Informa plc

Thanks so much. Good morning, everyone.

Thanks so much for joining the call. It’s Richard Menzies-Gow here, Director of Investor Relations.

I’m here with our Finance Director, Gareth Wright. Gareth is going to do our normal format, so he’s going to just say a few opening remarks, and then we’ll jump straight to Q&A.

Gareth?

Thanks, Richard. Good morning, everyone, and thank you for coming on the conference call this morning.

Our headline today in the announcement that you’ll have seen is that post combination, Informa is in good shape, on balance and breadth of portfolio, on international reach, on quality of revenue, on predictability or forward pacing. This is allowing us to deliver a good underlying performance in 2019 that sets us up well for 2020 and beyond.

As you know, in the second-half of 2019, we’ve had a couple of one-off market-specific factors to manage in Hong Kong and Dubai. But despite this, we remain on track for the full year, and another year of growth in revenue, OP, earnings and cash flow.

As the statement shows, group underlying revenue growth for the 10-month period at the end of October was 2.8%, which ahead of the significant November and December trading months puts us on course for our revenue growth guidance for the full year. As expected, the growth reported today is a little lower than what we reported at the half year, mainly due to the seasonally lower growth in Informa Markets during the third quarter.

The seasonality is consistent with previous years. So if you take them by revenue growth, together with the achievement of our operational objectives, Progressive Portfolio Management program and the successful refinancing of our debt, we’re pleased with our progress across 2019.

So turning to the divisions and starting with the Informa Markets business, which overall, we think is in good shape. The quality of the portfolio and our brands, international reach of balance and the mix of specialist markets we serve is very high, which gives us visibility and predictability, resilience and growth, and gives us confidence in the future.

In 2019, the bulk of our strong B2B international brands have traded well since the half year with particularly good performances in Health & Nutrition, Hospitality, Food & Beverage and Design & Furniture. We’ve also traded two of the major fashion brands in the period, which while down year-on-year as expected, trading exactly as we would have hoped, which sets us up well for continued progress in this business into 2020.

Alongside this, we’ve seen two market-specific in-year impacts in the period. In Dubai, as we flagged at the half-year commitment to World Expo 2020, together with challenging property market conditions, has had a significant impact on the Cityscape Global exhibition, which ran in September.

In Hong Kong, the recent civil protests had an impact on business in the region, which represents around about 4% of Informa Group revenue, mostly within Informa Markets. Our largest brand right in September, the Hong Kong Jewellery & Gem Show, we saw some impact to revenue growth, although a strong program of support, including investment in additional security and transport ensured that the show ran effectively.

Trading through the third quarter is our seasonally slower period in our trade show business, with few of our fast-growing major brands taking place. And so, Informa Markets’ underlying revenue growth for the 10 months was 3.4%.

The strength of the portfolio in November-December, a significant period for the group, puts us on track to deliver a strong result for the full year, albeit the 2 market-specific in-year impacts mean this will now be in the 4.5%-minus territory rather than 4.5%-plus. The overall message though is that Informa Markets is in good shape.

Turning to Informa Connect, which also continued to make good progress during the last couple of months, revenue growth for the 10 months increased to 2.8% from the 2.1% growth reported for the half year. This result leaves us well placed to meet or beat our growth target for the year of 2.5%, although there is still plenty of trading to deliver in the last 2 months of the year, particularly in November.

Informa Tech, our newest division, continues to focus on building its foundation for future growth in 2020 and beyond. As part of that today, following on from the asset swap that brought the IHS Markit business into the group, we’ve announced a small investment and launch of a JV with Founders Forum, the leading community for tech, innovation and entrepreneurs.

Against this backdrop of building and expansion, it’s good to report further progress towards our 2019 growth targets at Informa Tech with 1.7% underlying growth in the 10 months, an acceleration from the 1.1% growth reported in the half year. Informa Intelligence delivered 3.1% underlying growth in the 10 months, broadly consistent with its performance in the first half of the year.

And this leaves it well placed to also meet or beat its 3% underlying growth target for the year. The Progressive Portfolio Management program continues to increase the focus of the intelligence division.

