Informa Regulatory News (INF)

Informa PLC Press Release

21 September 2020

2020 Half-Year Results and COVID-19 Action Plan

Informa (LSE: INF.L), the Information Services, Advanced Learning, B2B Exhibitions and Events Group today announced its financial results for the six-months ended 30 June 2020, alongside an update on its ongoing actions to ensure Stability and Security through 2021, amid continuing COVID-19 disruption.

· H1 2020 Results: Adjusted Operating Profit1 of £118.6m (H1 2019: £435.7m) on revenues of £814.4m (H1 2019: £1,407.6m), amid significant pandemic-impact on physical Events business; COVID-19 non-cash impairments and exceptional costs impact statutory pre-tax loss of £739.9m;

· Data & Depth: Continued strong demand for specialist data and intelligence helping offset COVID-19 disruption to physical Events, with solid performance in Subscriptions businesses and specialist B2B brands, underpinned by Informa's geographic breadth and depth of customer relationships;

· Recovery & Return: Physical Events business in Mainland China back to operating capability, with 20 further B2B events scheduled before year-end, highlighting recovery potential as permissions return and confidence rebuilds; elsewhere, customer engagement remains high with continued commitment to forward bookings and growing participation in virtual events;

· COVID-19 Action Plan: Group announces next stage of its ongoing COVID-19 Action Plan to support Colleagues, stabilise the business and secure baseline full-year revenues of c.£1.7bn/£1.7bn-, including extending The Postponement Programme to mid/late Spring 2021 and expansion of the Cost Management Programme to deliver more than £600m+ of savings by year-end;

· 2021 Cashflow Positive: Combination of lower costs, more efficient financing and effective cash management will secure positive monthly cashflow position by January 2021, even assuming no physical events activity other than shows within Mainland China and outdoor events.

· Balance sheet & Financing Security: Current liquidity of £2.8bn, with intention to renegotiate or repay US private placement notes, combined with planned issue of around £500m equivalent Euro Bonds, extending drawn debt maturity through to 2023. 

H1 2020 Key Highlights

Financial results reflect the impact of COVID-19 and Informa's effective response through its Postponement Programme, Cost Management Programme and financing activities:

· Statutory Group Revenue: £814.4m (H1 2019: £1,407.6m), reflecting robust performance by Subscriptions-led businesses and good start to the year by Events-led businesses, before COVID-19 disruption and launch of major programme to reschedule events;

· Adjusted Operating Profit1: £118.6m (H1 2019: £435.7m), with close to £300m of direct and indirect cost savings in H1;

· Statutory Operating Loss: First-half loss of £739.9m (H1 2019 profit: £248.3m), reflecting lower revenue, intangible amortisation (£148.2m), COVID-19 non-cash impairments (£592.9m) and exceptional costs (£43.4m);

· Free Cash Flow1: £71.3m (H1 2019: £306.4m), with resilient cash conversion, reflecting effective cost management and cash controls, with low levels of customer refunds in H1;

· Net Debt: £1947.9m (H1 2019: £2846.0m), with a leverage ratio of 2.3x (H1 2019: 2.7x), supported by positive free cash flow, equity raise and retained cash facilities;

· Chairman Succession: In March, the Chairman's succession process was paused to enable the Group to focus on the Stability and Security of Informa through 2020/2021. The Group now has a clear path into and through 2021 and, therefore, the Chairman succession process, which was previously well progressed, has resumed with the aim of concluding by year-end, with a detailed update at the Group's Nine-Month Trading Statement in early November.

COVID-19 Action Plan

Following the delayed recovery and return to business in North America and EMEA, Informa is moving to the next stage of its COVID-19 Action Plan:

· Postponement Programme Extended to Spring 2021: Programme to reschedule physical events to later dates has been extended to mid-late Spring 2021, maximising the revenue opportunity from physical events, supported by increasing commitment to and experience in virtual events;

· Effective Cost Management: Move to the next stage of the Group's Cost Management Programme, with around £400m direct savings to adjusted operating profit and £200m+ annualised indirect savings by year-end, supported by a Voluntary Severance Programme, a 2020/21 Sabbatical Programme, a Balanced Working Programme and targeted compulsory redundancies largely in North America and EMEA, aligning the 2021 cost base to the revenue outlook;

· 2021 Cashflow Positive: Strength of B2B brands and focus on cash management reflected in customer commitment to forward bookings, with refunds less than 15% of Events gross cash collections. Combined with additional cost measures and increased financing efficiency, delivering positive monthly cashflows in January 2021, even if physical events activity remains limited to domestic trade shows in Mainland China and outdoor events;

· Ongoing Colleague Support: Further measures to support the safety and wellbeing of Colleagues, including increased working flexibility though the introduction of the Balanced Working Model;

· Further Financing Flexibility:  Current liquidity of £2.8bn and average debt maturity of 5.4 years. Intention to renegotiate or repay US private placement notes, removing point covenant, combined with planned issue of around £500m equivalent Euro-bonds, extending drawn debt maturity to 2023.

