UBM share price drops on disappointing outlook

ubm-logoUBM s ays this year’s revenues will be in line but warns on 2014 events margins. As reported in a The Guardian, UBM’s share price has dropped nearly 4% after the media and exhibitions group issued a disappointing outlook for next year.

In a trading update, the group said 2013 revenues were likely to be in line with expectations at around £800m. But in 2014 it warned that margins in its events business would fall to 30%, below forecasts, and also pointed to adverse exchange rate effects given that 85% of its revenues are generated in currencies other than the strengthening pound.

UBM’s shares are currently down 25.5p at 649.5p. Analysts at Canaccord Genuity said:
UBM produced a pre-close trading update with a reassuring message for 2013, but pointing to downward pressure on 2014 forecasts. Management is flagging a reduction in events margins, due to both biennial effects (obviously, this had been expected) but also space constraints at some of its larger shows. As such, events margins are now expected to be “about 30%” in 2014, which will be down from close to 32% in 2013. There is also likely to be an foreign exchange impact, with a £2.7m profit hit from every 1 cent move in the dollar/pound, against a 2013 average of 1.56 – so at current rates, there would be a £18m or so hit to profits from foreign exchange translation on a year on year basis.

It has been a disappointing year for UBM, with downgrades both from the data services division disposal, but also the core events business. The impact of foreign exchange is clearly outside management control, but events margin guidance points to weaker trends elsewhere. We are leaving our 2013 forecasts unchanged, but we downgrade our 2014 pretax profit estimate from £166m to £160.3m.

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