Press Release

25 July 2017

 

 

Informa PLC

Half-Year Results for Six Months to 30 June 2017

Full Year Performance on Track Following Integration of Penton and Continuing Operational and Financial Delivery

Key financial and operating highlights for enlarged informa group

·      Improving Revenue Growth: +3.7% underlying and +41.3% reported, including Penton

·      Growing Adjusted Operating Profit: +1.0% underlying and +41.0% reported

·      Higher Adjusted Diluted EPS Growth: +12.7% to 24.0p (H1 2016: 21.3p¹)

·      Increased Interim Dividend: up 6.2% to 6.65p (H1 2016: 6.26p¹)

·      Strong Free Cash Flow, On Track for £400m+ in Full Year: £113.8m (H1 2016: £74.2m)

·      Robust Balance Sheet following completion of refinancing: Gearing of 2.8x (H1 2016: 2.4x)

·      Enhanced Statutory Operating Profit: +28.7% to £182.2m (H1 2016: £141.6m); Statutory Diluted EPS +11.9% to 14.1p (H1 2016: 12.6p)

London: Informa (LSE: INF.L), the international Business Intelligence, Exhibitions, Events and Academic Publishing Group, today published results for the six months to 30 June 2017, reporting continued growth in Revenue, Profit and Earnings in its seasonally stronger first half of the year:

Stephen A. Carter, Group Chief Executive, said: "The Informa Group continues to make steady operational and financial progress in the fourth year of our acceleration programme, whilst effectively integrating US-based Penton Information Services ahead of plan."

He added: "Our increased Balance and Breadth, improving operational fitness and the benefits of consistent product investment give us confidence that we will meet our financial and operational targets for 2017, including further growth in revenue, earnings, cashflow and dividends."

·      Continuing Operational Performance and Financial Delivery:

o  Global Exhibitions…Expansion: Clear benefits of building a portfolio of large-scale international Brands in attractive verticals, combined with continuous product innovation and a positive weighting to the first-half of the year generates strong underlying revenue growth, +11.0%;

o  Academic Publishing…Resilience: Continued strength in Academic Research Journals, combined with steady trading in Upper Level reference-led Books offsets the challenging market for our small, sub-scale holding in Lower Level textbooks, producing underlying revenue growth of +1.2%;

o  Business Intelligence…Growth: Improving underlying revenue growth of +1.1%, reflects increased focus on core subscription renewals, positive new product momentum and further traction in the development of contingent revenues;

o  Knowledge & Networking…Focus: Shift in portfolio balance to the three end markets of Global Finance, Life Sciences and TMT helps ease the decline in underlying revenue to -4.0%.

Portfolio focus continues today with the majority purchase by Handelsblatt² of the German/Swiss domestic conference business, Euroforum. This follows on from previous portfolio changes in Scandinavia, the Netherlands, Russia and a number of other markets;

o  Penton Information Services…Integration: Effective integration of US-based business ahead of plan; operating and reporting as a single, enlarged Informa Group and on track to deliver £14m net operating synergies in 2018;

o  Dividend…Increase: Improving operational performance, strong cash generation and confidence in full-year delivery leads to a further increase in our GAP dividend commitment to a minimum of 6% year-on-year growth for 2017, the final year of GAP.

¹ H1 2016 EPS and DPS restated to reflect November 2016 Rights Issue.

² See separate press release

 

Financial Highlights

	H1 2017	H1 2016	Reported	Underlying1
	£m	£m	%	%
Revenue	915.4	647.7	41.3	3.7
Statutory Operating Profit	182.2	141.6
Adjusted Operating Profit2	285.1	202.2	41.0	1.0
Adjusted Operating Margin (%)2	31.1	31.2
Operating Cash Flow3	168.1	123.2
Statutory Profit Before Tax	148.8	98.9
Adjusted Profit Before Tax2	256.4	184.8
Statutory Profit for the Period	118.6	90.1
Statutory Diluted Earnings Per Share (p)	14.1	12.6
Adjusted Diluted Earnings Per Share (p)2	24.0	21.3	12.7
Dividend Per Share (p)	6.7	6.3	6.2
Free Cash Flow3	113.8	74.2
Net Debt	1,566.4	1,054.9
1In this document we refer to Underlying and Reported figures. Underlying refers to results adjusted for acquisitions/disposals, the phasing of events and the effects of changes in foreign currency. Year-on-year growth from material acquisitions/disposals is included on a pro-forma basis from first day of ownership. Reported figures exclude all such adjustments. 2In this document we also refer to Adjusted and Statutory results. Adjusted results are prepared to provide a useful alternative measure to explain the Group's business performance. Adjusted results exclude adjusting items as set out in Note 4. 3Operating cash flow and free cash flow are as calculated in the Financial Review.

Divisional Highlights

	H1 2017	H1 2016	Reported	Underlying
	£m	£m	%	%
Global Exhibitions Revenue	342.8	192.9	77.7	11.0
Statutory Operating Profit	100.9	71.4
Adjusted Operating Profit	144.8	88.3	64.0	10.9
Adjusted Operating Margin (%)	42.2	45.8

  academic publishing

Revenue	238.9	214.7	11.3	1.2
Statutory Operating Profit	58.1	48.2
Adjusted Operating Profit	85.5	72.9	17.3	0.3
Adjusted Operating Margin (%)	35.8	34.0

  Business Intelligence

Revenue	187.6	134.6	39.4	1.1
Statutory Operating Profit	18.4	17.9
Adjusted Operating Profit	37.5	26.9	39.4	0.2
Adjusted Operating Margin (%)	20.0	20.0

  Knowledge & Networking

Revenue	146.1	105.5	38.5	-4.0
Statutory Operating Profit	4.8	8.6
Adjusted Operating Profit	17.3	14.1	22.7	-40.2
Adjusted Operating Margin (%)	11.8	13.4

 

Enquiries
Informa PLC
Stephen A. Carter, Group Chief Executive	+44 (0) 20 7017 5771
Gareth Wright, Group Finance Director	+44 (0) 20 7017 7096
Richard Menzies-Gow, Director of Investor Relations	+44 (0) 20 3377 3445
Teneo Strategy
Tim Burt / Zoe Watt	+44 (0) 20 7240 2486

Analysts and investors

There will be a presentation to analysts at 9.30am on 25 July 2017 at The London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. A simultaneous webcast of the analysts' presentation will be available via the Company's website (www.informa.com).

