Euromoney Results for the six months ended 31 March 2019 Thursday, - - PDF document

Euromoney – Results for the six months ended 31 March 2019

Thursday, 16th May 2019

Transcript produced by Global Lingo London - 020 7870 7100 www.global-lingo.com

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 2

Overview

Andrew Rashbass CEO, Euromoney

Welcome Good morning, everyone. Thank you for coming to this presentation of our half year results. Unusually for us we are recording this and we will be producing a transcript. It is a feedback we have had from investors that those who cannot be here would like to be able to read a

• transcript. So let me start with a summary of the results.

Headlines Strategic & Operational So I think the first thing that I would say is, and you have seen this through portfolio management and way of seeing growth in the business that that continuation of our move towards a 3.0 business continues. We completed the acquisition of BoardEx and The Deal. We sold Mining Indaba. Very much we have talked a lot over the last couple of years about a price reporting and we are making very good progress in the recognition and take-up of our pricing and the financialisation of those. And of course, perhaps more interesting to us than to others, but the distribution of DMGT shares to their shareholders completed, I think, successfully and we are delighted to welcome direct shareholders who are previously shareholders through DMGT. Financial One the financial side, underlying revenue grew 1%, that is the result of the mix of the strength in Pricing, Data & Market Intelligence; the challenges in Asset Management; and then some issues around event marketing. Wendy is going to talk in more detail about that. Strong profit growth driven by three things:  the drop through of profit from the growing subscriptions in pricing;  secondly, the benefit of the lower cost base and asset management following our restructure last year;  and thirdly, lower interest compared with last year. You will see there the asset management numbers. And again, Wendy will come back to that

• later. And of course continuing strong cash conversion and strong balance sheet that you are

used to with Euromoney. I mentioned this just a moment ago. But just record formally that that distribution has taken place and that having started just four years ago from DMGT’s point of view as a subsidiary of DMGT when they had two-thirds of their shareholding, they then did, as you know, their initial sell-down to 49% and now the full distribution and we have a independent Board and a more diversified shareholder base. I think many of you will have seen the greater liquidity that we are now seeing in our shares. So I think that reinforces the platform for growth that we have talked to you about over the past couple of years. Wendy?

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 3

Finance

Wendy Pallot CFO, Euromoney

Highlights Thank you, Andrew. Good morning, everyone. H1 2019: Group at a glance So the group at a glance. On the top left here you can see that over the past 12 months almost 60% of our revenues have come from subscriptions. That is a slight increase from when I presented here in November. And almost 70% of our revenues were in dollars, which is a similar level to last year. On the top right there you can see the underlying half year revenue growth rates. So we have 1% underlying growth in the period. This time last year we had 4% growth. Andrew referred to some challenges on marketing to delegates in our PDMI segment, which I will talk about

• later. That accounted for about 1 percentage point of Group underlying growth reduction.

Secondly, we have also sold in Mining Indaba, which last year contributed about 0.5 of that

• growth. You can also see we have added our ROIC on here on the bottom left. It is a question

we sometimes get asked by shareholders, so that has gone on. Adjusted operating margin is 25% as it was during the first half last year. And our cash conversion, as Andrew said, remains strong at 98%, marginally below our performance last year but that reflects the timing impact as we upgrade our customers in Fastmarkets from subscriptions to licensing. What we do So you can see here the three segments within our business. Asset Management and PDMI are the two largest being predominantly subscriptions revenue. And Banking & Finance is the smaller segment being mostly events revenue. You will remember that we came down to this segment structure following the sale of Mining Indaba last year and there has been no change to this structure since we presented to you in November. Half-year Results Half-year summary The first six months saw as continuation of recent trends with the 1% underlying revenue

• growth. This was driven by PDMI, where underlying subscription revenues grew by 8% but

partly offset both by those challenges in delegate marketing and continued headwinds in our Asset Management area. Adjusted revenues, which are the numbers you see here, are down year-on-year reflecting the sale of Mining Indaba partly netted by the acquisition of Random Lengths, TowerXchange, and BoardEx and The Deal. There are quite a few things coming in and going out this year in adjusted numbers. We have put a slide in the back of the presentation which will help you reconcile those numbers.