1In this report we refer to non-statutory measures including underlying results, as defined in the Financial Review on page 8 and Glossary on page 58.

H1 2020 Financial Summary

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 new accounting standards and accounting policy changes, and the effects of currency. 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 such adjustments. Alternative performance measures are detailed 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 4 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.

Trading Outlook

The demand for specialist knowledge and information remains resilient. This is reflected in solid trading and good visibility in the majority of Informa's Subscription-led businesses and high levels of engagement and activity across the Group's other digital content, media, marketing services and virtual event businesses.

The strength of these businesses, combined with the quality of Informa's other B2B brands, broad geographic reach and strong customer relationships, is providing stability and security in the face of the significant, ongoing impact of COVID-19 on the Group's physical events portfolio.

The COVID-19 pandemic continues to have a more volatile and far-reaching impact around the world than initially predicted. Over recent months, whilst Government control restrictions have been gradually relaxed in many countries, more often than not this has been followed by a resurgence in infections and an increasing cycle of on/off targeted local lockdowns and extended travel restrictions.

This includes in North America, Informa's largest market for physical events, and also across EMEA. We had previously anticipated events in these regions would gradually resume through the summer, before picking up from September. However, this has not been possible, leading to £1bn+ of budgeted physical events revenue being cancelled this year and more than £450m since June.

By contrast, our physical events business in Mainland China is now back to operating capability and, combined with growth in virtual events, specialist media and marketing services, is helping to offset some of the weakness in North America. Full year Group revenue is now expected to be in the range of c.£1.7bn/£1.7bn-, with Informa tracking closer to the Vigilant Scenario outlined in our April and June updates. As a consequence, we have moved to the next stage of our COVID-19 Action Plan, including the delivery of £600m+ cost savings to adjusted operating profit in 2020, with direct savings of around £400m and £200m+ annualised indirect savings by year-end.

Subscription-led Businesses (c.54% of H1 Revenue):

Our portfolio of subscriptions-led, specialist knowledge and information businesses remain resilient, underpinned by forward-booked subscriptions, with strong visibility and attractive cash flows.

Taylor & Francis

Taylor & Francis continues to perform well. In Research Publishing, consistent levels of growth are underpinned by high renewal rates for journal subscriptions and further positive momentum across open access. The outcome for 2020 is now largely secure and focus is turning to 2021, as the new university year approaches and the annual subscription renewal season gets underway.

Advanced Learning also remains a robust business and whilst it has seen some impact from COVID-19 on its supply chain and US retail business, trading has started to return to more typical patterns over recent months.

Informa Intelligence

Our B2B Information business continues to deliver predictable underlying growth, reflecting the quality of its specialist intelligence, valuable data and targeted customer solutions.

Pharma Intelligence is trading particularly strongly. Following recent investment to upgrade our technology platforms, we are delivering greater functionality to our customers through enhanced APIs and workflow tools, and this is reaping benefits in a market currently buoyant with activity.

As we approach a key period for subscriptions, overall momentum is good, with renewal rates high, new business pipelines strong and annualised contract values positive. This gives us confidence we will deliver further resilient growth in the second half of the year.

Informa Tech: Research & Data

Omdia is progressively establishing its brand with customers, supported by a steady flow of new research and enhanced data products. As its reputation grows, we continue to target a gradual improvement in performance and growth.

Events-led Businesses (c.46% of H1 Revenue):

Informa Markets ran its first post-COVID trade show in Mainland China in late June and has since run a further 20 events in the region, all of them incorporating AllSecure protocols. These have varied in size and location, including large-scale brands such as China Beauty Expo in Shanghai, with around 2,500 exhibitors and more than 100,000 visitors and Furniture China, with over 1,000 exhibitors and 100,000 visitors, as well as some more targeted shows such as Hotelex Chengdu, with 140 exhibitors and over 14,000 visitors.