Trading Outlook

Informa's strategy of pursuing greater international scale, building Balance and Breadth across geographies and verticals, and increasing the proportion of forward-booked, recurring and predictable revenue provides resilience and strength. This allows us to continue making steady operational and financial progress despite ongoing macro and geo-political uncertainty in the US and Europe.

2014-2017 Growth Acceleration Plan ("GAP")

Our strategy to improve operational fitness and invest in strengthening the Group's core capabilities is delivering steady and consistent improvements in revenue growth. There is a natural lag before this translates into profit growth, reflecting associated depreciation as new products and platforms go live.

The ambition of our acceleration programme is to build an international, predictable and resilient business with a cycle of continuous re-investment at a level that delivers higher levels of sustainable growth. We continue to target a post-GAP operating framework producing consistent 3%+ underlying revenue growth for the Group, with attractive 30%+ adjusted operating margins and strong cash conversion and free cash flow.

As part of GAP, we have also been building international scale in attractive and growing verticals, including the addition of Virgo Publishing, Hanley Wood Exhibitions, Maney Publishing, FIME, Penton Information Services, and most recently YPI. The integration of Penton is progressing ahead of plan and we are on track to deliver at least £14m of net operating synergies in 2018, with half in 2017. Penton businesses have been combined with their respective Informa Divisions, management responsibilities confirmed and we are now operating and reporting as a single Group.

global exhibitions

Our focus on market leading Brands, international expansion and building scale within attractive and growing verticals is delivering consistently strong divisional growth, supported by ongoing investment in product innovation, pricing initiatives and digital platforms via our Market Maker strategy.

These positive attributes and continued healthy pre-booking trends in the seasonally bigger first half provide good visibility into the second half and beyond, giving us confidence of another year of strong growth in 2017. Similar to last year, this is likely to be at a moderated level compared to our first half performance, when the majority of our larger, fastest-growing exhibitions take place including Real Estate & Construction (World of Concrete, TISE West), Health & Nutrition (Natural Products West, Vitafoods) and Life Sciences (Arab Health, Medlab).

Academic Publishing

Our business is focused on Upper Level, scholarly research and specialist, reference-led content, with close to 60% of revenue from peer-reviewed Academic Journals. These attract high renewal rates, deliver consistent levels of growth and strong cash generation, providing visibility and resilience.

Technology continues to shape the Academic market, facilitating greater collaboration and sharing of ideas, increased connectivity between subjects and flexible pricing models. This is creating growth opportunities but also a need for ongoing innovation. We continue to invest to strengthen our capabilities most recently through the addition of Colwiz, a technology business employing big data analytics, machine learning and artificial intelligence to search, collate and map targeted global research activities.

Continued Journals strength, combined with fresh leadership and the benefits of a number of operational initiatives position us for steady in-year performance, with the assumption that weakness in Lower Level textbooks continues through the important fourth quarter trading period.

business intelligence

Our programme of simplification and increased customer focus, combined with significant investment in enhancing and upscaling our core subscription products, is delivering consistent improvements in underlying revenue growth.

Robust renewal rates, improving annualised contract values and healthy customer pipelines point to continued positive growth momentum in the second half. This is supported by the progressive release of GAP-enhanced subscription products, alongside further traction in contingent revenues, following the relaunch of our Consulting offering and integration of Penton's Marketing Services business.

knowledge & networking

Our strategy of operational improvement and portfolio focus is gradually improving the mix, quality and visibility of revenue and today's confirmed portfolio changes in Germany, Switzerland and Brazil will further reduce volatility, as well as streamlining our offering.

This will increase the focus on specialist communities in our core end markets of Global Finance, Life Sciences and TMT. Combined with continued operational focus and enhanced digital and data capabilities, we are targeting a return to positive underlying growth as we exit GAP, in 2018.

Operational Review

During the first half of 2017, the Group continued to make steady operational and financial progress in the fourth and final year of our Growth Acceleration Plan ("GAP"). Operational fitness continues to improve and the progressive roll-out of new GAP-funded products and enhanced platforms is being received positively by customers. We have also been focused on the effective combination of Penton Information Services with Informa, adding further scale and bringing new capabilities to the Group.

growth, international expansion and scale in global exhibitions

One of the key features of GAP has been our strategy to build and buy a scale Exhibitions business through a combination of consistent and strong underlying growth and targeted international expansion, with a particular focus on building our presence in the key US market.

Our approach has been to focus on verticals with features that provide a rich backdrop for long-term, attractive Exhibitions growth, including:

·      Fragmentation…large numbers of buyers and sellers

·      High value… contracts and purchases of high value goods and services

·      Innovation…high levels of new product development

·      Growth…underlying markets experiencing positive structural growth

·      International reach…markets with high levels of international trade

·      Business-to-Business…less exposure to retail cyclicality and shifts in consumer fashion

We have also largely focused on major Brands within verticals, which tend to benefit from a network effect over time, as more buyers and sellers gravitate towards them, where they can meet potential customers or suppliers most efficiently.

Our focus on the US region reflects its scale (it represents around half of global industry revenue), the high level of innovation in US exhibitions and the supply of large, high quality venues. This has led to a steady improvement in our divisional performance as we have built our position in the region and the US has become a larger proportion of our revenue mix.

The addition of Penton Information Services added around 30 major US Brands to the portfolio, with particular strength in Agriculture (Farm Progress, Husker Harvest Days), Aviation (MRO Network) and Health & Nutrition. The latter, which includes Brands such as Natural Products Expo West and Engredea, have been combined with Informa's existing Brands in the vertical, including Vitafoods and Supplyside West, to create a global leader with annual revenue of over $110m and exhibition space sales of more than 125,000 square metres. In a vertical valued at over $200bn and growing at more than 6% per annum, with all the attractive features listed above, this is creating a future growth engine for our business.

