Informa : 2020 Half-Year Results (Transcript)

Informa

09/21/2020 -- 04:00 AM EDT

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Informa

September 21, 2020

04:00 AM EDT

Operator:	Good day, and welcome to the Informa Half-Year Results Webcast. Today's conference
	is being recorded. At this time, I would like to turn the conference over to Stephen
	Carter. Please go ahead, sir.
Stephen Carter:	Thank you very much, Adam, and good morning, everybody. Thank you very much for
	making the time to join us today. I'm joined by Gareth Wright, our Group Finance
	Director, and Richard Menzies-Gow, our Director of Investor Relations and Corporate
	Communications.
	I'm conscious that it's Monday morning and that we now know there's going to be a
	significant UK government announcement I think at 11:00, so we'll try and make it worth
	your time.
	We are ostensibly here today to talk about our half-year results to the end of June of this
	year. But for those of you who've seen our release statement this morning, you will see
	that one of the reasons why we took advantage of the extension to reporting obligations
	and moved our half-year results presentation until late September was really to enable us
	to have a conversation about forward visibility, both for the end of 2020 and indeed
	through to 2021. The last eight months has been a remarkable experience, I suspect, for
	virtually everybody on this call. But it certainly has for our business. We, as many
	people will know, operate at some scale in Mainland China, and so we have been living
	the realities of the impact of COVID-19 pretty much since January the 23rd when China
	went into lockdown. And we have seen that progressively roll out around the world, and
	certainly for the vast majority of the first half, so the official period of this results
	announcement, our events business -- physical events business -- by the end of February
	was effectively closed everywhere in the world.
	I would like to use this just to put on record my appreciation to our colleagues around the
	world. They say adversity brings out the best in people. Certainly, we have seen that
	within our own company, and our culture of agility, ownership, distributed authority, and
	personal sense of responsibility has served us extremely well. And also has our
	relationship with our customers and our co-partners, whether they be venue operators or
	governments or trade associations. And that has enabled us to run a program of

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rescheduling and postponement and cost management, which has served the company extremely well.

I'm going to work my way through a slide deck which is available, and I will as I go through it, pass over to Gareth at appropriate points to take you through the detail of the half-year results and our forward look on our financial position overall. And then we will take questions at the end.

The normal disclaimer, and then on to where are we. Well, as we've been saying for many years, the strength of the Informa Group is that we operate in what we describe as the knowledge and information economy, and if there was ever a circumstance where the knowledge and information economy comes to the fore, it is when 65% to 70% of the world's population is in lockdown and working remotely, where connectivity to subscription data, online activity, data and information, high quality information, trading on online platforms and access to digital content has never been more important. We, like many others who operate in the advanced learning/academic publishing environment, made available all of our articles and knowledge as it related to COVID-19. We've seen over 2 million downloads of that information that was made freely available by our colleagues in Taylor & Francis.

Broadly speaking, for those parts of our business that are in the subscription and data world, this circumstance has served us well and we have thought to serve our customers well. But clearly, where we have felt the financial and operating pain has been in our physical events business, and we'll come on to where that leaves us and takes us in a second.

The key proposition that we are seeking to lay out in some detail today is that we have used the summer period, where it became clear that the North American and European markets were not returning to physical event trading in 2020 to take our plan to a point whereby we could achieve long-term stability and security for our company even if there were no physical events in 2021 in North America or Europe. Not our plan, not our preference, not, indeed, our view. But we have taken the position that getting to that level of stability and security is essential 8 or 9 months into this situation.

What speaks to that is a combination of things. Clearly, our subscription business gives us a fundamental underpinning. Our depth in specialist markets is allowing us to secure our relationships on renewals and annual contract value. The nature of our events business even where it does not specifically trade, is that it forward-books and we have been working extensively on our forward relationships with our customers to maintain our forward booking. And also, we have used this circumstance to learn and experiment at scale in the provision of virtual events, and indeed, sitting here towards the end of September we have run probably over 500 virtual events all over the world, in multiple geographies, in multiple categories. Many of those events networking events, some of those events product discovery events, some of them trading events, some of them training events. They're very different products, and 2020 has been a petri dish of experimentation for (inaudible) for our customers. And that has taught as much about how we develop that capability on a going-forward basis.

Stepping back to go forward, if you look at our financial performance in the first half of 2020, our subscription business has been very robust and we had a strong start to the

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year, actually, in our event-led business where it was trading in January and February before COVID-19. It was further confirmation of what we had seen in the preceding 6 or 7 years, which is we have a very strong portfolio of brands and market positions in specialist markets and when the world is able to travel, transact and trade face-to-face, our products serve as well.