As more physical event brands trade in Mainland China, customer enquiries and forward commitments are rising, illustrating the path to recovery as permissions and confidence return, with clear pent up demand in the market. Elsewhere, this is reflected in the continuing commitment to forward bookings and cash deposits as events are rescheduled to 2021, with refund requests currently running at less than 15% of Events gross cash collections.

Outside of Mainland China, Informa Markets, Informa Connect and Informa Tech all continue to face significant disruption from COVID-19, with scale physical events in North America, in particular, but also across EMEA, not yet feasible.

Virtual Events and Digital Services

Despite the absence of physical events, we are using the strength of our brands, knowledge of specialist markets and strong relationships to deliver virtual events and other digital services for customers of our event brands. This includes a wide range of specialist content, media and marketing services activities, as well as a burgeoning portfolio of virtual events.

On virtual events, we are constantly innovating and adapting to meet customer demand and the specifics of our specialist markets, with products ranging from webinars providing education and content and a way to keep our brands visible, to more sophisticated platforms driving customer value through targeted matchmaking, product showcases and virtual factory tours.

Virtual events are a different product to physical events, lacking the intimacy and immediacy that creates networking opportunities and personal interactions. However, they have their own advantages, such as unlimited reach, which allows us to target a much broader customer set, including those who do not typically attend a physical show. Virtual events also generate deep pools of data, providing unique insights into customer behaviour and preferences. We believe there is power and differentiation across both mediums and an opportunity to generate real value from harnessing the strengths of both to deliver better customer insights and more highly qualified leads.

Over recent months, the level of customer engagement and participation in some of our virtual events has grown significantly, often where an early decision was made to cancel the physical event to put full focus on building a powerful digital platform. Examples include Black Hat and Enterprise Connect within Informa Tech, BioEurope Spring and IM Power in Informa Connect and Spark Change and the upcoming CPHI Festival of Pharma within Informa Markets.

In total, we expect to run more than 500 virtual events across all formats in 2020, attracting more than 500k+ attendees. The main objective for many this year is to keep our brands visible and customer engagement high. Revenues are typically below the physical product but this has potential for improvement as platforms become more sophisticated, the range of services we offer broadens and we are able to plan and market the virtual events more effectively.

Chairman Succession

In January, Informa announced the launch of a process to identify a new Group Chairman to succeed Derek Mapp. This process was temporarily paused in March to enable the Group to focus on the response to COVID-19 and the stability and security of Informa through 2020/2021.

With the Group now in a stable position, with a clear path into and through 2021, the Chairman succession process, which was previously well progressed, has resumed with the aim of concluding by year-end, with a detailed update at the Group's Nine-Month Trading Statement in early November.

Stability & Security through 2021

Informa continues to demonstrate depth and resilience through our Subscription-led businesses and the power of our data and relationships through media, marketing services and virtual events activities.

In June, we had anticipated physical events would return gradually through the summer, phased by market, but with strength returning to our largest market, North America, before the end of the year. However, the impact and reach of COVID-19 remains significant, with physical events still not running at scale in North America, nor anywhere else other than Mainland China.

COVID-19 Action Plan

The recovery in Mainland China continues to build in pace and scale and the outlook for the remainder of 2020 looks steady, as confidence returns in that market and in the broader region. However, this is more than offset by the slower recovery in North America and elsewhere, with the net consequence a reduction to Group revenue expectations for the full year. We are now tracking closer to the Vigilant Case scenario outlined in our April and June updates.

In response, today we are moving to the next phase of our COVID-19 Action Plan, introducing a further range of measures to ensure we can continue to manage the business for long-term strength and value:

· Postponement Programme Extended to mid/late Spring 2021

As we look to 2021, we remain flexible in our approach to the year to ensure we create the best opportunities for our brands and customers. We already have a full schedule of virtual events planned, with the advantage of much greater advance planning and pre-marketing than was possible in 2020.

In addition, today we are announcing the extension of our Postponement Programme to mid/late Spring 2021, with the majority of our physical events scheduled for the beginning of 2021 being moved to a later date. This will de-risk the early months of the year, providing a longer period to move beyond COVID-19 disruption, exposure to a second wave of the virus through the winter months in the Northern Hemisphere and the other side of the US presidential election.

AllSecure: A key component in gaining permissions from local authorities and rebuilding confidence amongst participants, is the AllSecure Standard for events. This was created through collaboration amongst leading organisers, association partners and suppliers, establishing an industry best-practise playbook for running physical events to the highest standards of hygiene, safety and cleanliness.