And today, we’ve announced the disposal of the Industry & Infrastructure Media Brands Portfolio. Taylor & Francis has continued to trade consistently with a growth of 1.8% for the 10 months, in line with its half-year growth.

This is encouraging particularly given the tough prior year comparable it faced in the third quarter. The dynamics behind the trading is similar to those in the first half of the year with consistent growth in Journals and year-on-year growth in group Open Access supported by a solid performance in Books.

So in summary, as I said at the start, headline is that Informa is in good shape with strength in mix, breadth, quality and predictability, which puts us in a very good place going into 2020. In 2019, we’re on track to deliver on the trading and operational targets we set for the year.

So I hope that was a helpful summary of what we think the key points in the release are. And we’d be happy to take any questions that you have on the detail.

Hello. Hey, this is Will Packer from Exane.

Am I online?

Yeah, we can hear you now.

Oh, okay, thanks. It was unclear, sorry.

So 3 questions for me, please. Firstly, you’ve given some confident commentary on the next 2 months of trading.

Specifically at the Markets division, could you comment on how trading is and forward bookings are for the Construction and Real Estate business in the U.S., which is typically a big weighting in the first-half of the year? Secondly, you’ve commented on the challenge in Dubai and Hong Kong in the last few weeks.

How should we think about forward bookings for those events for 2020? Should we expect a second hit this time next year?

And finally, you’ve suggested that an acceleration at Taylor & Francis in the last 2 months of the year should be expected. Could you just talk us through the moving parts there in previous years?

It’s been a Book heavy quarter and sometimes a challenge, so what’s different this year around? Thank you.

Hi, Will. Good morning.

Maybe we take those in reverse order. I think in terms of T&F, you’re right in terms of getting to the 2% guidance for the full year.

We’re expecting a little bit of a step-up in the last quarter. I think that’s partly because the comparable in the third quarter was tough, therefore accelerating beyond that was a bit harder in the third quarter, whereas the fourth quarter is more of a standard comp from last year.

And I think we’re also looking at where we are in the year, not just in terms of Books pipeline, but also once you have the ancillary bits of revenue in the Journals business. And we feel that if we take the – combine together in the mix, we think the 2% guidance for the full-year thus still stands and is achievable in that business.

So it’s not just all about Books sales at the yearend. Although, as you’re right to say that those will be a key part of the mix for us in terms of how we trade over the next 2 months in that division.

In terms of Markets, I think looking at the forward bookings, questions that you asked. In terms of Construction/Real Estate, we think that looks in reasonable shape.

As you say, that’s quite a January/February timeline for those shows, so they look, say, reasonably solid and in line with where we’d expect them to be in terms of what we want to do for that business overall for the full year in 2020. On Dubai and Hong Kong, it’s quite early on those ones.

Dubai in particular, that’s a September show, so it’s quite early. We’re very early to be talking about how that’s going to trade out in 2020 and how we think it’s going to be in the mix.

We’re looking at some ways we could manage some of the Expo 2020 dynamic by perhaps citing some of our exhibition alongside Expo 2020, with the events that are happening around that festival. And also, in terms of Hong Kong, again very early to really be talking about what’s going to happen in 2020 there.

We’re monitoring the situation closely. But at this stage, it’s a bit too early to say what’s going to happen with the shows there, which really only start in Q2 in that location.

And thanks, that’s very helpful. Just to clarify in the forward booking is there any particular notable divergence in trends from previous years you could catch up on or just sort of no comment at this stage?

I don’t think there’s any particular dynamics or variables to comment on really at this stage. It’s quite early.

What we are seeing doesn’t change our view or our outlook for 2020. But we can’t just give you a huge amount of assurance about how, say, Q3 or Q4 is going to look next year, because it’s just too early.

So it’s not really a no-comment answer, it’s more of those we can only talk about what we have visibility over at the moment. And what we do have visibility over looks solid.

Thank you. Very useful

Thanks, Will.

Hi, good morning, Gareth, Richard. It’s Adam Berlin from UBS.

Good morning.

Hi, Adam.

Two questions for me. You said that for the group overall, November/December, about 20% of revenue.