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 4 The underlying operating profit margins up by 1 percentage point and that reflects some of the savings we have seen in the restructured Asset Management segment following that strategic review we did last year. These savings together with the flow-through from the PDMI growth and the lower interest costs, following our disposal of GMID last year, have meant that underlying profit before tax has grown by 13%. We are reiterating our effective tax guidance that we gave at the full year last year, that we expect the tax rate to be 20% for FY19. There is an interim dividend which is in line with our stated policy, which is that we pay 33% of the prior year’s dividend. So that increases the half year dividend by 6%. Strong cash conversion was at 98% and the comparator year, of course, also included GMID, which had quite a high cash conversion rate. So despite the acquisition of BoardEx and The Deal, we have got £29.3 million in cash at the end of March. Underlying revenue growth This is the revenue bridge. You can see some of the ins and outs I was talking about earlier. It highlights the underlying business growth. The discontinued operations on the left, that is GMID, which we sold in April. You can see the adjusted revenues benefited from the strengthening of the dollar, that is the £5.2 million you can see there. Timing adjustments includes removal of SFIG revenues, that was a major structured finance event which we were contracted to run for five years. The contract ended last year. Net M&A, of course, includes Mining Indaba. And you can see the underlying revenue growth there on the right-hand side, £1.2m, which came mainly from the PDMI segment offset by the decline in Asset Management, and in terms of revenue type that was events. Underlying PBT growth And a similar bridge on profit. So underlying profit grew by 13%, and particularly here on the right-hand side, you can see the benefit of the interest I was talking about following the GMID disposal, of £2.2 million year-on-year. We also had a small upside in the half year on central costs, which is largely from some unfilled positions and a bit of timing. But the main contributors on the right-hand side to profit growth, you can see were PDMI and Asset Management. Pricing, Data & Market Intelligence (PDMI) So let us look in a bit more detail at those segments. PDMI revenues grew by 3% on an underlying basis, despite having that strong comparator in the prior year. Subscriptions make up about 58% of the revenues in this segment. And they increased by 8%. Now that is down from the 12% in the prior year but obviously still a good number. But within that, if you dig into that, Fastmarkets subscriptions grew by 12% both in this period and in the same period last year. Outside of Fastmarkets, the underlying subscriptions grew by 4%, less than the 11% last year, which benefited from some one-off licence upgrades within Insurance Insider. We did see a fall in events revenue by 4%. We talked about those delegate marketing challenges. We had a number of marketing vacancies in this area at the end of the last financial year and indeed at

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 5 the beginning of this year and that had an impact given that we sell events in advance. And it also took us some time to adjust to the new ways of marketing in the GDPR world. We did have a successful Capacity Europe event in the period, which is one of our largest. So the net effect of those, as I said, reduced underlying group revenue growth by about 1 percentage point. The acquisition of BoardEx and The Deal completed in February and it is now managed within this segment and in the period contributed £1.9 million of revenues. Within Fastmarkets we are in the process of upgrading customers from subscription to licenses. Licences can be two or three times the price of subscriptions and much better reflect the value

• btained by our customers from those using our prices. We have had quite a successful

transition from the top 100 customers in metals over the past 18 months and we continue that journey in metals and actually now we are starting in forest products as well. And in the second half, we will see the roll out of our Intelligence platform in Fastmarkets, which will give our customers best-in-class reporting and analytics. We are hoping to provide you all with a demo of that platform if you come along to our Capital Markets Day on July 17. Asset Management So moving to Asset Management. I think you will be aware of the trends here but we are continuing to see these impacts of the headwinds. So we have got the active to passive trend, we have got the squeeze on traditional asset management margins and those have all impacted, particularly the more discretionary areas over a long period, and we believe that is a trend that is continuing. In addition, Brexit uncertainty has recently affected new sales in the UK for the discretionary European institutes in Institutional Investor. Vote revenue continues to decline and that is directly impacted by MiFID II, although of course now is quite small. It now represents only 7% of investment research revenues Andrew will take you through this in more detail in a minute. We have seen some growth in advertising and events in the period and that has helped to offset the decline in subscriptions. We also saw a growth in operating profit in the half and a 3 percentage point increase in the margin, which are due to the impact of the savings we made in this restructured segment last year. Banking & Finance So moving on to Banking & Finance. There is a 4% growth in underlying revenue here. It is mainly events in this segment, and events income in particular grew by 13%, thanks to a very strong performance from IMN in the period. We have consolidated our Banking & Finance structure now into three brands, which are supported underneath by an operational pillar. You can see those brands there: Global Capital, Euromoney, and IMN. And we hope it is going to bring us efficiencies and give us a greater ability to cross-sell our product range to a mutual customer base. That investment has caused a slight fall in the operating profit in the period.