It has already been widely adopted by the industry, governments and health authorities across the world and Informa AllSecure, the adoption of the standard for all Informa's physical events, is now being actively deployed across all our brands, including the returning physical events in Mainland China.

· Effective Cost Management

Early in 2020, as the initial impact of COVID-19 became clear, we introduced a series of direct and indirect cost controls, helping to secure around £300m of total savings within the first six months of the year, whilst continuing to preserve and protect the core talent and intellectual property within the Group:

· Recruitment Rate: The postponement of all affected recruitment and review of all contractors and consultants;

· Rewards Phasing: The cancellation of annual salary reviews, merit rises, cost of living increases and other rewards;

· Project Review: The postponement of all non-essential projects and capital expenditure;

· Discretionary Costs: A reduction of all non-essential spend, including travel, professional fees

· Procurement: The review and renegotiation of major contracts with suppliers;

· Property: The review of our real estate portfolio to consolidate office space and improve utilisation and efficiency;

· Employment Flexibility: The 2020 Informa Sabbatical, under which Colleagues can take voluntary unpaid leave over a six-month period.

Today we are moving to the next stage of our Cost Management Programme, with a target to deliver £600m+ savings to adjusted operating profit by year-end, including direct cost savings of around £400m and £200m+ of annualised indirect savings, further aligning the Group's costs to our revenues going into 2021.

This will be supported by a range of initiatives, including the further reduction of all non-essential costs, a second edition of the 2020 Sabbatical Programme, the launch of the Balanced Working Programme, and the Voluntary Severance Programme, as well as some targeted compulsory redundancies largely in North America and EMEA.

· Ongoing Colleague Support

Throughout the COVID-19 pandemic, we have always prioritised the safety and wellbeing of Colleagues and Customers. From early advice and guidance, to remote working support, flexibility for community volunteering and direct assistance through the Informa Colleague Support Fund, we have aimed to provide both personal and professional support and reassurance.

As the world gradually starts to return to offices, the Group is providing further flexibility and support through its Balanced Working Programme. Recognising the success of remote working through lockdown but also the value of office-based working for more collaborative activities, we are providing colleagues with much greater flexibility to adopt a more blended approach.

This will see the Group introduce more flexible office structures and working environments, enabling Informa to use its office space more effectively, closing smaller locations that are no longer required and consolidating space in other offices. The efficiencies this creates will contribute to the expanded cost management programme.

· Cashflow Controls

The combination of our actions to reduce costs, increase financing efficiency and focus on cash management, is expected to move the Group into a monthly cash positive position by January 2021, even if physical event activity remains limited to Mainland China and outdoor events.

This will further strengthen our overall liquidity position and enable management to focus on the long-term value of our brands and businesses.

· Further Financing Flexibility

As the COVID-19 pandemic unfolded, we moved quickly to strengthen our balance sheet and improve liquidity through a range of measures, including extending our banking facilities and raising additional equity. As at 30 June, our liquidity was £2.8bn, including eligibility for the Bank of England's COVID Corporate Finance Facility (CCFF), and the average debt maturity was 5.4 years.

Today we are taking additional steps to increase our financing flexibility. This includes the intention to renegotiate or repay our US Private Placement notes (£1.1bn of borrowings) by the end of the year, combined with the planned issuance of around £500m equivalent Euro Bonds. This will extend the maturity profile of the current debt structure.

Repaying the private placement notes removes its covenant from our debt structure, reduces interest payments and extends drawn debt maturities to 2023, whilst leaving the Group with £1.5bn+ of liquidity, with average debt maturity of 5.8 years. Combined with our Cost Management Programme, these actions would also deliver a monthly cash positive position by January 2021.

We believe these actions will significantly strengthen our financing flexibility, ensuring we have sufficient liquidity to the other side of COVID-19.

Financial Review

Income Statement

In the first half of 2020, Informa demonstrated resilience and depth through our Subscriptions-led businesses and the power of our data and relationships in events through our media, marketing services and virtual events activities. Our physical events portfolio started the year positively before being severely disrupted by COVID-19, which led to a major Postponement Programme, a switch into virtual events for many brands, and a number of cancellations. These actions significantly reduced the revenue and profit reported in the period in comparison to last year.

  1 H1 2019 Restated for share placement

Statutory income statement results

The disruption to our physical events portfolio led to a decrease in statutory revenue of 42.1% to £814.4m.