Can you tell us for Informa Markets specifically, is it around 20%, is it slightly higher, slightly lower? Just help us understand likely trading implied in Q4.

And secondly, in this morning’s release, you talked about some of the high-growth events in November and December around CPhI, for example. What proportion of that revenue is coming from those high-growth events?

Are they like more than half of the revenue in November/December? That would be helpful as well.

Thank you very much.

Yeah, I think in terms of the November/December phasing of markets, I think broadly sort of 20% or there or thereabouts in the mix for that business. But it’s quite a big month, particularly because of the events that we listed out in the release there.

And those are events that are growing above average. So they grow, and they’re going sort of pull the average growth for the division for the 10-month number up to what we think, or there or thereabouts to what we think the full-year guidance should be.

So I think really in terms of the overall math, it’s a reasonable part of the mix, November. And I think, what we could see in terms of the bookings and the contractual positions are those shows give us a reasonable amount of confidence that we could get up to a higher number than we had at 10 months.

Although as we have said, it’s probably 4.5% minus rather than 4.5% plus that we talked about previously.

What does 4.5% minus mean?

Just under 4.5%. So you can model and predict.

I think there’s numbers in – I’ve seen in papers coming out recently so talking about sort of 4.2%, 4.3%. I think, we’d hope to be a bit of ahead of that to be honest, but whereas perhaps we would be 4.6%, 4.7% previously.

With overall, perhaps we’re like 4.4%, 4.3%. And it’s really a factor of those in market, in year specific dynamics around Hong Kong and Dubai that have just taken a little bit of the growth off the top of the numbers for markets, and therefore, we’re coming in just a touch under where we thought we would be, but still pretty good growth overall.

And certainly, we’re comfortable with how it fits in the mix of the group numbers. And as your 2019 specific dynamics, we don’t think it changes our outlook going forward for the business.

Thanks very much.

Thanks, Adam.

Yes. Good morning, everyone.

This is Adrien from Bank of America. So few questions for me, please.

So first of all, on your guidance for 2019. If my math is correct, I think, it implies about 6% growth in November-December.

Just curious how much of this is already contracted and how much depends on transaction revenues, maybe sponsorship or these kinds of things? That’s the first question.

Secondly, perhaps as a follow-up to what you were saying before. I understand the quantum of the Hong Kong and Dubai impact is something like call it 40 to 50 basis points on 2019.

How much of a drag do you expect from Fashion next year in 2020? I think it was about 100 in 2019, but how much of a drag do you expect in 2020?

And maybe one last question about Intelligence. Can you give us a bit more color on the ACV increase you’re seeing in that business?

And how do you think about the cycle of investment for that unit? Thank you very much.

Good morning, Adrien. Thanks for the questions.

Maybe what I’ll do is I’ll kick off with the first and the third one, and then, Rich can talk to you a bit about what he’s seeing in consensus and say his guidance on the Fashion one for the second question. In terms of your first question, the 6% you quoted.

I should be clear that, that’s markets is what Adrien’s talking about that. So if you go from where it is for the 10 months numbers and you’re trying to get to what we’re talking about for the full year, it implies about 6% growth in the remaining 2 months of the year for markets.

So what we’re saying is that if we look at the strong shows that operate in that period, they’re particularly good shows. And as some of you will have seen in the CPhI trade show that ran last week is an example of that.

And if we look at the portfolio of shows and what’s contracted on them, we feel confident that we can bridge our way across to that full year guidance for the revenue. Clearly, there is trading there to deliver in November and December, but there’s a lot to do operationally in those shows and some of the kind of extra ancillary revenues really come through at the last minute.

Those could be the difference between being 4.5% or 4.4% or something in those divisions. So there’s quite a lot to do.

Very clearly, we’re monitoring the situation closely in Hong Kong where there’s been some mostly tough news overnight in terms of the protest that was shot. So we’re watching it very closely and we’re monitoring the evolving situation, but we feel that, on balance, we’re in a reasonable place overall in the portfolio in terms of what’s contracted or what still to do.

That’s why we are giving you the position that we have done today in terms of the trading statement. In terms of Intelligence, the ACV growth is kind of consistent with the overall growth in the division.