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 6 H1 2019 Adjusted revenue and profit matrix by segment So moving on to slide 14. Hopefully this will be familiar to you all. We have talked about the main mechanics of this before. But just to highlight probably the three biggest numbers on here, the most important numbers. First the Asset Management subscriptions number in the top left there which we discussed, which is down by 5%. You can see the strength in PDMI underneath that where the subscriptions were up by 8%. Finally total events, which were at £55.8 million, are up by 3% as we guided you last year, and that was despite the weakness we have seen in PDMI events. And on the right-hand side, you can see the underlying profit growth in the asset management segment and in PDMI as well. Strong cash conversion So moving on to cash. This is the cash bridge, which has excellent business cash generation

• f £53.2 million. Couple of points to pick out in here. The tax was £24.8 million. That included

an exceptional cash payment which we told you about last year, £14.6 million for Canadian withholding tax. So that has come through as we guided. The disposals column is Mining Indaba, for which we are going to receive the last instalment of those proceeds of £10 million in June this year. And acquisitions, of course, was BoardEx and The Deal. Uses of cash This is how we used our cash. In line with our strategy, we are managing our portfolio. The biggest numbers here relate to acquisitions and disposals. So for the first half there was a net

• utflow £46.5 million and that is Mining Indaba less the acquisition of BoardEx and The Deal.

Capex, you can see there as well. In this period, the global financial transformation project continues, which I spoke to you about in November. That is the key item. You will see investment in the Intelligence platform coming through as well. Some of it is in the first half but there will be some in the second half too. And at the bottom, the dividend which is in line with our policy. New International Accounting Standards So the slide you all love, International Accounting Standards. Anybody who wants the detail

• n this, you can come and see me afterwards. So I will just say IFRS 9, IFRS 15, they are

implemented from 1st October 2018. There was no significant impact on the Group. IFRS 16 will be adopted from 1st October 2019. There will be an impact. We will tell you about that in due course certainly ahead of the year end. So I will hand back to Andrew who is going to recap on the strategy.

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 7

Conclusion

Andrew Rashbass CEO, Euromoney

Strategy Recap Continued transition towards a 3.0 business Thank you, Wendy. So I am not going to take you through this again, you will be pleased to

• know. But I think you all know this journey that we are on from, I guess, today or from last, I

guess, from a couple of years, what I would describe as a 2.0 business into what we are today which is a proto 3.0 business. Quadrants And I think you know how we plot that alongside business cycles into quadrants and manage

• ur capital accordingly.

Pillars And that then leads to the three things that we do. We invest organically. We operate in a “best of both worlds” to take advantage of both our scale and our all market facing brands. And finally that we manage the portfolio actively. Subscriptions Book of Business growth You have seen versions of these slides before. But I wanted to go into a bit more detail. These are what we call our book of business graphs. Book of business, you will remember, is the aggregate of the annualised value of all our subscriptions. So for the revenues that Wendy has been talking about, the way subscriptions work is they earn out over the lifetime of a subscription. So revenue numbers are backward-looking. A book of business kind of tells you what should earn out over the next 12 months. And therefore they are more of a forward-looking indicators. And that is something that we use to be able to assess what the future may look like. Now for historical reasons we call this the crocodile because it used to look more like crocodile than it does now. But what you can see at the top is the pricing segment and what you see at the bottom is the Asset Management segment that nets out to the group subscription line that you see in the middle. And the dynamic between those two numbers are two of the three big numbers in our group. And, I mean, there is some ups and downs, little bumps along the way. But broadly you can see because just to remind you, of course, those lines show growth rates. So if something is showing 10%, it does not mean flat. It means consistently growing at 10%. Asset Management Book of Business growth But I wanted to dig in particular into the Asset Management side. Wendy explained that we reminded you that we did that restructuring last year and you have seen the profit protection where Euromoney has always been very good at managing its bottom line. And despite the fact that revenue that you lose and the subscriptions typically is quite high margins on the

