Informa Regulatory News (INF)

Informa PLC Press Release 

10 March 2020

Results for 12 months to 31 December 2019

Informa (LSE: INF.L), the International Exhibitions, Events, Information Services and Advanced Learning Group, releases results for the 12 months to 31 December 2019, reporting continuing benefits of Market Specialisation, including further revenue growth and strong cash generation.

2019 Financial Highlights

· Strong revenue growth: +22.0% reported growth and +3.5% underlying1, reflecting full year of UBM

· Improved Adjusted Operating Profit growth1: +27.5% reported growth and +6.5% underlying1

· Higher Statutory Operating Profit: +48.2% growth to £538.1m (2018: £363.2m)

· Increased Adjusted Diluted Earnings per Share1: +4.3% growth to 51.3p (2018: 49.2p), reflecting timing of UBM addition and share issue; pro-forma EPS growth of +16.1%

· Lower Statutory Diluted Earnings per Share: 18.0p compared to 19.7p in 2018, reflecting full-year impact of UBM, primarily the higher share count and amortisation levels;

· Strong Free Cash Flow1: £722.1m versus £503.2m in 2018;

· Strengthened Balance Sheet: Reduction in leverage ratio to 2.5x, in line with plan (2018: 2.9x)

· Enhanced Dividend per Share: Proposed final DPS +7.4%, delivering total DPS of 23.5p (2018: 21.9p)

1In this document we refer to non-statutory measures including underlying and adjusted results; these are defined in the Financial Review on page 11 and Glossary on page 48.

2019 Divisional Highlights

Continued Growth and Delivery in 2019, with Group underlying revenue growth of 3.5%1:

· Informa Markets: Increased international breadth and depth within specialist markets delivered underlying revenue growth1 of +4.3%. Reported growth of +40.5%, including a full year of UBM;

· Informa Connect: Continued focus on major B2B brands in Pharma and Finance delivered further improvement, with underlying revenue growth1 of +2.9%. Reported revenues -0.7%, reflecting the sale of the Life Sciences Media Portfolio in January 2019;

· Informa Tech: Solid performance in year of combination and creation, whilst building strong foundations for future growth. Underlying revenue growth1 of +2.0% and reported revenue growth of +46.0%, the latter including a full year of UBM and five months of the IHS Markit TMT Portfolio;

· Informa Intelligence: Increased focus on strongest brands in attractive specialist markets delivered an increase in underlying revenue growth1 to +3.3%. Reported revenues at -0.7% after divestiture of Agribusiness portfolio at end of June and Industry & Infrastructure portfolio in October;

· Taylor & Francis: Solid subscription renewals, strong momentum in Open Access and steady performance in advanced learning products delivered robust underlying revenue growth1 of +2.4%. Reported revenue growth of +5.0%, benefiting from positive currency tailwinds.

Key Operational Highlights

Following the completion of the Accelerated Integration Plan ("AIP"), Informa is operating as one business, with a resilient and balanced international platform built for further Market Specialisation and future growth. Our focus is on:

· Expanding our portfolio of B2B products and knowledge services: By broadening and strengthening our range of B2B services and advanced learning products for specialist markets, we have the opportunity to sell more services to more customers, including in events, data, digital, content, open access, consulting, research, media and marketing services;

· Enhancing our position in specialist markets through targeted expansion: We are continuing to target additions and partnerships that deepen our connections and add new capabilities in attractive specialist markets; Partnership with Bologne Fiere in Beauty, addition of F1000 in Open Research and Publishing Services and joint venture with Founders Forum in Tech;

· Strengthening our operating capability: Building on our operational fitness programme we are further simplifying and consolidating systems and strengthening operating capabilities in key areas, including product development, product management, data management and marketing automation;

· Advancing our commitment to Sustainability: We are launching a five-year programme called FasterFoward to become fully carbon neutral by 2025 and net zero carbon by 2030, whilst also putting Sustainability Inside all our Brands by 2025, thereby making Informa a Champion of Sustainability within our own business and across the specialist markets we serve;

· Improving our Financial Fitness: We are continuing to use the strength and scale of our cash flows and flexible, long-term financing to maintain a strong balance sheet and underpin our dividends.

1In this document we refer to non-statutory measures including underlying and adjusted results; these are defined in the Financial Review on page 11 and Glossary on page 48.

2019 Financial Highlights

1In this document we refer to Underlying and Reported results. Underlying figures are adjusted for acquisitions and disposals, the phasing of events including biennials, the impact of changes from implementing new accounting standards and accounting policy changes, and the effects of currency changes. It includes, on a pro-forma basis, results from acquisitions from the first day of ownership in the comparative period and excludes results from sold businesses from the date of disposal in the comparative period. Reported figures exclude all such adjustments. Alternative performance measures are discussed in the Glossary.

2In this document we also refer to Statutory and Adjusted results, as well as other non-statutory financial measures. Adjusted results are prepared to provide an alternative measure to explain the Group's performance. Adjusted results exclude adjusting items as set out in Note 7 to the Financial Statements. Operating cash flow, free cash flow, net debt and other non-statutory measures are discussed in the Financial Review and the Glossary.

The 2020 Impact of COVID-19

In 2020, our subscriptions-related businesses, representing around 35% of Group revenue, continue to trade well, underpinned by strong Renewal Rates, at 90%+ on average, and consistent low to mid-single digit growth in Annualised Contract Values. However, like a number of businesses, we are seeing an impact from the outbreak of COVID-19 within our Events portfolio. We are making all the decisions necessary to look after colleagues and customers and ensure the long-term strength of our brands and customer relationships.

As the implications of COVID-19 started to become apparent in late January, initially in Mainland China, we moved quickly to implement our COVID-19 Action Plan, creating an internal framework for decision-making and actions to support Colleagues, Customers and the specialist Communities we serve.

This included the launch of a Postponement Programme to Re-Schedule and Re-Phase our event brands, ensuring we made the right decisions for our Customers, for the Brands we own and operate, and for the specialist Communities we serve and support.