That division, following the sort of PPM disposals and following the reorganization of the assets at the end of last year is quite a subscription weighted business. So ACV growth roundabout sort of 3%, 3.5% is what you need to be delivering to get to kind of 3%, 3.1% overall growth in that division.

So we’re pretty consistent with that. And in terms of cycle of investments, we’re not flagging or predicting a great change in the cycle of investment in that business.

We do challenge them at this time of the year as we go through the budget process about what we could do, what more could we do through investment to fuel the growth or accelerate growth for that division. But what we’re seeing at the moment in terms of 2020 and beyond, there’s no significantly larger calling on capital from that division and they seem reasonable – reasonably comfortable with their prospects for 2020 based on the existing capital allocation.

Yeah. On Fashion, Adrien, I guess, we’d go back to go forward, I guess, quite quickly after we announced or completed the deal, you’ll recall we brought in actually our COO of the Markets Division, Mark Temple-Smith, to sort of come into the Fashion business to develop a plan and we launched the Fashion GAP towards the end of 2018, so we sort of came into 2019 with a plan.

And I think, we were quite open that we expected to decline revenues about 10% this year, and I think, we’ll deliver to that plan. But more importantly the plan really was about getting some basic sorted around scheduling, venues, databases, sales.

So that going into 2020, we could see an improvement in the trend with the goal by 2021, in the third year of the plan, we could get the business back to sort of flat positive. So I think if we do sort of minus 10% of revenue this year, you expect us to be somewhere between that and sort of flattish next year, whether that’s minus 5%, minus 4%, minus 3%, something in that territory, I think we’ll be what we’d be sort of going forward.

And I think we’re sort of planning for that and on track to deliver that after what we’ve done this year.

That’s all very clear to known. Thank you very much.

Thanks.

Yeah. Hi.

It’s Nick Dempsey from Barclays. I’ve got 3 questions to ask.

First one, a lot of investors focus on cash flow for your business, Gareth. There was a bit of joshing in the first half about your £600 million plus guidance for free cash flow.

I just wonder if you could give us a sense of how conservative you’re being now that you can see closer to the end of the year. And whether there’s any kind of [qualities] [ph] or timing things that could surprise us in terms of the free cash flow for 2019?

Second question. You referred to investment in Hong Kong Jewellery and I think also CosmoProf in terms of transport, hotel rooms, if you think about that.

Wonder if you could give us an approximate amount of what you might have invested in the 2 of them incremental work to what you would normally do? And the third question, yeah, I mean, at Taylor & Francis, you talked about November and December, I mean the comp is a lot easier.

So if you’re kind of current trends you’ve seen on a 2-year basis would continue, you’d do clearly better than 2.0% for the year. So is there anything that should dissuade us from following along that 2-year trend and then giving the full benefit of those easier comps in November-December?

Thanks, Nick. Good morning.

We’ll be following the same format as last time; I’ll do 1 of the 3 and then Rich can talk to you about what is out there in the market in terms of Hong Kong and Cosmoprof investment. In terms of the cash flow number, yeah, there was a lot of chatter about that, I think, by the year-end numbers.

And Q1 and H1 in terms of the £600 million plus number, I mean, there’s always a bit about of a placeholder and we always hope to beat that. But it’s highly dependent on what we did in terms of CapEx or reorganization, et cetera.

But certainly, at this stage of the year, as it begins to firm up, I’m pretty confident now that we can beat £650 million in terms of that. So £650 million of free cash flow is the number that I think we can come bit ahead of.

So it’s quite a lot of plus versus that £600 million that we quoted earlier in the year. In terms of T&F, I mean, you’re right in that the comp for the rest of the year is a lot easier than the comp was for Q3.

And therefore, I certainly understand how you get to the numbers you’re getting at in terms of growth rates. I guess, we just want to see a little bit more about how the Books trading pans out over the last 2 months of the year, to Will’s earlier question about how much there is to do in terms of retail trading in that business.

But if everything pans out as hoped, then, yeah, there should be a little bit of upside on that number, but it’s difficult to commit to that based on the visibility we have at the moment of the retail side of Books.