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 8 variable margin that you lose, gross margin. And therefore actually the teams have done a great job in actually improving the profitability despite the falling revenues. And if you break that down into the two parts of that division, you have got our investment research, which is NDR and BCA, and you have Institutional Investor. Institutional Investor, you see that there is downturn in the previous two or three months and that relates primarily to this Brexit-related slowdown in the UK. And I do not have to tell many of you that asset managers are thinking through where they need to put their resources, etc. and that is having an impact on their participation in our institutes for which they are members. Vote revenue rate of decline is steeper than subscriptions But this is new. And I have mentioned this to you but I actually wanted to show you the numbers because I am sure what a lot of you are saying is we say to ourselves is where does the Asset Management trend, and in particular, investment research go? This graph has two Y-axes. The one on the right is the vote revenues. That is the absolute book of business vote revenue. And you can see that is going from $2 million to $9 million on that axis. And on the left-hand side, you see the subscription. i.e., the non-vote element of the book of business. And what you can see is a very, very different dynamic in shape. These scales because they both go from $20 million to $90 million and $2 million to $9 million, they are the side of the same gradient, if you like, even though one to 10 times is big. And what you can see is how precipitate the fall in vote revenue is compared with reasonable stability on the subscription lines that is. The previous graphs, when we talk about subscription that includes vote. Here is subscriptions excluding vote. If anyone does not know what vote revenue is, do ask me in the Q&A and I can take you through that. But what you can see here is that the decline in vote has a natural flow and that will be something zero or above, but if you take NDR for instance, you can see how much that has fallen. And if you then go and calculate what the vote is as a percentage of the total subscription, you can see that at least half of the decline that we have seen in the subscription content side of investment research has actually come from that vote revenue. And that decline is all to do with MiFID-related spend. What I want to concentrate on, because it is the much bigger number and it is about the future is that subscription line. Subscription renewal rates have remained reasonably firm So this slide I am showing you now is a new piece of information, you have not seen before. I want to show you this. These are the subscriptions non-vote renewal rates for BCA and NDR. And what you can see there is that actually they have been kind of remarkably stable over a sustained period but also particularly strong actually in a post MiFID implementation period. So one of the questions that you are often asking me is how are renewal rates doing in the MiFID world? And I am always saying, yeah, they are basically stable. But I thought I would actually show you the numbers that show that stability. So if you are taking that subscription line that we just looked at, this one, the solid lines, you see that there is particularly in BCA some decline and then you see that renewal rates are stable

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 9

• r even ticking up a bit. What that tells you and tells us is that the issue is in new sales. And

again, I think that is something I have stated to you in the past but not shown you the data. And therefore what we are doing is putting emphasis on the sales and marketing, particularly relating to new sales and it is around that that we are beginning to see some impact but it will take a while for that to feed through to all the numbers worldwide. Events and advertising Now here we see these sales of events and advertising. It is not as leading an indicator as book of business, which effectively tells you a 12-month picture. This will typically tell you because we typically sell forwards, say, two or three months, so it could be a two or three month period. Looking at events, you can see it is quite bouncy year-on-year. The lighter line is this year. The darker line is last year. And this is sales into our events, combination of delegates and

• sponsorship. And you can see that it is quite bouncy but broadly in line with last year.

Wendy talked about some of the challenge we have had in event marketing. I think we are making good progress with that. Personally I will feel a lot more comfortable when we are seeing that progress reflected in the sales numbers in this graph. And then on the right, that is the advertising number. In the first half that was less than 8%

• f our business. That is a good thing. But you can see that the industry-wide downward trend
• n advertising still applies even though the numbers it’s applying to are increasingly small.