Our growth and expansion programme in Global Exhibitions has increased Exhibitions revenue from less than $100m in 2009 to more than $600m in 2017, with around 60% in North America. Our Top 30 Brands represent about 70% of this total, with 18 taking place in the first six months of the year. This weights revenue and growth to the first half period and with Global Exhibitions now our largest division, this has a more pronounced impact at a Group level, as was evident in the first half of 2017.

Product Innovation

A number of product initiatives also contributed to the high level of growth through the first half of 2017. In Dubai we took the decision to separate our Medlab brand focused on laboratory equipment from within the venue-bound Arab Health show and run it separately as a new, scale Exhibition in the subsequent week. Such a move always carries risks but we made a smooth transition, delivering strong aggregate year-on-year growth, with Medlab becoming a Top 20 exhibition in its own right on debut. 

Separately, we also started to roll out a customer value initiative at a number of exhibitions following a successful trial of tiered, value-based pricing at The International Surfaces Event earlier this year. This provides flexibility for exhibitors through a more customer service oriented approach, with the potential to improve rebooking rates and generate incremental yields.

We also continue to invest in developing our digital and data capabilities to strengthen our general digital marketing and sales effectiveness but also, more specifically, in relation to our Market Maker strategy. In this respect, we are building a number of vertical-specific digital platforms to target revenue opportunities outside of Exhibitions, leveraging our customer relationships and industry knowledge to connect buyers and sellers online.

Effective integration of us-based penton with Informa

The integration of Penton Information Services has progressed smoothly and quickly, ahead of our original timeline. This reflects the positive and constructive attitude of our new Penton colleagues and their eagerness to become part of a bigger group with all the opportunities that brings. Progress has been achieved whilst maintaining the focus on day-to-day trading, with Penton's businesses delivering broadly consistent year-on-year revenue in the first half of the year, in line with the acquisition plan.

Penton had historically organised and operated around franchises and our approach from the start of the integration programme was to keep Penton franchises intact where they were operating in an integrated manner, rather than artificially separating them to fit Informa's divisional product and format delineations. As we entered the Combine stage of the integration programme, having owned and managed the businesses for six months, we updated the original allocation of Penton into Informa's four Operating Divisions to ensure the best outcome for each business. After the final allocations, around 90% of Penton revenue is still being allocated into Global Exhibitions and Business Intelligence but is now roughly split 60% and 30% respectively. Around 10% of Penton revenue is still being allocated to the Knowledge & Networking Division.

With Penton business units now combined into their respective Informa divisions, we are operating and reporting as a single, enlarged Informa business. Full systems integration plans are well advanced and the harmonisation of employee benefits is scheduled to take place through year-end. The integration plan means we are on track to secure our targeted £14m of net operating synergies in 2018. These will come from a combination of management and operational overlap, property consolidation, functional duplication, procurement and commissions. We are also starting to see early revenue benefits from cross-selling Exhibitions and leveraging its Marketing Services capability across Informa.

management succession & operational initiatives in academic publishing

In May, we announced the appointment of Annie Callanan as the new Chief Executive of the Academic Publishing Division. An experienced and proven leader of technology and information service businesses, Annie joined from Quantros, the Healthcare technology solutions group. She brings deep knowledge and expertise in digital platforms and technology, with a strong track record of operational improvement and innovation.

Prior to Annie's appointment, in 2016 we combined our UK and US books operations into a single, global books business, delivering operational efficiencies but also giving us greater flexibility and bringing us closer to customers. This has led to a number of operational benefits in 2017, including in the commissioning and production of new titles, inventory management, invoice processing and in our flexibility around digital product development. This is strengthening customer relationships and ensuring we maximise any potential revenue opportunities.

Strong cash generation and Increased dividend commitment

The Group's focus on the conversion of profits into cash and strong levels of free cash flow generation provide liquidity and balance sheet flexibility. Gearing at the end of June was 2.8x net debt to EBITDA*, slightly above our target range of 2 times to 2.5 times net debt to EBITDA ahead of the Group's seasonally stronger period for cash generation in the second half, which in the absence of further acquisition activity, we expect to bring us comfortably back into the target range by year-end. Free cash flow of £113.8m in the first six months was still up strongly year-on-year due to the profit contribution from Penton, as well as the utilisation of some of the tax credits that came with the business. The Penton businesses have similarly strong underlying cash dynamics to Informa, reflecting the high level of forward-booked exhibitions and subscription revenue within the mix.

This provides flexibility for continued reinvestment into organic initiatives and further targeted acquisitions. We intend to remain pro-active on both fronts and continue to scan the market for opportunities, with particular focus on Global Exhibitions and Business Intelligence.

Strong cash generation, continued operational progress, and our confidence in meeting full year financial expectations leads the Board to raise the GAP commitment to dividend growth from the previous minimum of 4% to at least 6% for 2017, the final year of GAP. On current projections, this leaves the group with an adjusted dividend comfortably over 2 times adjusted earnings.

For 2018 and beyond, the Board will revisit dividend policy and guidance post-GAP.  

*Net debt to EBITDA is calculated using average net debt over the previous 12-month period, in line with banking covenants

Divisional Trading Review

Informa delivered steady improvement in its operational and financial performance through the first half of 2017, with positive underlying business improvement bolstered by the effective integration of Penton Information Services and favourable currency trends. Underlying revenue growth was +3.7% and Reported growth was 41.3%, the difference reflecting a -1.2% impact from the phasing of events, a +26.0% benefit from acquisitions and a +12.8% benefit from currency. Adjusted operating profit rose +41.0% to £285.1m.

The commentary below includes statutory and adjusted measures. We believe adjusted operating profit is a useful additional measure in monitoring Divisional trading performance.

Global exhibitions

	H1 2017	H1 2016	Actual	Underlying
	£m	£m	%	%
Revenue	342.8	192.9	77.7	11.0
Statutory Operating Profit	100.9	71.4
Adjusted Operating Profit	144.8	88.3	64.0	10.9
Adjusted Operating Margin (%)	42.2	45.8

The Global Exhibitions Division organises transaction-oriented Exhibitions and trade shows, providing buyers and sellers across different industries and communities with a powerful platform to meet face to face, build relationships and conduct business. Informa has around 200 Exhibition Brands, serving a number of core verticals, including Agriculture, Beauty & Aesthetics, Construction & Real Estate and Health & Nutrition.