And I think on Hong Kong, Nick, I think the team around the jewelry show actually did publicly say they invested about $4 million in extra sort of security, travel support and also, they launched quite an interesting sort of buyer program where they sort of supported some sort of discounted hotel rooms for key buyers to encourage attendance. So tactically, we’ll do that around shows to support if they think they need it.

We certainly did a bit of that in Dubai. We do a bit out around – or doing a bit of that around Cosmoprof.

They’re not as big shows in sort of Hong Kong so wouldn’t expect it to be anywhere near that sort of number. But there is some extra investment going in.

I think all I’d say is, if I look at where consensus is today for this year, I think we’re around [9.20] [ph] of operating profit £0.155 of earnings at last collection, I think, we pull through, we feel very comfortable with that. So I think there is extra investment going in, we’re managing through that okay.

Very clear. Thanks, guys.

Okay. Thanks a lot.

Hello?

It’s Patrick Wellington at Morgan Stanley.

Good morning, Patrick.

Good morning, all. I’m going to ask the global trade thing.

What do you think industry growth is for Exhibitions in 2019? And do you think that you’re ahead, in line or behind Global Exhibitions growth?

And how do you feel generally about the outlook for next year in terms of Exhibition growth potential? And then secondly, zeroing that down on Informa a little bit.

You’ve obviously got a few moving parts maybe Hong Kong might be better next year. You don’t get the effect of the biennials next year.

I’m not quite sure how to read Middle East for next year. So what do you think is a good number for Exhibitions growth in 2020?

And then, finally, on the AIP process, you’ve sold the business. Can you remind us how much more if any, you have to do in that rationalization program?

Good morning, Patrick. Thanks for the questions.

Just skimming through them in order. I think in terms of the trade show industry globally, we think that looks like around about a 4% growth market in 2019.

So we feel good about where our business is in terms of the mix of the brands, the quality of the revenue, et cetera, and that’s what’s getting us to a slightly higher market level of growth for the business. And that’s the usual sort of drivers we’ve had in recent years.

I mean good growth in terms of space, because we’ve still got quite a lot of portfolio. It’s not mainly about better growth in yields, the focus on the ancillary revenues that we can generate around the exhibition piece.

So overall, we think we are a bit better than the market average. In terms of growth rates in 2020, really at the moment, we don’t plan, at this stage here, don’t quote specifics for the following year.

But overall, I think we’d say we feel pretty good about it. The registrations look good.

The contractual position looks good as we commented on for a previous question. But we think overall in terms of the international reach in that business or the markets we’re exposed to in terms of the geographies and the end markets, we feel pretty good about the business that we have there.

So overall prospects for 2020, we think, look pretty positive. Clearly, the in-market specific factors we talked about in relation to 2019 will need to be managed and monitored.

But overall, in terms of the business as a whole, we feel pretty good about that. In terms of the AIP, we’re basically largely at the end of that program now.

The media divestment we’ve announced today in Informa Intelligence, one or two changes in the portfolio already the last knockings of that in 2019. And the businesses don’t focus on setting budgets for 2020 to really maximize the growth opportunities for the businesses that we now hold.

I think those are everything you asked. Have I missed anything there?

No, I think that was everything.

Yeah. That’s great.

Thank you.

Thanks, Patrick.

Cheers, Patrick.

Hi. It’s Matthew.

Can anyone hear me?

Yeah. Hi, Matthew.

Hi, Matthew.

Good morning. Good morning, guys.

A couple of questions, please. The first one is on Fashion, you indicated desire for improvement for next year and confidence around that.

Can you give us a few details on what your plans are with the Fashion Events in the first half and the second half? And how you intend to get that very welcome improvement that you talked about?

The second question is, obviously, when you bought UBM, I guess, were you thinking about a particular return on invested capital that you were going to get from that? How are you – what is that?

And how are you tracking towards it? And the final question is on the disposal you’ve made, which I guess is in the Intelligence – I think is in the Intelligence area.

How big is that in terms of revenue and EBIT? And are you, despite that disposal, confident in the consensus expectation for EBIT in 2020?

Matthew, why don’t I start and then Gareth can come in. Maybe you can do the ROIC question given you’re in financing, Gareth.