We continue to make steady progress towards a 3.0 business model So in summary, we continue to expect to meet the Board's profit expectations for the year. I am pleased with the progress we are making towards 3.0. I would like us to go faster. That is the way to fix the mix, which is what drives in the end the revenue growth, in this case, 1%, because the mix comes from those three numbers, the speed that pricing grows, the challenges in asset management and what is going on in events. What you see is where we get 3.0 right, you see this very fast consistent growth. And therefore the way for us to achieve sustained good underlying revenue growth is to accelerate the move of our company to 3.0. And what that will then continue the trends that we are seeing, which is that continued subscription growth, that is going to require – we have seen active portfolio management. You will see that I hope continuing in the future. And of course, we have the great benefit that we have with this strong cash flow and balance sheet that you are well familiar with Euromoney. So Wendy and I would be delighted to take your questions. Please wait for the microphone. As I say, we are being recorded.

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Q&A

Fiona Orford-Williams (Edison Investment Research): You are talking about getting to as much as you can moving from subscription to just licensing. Is the licensing income shown within the subscription? Are we getting any visibility and what impact will that have on your chance of new business? And then secondly, the investment you are talking about in the Banking & Finance. Is that a one-off or is that a continuing cost? Andrew Rashbass: Can I take that, Wendy? Okay, I will do the first one then. So yes, the licensing numbers are in the subscription line. And it is worth certainly to let us think about the Capital Markets Day when there is a bit more time and I am very conscious of trying to get a balance for you between diving into lots and lots of lines that obscure the overall picture. But we will look at the capital and see whether there is something we can do in the Capital Markets to show you the speed at which that is happening. Wendy Pallot: Banking & Financing, it has generally been an investment in people. It is upgrading to get a really strong operational pillar to sit beneath the three brands. It is about £0.3 million in the first half, so obviously it is a small segment and it is a small number. There will be a little bit extra in H2 - we have got a new CTO coming in, in the second half, and there will be some CAPEX in next year. But they are all relatively small numbers. Paul Richards (Dowgate Capital): Two questions. Andrew, could you give us an update on your quadrant? I know you are fond of your quadrants. But in terms of the proportion of business in each of the quadrants in slide 20 and how that has changed over the last year? And then the second question alluding to your comments, particularly in terms of Asset Management, which is zero-ish growth and very high margin. Are you sort of perhaps suggesting that we may see a significant organic investment in the reshaping of that, or do you think that is more something that is going to be addressed by portfolio management? Andrew Rashbass: So first of all, on the quadrants. In definitional terms, where the Y-axis is defined by that print advertising at the bottom and subscriptions in the middle, the fact is that Asset Management, in the case of investment research, is predominantly a digital subscription business or businesses. And institutional investor again at its heart is a membership business. So from a structural business model point of view, they actually do not qualify as in the bottom

• left. But clearly some of the issues that we have been confronting around vote and various
• ther things and some of the macro issues that Wendy was talking about that obviously you all

know extremely well about the impacts the shift from active to passive, etc., some of those things are deeply structural in the market. So what we are doing with those businesses is managing them using some of the techniques

• f the bottom left, which means the things that Wendy talked about, namely that first of all,

you have to be mindful of the costs and probably take the cost down significantly. We did that last year. Secondly, it is then putting the investment in to be able to drive where there are areas of

• growth. And that is where the insight that says actually the product is the right product. And

again probably in July we will show you some of the data that we have been looking at that shows that our customers find our products to be high-quality in the right areas but the issue we have had is open new sales and that we believe to be fundamentally a sales and marketing

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 11 issue and how we are fixing that. That is a organic investment but that organic investment is already going in and you are seeing that largely reflected in these numbers anyway. So the question of which quadrant it goes into to me is less important than understanding the nature of where it is and why it is and how you dig yourself out. It becomes a bit semantic for me to say, I think, it is bottom left and you say, well, I think it is just over the line and would be top left or whatever. We can sit and rather you understood the underlying drivers than we got into a discussion about where that places it in the quadrants. I think the thing that I am pleased about is that compared with, I guess, in 2016 when we first introduced the quadrants, is actually the speed at which the top right is. There was nothing in this business of scale growing double digits and that is, I think, is what I am pleased about is that actually many companies struggle to find growth. You can see 1% underlying growth here and say well, you are one of them. But what I see is that actually this is a company that has growth. We just have to unleash it, which means managing some of that drag. And I think the steps we are taking around the Asset Management are the right ones. I am not sitting here being coy. Our approach, as I think you know, is to share everything we know and see. It is quite difficult to predict the timings of some of those turnarounds and we have some positive early signs. And again, we will share some of those with you more in July. So in summary, the big quadrant question is where do you put Asset Management? From a business model point to view, you put it above the line. From a kind of a performance and feeling about the market in which your customers operate in, I think, you would have to say it feels a bit below the line. So that is the big quadrant question. It is becoming increasingly academic for us because we understand what is going on and we think we have the right plans to address it. Does that answer that question? Paul Richards: Absolutely. Andrew Rashbass: And you have done the Banking & Finance one. Wendy Pallot: Yes. Andrew Rashbass: I know we did the Asset Management one, yes. Thank you. Steve? Steve Liechti (Numis Securities): Just on PDMI. You talked about the new Fastmarkets intelligence platform. Do we look on that potentially a further step-change upwards in the velocity of revenue growth on that, or is that more just a support function to support this very strong growth that we are already seeing? That is the first question. Then secondly, on Asset