As of 10 March 2020, across the Group we have successfully agreed or are in the process of agreeing the Re-Scheduling of around 45 large event brands to a date later in 2020, representing budgeted revenue of around £350m. Around 70 smaller brands have also been Re-Scheduled with revenue of around £50m. In addition, we have Localised or Virtualised several brands to deliver the best solution for customers in those markets this year. We have also Re-Phased (biennials)/Cancelled 13 brands in 2020, with budgeted revenue of £25m.

For those brands we have Re-Scheduled, Localised or Virtualised in 2020, we would expect to incur some incremental investment in venue capacity, customer marketing and other duplicative costs of Re-Scheduling and Virtualisation, subject to in-market support budgets and insurance outcomes.

Implicit in all our decisions so far, has been the wellbeing of Colleagues and Customers and this will remain our priority going forward. It is testament to the foresight and commitment of our teams around the world that, in very challenging circumstances, we have stayed resilient and continued to find solutions to serve and support our customers and the communities of which we are a part.

At this point we are not providing market guidance for the Informa Group in 2020.

Trading Outlook

Our strategy over the last six years has been to progressively build a business with international reach and depth in a range of attractive specialist markets. We have a strong presence in all major geographic regions and a portfolio providing visibility, balance and breadth.

Subscriptions-related Businesses (c.35% of Group Revenue):

This portfolio includes a range of subscription-related, specialist knowledge and information businesses. These businesses continue to grow consistently in 2020, with minimal impact to date from the outbreak of COVID-19, underpinned by forward-booked subscriptions that provide visibility and predictability, as well as attractive cash flows.

Informa Intelligence

Following a period of targeted portfolio management, Informa Intelligence is more focused on attractive and growing specialist markets where we have strong brands and market positions.

This focus, supported by continuous investment in our product and platform capabilities, is delivering good performances so far in 2020, particularly in our clinical trials business in Pharma (Citeline), our fund flow business in Finance (EPFR Global) and our shipping intelligence business in Maritime (Lloyd's List Intelligence).

Annualised contract values continue to grow consistently, and renewal rates remain high, at around 90% on average. This provides strong visibility and confidence we can further improve underlying growth1 in 2020.

 Taylor & Francis

The market for verified and trusted, specialist knowledge continues to grow, and is matched by the range of new formats and distribution models. In this context, our strategy to invest in the quality and integrity of our content, whilst remaining flexible with customers, is delivering steady and predictable performance.

In January 2020, we added F1000 Research to the portfolio, a leader in open research publishing. This complements and extends our programme of investment to strengthen our presence and capabilities in the increasingly important Open Access publishing arena.

After a strong end to 2019, trading remains solid in the early part of 2020, with robust subscription renewals, continued positive momentum in Open Access publishing and a steady performance in our Advanced Learning products. With good forward visibility and a solid pipeline of future activity, we are confident we can once more meet our annual target for underlying revenue growth1 in 2020.

Informa Tech: Research & Data (c.20% of divisional revenue)

Our specialist research and data businesses within Informa Tech were recently relaunched as Omdia, combining the strengths of Ovum, Tractica and Heavy Reading, amongst others, with the IHS Markit TMT portfolio, to offer customers a deep pool of specialist research and analyst expertise.

As Omdia builds its reputation in the market, starts to launch new products and focuses on greater collaboration and cross-marketing with the events brands within Informa Tech, we are targeting steady and consistent improvement in growth.

Events-related Businesses (c.65% of Group Revenue):

Our events businesses generate revenue through a range of activities, including through exhibitors and attendees, as well as sponsorship, digital, data, content and marketing services. All three divisions entered 2020 with positive momentum and a strong pipeline of activity and forward bookings. As the impact of COVID-19 became clear, through our Postponement Programme we began Re-Scheduling Brands, with around 45 large Events now agreed or in the process of agreeing a move to later in 2020.

The strength of our brands and customer relationships put us in a strong position to recover once the current disruption is past, but in 2020 all three events businesses will see an impact from COVID-19.

Informa Markets

Our portfolio of 450+ B2B brands has international reach and breath, with around 40% of revenue in North America, 30% in Asia, 10% from the Middle East and the remainder across Europe and the rest of the world.

Trading in the early part of the year was encouraging, with strong forward bookings and good performances in Pharma & Healthcare (Arab Health) and Construction & Real Estate (World of Concrete), as well as an improving trend in Fashion (Magic).

Informa Connect

Our branded confex and content business continues to benefit from greater focus on its major brands within specialist markets, with our top 50 brands now representing around 50% of divisional revenue.

This improvement in mix and quality was reflected in some good performances in the early months of 2020, including in Global Finance (SuperReturn International) and Life Sciences (BioTech Showcase).

Informa Tech: Events (c.80% of divisional revenue)

The creation of Informa Tech in 2019 saw us establish our first market-based division, bringing together all our B2B brands that serve the Tech market through events, data, media, research and training products.

Unlike in Informa Markets and Informa Connect, our major Events Brands in this business were already weighted towards the second half of the year, including in key segments like Cybersecurity (Black Hat) and Artificial Intelligence (AI Summit). As we reap the benefits of combination and scale, our target is for steady and consistent improvement in growth across the division.

Operational Review

Since 2014, we have been pursuing a growth strategy, built around specialist markets. The 2014-2017 Growth Acceleration Plan ("GAP") saw us reorient the group around customers and invest to improve operational fitness, modernise our platforms and bring fresh talent and experience to the Group. We also started to build a position in the Exhibitions market, Identifying, Acquiring and Integrating a series of international businesses to deepen our connections in specialist markets.

In 2018-2019, through the Accelerated Integration Plan ("AIP"), we combined two highly complementary portfolios that further extended our reach and depth in specialist markets and created a business of scale and quality in fast-growing Asian markets.