The Group reported a statutory operating loss of £739.9m compared to an operating profit of £248.3m for the six months to 30 June 2019. This reflects the reduction in revenue as well as a number of adjusting items, including a non-cash impairment of £592.9m relating to goodwill.

This impairment reflects the impact of COVID-19 on the long-term trading outlook for our physical events portfolio in our Events-led businesses. The impairment review was based on forecasts as at 30 June, when the continued inability to run physical events in our largest market, North America, or elsewhere was expected to significantly impact the full year outcome in 2020, before our assumption of a gradual recovery over the next few years. For modelling purposes, it was assumed that the Group returns to 2019 levels of operating cash flow by 2025. This results in a non-cash impairment of £231.1m for Markets, £105.9m for Connect and £255.9m for the Tech Division. Since the 30 June, the outlook in Mainland China has improved with physical events now running in the second half of the year.

Statutory net finance costs fell 2% to £57.3m, comprising of £62.1m of finance costs and £4.8m of investment income. The combination of lower interest rates and the successful refinancing of a USD Bond and certain US Private Placement notes delivered a £9.0m reduction in interest expense on borrowings offset by a £9.2m increase in finance costs.

The combination of all these factors led to a statutory loss before tax of £801.2m, compared to a profit before tax of £232.8m for the 6 months ended 30 June 2019.

The statutory loss before tax led to a tax credit for the period of £34.7m, compared to a tax charge of £36.2m in the period to 30 June 2019.

Statutory diluted earnings per share decreased from 14.4p for the 6 months to 30 June 2019 to a loss per share of 56.9p. This primarily reflected the impact of COVID-19 on trading and the impairment, partially offset by the favourable tax charge for the period. There was also a 78.3m increase in the weighted average number of shares compared to the first half of 2019, reflecting the impact of the equity addition in April, which saw 250.3m new shares issued.

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 other underlying measures. A full definition of these metrics can be found in the glossary of terms on page 58. The Divisional table on page 38 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 in the table below. This highlights that phasing was one of the main reconciling items in the first half, reflecting the significant number of event postponements in the period. For the calculation of underlying growth, where an event originally scheduled for the first half of 2020 was postponed to the second half, the corresponding event revenue from the first half of 2019 was removed from the 2019 comparative. In the case where an event due to be held in the first half of 2020 was cancelled, no adjustment to 2019 revenue was made.

Adjusting Items

The items below have been excluded from adjusted results. The total adjusting items in the period increased to £858.5m (H1 2019: £187.4m), largely due to the COVID-19 related impairment of goodwill and COVID-19 related onerous contract costs and one-off costs.

1 Excludes acquired intangible product development and software amortisation

Intangible amortisation of £148.2m relates to acquired book lists and journal titles, acquired databases, customer and attendee relationships and brands related to exhibitions, events and conferences. As it is related to acquisitions, it is not treated as an ordinary cost. By contrast, intangible asset amortisation arising from software assets and product development is treated as an ordinary cost in the calculation of operating profit, so is not treated as an adjusting item.

Impairment of goodwill of £592.9m arises from the impact of COVID-19 on the carrying value of our physical events portfolio. Following an H1 2020 impairment review of the events-related businesses, impairments were made in all our Events-led businesses, including Informa Markets (£231.1m), Informa Connect (£105.9m) and Informa Tech (£255.9m). Impairments reflect the relative levels of headroom in these divisions in the previous reporting period. See note 10 of the financial statements for further details.

Impairment of right of use assets of £17.4m and vacant property and finance lease modification costs of £13.9m resulted from our decision to permanently vacate a number of office properties from June 2020.

Integration costs of £33.1m include £21.8m relating to the acquisition of UBM, consisting mainly of process, property and colleague-related reorganisation costs. This brings the cumulative UBM integration costs to £103.7m to date, in line with guidance. The remaining £11.3m of integration costs relates to the addition of IHS Markit's TMT research and intelligence portfolio.

Onerous contracts associated with COVID-19 were £37.9m through the period, arising from costs for events which were cancelled or postponed due to COVID-19, where the costs cannot be recovered, typically related to venues and event set-up. The other items associated with COVID-19 of £5.5m are one-off indirect costs incurred as a result of COVID-19, largely relating to contractual commitments to the owner of an event that was cancelled.

The table below shows the results and adjusting items by Division, with a robust performance by our Subscriptions-led businesses, Informa Intelligence and Taylor & Francis, offset by the impact of COVID-19 on our Events-led businesses, Informa Markets, Informa Tech and Informa Connect.