• Management. Just go back because you did the big restructuring in December of last year.

You have obviously delivered on the cost. Just curious just a bit more in terms of how you are improving the products and I think you mentioned the sales and marketing side as well. Just to help me understand, how you are going to almost solve the decline issue with self-help there? And then last question. Well, almost last question. You are quoting Ned Davis improvement, just a comment on that relative to BCA as well? And then finally you asked us to ask you about vote revenue. Andrew Rashbass: What would you like to know?

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 12 Steve Liechti: What is that then? And really if you sort of look at that the chart you are saying there, you are saying that the BCA votes gone down by about $1 million in last 12 months. NDR has gone down by about $0.5 million. Do we expect that sort of trend to go to zero? Is that how we model it or does that stabilise? Andrew Rashbass: Well, let me have a go at some of those and Wendy can chip in. So again, to make it very straightforward, I think the intelligence platform supports the growth rates rather than accelerates the growth rates. It is a bit of a mixed thing. And frankly, I think where it becomes interesting, and again without, I guess, this is all trailer for the Capital Markets Day. But I think it will create opportunity, but again to come along here from the leadership of that business see the products and then you will be able to take a view yourself. I think it creates

• pportunity. But I think for the sake of this meeting, I think you should see it as supporting

the current growth rates. In terms of the Asset Management restructuring, our analysis says that the issue that we face is not the products. Now Wendy mentioned a series of macro external factors, all of which are

• real. One of the things also to bear in mind is we are talking about investment research decline.

If we go back five or six years, it was one of the big drivers of growth of this business. So those who have been following will know, the growth in BCA was one of the big drivers of the growth period. There is two parts. To what extent is would we need new product in order to return to historical growth rates? The answer is I am sure, we would. And that is part of our medium-term plan. But the immediate thing we have to do is to make sure that the products we have which the market tells us meet needs which are critical to them, that we make sure that we have the right sales and marketing to connect that. And you must hear all the time the problem sales and marketing when you think, yeah. The thing that to me demonstrates that is the stability of the renewal rates because normally you would expect renewal rates and new business kind of to move in sync, whereas what you see here is incredibly consistent renewal rate of these same products to these same types of customers in markets that our analysis shows have plenty of headroom for growth. So it is not a question of saying, well, you sold to everybody. Our analysis shows – and again I can share some numbers but says that there is headroom there. The fact that you are seeing declines because the new business is not there. Then when you look at why the new business is not there and you look at the fact that we have underinvested and are not structured properly for new sales. And then when we begin to put in the right sales structures in certain areas of those businesses, you begin to see it turnaround. All of that is what makes us all the data points at it being about sales and marketing. However, we can sit there and run the models and the maths to say where that gets us to. This business will not get back to – it may never get back to but it cannot get back to the kinds of growth rates that this business saw historically without a significant refresh of the products. But that is a medium. And as I say, for this in a sense low ambition for this business to pop what we need to do is to reduce the drag in order to expose the growth in the pricing segment, then if we can turn the Asset Management segment to rapid growth, then clearly you get a kind

• f market-leading level of growth in this company.