Accelerated Integration Plan ("AIP") completed on schedule

Our 12-month programme to combine UBM into Informa completed in June, delivering benefits across six key areas:

· AIP Operating Model: We adapted our divisional structure and operating model to further increase the focus and orientation around specialist markets;

· AIP Leadership & Talent: Teams were combined and leadership structures confirmed to enable the Group to go to market as a single, unified business around the world;

· AIP Operating Synergies: We removed duplication in central functions, simplified systems and structures and rationalised overheads to deliver more than £50m of savings in 2019;

· AIP Fashion GAP: We injected fresh leadership into the Fashion business and developed a three-year plan to return to growth, with the initial focus on operational fitness, venues and scheduling.

· AIP Portfolio Management: We reviewed and divested several portfolios and businesses, increasing our focus on specialist markets where we have strong brands and market positions;

· AIP Brand, Identity & Culture: We retired the UBM brand and launched a brand platform for the enlarged Group, including an updated Group purpose and set of guiding principles.

A number of combination activities remain ongoing, mainly in relation to systems simplification and the consolidation of back office services, but the Group is now operating as one business, with a platform built for further Market Specialisation and future growth.

Board strength and succession

With the AIP complete, there was a natural evolution in the mix and composition of the Group Board of Directors during 2019, as several Non-Executive Directors completed terms on the Board. This led to the appointment of Gill Whitehead as Non-Executive Director in August, bringing significant digital, data and analytics experience to the Group from her time at Google and elsewhere.

In January, we also announced that, having completed a full term at the Group, and with the integration of UBM complete, we had started a process to identify a successor for our Chairman, Derek Mapp. A new Chair is expected to be in place by the end of 2020, following an appropriate handover period.

Market Specialisation and Growth

Our approach to Market Specialisation is seeing us move deeper into a range of specialist markets. The creation of Informa Tech is the best example of this commitment, bringing all our brands serving the Tech market together and investing to further strengthen our position across subject categories and geographies.

More broadly, Market Specialisation sees us focused on a number of areas:

· Expanding our portfolio of B2B Products and Services: As we deepen our knowledge and connections in specialist markets, our relationship with customers is evolving. The closer we get to the fabric of these professional communities, the more we become part of these markets and the greater the opportunity to add value and create opportunities for customers and ourselves.

In Health & Nutrition our portfolio of international brands (Natural Products Expo, Vitafoods, SupplySideWest) spans the supply chain, from ingredients to finished products, giving us depth of knowledge and an extensive network of industry relationships. This depth and proximity is enabling us to sell a broader set of B2B products and services to customers, ranging from digital platforms, to data, research, consulting, media and marketing services. 

We are following this approach in other specialist markets. For example, we have a growing portfolio of B2B services in Pharma and Aviation, amongst others.

· Enhancing our market positions through targeted expansion and partnerships: Our strength in Identifying, Acquiring and Integrating businesses gives us long-term confidence to pursue targeted additions and partnerships that enhance our position in specialist markets. Recent examples include:

· Beauty: We are currently exploring the potential to expand our existing joint venture with Bologne Fiere to enhance and accelerate our position in the international Beauty market. This will build on the strength of our current partnership on Cosmoprof Asia, the international reach and profile of the Cosmoprof brand, and Informa's broader portfolio of brands and businesses serving the Beauty market.

· Open Research: In January we announced the addition of F1000 Research, which offers fully managed, open research publishing services directly to research funders and learned societies. It is also the leading independent open research publishing platform for scientists and academic scholars, enabling the rapid publication of research. It adds new capabilities to our portfolio and further deepens our presence in the growing Open Access publishing arena.

· Technology: In November, we announced a joint venture with Founders Forum, the leading community for entrepreneurs, investors and leaders in the Digital, Media and Technology markets. This has raised the profile of some of our events, such as London Tech Week, benefiting from Founders Forum unique brand and high-profile connections in fast-growth segments.

· Strengthening our operating capabilities: A key feature of GAP was investment in operational fitness, strengthening our capabilities in key areas like product development and customer management, whilst also improving the level of experience and expertise in many central functions.

As we grow and expand, the operational demands on our business continue to evolve. The number of customers and suppliers is increasing, the volume of transactions rising, the number of countries we operate in growing, and our product portfolio is becoming broader and more complex.

Meeting these challenges whilst maintaining flexibility and operational effectiveness, requires investment and discipline. Our ongoing work to consolidate our technology platforms and simplify back-office systems is an important component of this.

We also continue to invest in front office capabilities to stay relevant, ensuring we innovate and adapt our products and platforms to serve the changing needs of customers. This includes key areas of product development, data management, sales effectiveness and marketing automation.

· Advancing our commitment to Sustainability: In 2014, we strengthened our resources in sustainability, with a view to improving sustainable practices across the Group. This led to Informa achieving membership of the Dow Jones Sustainability Index for the first time in 2018. We also received certification from the Science Based Target Initiative for committing to do our part to meet the goals of the 2015 Paris Agreement to combat climate change.

Therefore today, Informa is launching FasterForward, a five-year plan to further enhance Informa's sustainability practices, with a goal to become a Champion of Sustainability within our own business and across the specialist markets we serve.

This sees us commit to move Faster to Zero, with a goal to be carbon neutral across our business and products by 2025 and net zero carbon and zero waste by 2030 or earlier.

Across our markets, we are committing to put Sustainability Inside all our brands by 2025 or sooner, ensuring our platforms for sharing knowledge and connections are used to support sustainable development and identify solutions to key issues in every specialist market we serve.

Finally, we also recognise that our products deliver efficiencies for customers, from knowledge transfer and distribution, to idea exchange, decision making and investment, sourcing suppliers, launching products, business meetings and travel. For example, our events convene an industry or professional community in one location to meet their shared goals, saving attendees multiple flights to multiple locations to meet customers individually. By focusing on improving the efficiencies we deliver, we can help industries, companies and individuals improve their own impact on the world. Our role as an Impact Multiplier, sees us target saving our customers more carbon than we emit ourselves as a company by 2025.

· Improving our Financial Fitness: Following the completion of the AIP, the enlarged Group delivered further consistent growth, with high levels of cash conversion, leading to strong free cash generation. In 2019, free cash flow1 was £722m, up from just £237m in 2014, providing significant flexibility for investment, expansion and returns.

