 30 was £65.8 million, an increase of £3.3 million since the previous year end.  The group continues to generate strong cash flows with nearly 50% of its revenues generated from subscriptions and delegates.  Net cash inflows from operating activities increased by 29% to £43.5 million, helping finance acquisitions and investments of more than £23 million.  These included the acquisitions of CEIC (£4.0 million) and TelCap (£2.1 million); further investments under deferred consideration agreements in HFI (£5.5 million) and IMN (£5.4 million); and £3.7 million on a head lease and capital improvements for the group’s London offices.  
 
TAX
The company has traditionally had a low rate due to the tax amortization of goodwill available on US acquisitions and the availability of brought forward tax losses for use against its US profits.  The significant improvement in the profits of the US businesses has lead to the recognition in 2005 of a deferred tax credit of £5.3 million for unused US tax losses.  This, combined with recent changes in UK tax legislation which reduce the tax benefit from US acquisitions, means the company’s underlying tax rate is likely to increase from 20% in 2005 to approximately 24% in 2006.

DIVIDEND
The increase in the final dividend is consistent with the company’s strategy of moving gradually to a dividend cover of two times, while still delivering real dividend growth.  The total payment to shareholders for the 2005 financial year will be £14.4 million, bringing the dividends returned to shareholders over the past five years to £66 million, all financed from operating cash flows.  

MANAGEMENT
Following the independent recommendation of the Nominations Committee, the board has independently considered the service contract of the chairman of the company, and has resolved to extend the automatic retirement date under his service contract from age 60 to the date of the Annual General Meeting following his 63rd birthday.    

OUTLOOK
The outlook for financial markets in 2006 remains positive, and the company will continue to focus on implementing its plans for organic growth, improved operating margin, and strategic acquisitions that create value for shareholders. For the new financial year the first quarter is the least significant in profit terms, and visibility for the second quarter is always limited at this stage.  However, current trading is pleasing with advertising, sponsorship and delegate sales all ahead of the same period in 2004. The Capital Appreciation Plan is beginning to deliver results in terms of execution, and the company remains committed to implementing its stated strategy.

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 located in London, New York and Hong Kong and nearly half its revenues and profits are derived 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@euromoneyplc.com

The Company Agency
Alex Money or Tom Allison  020 7670 7451 a.money@thecompanyagency.com

Or visit our website at: www.euromoneyplc.com

* Before goodwill amortization, goodwill impairment, capital appreciation plan costs and exceptional items as set out in the attached profit and loss account and note 2.
** Before goodwill amortization, goodwill impairment and exceptional items as set out and reconciled in note 6.

Back to contents

Group Profit and Loss Account
for the year ended September 30 2005

Back to contents

Group Balance Sheet
as at September 30 2005

Back to contents

Group Cash Flow Statement
for the year ended September 30 2005

Back to contents

Notes to the Group Cash Flow Statement

A - Reconciliation of operating profit to net cash inflow from operating activities

B - Reconciliation of net cash flow to movement in net debt

C - Analysis of changes in net debt

Other non-cash changes represent capitalised interest charged on debt and a reclassification of the DMGT loan.

Back to contents

Group Statement of Total Recognized Gains and Losses
for the year ended September 30 2005

Back to contents

Reconciliation of Movements in Equity Shareholders' Funds
for the year ended September 30 2005

Back to contents

Notes to the Accounts

1. Basis of Preparation

The financial information set out in this announcement does not constitute the company’s statutory accounts for the year ended September 30 2005 but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Registrar of Companies, and those for 2005 will be delivered following the company’s annual general meeting. The auditors have reported on those accounts; their report was unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.

The financial information for the year ending September 30 2005 has been prepared in accordance with the accounting policies set out in the group’s 2004 annual report.

2. Segmental analysis