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 the interest costs on our US private placement loan notes, our corporate bonds and bank borrowings, decreased by £10.3m to £47.6m. The decrease primarily relates to lower interest rates following a refinancing of the USD Bond and certain Private Placement notes in October 2019 and February 2020. The £9.7m Adjusting items relating to finance costs consist of £6.4m fair value movement on acquisition put options and £3.3m associated with the early settlement of borrowings in 2020. 

The reconciliation of adjusted net finance costs to the statutory finance costs and investment income is as follows:

Taxation

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 and Informa has open and constructive working relationships with tax authorities worldwide. 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 H1 2020, the effective tax rate (as defined in the glossary) was 13.0% (H1 2019: 19.0%).

Earnings Per Share

Adjusted diluted earnings per share (EPS) decreased by 78.4% to 5.0p (H1 2019: 23.1p). This reflects a 77.1% decrease in adjusted earnings to £66.9m (H1 2019: £291.8m), combined with a 6.2% increase in the weighted average number of shares. In April, an equity addition led to the issue of 250.3m new shares, priced at 400 pence per a share, a 4 per cent discount to the previous closing share price of 416.8 pence on 15 April 2020. The weighted average number of shares for the prior period has been restated to reflect the new shares issued, leading to a restatement of earnings per share and dividends per share as well. The restated earnings per share figures are detailed below

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

Dividends

In April, as part of the Group's response to the COVID-19 pandemic through our COVID-19 Action Plan, and following consultation with shareholders, the Board announced the suspension of dividends, including the withdrawal of the 2019 final dividend.

Currency Impact

One of the Group's strengths is its international reach and balance, with colleagues and businesses in most major regions of the world. 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 H1 2020, approximately 73% (H1 2019: 62%) of Group revenue was received in USD or currencies pegged to USD, with 4% (H1 2019: 4%) received in Euro and around 1% (H1 2019: 8%) in Chinese Renminbi.

Similarly, we incurred approximately 56% (H1 2019: 54%) of our costs in USD or currencies pegged to USD, with 2% (H1 2019: 2%) in Euro and around 3% (H1 2019: 7%) in Chinese Renminbi.

Each one cent ($0.01) movement in the USD to GBP exchange rate has a circa £11.2m (H1 2019: c£14.2m) impact on annual revenue, and a circa £6m (H1 2019: c£6m) impact on annual adjusted operating profit.

For the purposes of calculating Informa's leverage, in accordance with the Group's banking 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. In H1 2020, conversion rates remained relatively high, however, absolute levels of cashflow were lower, reflecting the impact of COVID-19 on our Events-led businesses.

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

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

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

3 Amount includes £3.3m of make-whole interest paid in respect of the early refinancing of bond and private placement debt  

The decrease in cash generated compared to H1 2019 is largely driven by the impact of COVID-19 on operating profit, together with the one-off costs of onerous contracts, and other one-off costs associated with COVID-19. These factors were partly offset by favourable working capital movement. The calculation of operating and free cash flow conversion is as follows:

Net capital expenditure was £25.5m (H1 2019: £26.2m), equivalent to 3.1% of 2020 revenue (H1 2019: 1.8%). We expect full year 2020 capital expenditure to be at a similar level relative to revenue.

The working capital inflow of £44.2m was a £86.4m improvement on the £42.2m outflow in H1 2019, reflecting the impact of COVID-19 on the working capital phasing within the Events-led businesses. Specifically, this reflects lower deferred income releases due to the cancellation or postponement of events that were scheduled to be held in H1 2020 until later in the year. This increase in deferred income resulted in an increase in trade receivables, the balance of which is spread across a large range of geographies, industries and customers, with no significant concentration of credit risk. Having assessed the provisions related to expected credit losses in the context of COVID-19, we concluded there was no material change required to these provisions at the half year. The Group continues to collect cash in advance for events and as at 30 June 2020 the Group was holding £402.8m of cash relating to future events. The strength of our brands and demand for our products led to relatively few customers asking for refunds on cash committed to events that were postponed or cancelled, with only £41.2m requested during the period.

Net cash interest payments of £49.1m were £1.5m lower than the prior year, largely reflecting lower interest rates following the refinancing of the USD Bond and certain Private Placement notes. In H1 2020 borrowing fees of £10.6m were paid relating new financing facilities.