This cashflow underpins the 7% increase in dividends per share we have proposed for 2019, which extends our track record of consistent dividend returns to shareholders over the past six years.

It also underpins a strong and flexible balance sheet, helping us to meet our leverage target for 2019, with net debt to EBITDA ending the year at 2.5 times.

In October, we strengthened our balance sheet further through a €500m bond, lowering our cost of debt and allowing us to repay the $350m bond due to mature in November 2020 and $185m of private placement debt due to mature in December 2020.

More recently, in 2020, we secured a surplus, committed credit facility of £750m which will provide full flexibility through the current period of market volatility.

Following the pro-active management of our financing structure, the Group's average maturity on its drawn borrowings is 5.6 years, with no borrowing maturities until 2022, providing attractive and secure long-term financing.

Divisional Trading Review

In 2019, the Informa Group's reported revenues increased +22.0%, reflecting attractive underlying growth1 (+3.5%), supported by the benefits of targeted expansion, including a full year of UBM (+15.3%), as well as a small phasing benefit (+0.2%) and positive currency tailwinds (+3.0%). Adjusted operating profit2 followed a similar pattern, with underlying growth1 of +6.5% reflecting the effective delivery of combination synergies, with over £50m realised in-year. Statutory operating profit increased with the full year contribution of UBM.

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

Informa Markets creates platforms for industries and specialist markets to trade, innovate and grow. Through more than 450 international B2B brands, we provide opportunities to engage, experience and do business via face-to-face exhibitions, specialist digital content and actionable data solutions.

In 2019, Informa Markets accounted for 50.2% of Group Revenue and 52.9% of Adjusted Operating Profit. This included revenue of £101m from biennial events.

Increased international reach and the continuing benefits of market specialisation delivered further good underlying growth in 2019, with particular strength in Health & Nutrition (Natural Products Expo West), Healthcare & Pharma (CPhI Worldwide) and Hospitality & Food (Hotelex). This strong performance included two market-specific, in-year impacts in Dubai and Hong Kong, as well as the managed programme of change within Fashion, underlining the strength in depth across our portfolio.

In total, the AIP delivered more than £50m of synergies in 2019, the majority falling within Informa Markets. At a reported level, divisional margins were broadly consistent at 34%, with the benefit of synergies offset by a full year of lower margin UBM businesses, which were only included for six months in 2018.

Informa Connect is our Content and Connectivity business, organising content-driven events, training and programmes, that provide platforms for professional communities to meet, network and share knowledge. It has 500+ major brands, with particular strengths in Biotech & Pharma and Finance & Investment.

In 2019, Informa Connect accounted for 9.5% of Group Revenue and 5.1% of Adjusted Operating Profit.

Our focus on major brands in specialist markets delivered further improvement in underlying growth in 2019, with strong performances in Biotech & Pharma (Bio-Europe) and Finance & Investment (SuperReturn).

As part of the AIP, we sold the Life Sciences Media Portfolio in January, lowering reported growth. We also absorbed our portfolio of Real Estate and Consumer Brands in Canada into Informa Connect, effective 1st January 2019, with 2018 figures restated to reflect its inclusion. Increased investment in this business, combined with the overall mix of profits in 2019, contributed to lower underlying divisional profit in the year.

Informa Tech informs, educates and connects specialist Technology communities around the world. Through more than 100 B2B brands, we provide specialist intelligence and knowledge, and build platforms for customers to engage, learn and be inspired to create a better digital world.

In 2019, Informa Tech accounted for 8.9% of Group Revenue and 7.5% of Adjusted Operating Profit.

In a year of combination and creation, Informa Tech performed steadily, with strong performances in Security (Black Hat) and Artificial Intelligence (AI Summit), amongst others. The priority was to combine teams effectively, including those who joined with the IHS Markit TMT Portfolio in August, and establish the brand in the market. In February 2020, we further enhanced our proposition through the launch of Omdia, a new business combining all our specialist research and data businesses, including the IHS Markit TMT Portfolio.

Reported growth and operating margins reflected the full year impact of UBM and related synergies.

Informa Intelligence provides specialist data, intelligence and insight to businesses, helping to make better decisions, gain competitive advantage and enhance return on investment. Through a range of specialist B2B brands, we provide intelligence to niche communities, including in Pharma, Finance and Maritime.

In 2019, Informa Intelligence accounted for 12.1% of Group Revenue and 11.2% of Adjusted Operating Profit.

Increased focus around our major brands in Pharma (Citeline), Retail Banking (FBX) and Maritime (Lloyd's List) delivered further steady improvement in underlying growth, underpinned by strong subscription renewals, steady new business activity and a solid order book for project consulting.

The divestiture of our Agribusiness and Industrial portfolios during the year adds further focus and momentum going forward. These disposals are reflected in the reported revenue decline in 2019.

Taylor & Francis publishes peer-reviewed scholarly research and specialist advanced learning products across subjects within Humanities & Social Sciences and Science, Technology and Medicine. It is recognised internationally through its major publishing brands, including Taylor & Francis, Routledge and CRC Press.

In 2019, Taylor & Francis accounted for 19.3% of Group Revenue and 23.3% of Adjusted Operating Profit.

Our flexible approach, balancing customer needs with maintaining the quality and integrity of our content, continues to deliver results, with robust subscription renewals, steady performance in advanced learning and strong Open Access momentum, which was further buoyed by the recent addition of F1000 Research.

Higher operating margins in 2019 reflect the benefit of positive currency tailwinds on statutory and adjusted operating profit, as well as Taylor & Francis' share of central operating efficiencies delivered by the AIP.

Financial Review

Income Statement

In 2019, Informa delivered a further year of increased revenue and profit on an underlying, adjusted and statutory basis.

Statutory income statement results

Statutory revenue increased by 22.0% to £2,890.3m, with growth including the full year benefit of the UBM combination, the business's underlying growth and favourable currency benefits. In 2019, there was a first full year of contribution from UBM, compared to just six and a half months contribution in 2018.

