Research firm IHS forecasts strong 2014 on subscriptions growth

Tue Jan 7, 2014 6:03am EST

Jan 7 (Reuters) - Research firm IHS Inc posted a better-than-expected fourth-quarter profit and forecast strong full-year results due to revenue growth in its subscription business in America and Europe.

The research firm, which owns Cambridge Energy Research Associates and iSuppli, has relied to acquisitions to grow, and on Tuesday said it would continue to look for targets to boost growth in its core sectors of energy, chemicals, technology, aerospace-defense and maritime.

"Right now we're looking at small tuck-in acquisitions," Chief Executive Scott Key told Reuters.

"And then as we get into latter parts of 2014 and will have really brought the leverage down using our strong cash flows, we will start looking at more typical larger deals as we have in the past," Key said.

The company, which also publishes Jane's Defence Weekly, has bought about 50 companies since 2005 and its targets are firms with annual revenue of about $40 million on average. Such deals helped boost subscription revenue by 21 percent in fiscal 2013.

The company said excluding acquisitions it expects growth in subscription revenue, which accounts for about three-quarters of annual revenue, in fiscal 2014 to at least match that in fiscal 2013.

"We improved our subscription organic growth rate to 7 percent (in the fourth quarter). Everybody was looking for that and we committed to improving our organic growth and we have delivered," Key said.

PROFIT BEATS ESTIMATES

IHS expects subscription revenue, excluding acquisitions, to grow 6-7 percent in fiscal 2014. Such revenue grew 6 percent in fiscal 2013.

The company, which competes with units of Thomson Reuters , SAP, Accenture Plc and Deloitte, expects total revenue of $2.17-$2.23 billion in 2014 and an adjusted profit of $5.50-$5.85 per share.

Analysts on average are expecting a profit of $5.58 per share on revenue of $2.2 billion, according to Thomson Reuters I/B/E/S.

Net income fell to $40.8 million, or 60 cents per share, in the fourth quarter ended Nov. 30 from $46.4 million, or 69 cents per share, a year earlier.

Excluding items, profit was $1.46 per share, handily beating Wall Street expectations of $1.27 per share.

Revenue for the company rose 35 percent to $559.7 million. Subscription revenue grew 38 percent overall and 7 percent excluding acquisitions.

Analysts on average were expecting revenue of $534.8 million, according to Thomson Reuters I/B/E/S.

Free cash flow rose 62 percent to $405 million in fiscal 2013.

Shares of the Englewood, Colorado-based company closed at $116.02 on Monday on the New York Stock Exchange. They have gained 17 percent over the last year.

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