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 13 Obviously we would like to do that. We are putting in place the medium-term plans that might make that possible but that is not our immediate focus. Does that answer that one, Steve? Steve Liechti: Yes. Andrew Rashbass: Shall I do Ned Davis relative to BCA? Wendy Pallot: Yes. Andrew Rashbass: I think there are a number of reasons for that. First of all, we happen to have fixed or done a better job I think of fixing the sales and marketing in Ned Davis, particularly

• n the marketing. And again it is another indication for us that it is about sales and marketing

because when we fix, not only do we fix it particularly in the Americas in BCA but we have also done that earlier in Ned Davis and you are seeing some of the results of that. But there is a second part as well that I do not have to dell you that challenges that long only- active equity managers are facing. About a third of Ned Davis’ revenue comes from US wealth

• managers. And wealth management in the US is a growing area. So I think one of the reasons

also why you are seeing a stronger performance in Ned Davis is because all of the growth among wealth managers. And it is also the case they are relatively small, we have done a better job at Ned Davis than we have at BCA in product innovation, partly towards wealth managers but also Ned Davis for instance also uses its IP in partnership with a ETF distributor

• too. You can actually invest directly through an ETF in Ned Davis investment IP, if you like.

And although that’s relatively small, it is an area of significant growth. So I think there are few reasons to do with the getting quicker to the operational sales and marketing, the fact that it happens to be an attractive proposition for wealth managers and does that at some scale within its size in North America. And it has some small but new product which we do not have the equivalent at the moment in BCA. So there are a number of dynamics. Finally your vote question. Many managers allocate a budget for research and then allocate that budget based upon the votes of the users of the research on which research they value. What that means is that if the client, cuts its overall research spend, you can be just as popular among the users of that research that you are just getting X percent, the same X percent but

• f a smaller pot.

I think the research companies, and which I include us, have been a little bit weak that managers have cut their vote budgets significantly. And we, as a community, of research providers have not withdrawn service as a result or not diminished the service. So what happens if you take a customer and the customer says, if I pay half as much and what will you do and you carry on providing the same product. Then the next year they say, well, what happens if I cut it again. And at some point there has to be a place where the service provider says, “okay”, but then you do not get all the products that you were getting before. That has not happened and therefore there has been, I guess, from the client point of view, a virtuous

• cycle. From a provider point of view a vicious cycle, all of kind of reinforcement of behaviour

and that is what has driven the vote revenues. Sorry, that was a long answer to the vote question. Well, frankly I do not think they will trend to zero because of the fact that why would anyone provide the service for zero. So I do not think they are quite trending to zero. I cannot believe they will reach zero. But I think that we are putting our resource where we can see that if we

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 14 believe it will make a difference because it is industry-wide, our share of the vote is not moving. And therefore what you actually would have to do is change the budgets that people are allocating to vote. And clearly these are very price-oriented things and we cannot talk to competitors about the prices that are charged. So it is actually a very difficult thing to work as an industry because that is anti-competitive and we would never do that. So as I say it is trending towards zero. I think it would not reach zero. But I do not think it is going to suddenly swing the other way. Alastair Reid (Investec): Couple of questions on Fastmarkets. I think you mentioned having 13 prices moving to exchanges. Should we think about that as a typical run rate or could that accelerate in the future? And what is the potential long-term number of prices that could be

• n exchanges? Then secondly, could you give us a sense of the split within Fastmarkets? Ie
• f your customer base between finance customers and non-banking finance customers. I think

for Platts it is quite a low percentage being in finance but it would be interesting to get your number? And lastly, can you talk perhaps about the pipeline of acquisitions in the price reporting space? Andrew Rashbass: So let me take the first one. We talk about the thing which is about we can specialize in pre or early financialised markets. So you talk about Platts. They specialise in highly financialised markets and even in metals. Their biggest metal price I believe is the 62% iron ore price, which is the most financialised part of the metals market for instance. So the success that you are seeing with Fastmarkets, the financial success that you are seeing and the growth that you are seeing is not because of those 13 prices. The revenue that we are getting from the exchanges, so the way it works is we get a small proportion of the exchange fees, etc. And then so in the end it comes down to the volume that is traded through those prices. Really what it is about because we are in a market that operates in this early financialisation, what it is about is when we talk about moving to data licensing that is not the exchange-traded, that is where our prices are being used in bilateral contracts effectively or where that is bilateral contracts between buyers and sellers or bilaterally in over-the-counter hedges with banks. So we use it because there could be and we anticipate there will be a step-change. So if you look at the heavily financialised market like the oil and gas market, then a company like Platts will be making, I don't know their numbers, but I would imagine a significant proportion of their revenues that they will be making will come from the volume that is being traded and their basis points of those volumes effectively. So first of all, there are lot of people to move to licensing but then there is this future as those markets financialise. So you should think about the fact that we have 5,500 prices and that 13 are exchange traded. So I do not think we should obsess too much about the number. I think use it as an indicator of how financialised those markets are becoming because simply having it on an exchange does not necessarily mean that anyone is trading on it in an exchange or managing their risk through an exchange. So it is an important indicator of medium to long-term future health of this business as opposed to something that you say, okay, how much is each one of those worth and what is the trajectory