Statutory operating profit increased by 48.2% to £538.1m, reflecting a £201.0m growth in adjusted operating profit. This also reflects UBM, underlying business growth and favourable currency impacts, and partly offset by a £26.1m increase in adjusting items charged to operating profit. These were largely related to the UBM acquisition.

Statutory net finance costs rose £41.8m to £124.0m and comprised £134.1m of finance costs and £10.1m of investment income. The increase in finance costs reflects the full year impact of the additional £1.2bn debt taken on to finance the UBM addition in June 2018, the adverse currency impact on our largely USD-denominated debt and the early repayment of borrowings to refinance and take advantage of favourable market conditions.

Statutory profit before tax increased by 13.0% to £318.7m, reflecting the £174.9m increase in operating profit, partly offset by the £96.5m increase in loss on disposals and the £41.8m increase in net finance costs.

The statutory tax charge for the year was £72.6m, representing an increase of £12.1m compared to 2018. This increase was due to the larger profit before tax and a higher statutory effective tax rate of 22.8% compared to 21.4% in 2018.

Statutory diluted earnings per share decreased by 8.6% to 18.0p (2018: 19.7p). This reflected a £174.9m increase in operating profit in the year, offset by four main factors: the £41.8m increase in finance costs, the £96.5m increase in losses on disposals, a £12.1m increase in the tax charge and a 198.5m increase in the weighted average number of shares, reflecting the full year effect of the shares issued in 2018 to part-fund the combination.

Measurement and Adjustments

In addition to statutory results, adjusted results are prepared for the income statement. These include adjusted operating profit, adjusted diluted earnings per share and underlying measures and a full definition of these metrics can be found in the glossary of terms on page 48. The Divisional table provides a reconciliation between statutory operating profit and adjusted operating profit by division.

Underlying revenue and adjusted operating profit growth on an underlying basis are reconciled to reported growth as follows.

Adjusting Items

The items below have been excluded from adjusted results. The total charge against operating profit for adjusting items rose to £395.0m in 2019 (2018: £368.9m), mainly due to the increase in amortisation of acquired intangible assets following the UBM combination.

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

The £68.8m increase in intangible asset amortisation in 2019 primarily reflects an additional five and half months of amortisation of acquired intangibles relating to the UBM acquisition, which totalled £60.5m.

Intangible amortisation relates to book lists and journal titles, acquired databases, customer and attendee relationships and brands related to exhibitions, events and conferences. Intangible asset amortisation arising from software assets and product development is not treated as an adjusting item and so is not included in the table, as it is treated as an ordinary cost in the calculation of operating profit.

Integration costs of £56.4m included £42.4m relating to acquiring UBM, and consisted mainly of process, property and colleague-related reorganisation costs. This brings the cumulative UBM integration costs to £81.9m to date. The integration of other acquisitions, including the IHS Markit TMT research and intelligence portfolio, amounted to £14.0m. 

Net finance costs of £12.3m largely relate to incremental finance costs associated with the early repayment of borrowings in 2019, allowing us to take advantage of favourable market conditions to secure long-term refinancing.

The loss on disposal of £95.4m included a £35.6m profit relating to the disposal of the Agribusiness Intelligence portfolio on 30 June 2019 and a £120.6m loss associated with selling the Industry & Infrastructure media brands portfolio on 9 October 2019.

Informa's updated Divisional structure was launched at the start of 2019 and included new divisional names and the launch of a fifth operating Division, Informa Tech. All five operating Divisions posted underlying revenue growth in 2019, with Group underlying revenue growth of 3.5% and underlying profit growth of 6.5%, as shown in the following table.

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

Adjusted Net Finance Costs

Adjusted net finance costs, principally consisting of interest costs on US private placement loan notes, bond and bank borrowings, increased by £29.3m to £111.7m. The increase principally reflected the full year effect of higher average debt levels following the addition of UBM. This increased net debt by £1,211.9m, reflecting the cash consideration of £643.5m and £568.4m of net debt acquired with the business.

In addition, £3.1m of increased financing related to adverse currency movements, with the remainder largely related to IFRS 16 net finance costs of £13.5m.

This reflects the inclusion in net debt of leases following the adoption of IFRS 16 Leases on 1 January 2019 (£329.2m net IFRS 16 finance lease debt added on 1 January 2019). The reconciliation of adjusted net finance costs to the statutory finance costs and investment income is as follows:

Taxation

Approach to tax

The Group continues to recognise that taxes paid are part of the economic benefit created for the societies in which we operate, and that a fair and effective tax system is in the interests of tax-payers and society at large. We aim to comply with tax laws and regulations everywhere the Group does business. Informa has open and constructive working relationships with tax authorities worldwide and our approach balances the interests of stakeholders including shareholders, governments, colleagues and the communities in which we operate.

The Group's effective tax rate reflects the blend of tax rates and profits in the jurisdictions in which we operate. In 2019, the effective tax rate was 19.0% (2018: 17.9%).

The calculation of the effective tax rate is as follows.

Tax paymentsDuring 2019, the Group paid £100.6m (2018: £82.4m) of corporation and similar taxes on profits, with the increase largely reflecting the full year of tax payments relating to UBM.

A breakdown of the main geographies in which the Group paid tax is as follows:

The reconciliation of the adjusted tax charge to cash taxes paid is as follows:

At the end of 2019, the deferred tax asset relating to US tax losses was £69.2m (2018: £106.0m), which is expected to be utilised against future US profits.

Goodwill is not amortised, and as a result, there is no charge to adjusting items for goodwill amortisation. However, there can be an allowable tax benefit for certain goodwill amortisation in the US and elsewhere. Where this benefit arises, it reduces the tax charge on adjusted profits.

The amortisation of intangible assets is considered an adjusting item. Therefore, the £14.4m (2018: £16.7m) of current tax credits taken in respect of the amortisation of intangible assets is also treated as an adjusting item and is included in the current tax credits in respect of adjusting items noted above.