Let me just – on Fashion, listen, the key thing this year has really been to build the relationship with customers and plan for the future around venues, scheduling, brand management and experience, and I think we’ve had a good response to that, and the important thing is we stemmed the decline in attendance through the last couple of shows this year. And we really sell-off that into next year.

So that gives us confidence that we’re selling on the back of a much firmer footing. In February, when the big MAGIC show in the first half of the year happens, we still have – it’s our last sort of scheduling issue to deal with.

There’s a clash with 1 segment of the show with an industry show, and also, we’re not in the Las Vegas Convention Center in February. We’re at the Marina Bay Sands, which is smaller in scope.

Post that, we then have a long-term commitment to be One-Magic in Las Vegas Convention Center. So in February, we still got to iron through the last of the sort historical scheduling sort of issues.

But I think that will really set us up well as we go into the second half of the year. So I think it’s all those things.

And I think, importantly, the feedback and feel around the shows is much, much better. We’ve got brands coming back into the shows that haven’t supported it for a while and attendance is really flattened out.

So it won’t jump overnight, but I think the plan we’ve got to stem the decline next year and look for sort of flat to positive in 2021, we feel quite good about. If I just jump maybe to the last question, deal with the disposal, it’s around £50 million of revenue from the Intelligence business.

It’s a collection of various sorts of niche brands, mainly advertising-driven stuff, which really isn’t where our focus is in that business. So it really helps again improve the quality of earnings in that business going forward.

The margin would be lower than the overall division somewhere in the sort of mid, high teen, something in that sort of territory. And that’s the last really, as Gareth says, of the PPM disposals.

In terms of the ROIC question on UBM, really just building it up, there were two kind of foundational building blocks for how we want to improve the ROIC, which is, first of all, Accelerated Integration Plan, which operationally integrated that business with Informa and set it up how we wanted to work on a management individual basis going forward. That was largely completed in the summer.

And then secondly, the second main building block was around the synergies, which, again, are on track and nothing has changed in terms of our focus or our delivery on those, where we expect about £50 million worth of [India] [ph] synergies in 2019, and then a further step up to a £60 million run rate by the end of 2020. So that’s all on track.

In terms of the operational work around UBM ROIC, in terms of the Board’s focus on it, that’s a key part of that focus through the Accelerated Integration Plan and also in terms of remuneration targets put in place around UBM combination, which is really looking to get the business to an outcome by end of 2021 and the end of 2022, where we were getting back close to the overall cost of capital for the group on the UBM combination. So really, we don’t expect it to be a kind of enhancing in year-1 deal, but we’re on track for our kind of 2021, 2022 targets around that deal of where we want the ROIC to be.

And just a quick follow-up if I can on the disposal, so just going back to the question. That would make it something like around about £8 million of EBIT being disposed in 2020?

I guess the question still stands, which is would you be able to absorb that within current consensus or should we be reducing – should consensus come down by that £8 million, do you think?

Listen, I think consensus for next year is a bit mixed at the moment anyway. The bigger impact is probably currency.

I think the spread of assumptions into next year is anything from $1.23 to $1.29. I mean, $0.06 to us is £40 million of profit.

So I think there is a bigger sort of spread on sort of currency in the mix of sort of consensus. I mean, everything else, all other things being equal I think you’d flow through the disposal profit out of your numbers.

I think balancing that, you got a bit of interest-saving coming in from the refinancing that will help.

And can you quantify that?

Well, I think it’d be sort of up to £10 million, something like that. Gareth, you want to…?

Yeah, we issued about €500 million bond, which we’re using to repair about $550 million of bond and PP debt. And so, in terms of the rates we are repaying, and I’ve issued at, I think as Richard said about up to £10 million worth of P&L benefit from this refinancing.

And then, interest, obviously, comes down a little bit more, because of the lower debt as you generate cash during the year. But that’s to sort of say you should expect the refinancing.

Thank you.

Okay. Thanks a lot.

Okay, thanks, operator. Well, thanks everyone for taking the time to join us.

We’re obviously around today if you want to follow up with more detailed questions. But thanks again and look forward to speaking soon.