But we then had to get into the launch of our postponement program, which we did deep and fast, to shift where it made sense to later in the year and that has worked in mainland China where we began to see product return at the end of June and is now running at pretty near the standard operational capacity in 2020. It has not returned in North America and Europe, and we'll come on to how we are reacting this on a going forward basis.

Our revenues for the first half are tracking significantly below where we were this time last year. That is almost entirely, in fact entirely, a function of the gap in revenues in our events business. Our subscription businesses are effectively flat year-on-year. We saw some weakness in the physical part of our books business in Taylor & Francis, partly because of supply chain impacts, distribution, and access, and partly because of the closure of college campus bookshops and indeed college campuses themselves.

That plays through to profits and as a consequence, we have moved quite significantly on our costs in the first half with a nearly GDP 300 million worth of direct and indirect cost savings. One of the (inaudible) strengths of our business is that we have a very highly- flexible cost base where costs are incurred very directly related to activity and so our ability to be able to flex our costs with our activity schedule has been something that has given us a flexibility of response.

I'm pleased to say we remain in positive free cash flow for the first half. Gareth will talk more about that. But again, cash flow, strength and volume and quality of cash flow is a feature of our business in normal times but even in stressed times we have worked very hard on cost management, on cash controls and on cash conversion.

And our balance sheet largely is a function of the support from shareholders but also the management of our other costs has allowed us to keep our leverage at a comfortable level in the first six months of the year. We will see a leverage spike at the year end for reasons that we will talk to, but we have a view about how we work our way through that which we will return to.

I suspect that most of the questions, the commentary and the forward critical analysis understandably will be around the weakness, or not, as a result of the lack of return to physical product in North America and Europe. But I don't want to gloss over the depth and the resilience of our information and intelligence businesses. Again, one of the other strengths of the Informa Group is that we are not a single business. We have, over the years, resisted the temptation and indeed at times, the encouragement, to divest and be a single-purpose business. But we have always taken the view that operating in three markets -- in advanced learning, in high-quality business information, and in B2B events -- was the basis of strength for our group. And this circumstance has borne that out.

Taylor & Francis is now a multi-faceted business, increasingly, where we see a spread of product, subscription product, open access product, open research product, digital service

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products, electronic products in the main, and still some residual physical product where we have felt some pain in the first half of 2020. Our intelligence business where we have spent much time over the last three or four years improving both the portfolio, its focus in key markets, importantly its product, and also the way in which that product is accessible by customers, and we have seen that pay dividends in the first half of this year and we have a very strong forward new business pipeline through to the year end. So we feel confident in both those businesses on their likely year-end performance.

Interestingly, within our event business, not unsurprisingly, this circumstance has driven us to virtual and digital solutions. And many people on this call have had their own personal experience with participation or attendance in virtual and digital events. It's a bit of a (inaudible) depending upon which you attend. There are a wrath of technology platforms and services that are developing to provide service delivery and capability, and we have been learning through a process of constant innovation as to what works, what serves, what delivers, and which partners are best for us to work with.

In the short term, our focus has largely been on keeping our brands visible, refreshing our data, and ensuring that we are providing some service to our customers when they are otherwise unable to gain access to their customers. On top of that, because of the volume and scale of our business, it's allowed us to drive audience and that is serving us in our media and marketing services revenues, and in those event-led businesses where we do have a data product to offer, aviation and technology probably being the two leading examples, that has served as well in the data sets that sit underneath those event businesses. And that mixture of service delivery and revenue reach and emerging revenues is contributing something to 2020, and we believe will have the capability of delivering something more in 2021. And that speaks to our belief that we're now finding a floor in revenue for the group even without physical trading in physical events in North America and EMEA in 2021.

For those colleagues who are on the call who are in the United Kingdom, you will get a much more detailed update on the macroeconomic impact of COVID-19 later today from the UK authorities so I will not attempt to compete. But suffice to say there are multiple statistics that bring out the practical reality of how this COVID circumstance is impacting individuals and we see that in the case count; countries, where we see a differing level of case progression where probably the notable outlier in terms of -- at scale -- in terms of case reduction is China -- how that's changing behaviors and in business life, a place where that is most striking is in European flight volumes and US flight volumes where even post-Labor Day we have seen no material return to business flight activity in North America.

And the net consequence of that is for our products, which in North America and Europe demand physical travel and face-to-face interaction, it has left us with a gap versus our previous plan.

Everyone on this call will be drawing their own data on what's happening in clinical trials. We have a window into that through our Citeline business, what's happening on the status of those clinical trials. We track that and indeed provide that as a subscription service to our customers. Where are we seeing progress, which I think the world is seeing progress on therapeutics, and there are estimated timelines on when the vaccine cavalry may or may not come over the hill, and where it arrives first, and how it gets

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