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 15 and I am modelling this much against it and therefore. So I think it is a strategic point more than it is a modelling point. Does that answer that one? We do have the breakdown of the Fastmarkets business between those different groups. I do not have them at the hand by the way. But again, maybe we can share something in the Capital Markets. Wendy Pallot: I can provide that. Andrew Rashbass: But what I can say is that you do have to distinguish between volume and

• value. Some of our biggest value customers are going to be the big financial houses. But we

have within Fastmarkets 25,000 customers. The majority of those are going to be people in the supply chain. But clearly the average value in the supply chain will be lower than it will be with a big financial house. Pipeline acquisitions, I mean you are absolutely right to ask about pipeline of acquisitions and we always say the same thing, which is I guess there is an interesting pipeline of acquisition and you have seen steady pace of that happening and our pipeline continues to be interesting and we continue to, the usual anyways. But you are right to ask and that is the answer we always give. Derek Terrington (Hardman & Co): Just on the outlook for events, obviously you have restructured and reduced costs there. But what is the outlook on the revenue front? I mean, it is quite a bit of turbulence internationally in all sorts of ways. But do you see the same sustained demand for attendances and for your major events in particular there? Wendy Pallot: Well, yes, I can talk to this. At the beginning of the year we guided for this year to low-single digit event revenues generally. And that guidance is unchanged, although you will know we talked about that blip we had in marketing and some marketing challenges. But still we are up 3% in the half year and that is still within our guidance for the year. But your question is also about the longer term. I think it really depends on the events you are talking about. So some of our events particularly are more 3.0 events, the ones which are embedded in the workflow of an industry. So for example the telecoms events, we run ITW - you have to go there. You have to go there to fix your wholesale prices for the year in telecoms. I think other events of ours structured finance probably are particularly suited for more difficult times and people will want to go to those kind of events. So I think it is a mixture of things. But I think we tend not to have events which we would call exhibitions on the other end of the scale where it is the kind of event that might be cut in a downturn. It is discretionary spend, you would cut because you do not have to go to an exhibition, so a little bit again to perhaps Mining Indaba which you would have walked around or actually seen things for sale there. That is one of the reasons we came out of Mining Indaba. So our events tend to be a bit more along the 3.0 scale. Andrew Rashbass: And when Wendy says you have to go to fix your prices, I think would have been fixing your prices. We mean that effectively when you in the telecoms event, when you go abroad and your phone roams, that requires a bilateral agreement between all these different wholesale providers and carriers and they agree those bilateral deals at ITW. Wendy Pallot: Yes, that is my shorthand.

Euromoney – Results for the six months ended 31 March 2019 Thursday, 16th May 2019 www.global-lingo.com 16 Andrew Rashbass: Correct. Anything else? So thank you. Do we know the date for the CMD? Wendy Pallot: 17th July. Andrew Rashbass: So 17th July. And in the interest of time, we try and share as much as we possibly can within the realm of regulation and confidentiality. And there will be lots more

• information. I and Wendy, we try and operate this business on the basis of data and we try to

share as much information as we can. We look at the data that we can make available to you and when we make judgments based

• n that data and you have seen a little bit of that today and I hope you always do. And we will

be sharing more of that. But you will also get a chance to meet the management team other than Wendy and me, and also to see some of our products in action. Wendy Pallot: Thank you. Andrew Rashbass: So we look forward to seeing you there. Thank you very much. [END OF TRANSCRIPT]