Tax contribution

The Group's total tax contribution, which comprises all material taxes paid to, and collected on behalf of, governments globally was £375.2m in 2019 (2018: £316.9m). The geographical split of taxes paid by our businesses was as follows:

In addition to the above, in 2019 we collected taxes on behalf of governments (e.g. employee taxes and sales taxes) amounting to £209.9m (2018: £177.8m).  

Earnings Per Share

Informa delivered an increase in adjusted earnings per share (EPS) of 4.3% to 51.3p (2018: 49.2p). This reflects a 24.0% increase in adjusted earnings to £644.7m (2018: £519.8m), more than offsetting the 18.8% increase in the weighted average number of shares.

Reconciliation of Adjusted profit after tax and adjusted diluted earnings per share is as follows:

If we were to reflect a full 12 months ownership of UBM, related finance costs and share issuance, and remove the impact of owning the Life Sciences media brands portfolio which was sold in January 2019, pro-forma adjusted diluted EPS grew by 16.1% from 2018 (51.3p in 2019 compared to 2018 pro-forma amount of 44.2p, see table below). See the glossary of terms for a full definition of pro-forma diluted EPS measures.

Dividends

The Group's strong cash conversion and free cash flow generation supported further growth in dividends in 2019. The Board has proposed a final dividend of 15.95p per share (2018: 14.85p per share) representing a 7.4% increase on the final dividend in the prior year.

The final dividend is scheduled to be paid on 10 July 2020 to ordinary shareholders registered at the close of business on 19 June 2020. This will result in total dividends for the year of 23.5p (2018: 21.9p), a 7.3% year-in-year increase.

The growth in earnings in 2019 means dividend cover (see glossary of terms for definition) was 2.2 times (2018 2.2 times), being adjusted diluted EPS of 51.3p (2018: 49.2p) divided by total dividends per share of 23.5p (2018: 21.90p). Our dividend payout ratio was 45.8%, being total dividends per share of 23.5p divided by adjusted EPS of 51.3p.

In 2019 £280.0m (2018: £201.9m) of dividends were paid to external shareholders and £17.5m (2018: £8.6m) in dividends were paid to non-controlling interests.

Currency Impact

One of the Group's strengths is its international reach and balance, with businesses in most major regions. This means the Group generates revenues and costs in a mixture of currencies, with particular exposure to the US Dollar and some exposure to the Euro and the Chinese Renminbi.

In 2019, approximately 59% (2018: 61%) of Group revenue was received in USD or currencies pegged to USD, with 7% (2018: 6%) received in Euro and around 8% (2018: 7%) in Chinese Renminbi.

Similarly, we incurred approximately 53% (2018: 53%) of our costs in USD or currencies pegged to USD, with 3% (2018: 2%) in Euro and around 7% (2018: 6%) in Chinese Renminbi.

Each one cent ($0.01) movement in the USD to GBP exchange rate has a circa £13m (2018: £11m) impact on annual revenue, and a circa £5m (2018: c£4m) impact on annual adjusted operating profit.

For the purposes of testing Informa's leverage in accordance with the Group's bank covenants, both profit and net debt are translated using the average exchange rate during the relevant period.

The following rates versus GBP were applied during the period:

Free Cash Flow

Cash generation remains a key priority and focus for the Group, providing the funds and flexibility for paying down debt, future organic and inorganic investment, and consistent shareholder returns. Our businesses typically convert adjusted operating profit into cash at an attractive rate, reflecting the relatively low capital intensity of the Group.

The following table reconciles statutory operating profit to free cash flow. See glossary of terms for the definition of free cash flow.

1 Right of use assets arise on the adoption of IFRS16 leases from 1 January 2019.

2 Adjusted EBITDA represents adjusted operating profit before interest, tax, and non-cash items including depreciation and amortisation

3 Working capital movement excludes movements on restructuring, reorganisation, acquisition and integration accruals

4 Amount includes £13.5m of make-whole interest related to the early refinancing of bond and private placement debt  

Our focus on cash generation led to a consistently strong operating cash conversion in 2019 of 103.5% (2018: 91.2%).

The calculation of operating and free cash flow conversion is as follows:

Net capital expenditure was £49.8m (2018: £59.4m), equivalent to 1.7% of 2019 revenue (2018 2.5%). We expect full year 2020 capital expenditure to be around 3% of revenue. 

The working capital outflow of £13.6m was a £48.7m improvement on the £62.3m outflow in 2018. The smaller outflow in 2019 reflects a more normal performance after the prior year was impacted by the timing of the combination with UBM part-way through 2018.

Net cash interest payments were £132.8m, this was a £68.6m increase on the prior year, largely reflecting the full year effect of the additional debt to acquire UBM.

The following table reconciles net cash inflow from operating activities, as shown in the consolidated cash flow statement to free cash flow:

Net cash inflow from operating activities increased by £233.3m to £719.6m, principally driven by the growth in adjusted operating profit.

The following table reconciles cash generated by operations, as shown in the consolidated cash flow statement, to operating cash flow shown in the free cash flow table above:

The following table reconciles free cash flow to net funds flow and net debt, with net debt reducing by £24.3m to £2,657.6m during the year. Net debt increased by £329.2m due to the introduction of IFRS 16, partly offset by favourable movement in the USD to GBP exchange rates. As the majority of our net debt is US dollar-denominated or swapped into USD (86.5% of net debt), the weakening of the USD against GBP reduced our net debt by £87.4m. 

Financing and Leverage

The Group's consistent growth, high levels of cash conversion and strong free cash generation provide significant flexibility for investment, expansion and returns. This underpins our strong and flexible balance sheet, helping us to meet our leverage target for 2019, with net debt to EBITDA ending the year at 2.5 times. This equated to net debt of £2.7bn or £2.4bn on a pre-IFRS 16 basis at 31 December 2019 (2018: £2.7bn), with our robust and flexible financing framework providing unutilised committed financing facilities of £843.1m (2018: £776.5m).