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 decreased by £239.4m to £76.1m, principally driven by the reduction 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 £709.7m to £1,947.9m during the 6 months to 30 June 2020, primarily due to the net receipt of £975.2m from the share placement proceeds, partly offset by a £178.7m increase due to the unfavourable movement in the USD to GBP exchange rates.

Financing and Leverage

Positive free cash flow and the strength of our balance sheet, supported by the equity addition in April, helped to reduce the Group's leverage at 30 June 2020, with net debt to EBITDA ending the period at 2.3 times (H1 2019: 2.7x). This reflected net debt of £2.0bn or £1.6bn on a pre-IFRS 16 basis at 30 June 2020 (H1 2019: £2.8bn), including unutilised committed financing facilities of £1,650.0m (H1 2019: £698.9m).

On 24 January 2020, both tranches of the Group's revolving credit facility (RCF) were extended by one further year, with the £600m tranche now due in February 2025 and the £300m tranche in February 2023.

On 24 February 2020, we made an early repayment to the US private placement holders of the $200.5m debt maturing in December 2020.

In March 2020, the Group secured a surplus, committed credit facility of £750m, with a maturity of up to 30 months, providing additional flexibility through the current period of uncertainty created by COVID-19.

Following the pro-active management of our financing structure, the average debt maturity on our drawn borrowings is currently 5.4 years (4.4 years as at 30 June 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 30 June 2020, 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 30 June 2020, our covenant leverage ratio was 2.3 times (30 June 2019: 2.7 times), calculated in accordance with our note purchase agreements. The interest cover ratio was 7.3 times (30 June 2019: 8.6 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 interest cover is as follows:

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

Share placement

As part of our COVID-19 Action Plan, on 15th April 2020 the Company announced a share issue of 250,318,000 new Ordinary Shares, representing approximately 19.99% of the Company's existing issued share capital. 125,159,000 new Ordinary Shares were issued on 20 April 2020 and a further 125,159,000 on 5 May 2020. The share issue Placing Price was 400 pence per a share and represented a discount of 4 per cent to the closing share price of 416.8 pence on 15 April 2020. The gross proceeds raised through the placement were £1,001m.

Corporate development

Informa has a proven track record in creating value through identifying, executing and integrating complementary businesses effectively into the Group. In H1 2020, cash invested in acquisitions was £81.3m (H1 2019: £82.4m), with £26.0m relating to acquisitions (H1 2019: £65.9m), £27.2m (H1 2019: £16.5m) relating to acquisition and integration costs and £28.1m (H1 2019: £nil) relating to the exercise of an option relating to minority interests in certain Fashion shows in the US. Net proceeds from disposals amounted to £11.8m (H1 2019: £164.2m).

Acquisitions

On 9 January 2020 the Group acquired F1000 Research for consideration of £16.0m, including £14.9m cash consideration. The business is an open research publishing company and forms part of the Taylor & Francis Open Access Portfolio.

Pensions

The Group continues to meet all commitments to its pension schemes, which include six defined benefit schemes. At 30 June 2020, the Group had a net pension liability of £77.2m (31 December 2019: £30.1m), represented by a pension deficit of £78.2m (31 December 2019: £35.0m) and a pension surplus of £1.0m (31 December 2019: £4.9m). Gross liabilities were £767.2m at 30 June 2020 (31 December 2019: £730.8m). This increase is predominantly driven by a decrease to the discount rates used whilst calculating the present value of the pension liability.

The net deficit remains 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 £7.7m of employer deficit recovery payments during 2020.

Principal Risks and Uncertainties

Informa's approach to risk management focuses on ensuring that significant risks are identified and understood, managed and mitigated appropriately, and monitored and reported to the company's governance bodies. 

Informa's risk framework is designed to provide the Board and Audit Committee with oversight of the most significant risks faced by the Group. Regular analysis and scanning for emerging risks are embedded in our risk management process and overseen by the Risk Committee. The Risk Committee reports through the Audit Committee to the Board.

In the first half of 2020, the pandemic has materially impacted our business and is recognised as a new principal risk to the Group. Our response, through our COVID-19 Action Plan, is outlined on page 6 of our Half Year Report.

Risk Profile at Half Year 2020

The pandemic has prompted a reassessment of certain principal risks, resulting in four having increased risk scores, and two having decreased risk scores.