In H1, Global Exhibitions accounted for 37% of Group Revenues and 51% of Adjusted Profit.

Our strategy to build a portfolio of major Brands in attractive and growing verticals delivered further double digital underlying growth, including strong performances from our Top 20 exhibitions in Health & Nutrition (Natural Products West, Vitafoods Europe), Construction & Real Estate (World of Concrete, TISE West) Life Sciences (Arab Health, Medlab) and Beauty & Aesthetics (China Beauty).

This growth was broad-based, reflecting a combination of improved yield, volume expansion at existing exhibitions, new launches and geo-cloned events. The launch of Medlab as an independent exhibition separate from Arab Health was particularly successful, driving strong aggregate growth. The combination with Penton also brought immediate benefits, most notably in Health & Nutrition where the increased scale and international breadth created by the combination with Informa is having immediate traction with customers, opening up valuable cross-selling opportunities.  

Alongside this growth and expansion, we continued to invest in the business to support future growth and scale. This largely revolved around our Market Maker strategy as we continued to invest in strengthening our data capabilities and building new digital platforms for monetising customers relationships in new ways.  This incremental investment, combined with the mix effect of adding lower-margin Penton revenue led to a lower year-on-year divisional operating margin.

Academic publishing 

	H1 2017	H1 2016	Reported	Underlying
	£m	£m	%	%
Revenue	238.9	214.7	11.3	1.2
Statutory Operating Profit	58.1	48.2
Adjusted Operating Profit	85.5	72.9	17.3	0.3
Adjusted Operating Margin (%)	35.8	34.0

The Academic Publishing Division publishes specialist books and journals. Operating as the Taylor & Francis Group, it is recognised internationally as a leading Upper Level academic publisher through a number of major publishing Brands, including Taylor & Francis, Routledge, CRC Press and Cogent OA. It has a portfolio of more than 130,000 book titles and 2,500 journals available in both print and digital formats, across a range of subject areas within Humanities & Social Sciences, and Science, Technology & Medicine.

In H1, Academic Publishing accounted for 26% of Group Revenue and 30% of Adjusted Profit.

Overall trading remained solid through the first half, underpinned by another strong performance by our Journals business, with high subscription renewals and continued growth in article submissions and content usage.

Our monograph and reference-led books business performed steadily. Library budgets remain tight and with journals typically being allocated first, this is putting added pressure on books expenditure.

However, certain subject categories continue to grow strongly, illustrating demand is there for relevant specialist content that is priced reasonably. Budget pressure is being felt most prominently in the Lower Level textbook market where we have a historical, sub-scale position representing around 10-15% of Books revenue. Here average prices tend to be higher, the content less specialist and users tend to have a relatively short-term connection to the subject area.

We continued to invest in our technology capability to improve the digital discoverability of our content and meet changing market demands, opening up new growth possibilities in areas such as Academic Digital Services. This included the acquisition and ongoing investment in Colwiz in May.

Business intelligence

	H1 2017	H1 2016	Reported	Underlying
	£m	£m	%	%
Revenue	187.6	134.6	39.4	1.1
Statutory Operating Profit / (loss)	18.4	17.9
Adjusted Operating Profit	37.5	26.9	39.4	0.2
Adjusted Operating Margin (%)	20.0	20.0

The Business Intelligence Division provides specialist data, intelligence and insight to businesses, helping them make better decisions, gain competitive advantage and enhance return on investment. It has more than 120 digital subscription Brands, providing critical intelligence to niche communities within six core industry verticals: Pharma, Finance, Transportation, TMT, Agribusiness and Industry & Infrastructure. This is supported by a portfolio of B2B media Brands and businesses targeting contingent revenues in Consulting and Marketing Services.

In H1, Business Intelligence accounted for 21% of Group Revenue and 13% of Adjusted Profit.

The focus on core subscriptions and strengthening customer relationships continued to deliver positive trading momentum, with high renewal rates and steady improvement in annualised contract values. This translated into underlying revenue growth of 1.1%, including pro-forma year-on-year growth from the Penton assets integrated into the Division.

We also relaunched our Consulting business under fresh leadership which, combined with the full integration of Penton's Marketing Services business, forms part of our plan for growth in contingent revenue in the second half of 2017.

The other feature of the first-half which will continue throughout the rest of the year was the progressive roll-out of new GAP-funded products and platform upgrades. These have generally been received well by customers, improving utility and workflow capabilities. This was evident in the strong performance of our AgriBusiness and Transportation verticals in the first half, following the planned launch of major new product launches.

Knowledge and networking

	H1 2017	H1 2016	Reported	Underlying
	£m	£m	%	%
Revenue	146.1	105.5	38.5	-4.0
Statutory Operating Profit	4.8	8.6
Adjusted Operating Profit	17.3	14.1	22.7	-40.2
Adjusted Operating Margin (%)	11.8	13.4

The Knowledge & Networking Division is the Group's Community Content, Connectivity and Data business, incorporating its training, learning, conference, confex, advisory and congress businesses. It organises content-driven events and programmes that provide a platform for communities to meet, network and share knowledge. It runs around 1,200 events each year globally, covering a range of subjects, but with particular focus on Life Sciences, TMT and Finance.

In H1, Knowledge & Networking accounted for 16% of Group Revenue and 6% of Adjusted Profit.

We continued to make steady progress in the first half, with continued improvements in trading amongst our core Brands within the three end markets of Global Finance (SuperReturn, Fund Forum), Life Sciences (Bio-Europe Spring) and TMT (London Tech Week). The first year of London Tech Week under our management proved successful, with good year-on-year growth in attendees and sponsorship, providing good momentum for 2018.

Our domestic conference businesses continued to be more volatile, impacting the overall revenue performance, which dropped through to the bottom line, hence the reduction in margin. Today's confirmation of portfolio changes in Brazil, Germany and Switzerland will provide more stability going forward and we continue to review our domestic conference businesses in Australia / Asia.