On 15 February 2019, the Group negotiated a new revolving credit facility (RCF) with two tranches: £600m for a five-year term to February 2024 and £300m for a three-year term to February 2022. On 24 January 2020 both tranches of RCF were extended by one further year, to February 2025 and February 2023 respectively.

On 22 October 2019 the Group took advantage of favourable financing market conditions to issue €500.0m of new EMTN loan notes, with maturities of 8 years and 6 months (maturing on 22 April 2028). These loan notes were swapped into USD and used to prepay bond and private placement debt that was due to mature in 2020. In November 2019 we repaid the $350m bond due to mature in November 2020 and in December 2020, we also repaid $185m of private placement debt due to mature in December 2020. On 24 February 2020 we made an early repayment to the holders of the remaining $200.5m private placement debt maturing in December 2020.

In addition, in 2020, we secured a surplus, committed credit facility of £750m which will provide full flexibility through the current period of market volatility.

Following the pro-active management of our financing structure, the Group's average maturity on our drawn borrowings is currently 5.6 years (5.5 years as at 31 December 2019), with no borrowing maturities until June 2022.

There are no financial covenants on our debt facilities other than for our US private placement loan notes in issue at 31 December 2019, where the principal financial covenants are a maximum leverage ratio of 3.5 times and a minimum interest cover of 4.0 times, tested semi-annually.

At 31 December 2019, the leverage ratio was 2.5 times (31 December 2018: 2.9 times), calculated in accordance with our note purchase agreements, with net debt on a pre-IFRS 16 basis and using average exchange rates to translate net debt and including a full year's trading for acquisitions completed during 2019. The interest cover ratio was 9.4 times (31 December 2018: 9.5 times). See glossary of terms for the definition of leverage ratio and interest cover.

The calculation of the leverage ratio is as follows:

1 Refer to Glossary for details of the nature of debt covenant adjustments to EBITDA and Net Debt for leverage ratio

The calculation of the interest cover is as follows:

1 Refer to Glossary for details of the nature of debt covenant adjustments to EBITDA for interest cover

Corporate Development

Informa has a proven track record in creating value through identifying, executing and integrating complementary businesses effectively into the Group, and we continue to target attractive businesses in specialist markets. In 2019, cash invested in acquisitions was £311.1m (2018: £697.8m), with £232.1m relating to acquisitions (2018: £623.6m), £46.8m (2018: £74.2m) relating to acquisition and integration costs and £32.2m relating to the cash settlement on the exercise of an option relating to minority interests in certain Fashion shows in the US. Net proceeds from disposals amounted to £179.3m (2018: £7.4m).

AcquisitionsOn 4 January 2019 the Group acquired the Centre for Asia Pacific Aviation Pty Ltd (CAPA), for cash consideration of £15.0m (AUD 24.8m), net of cash acquired. The business forms part of the specialist Aviation portfolio in Informa Markets.

On 1 August 2019 the Group acquired the TMT Research and Intelligence Portfolio from IHS Markit for £123.3m consideration. This business forms part of Informa Tech and its newly launched Omdia business.

DisposalsThrough the Progressive Portfolio Management programme within the AIP, the Group made several divestitures during 2019, leaving us more focused on specialist markets with the strongest future growth prospects for our brands.

This included the sale of the Life Sciences Media Brands Portfolio, completed on 31 January 2019, for a consideration of £79.3m, with £67.3m received in cash and £12.0m of deferred consideration. The profit on disposal was £10.8m. 

On 30 June 2019 we completed the sale of the Agribusiness Intelligence Portfolio within Informa Intelligence to IHS Markit, for cash consideration of £102.8m. This completed on 30 June 2019, with a profit on disposal of £35.6m.

On 9 October 2019 the Group completed the divestiture of a portfolio of Industry & Infrastructure Media Brands for a consideration of £42.4m, recording a loss on disposal of £120.6m.

On 15 November 2019 the Group sold a small portfolio of non-core US event brands, which were part of Informa Markets. The consideration was £6.6m, and the loss on disposal was £13.3m. 

Pensions

The Group continues to meet all commitments to its pension schemes, which consist of six defined benefit schemes. At 31 December 2019, the Group had a net pension liability of £30.1m (31 December 2018: £33.0m), represented by a pension deficit of £35.0m (31 December 2018: £37.5m) and a pension surplus of £4.9m (31 December 2018: £4.5m). Gross liabilities were £730.8m at 31 December 2019 (31 December 2018: £679.2m).

The net deficit remains manageable and relatively small compared to the size of the Group's balance sheet. All schemes are closed to future accrual and the Group expects to make £4.9m of employer deficit recovery payments during 2020.

Restatement of 2018 results

The segmental income statement for the year ended 31 December 2018 has been reclassified to align with the updated divisional structure effective from 1 January 2019.

In 2019 we completed the IFRS 3 fair value exercise in relation to the 15 June 2018 acquisition of UBM plc.

New accounting standards

The only material financial impact from new accounting standards in 2019 is from the adoption of IFRS 16 Leases on 1 January 2019.

IFRS 16 Leases, replaces the existing leasing standard, IAS 17 Leases. It treats all leases in a consistent way, eliminating the distinction between operating and finance leases, and has required lessees to recognise all leases on the balance sheet, except for low value leases and those with a term of less than 12 months. The most significant effect of the new standard has been the recognition in the Balance Sheet of right of use assets and lease liabilities for leases previously categorised as operating leases.

The new standard also changes the nature of expenses related to those leases, replacing the straight-line operating lease expense with a depreciation charge for the right of use lease asset (included within operating costs) and an interest expense on the lease liability (included within finance costs).

There are several practical expedients and exemptions available on the adoption of IFRS 16. The Group has elected to apply the modified retrospective method of implementation where there is no restatement of the comparative period and using the practical expedient where, at the adoption date, right-of-use lease assets are set to equal the lease liabilities. The Group has excluded leases of low-value assets and short-term leases, with a duration of less than 12 months from the application of IFRS 16, with payments for these leases continuing to be expensed directly to the Income Statement as operating leases. The major classes of leases impacted by the new standard are property and event space leases.