Financial Review

INCOME STATEMENT

Our strategy of strengthening operating capabilities, increasing scale and international breadth resulted in an increase in Group revenue in first half of 2017, up 41.3% to £915.4m, including a 3.7% increase on an underlying basis. This converted to Adjusted Operating Profit of £285.1m, some 41.0% higher than the prior half year and an 1.0% increase on an underlying basis. This also reflects the continued progress in the final year of the implementation of the 2014-2017 Growth Acceleration Plan.

	Adjusted results H1 2017 £m	Adjusting items H1 2017 £m	Statutory result H1 2017 £m	Adjusted results H1 2016   £m	Adjusting items H1 2016 £m	Statutory result H1 2016  £m
Revenue	915.4	−	915.4	647.7	−	647.7
Operating Profit/(loss)	285.1	(102.9)	182.2	202.2	(60.6)	141.6
Loss on disposal	−	(4.7)	(4.7)	−	(25.3)	(25.3)
Net finance costs	(28.7)	−	(28.7)	(17.4)	−	(17.4)
Profit/(loss) before tax	256.4	(107.6)	148.8	184.8	(85.9)	98.9
Tax(charge)/credit	(55.9)	25.7	(30.2)	(33.4)	24.6	(8.8)
Profit/(loss) for the year	200.5	(81.9)	118.6	151.4	(61.3)	90.1
Adjusted operating margin	31.1%			31.2%
Adjusted diluted EPS	24.0p			21.3p

 

measurement and adjustments

In addition to the statutory results, Adjusted Results are prepared for the Income Statement, including Adjusted Operating Profit and Adjusted Diluted Earnings Per Share, as the Board considers these non-GAAP measures to be the most appropriate way to measure the Group's performance in a way that is comparable to the prior year.  This is in line with similar adjusted measures used by our peer companies and therefore facilitates comparisons. Adjusted Results are outlined in the table above and exclude the Adjusting Items outlined in the next section. A reconciliation of adjusted measures to statutory measures can be found in notes 3 and 9.

Following the combination of Penton with Informa, we have adopted an approach where we include year-on-year growth from material acquisitions in the calculation of growth from the first day of ownership, as if we had owned them in the corresponding period in the previous year. This measure of Underlying Growth, which also strips out the impact of any events phasing during the relevant period, the impact of any disposals and the impact of foreign exchange movements, will ensure that all our teams are focused on the underlying performance of acquired businesses immediately.

Underlying growth in H1 2017 is analysed as follows:

			H1 2017 Underlying  growth		Phasing and other items	Acquisitions and disposals	Currency change	H1 2017 Reported growth
Revenue			3.7%		(1.2%)	26.0%	12.8%	41.3%
Adjusted operating profit				1.0%	(1.4%)	25.6%	15.8%	41.0%

Restatement of 2016 results

Results for the year ended 31 December 2016 have been restated following revisions to the provisional amounts recognised in respect of the fair value of assets acquired and liabilities assumed related to the Penton Information Services acquisition that completed on 2 November 2016 and finalisation of fair values related to the Light Reading LLC acquisition that completed on 13 July 2016.  There was no impact from the restatements on the income statement for the 6 months ended 30 June 2016. 

In addition, the business segment results for the year ended 31 December 2016 have been restated for the allocation of Penton business units into the business segments of Business Intelligence, Global Exhibitions and Knowledge & Networking, reflecting the integration of Penton into the relevant divisions.

Statutory and Adjusted earnings per share and dividends per share for the 6 months ended 30 June 2016 have been restated to reflect the adjustment required for the bonus element of the 2016 rights issue associated with the Penton acquisition.

ADJUSTING ITEMS

The Adjusting Items below have been excluded from Adjusted Results. The total charge against Operating Profit for Adjusting Items was £102.9m in H1 2017 (H1 2016: £60.6m) with amortisation of acquired intangible assets being the major element.

	H1 2017	H1 2016
	£m	£m
Intangible amortisation and impairment:
Intangible asset amortisation1	79.4	51.2
Impairment of goodwill and intangibles	2.8	2.3
Acquisition and integration costs	12.1	6.5
Restructuring and reorganisation costs:
Redundancy and reorganisation costs	2.5	2.7
Vacant property costs	6.1	(0.1)
Re-measurement of contingent consideration	−	(2.0)
Adjusting items in operating profit	102.9	60.6
Loss on disposal of subsidiaries and operations	4.7	25.3
Adjusting items in profit before tax	107.6	85.9
Tax related to adjusting items	(25.7)	(24.6)
Adjusting items in profit for the period	81.9	61.3

1 Intangible asset amortisation is in respect of acquired intangibles and excludes amortisation of software and product development

 

Our proactive and targeted acquisition programme led to an increase in intangible asset amortisation arising from acquired intangibles to £79.4m. This comprised amortisation of book lists and journal titles, database content and customer and attendee relationships related to exhibitions and conferences. Intangible asset amortisation arising from software assets and product development is not treated as an Adjusting Item and is included within the calculation of Adjusted Operating Profit. 

Acquisition and integration costs of £12.1m included costs relating to the integration of Penton Information Services through H1 2017 totalling £8.9m.

In H1 2017 the £4.7m loss on disposal relates primarily to the disposal of the Lloyds List Australia business in Business Intelligence (£4.4m loss). In H1 2016 the £25.3m loss on disposal related to a £23.5m impairment of the loan note receivable associated with the disposal in 2013 of five Corporate Training businesses and £1.8m from the loss on disposal of other businesses. 

The following table provides a breakdown of the Adjusted Items by Division:

	AP  £m	BI £m	GE £m	K&N £m	Total £m
Statutory operating profit	58.1	18.4	100.9	4.8	182.2
Add back:
Intangible asset amortisation1	25.2	12.4	32.7	9.1	79.4
Impairment of goodwill and intangibles	2.0	0.8	−	−	2.8
Acquisition and integration costs	0.2	1.9	9.4	0.6	12.1
Restructuring and reorganisation costs	−	4.0	1.8	2.8	8.6
Adjusted operating profit	85.5	37.5	144.8	17.3	285.1

1 Intangible asset amortisation is in respect of acquired intangibles, and excludes amortisation of software and product development

 

Net Finance Costs

Adjusted net finance costs, which consist principally of interest costs on US private placement loan notes and bank borrowings, increased by £11.3m to £28.7m. This principally reflects the effect of higher average debt levels following the acquisition of Penton.   

Taxation

Tax Expense

Our effective tax rate reflects the blend of tax rates and profits in the Group's various jurisdictions, some with lower corporate tax rates than the UK. In H1 2017, the adjusted effective tax rate was 21.8% (H1 2016: 18.1%).

 

The principal reason for the increase relates to changes to UK tax legislation, introduced from 1 January 2017, which reduced the tax benefit of certain internal financing structures. This provided a tax benefit of approximately £8m in 2016 and no further benefit is available from 1 January 2017. Additionally, there has a mix effect from more profits being generated in the US following the Penton acquisition. 

The Group tax charge on statutory Profit Before Tax ("PBT") was 20.3% (H1 2016: 8.9%).

Tax Payments

During H1 2017, the Group paid £29.0m (H1 2016: £27.7m) of corporation and similar taxes on profits, including approximately £21.5m (H1 2016: £10.4m) of UK Corporation Tax. UK tax payments have increased in H1 2017 compared to H1 2016 primarily as a result of the payment in full of tax related to profits on the contingent forward foreign exchange transaction we took out to act as a partial hedge for the purchase price of the Penton acquisition.  However, US tax payments are significantly reduced in 2017 largely due to tax deductions available from the write-off of loans in 2016 and prior years, including deductions on elements of these write-offs previously provided for in earlier years. These deductions will also reduce cash tax outflows in the US in 2018.

Earnings PER SHARE

Basic and diluted earnings per share (EPS) calculated on the statutory profit for the year for equity shareholders of £116.2m (H1 2016: £89.2m), resulted in Basic EPS of 14.1p (H1 2016: 12.7p restated).

Adjusted diluted EPS of 24.0p is 12.7% ahead of H1 2016 (H1 2016: 21.3p restated amount), principally reflecting the increase in adjusted profit before tax.

	H1 2017 £m	H1 2016  £m
Adjusted Profit for the year	200.5	151.4
Non-controlling interests	(2.4)	(0.9)
Adjusted earnings	198.1	150.5
Weighted average number of shares used in diluted EPS (m) 1	826.0	706.3
Adjusted Diluted EPS (pence)	24.0p	21.3p

¹ H1 2016 number of shares restated for bonus element of 2016 rights issue

The increase in average number of shares reflects the equity raised for the acquisition of the Penton Information Services, resulting in 162.2m of shares issued in a rights issue and 12.8m of shares issued to the vendors of Penton. 

Dividends

The Board has recommended an interim dividend of 6.65p per share (H1 2016: 6.26p per share restated amount) representing a 6.2% increase. The interim dividend will be paid on 15 September 2017 to ordinary shareholders registered as at the close of business on 11 August 2017.

                  

TRANSLATION IMPACT

Given our stated strategy of international expansion and purposeful shift to add businesses in North America, there has been an increase in exposure to US Dollar revenues and costs. In H1 2017 the Group currently receives approximately 67% (H1 2016: 57%) of its revenues and incurred approximately 56% (H1 2016: 45%) of its costs in USD or currencies pegged to USD. Each 1 cent ($0.01) movement in the USD to GBP exchange rate, based on the 30 June 2017 closing rate, has a circa £9m (H1 2016: £6m) impact on annual revenue and a circa £4m (H1 2016: £3m) impact on annual adjusted operating profit and a circa 0.4p (H1 2016: 0.2p) impact on full year adjusted diluted EPS.

The following US dollar rates versus GBP were applied during the period:

	H1		H1		Full Year
	2017		2016		2016
	Closing	Average	Closing	Average	Closing	Average
	Rate	Rate	rate	rate	Rate	rate
USD	1.30	1.26	1.35	1.43	1.23	1.36

For debt covenant testing purposes and for calculating Informa's leverage, both profit and net debt are translated using the average rate of exchange throughout the relevant period.

 

 

free CASH FLOW

Cash flow generation remains one of the Group's priorities, providing the funds and flexibility for future investment. The following table shows the Adjusted Operating Profit and Free Cash Flow reconciled to movements in Net Debt. Free Cash Flow is our key financial measure of cash generation and is stated before cash flows relating to acquisitions and disposals, dividends and any new equity issuance.

	H1 2017  £m	H1 2016  £m	Full Year 2016 £m
Adjusted operating profit	285.1	202.2	415.6
Depreciation of property and equipment	4.7	3.0	6.5
Software and product development amortisation	11.1	6.1	14.2
Share-based payments	2.4	1.3	3.9
Loss on disposal of other assets	−	−	0.1
Adjusted share of joint venture and associate results	(0.2)	(0.1)	(0.8)
Adjusted EBITDA	303.1	212.5	439.5
Net capital expenditure	(41.0)	(25.9)	(52.0)
Working capital movement 1	(94.0)	(63.4)	6.4
Operating cash flow	168.1	123.2	393.9
Restructuring and reorganisation	(2.8)	(4.9)	(9.9)
Net interest	(22.5)	(16.4)	(35.0)
Taxation	(29.0)	(27.7)	(43.3)
Free cash flow2	113.8	74.2	305.7

^{1 Working Capital movement above excludes movement on restructuring, reorganisation, acquisition and integration accruals}

^{2 Free Cash Flow for H1 2016 has been restated to show £6.5m of acquisition and integration costs within the acquisition and disposals line}

Our focus on cash generation across the Group led to another year of strong cash conversion in H1 2017, with Operating Cash Flow of £168.1m equating to 59% of Adjusted Operating Profit (H1 2016: 61%).

Net capital expenditure was £41.0m which is equivalent to 4.5% of H1 2017 revenue. We expect full year 2017 capital expenditure to be in the 3% to 5% range previously communicated. 

The working capital outflow of £94.0m in H1 2017 was £30.6m higher than the outflow of £63.4m in H1 2016, and this included the effect of the working capital profile of the acquired Penton business.

Net Interest paid increased in line with the increase in net debt, largely associated with the Penton acquisition. In H1 2017, the Group paid £29.0m (H1 2016: £27.7m) of Corporation and similar taxes on profits, including £21.5m (H1 2016: £10.4m) of UK corporation tax. 