At 1 January 2019 the adoption of IFRS 16 resulted in the Group recognising right-of-use assets of £295.3m, finance lease receivables of £14.4m and lease liabilities of £343.6m. There is also a reduction of £2.7m for prepaid rental amounts which are netted against the right-of-use assets, a reduction of £41.7m to liabilities for property provisions and deferred rent-free amounts netted against the right of use assets, and an increase in deferred tax liabilities of £1.0m.

The impact of IFRS 16 for the year ended 31 December 2019 increases adjusted operating profit by £6.5m, reflecting the removal of IAS 17 operating lease expenses of £39.6m and replacing this with IFRS 16 depreciation of £33.1m. Adjusted profit before tax decreases by £7.0m, reflecting the adjusted operating profit change together with the IFRS 16 net finance expense of £13.5m (£14.3m finance costs and £0.8m investment income), and the adjusted tax impact of the change of £1.3m, resulting in adjusted profit after tax decreasing by £5.7m and a decrease to 2019 adjusted diluted earnings per share of 0.45p.

The impact on 2019 statutory profit before tax was a decrease of £11.6m reflecting the £7.0m adjusted profit before tax decrease and the impairment of right of use assets of £4.6m.

In the Consolidated Cash Flow Statement there is no impact on the total change in cash and cash equivalents. Under IFRS 16 the repayment of lease liabilities is included in financing activities and interest on IFRS 16 leases is shown in operating activities, whereas under IAS 17 lease rental payments were in operating activities. The impact of IFRS 16 on the 2019 Consolidated Cash Flow Statement increases the cash inflow from operations by £39.6m and increases net interest paid by £13.5m.

Consolidated Income Statement

For the year ended 31 December 2019

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2019

12018 restated for finalisation of UBM acquisition accounting (see Note 3)  

Consolidated Statement of Changes in Equity

For the year ended 31 December 2019

12018 restated for finalisation of UBM acquisition accounting (see Note 3)

Consolidated Balance Sheet

As at 31 December 2019

12018 restated for finalisation of UBM acquisition accounting and held for sale reclassifications (see Note 3)

These financial statements were approved by the Board of Directors and authorised for issue on 9 March 2020 and were signed on its behalf by

Stephen A. Carter CBE Gareth Wright

Group Chief Executive Group Finance Director

Consolidated Cash Flow Statement

Reconciliation of Movement in Net Debt

Notes to the Full Year Results

For the year ended 31 December 2019

1. General information 

Informa PLC (the "Company") is a company incorporated in the United Kingdom under the Companies Act 2006 and is listed on the London Stock Exchange. The Company is a public company limited by shares and is registered in England and Wales with registration number 08860726. The address of the registered office is 5 Howick Place, London, SW1P 1WG.

The Consolidated Financial Statements as at 31 December 2019 and for the year then ended comprise those of the Company and its subsidiaries and its interests in joint ventures and associates (together referred to as "the Group").

These financial statements are presented in pounds sterling ("GBP"), the functional currency of the Parent Company, Informa PLC.

2. Basis of preparation

The financial information for the year ended 31 December 2019 does not constitute the statutory financial statements for that year, but is derived from those audited financial statements for the year ended 31 December 2019 which will be published on www.informa.com. While the financial information in these Full Year Results has been prepared in accordance with International Financial Reporting Standards (IFRS), these results do not in isolation contain sufficient information to comply with IFRS. Those financial statements have not yet been delivered to the Registrar of Companies, but include the auditor's report which was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The Directors have, at the time of approving the Consolidated Financial Statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the Consolidated Financial Statements.

The accounting policies, significant judgements and key sources of estimation adopted in the preparation of the financial information are consistent with those applied by the Group in its Consolidated Financial Statements for the year ended 31 December 2018, subject to new accounting standards, and are disclosed in full in the audited financial statements for the year ended 31 December 2019 which will be published on www.informa.com.

3. Restatement

Following the finalisation of the accounting for the UBM acquisition under IFRS 3 Business Combinations, there was no restatement to the Consolidated Income Statement for the year ended 31 December 2018 except for segmental results being restated to reflect the new operating structure that was effective from 1 January 2019.

The Consolidated Balance Sheet as at 31 December 2018 has been restated in relation to the UBM acquisition. One year on from the acquisition of UBM, as is required, we have completed the finalisation of the fair value of the acquisition balance sheet, resulting in the following true-ups and minor adjustments: an increase to Goodwill of £99.8m, an adjustment of £67m to reflect the fair value of options related to certain minority interests, a decrease of £18.2m to Intangible Assets, a decrease to Translation Reserves of £11.4m, a reduction to Trade and Other Receivables of £3.5m, a decrease to Deferred Tax Liabilities of £0.6m and a decrease to Property and Equipment of £0.3m.

There was also a restatement for adjustments to the held for sale amounts for the Life Sciences business with corresponding adjustments to other line items in the balance sheet, with no impact on total consolidated assets or liabilities. Assets classified as held for sale reduced by £0.4m, and liabilities directly associated with assets classified as held for sale reduced by £2.2m, with net assets relating to held for sale increasing by £1.8m to £65.2m.

4. Revenue

An analysis of the Group's revenue by type is as follows:

Year ended 31 December 2019

Year ended 31 December 20181

1 2018 restated for restructuring of divisions and the alignment of UBM revenue types to Informa Groups revenue types (see Note 3)

5. Business Segments

The Group has identified reportable segments based on financial information used by the Directors in allocating resources and making strategic decisions. We consider the chief operating decision maker to be the Executive Directors.

The Group's five identified reportable segments under IFRS 8 Operating Segments are as described in the Strategic Report.

There is no difference between the group's operating segments and the group's reportable segments.

Segment revenue and results

The Group's primary internal income statement performance measures for business segments are revenue and adjusted operating profit. A reconciliation of adjusted operating profit to statutory operating profit and profit before tax is below:

Year ended 31 December 2019