The following table reconciles net cash inflow from operating activities, as shown in the Consolidated Cash Flow Statement, to Free Cash Flow:

	H1 2017 £m	H1 2016 £m	Full Year 2016 £m
Net cash inflow from operating activities	132.3	93.4	336.3
Interest received	0.3	0.2	0.6
Purchase of property and equipment	(5.5)	(1.8)	(4.6)
Proceeds on disposal of property and equipment	0.4	0.2	0.6
Purchase of intangible software assets	(28.9)	(19.4)	(36.5)
Product development cost additions	(7.0)	(4.9)	(11.5)
Add back: Acquisition and integration costs paid	22.2	6.5	20.8
Free Cash Flow1	113.8	74.2	305.7

1 ^{Free Cash Flow for H1 2016 has been restated to show £6.5m of acquisition and integration costs within the acquisition and disposals line}

 

 

 

net debt

Net debt increased by £81.0m to £1,566.4m at 30 June 2017 and this included the favourable impact from foreign exchange of £74.0m primarily associated with the USD weakening by 5.6% against GBP from the closing rate of 1.23 at 31 December 2016 to 1.30 at 30 June 2017.  

	H1 2017  £m	H1 2016  £m	Full Year 2016 £m
Free cash flow	113.8	74.2	305.7
Acquisitions and disposals	(158.5)	(60.0)	(1,313.1)
Equity Rights Issue net proceeds	−	−	701.5
Dividends paid	(108.7)	(87.7)	(134.5)
Shares acquired	(0.4)	(0.2)	(1.0)
Net funds flow	(153.8)	(73.7)	(441.4)
Non-cash movements	(1.2)	(0.8)	(2.7)
Foreign exchange	74.0	(85.1)	(146.0)
Net debt at 1 January	(1,485.4)	(895.3)	(895.3)
Closing net debt	(1,566.4)	(1,054.9)	(1,485.4)

Our strategy to retain a robust and flexible financing framework led to two key developments in the first half of 2017. Firstly, on 25 January 2017 we issued USD 500m of private placement loan notes, with a maturity of six years (USD 55m), eight years (USD 80m) and ten years (USD 365m), at an average interest rate of 3.6%. Secondly, we arranged a new bank Term Loan Facility in March 2017 for USD 400m, with a maturity of up to 12 months, which refinanced the Acquisition Facility that was used to fund the Penton acquisition, on more favourable terms.

At 30 June 2017, the Group had £2.4bn of committed facilities, (£1.5bn at 30 June 2016 and £2.3bn at 31 December 2016).

	30 June  2017 £m	30 June 2016 £m	31 December 2016 £m
Cash at bank and in hand	(43.5)	(51.4)	(49.6)
Bank overdraft	5.0	2.0	9.4
Loans receivable	−	(0.4)	(0.2)
Private placement loan notes	1,036.2	629.4	682.2
Private placement fees	(2.1)	(1.4)	(1.5)
Bank borrowings - Revolving Credit Facility (due Oct 2020)	265.8	480.3	300.2
Bank borrowings - Term Loan Facility (due March 2018)	307.8	−	−
Bank borrowings - Acquisition Facility	−	−	548.6
Bank loan fees	(2.8)	(3.6)	(3.7)
Net debt	1,566.4	1,054.9	1,485.4
Revolving credit facility	634.2	419.7	599.8
Term facilities agreement	150.0	−	150.0
Unutilised committed facilities	784.2	419.7	749.8

 

The principal financial covenant ratios under the private placement loan notes and Revolving Credit Facility are maximum net debt to EBITDA of 3.5 times and minimum EBITDA interest cover of 4.0 times, tested semi-annually. The ratio of net debt to EBITDA was 2.8 times (at 30 June 2016: 2.4 times, at 31 December 2016: 2.6 times) calculated as per our facility agreements (using average exchange rates and including a full year's trading for acquisitions). The ratio of EBITDA to net interest payable was 10.4 times (at 30 June 2016: 12.8 times, at 31 December 2016: 11.0 times).

We have a net pension liability position of £27.6m from defined benefit pension schemes, which remains relatively immaterial compared to the size of our balance sheet. All schemes are closed to future accrual and there were no employer cash contributions paid in the 6 months ended 30 June 2017.

 

 

corporate development

The Group continued to pursue its disciplined and targeted acquisition strategy during H1 2017, adding several businesses to the portfolio. Total net spend on additions and disposals was £158.5m (H1 2016: £60.0m), which included acquisition expenditure of £140.9m (H1 2016: £51.1m), acquisition and integration costs of £22.2m (H1 2016: £6.5m), disposal proceeds of £4.6m (H1 2016: cash outflow of £2.4m).  Acquisitions included £13.0m (H1 2016: £30.9m) of expenditure on other intangible assets and £127.9m (H1 2016: £20.2m) on the addition of subsidiaries, net of cash acquired. 

As part of our disciplined approach, potential acquisition opportunities are assessed on a case-by-case basis against a broad set of financial and strategic criteria. This includes delivering returns in excess of the Group's weighted average cost of capital and being accretive or neutral to earnings in the first full year of ownership. For certain selective acquisitions, the Group will take a longer-term view on these metrics, to allow time for full integration of the acquired business, coupled with additional investment to maximise long-term returns.

The principal acquisition during the period was YPI the operator of some of the largest yachting and boat shows in the US. We acquired 100% of the issued share capital of YPI on 14 March 2017, and the business now forms part of the Global Exhibitions segment. The net cash consideration at closing, using an exchange rate of 1.24 was £111.2m (USD 138.3m), comprising £111.8m (USD 139.0m) paid to the vendors at closing that included working capital payments, less cash acquired of £0.6m (USD 0.7m). 

New accounting standards
A description of the expected impact from the adoption of new accounting standards that are in issue but are not yet effective is provided in Note 2 of Annual Report for the year ended 31 December 2016. This outlines the expected impact of IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases. The review concluded that the Directors do not expect the adoption of these standards, except for IFRS 16 Leases, will have a material impact on the financial statements of the Group. 

IFRS 9 Financial Instruments is effective for the 2018 financial year and our initial assessment is that the Group does not expect there to be any change to the Income Statement or Balance Sheet of the Group. Full disclosure of the final assessment of the impact will be provided in the Annual Report for the year ending 31 December 2017.

IFRS 15 Revenue from contract with customers is effective for the 2018 financial year and our initial assessment is that the Group does not expect there to be any material change to the Income Statement or Balance Sheet of the Group. Full disclosure of the final assessment of the impact will be provided in the Annual Report for the year ending 31 December 2017.

IFRS 16 Leases is effective for the 2019 financial year and the Group is in the process of assessing the impact of this new standard. 

 

 

Principal Risks and Uncertainties

The Group recognises 12 Principal Risks which have the potential to cause the most significant impact to Informa's strategic objectives, performance, future prospects and reputation. They arise from the external market as well as internal business operations. 

The Principal Risks and uncertainties affecting the business activities of the Group were identified on pages 25-31 of the 2016 Annual Report (available on the Company's website at www.informa.com). 

Regular analysis and scanning for emerging risks is embedded in our processes to ensure that the Principal Risks are current and relevant to the Group's objectives.  A recent change is the widening of the cyber breach risk to encompass data loss, this is to recognise and increase focus on the human causal factors which can lead to data loss and cyber breaches. There is increased focus on data protection as the Group prepares for the General Data Protection Regulation.

As described in the 2016 Annual Report, the Risk Committee and Board considered the impact of the UK's decision to leave the European Union (Brexit) on the Group.  Brexit has led to currency fluctuations which continues to be considered as part of the Principal Risk of economic instability and is managed through proportionate foreign exchange hedging. Given the global nature of the Informa's activities, we consider the Group to be in a resilient position, however, it is acknowledged that Brexit is an evolving risk and developments will be closely monitored as they unfold. 

These risks are summarised below (in no order of priority): 

Strategic Risks	Description
Failure to deliver anticipated growth under the Growth Acceleration Plan	Growth under the Growth Acceleration Plan may not be delivered within the expected timeline or at a rate that will not deliver targeted returns on investment.
Sub-optimal acquisitions	Acquisitions which do not deliver the expected business case.
Ineffective change management	Informa's growth strategy involves measured change across many parts of the Group and requires the assimilation of new ways of working and different corporate cultures.
Inability to attract and retain key talent	The inability to attract, recruit and retain key colleagues, and inadequate succession planning at senior management levels.
Economic instability	The arrival, or impending arrival, of an economic downturn or period of uncertainty affecting customer appetite for discretionary expenditure.
Market risk	Customer demands can change quickly and the Group may not keep pace with demand or customer behaviours. Competitors may offer preferable products and services. Market disruptors may enter and suddenly change markets in which we operate.
Reliance on key counterparties	The overreliance on, or loss of, key counterparties.
Data loss & cyber breach	Major information security breach or cyber-attack resulting in loss or theft of data, content or intellectual property.
Operational Risks	Description
Technology failure	A major technology infrastructure failure or the prolonged loss of critical systems, networks and similar services.
Health and safety incident	A significant accident or incident at an exhibition, event or business premises, or an incident that affects colleagues when travelling on company business.
Major incident	A significant event with the potential to cause harm to colleagues and customers.
Governance Risks	Description
Changes to regulation and inadequate regulatory compliance	There are regulations with which the Group must comply. We could be adversely affected by changes in legislation and regulation impacting the Group or customers and by enforcement activities.

 

 

Going concern

The Directors confirm that, after making an assessment, they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the forseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

To make the assessment, we considered each Principal Risk for its potential financial impacts and modelled these, where material, to test the Group's viability over the Group's business planning horizon. Each principal risk was evaluated for the estimated financial impacts that could occur given the implemented mitigating controls.  Wider consideration is given to risks which are not recognised as principal risks but working in combination with principal or other risks, may contribute to a Reasonable Worst Case Scenario.  When the financial impacts of these scenarios are considered to pose a material impact over the period of the Group's planning horizon, they are modelled to assess their financial impacts.  To make this assessment, the Group's growth drivers, forecast revenue, operating profits, EBITDA and cash flows over the assessment period were subject to robust downside testing.

 

Cautionary Statements

This interim management report contains certain forward-looking statements. These statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those currently being anticipated. The terms 'expect', 'should be', 'will be' and similar expressions (or their negative) identify forward looking statements. Factors which may cause future outcomes to differ from those foreseen in forward-looking statements include, but are not limited to: general economic conditions and business conditions in Informa's markets; exchange rate fluctuations, customers' acceptance of its products and services; the actions of competitors; legislative, fiscal and regulatory developments; changes in law and legal interpretation affecting Informa's intellectual property rights and internet communications; and the impact of technological change.

Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance.  These forward-looking statements speak only as of the date of this interim management report and are based on numerous assumptions regarding Informa's present and future business strategies and the environment in which Informa will operate in the future. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this document to reflect any change in the Group's expectations or any change in events, conditions or circumstances on which any such statement is based after the date of this announcement or to update or keep current any other information contained in this interim management report.

Nothing in this interim management report should be construed as a profit forecast. All persons, wherever located, should consult any additional disclosures that Informa may make in any regulatory announcements or documents which it publishes. This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Informa PLC shares, in the UK, or in the US, or under the US Securities Act 1933 or in any other jurisdiction.

 

Board of Directors

The Directors of Informa PLC are listed at www.informa.com.

Responsibility Statement

We confirm that to the best of our knowledge:

 

a)   the Condensed set of Consolidated Financial Statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;

 

b)   the Condensed set of Consolidated Financial Statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R; and

 

c)   the interim management report includes a fair review of the following information as required by DTR 4.2.7R;

 

i.    an indication of important events that have occurred during the first six months of the financial year, and their impact on the Condensed set of Consolidated Financial Statements; and

 

ii.    a description of the principal risks and uncertainties for the remaining six months of the year.

 

d)   the interim management report includes the following information as required by DTR 4.2.8R:

 

i.    related-party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group in that period; and

 

ii.    any changes in the related-party transactions described in the 2016 Annual Report that could have material effect on the financial position or performance of the Group in the current period.

 

 

By order of the Board

 

 

 

 

 

Stephen A. Carter			Gareth Wright
Group Chief Executive			Group Finance Director
24 July 2017