Increased principal risk assessments

The risk of economic instability has increased following the control measures enacted to limit the spread of the pandemic, which limit face to face gatherings, and the weaker global trading environment that has resulted. In response the Group has put in place a range of measures to conserve cash and strengthen our balance sheet to build financial resilience for a period of reduced trading. Our portfolio of products and services continue to offer diversification geographically and in terms of end markets, whilst before COVID-19 around one third of the Group's pre-COVID revenue was generated from non-events activities.

The strength of our specialist brands and customer relationships has enabled us to find other ways to stay connected and provide solutions to customers whilst restrictions on physical events remain in place around the world. This includes our specialist content, media and marketing services activities, and also through a burgeoning portfolio of virtual events.

This increased provision of digital and virtual services creates opportunities but also increases uncertainty. We have therefore elevated the market risk assessment.

We have a reliance on key counterparties in certain areas of our operations. Global economic uncertainty, reduced revenue and capacity constraints may lead to individual key counterparties becoming less reliable, potentially increasing the possibility of issues related to this risk.

We assess that data privacy related risks have increased. As we develop products and services that use data in new ways to reach target audiences and improve the digital customer experience, we continue to target compliance with the relevant data privacy requirements. The new and continually evolving privacy regulations around the world continue to build complexity to our data compliance programmes.

Decreased principal risk assessments

Since the start of the pandemic, colleague attrition levels have decreased, and therefore we consider the risk of being unable to retain key talent is lower than before. Results from our latest Colleague survey shows there has been an increase in Colleague engagement up to a record level of 86%. A very high proportion of Colleagues (92%) responded that they believe management's response to the pandemic has been sensible and effective and 91% said the management team has led by example and provided clear direction and information. 

Whilst Government control restrictions remain in place, we are operating very few of our physical events, business travel is significantly reduced, and we are returning to our offices in measured and appropriate ways. This all means the likelihood and impact of a health and safety incident is currently reduced. This risk is expected to return to pre-pandemic levels as control measures are relaxed and customers and colleagues start to attend our events and offices in larger numbers.

As at 30 June 2020, the Group recognises 13 principal risks which have the potential to cause the most significant impact to the delivery of its strategic objectives, performance, future prospects and reputation. This comprises 12 Principal Risks and Uncertainties that were identified at the 2019 year-end, plus the pandemic risk that has been added since.

The 12 Principal Risks and Uncertainties identified at the 2019 year-end were outlined on pages 84 to 90 of the 2019 Annual Report (available on the Company's website at www.informa.com).

These risks are summarised below (not in order of magnitude): 

· Acquisition and integration risk

· Data loss and cyber breach

· Economic instability

· Health and safety incident

· Inability to retain key talent

· Inadequate regulatory compliance

· Ineffective change management

· Major incident

· Market risk

· Pandemic

· Privacy regulation risk

· Reliance on key counterparties

· Technology failure

Going Concern

Overview

In adopting the going concern basis for preparing the financial statements, the Directors have considered the future trading prospects of the Group's businesses, the Group's available liquidity, debt maturities and obligations under its borrowing covenants, and the Group's principal risks as set out on page 19. A summary of the impact of COVID-19 on the Group's trading is detailed on pages 4-11. Given the disruption to trading the Directors have completed a comprehensive going concern review and, taking into consideration the recent guidance issued by the FCA and the FRC, are disclosing more information in respect of this review than in previous years. Further details, including the analysis performed and conclusion reached, are set out below.

Liquidity and financing position

The Group has a strong liquidity position. As at 30 August 2020 the Group has £1.4bn of cash and undrawn credit facilities of £1.4bn (including access to £300m of Bank of England CCFF which is uncommitted until drawn). The Group has taken a number of actions to reinforce its liquidity position since the start of March including, but not limited to, the following:

· Raising £1bn through the equity issuance in April

· Securing a Surplus Credit Facility of £750m, which is currently undrawn

· Confirming eligibility for £300m of Bank of England CCFF liquidity, which is currently undrawn, and uncommitted until drawn

· Withdrawing the 2019 Final Dividend and suspending further dividends

· A range of direct and indirect cost controls

In addition, the Group is a well-established borrower with an investment grade credit rating which provides the Directors with confidence that the Group could further increase liquidity by raising additional debt finance. The only Group borrowings with covenants are the £1.1bn of US Private Placement (US PP) notes which are due for repayment from 2022 to 2028. The principal financial covenant ratios under the private placement loan notes are maximum net debt to EBITDA of 3.5 times and minimum EBITDA interest cover of 4.0 times, tested semi-annually. See the glossary of terms for the definition of leverage and interest cover ratios.

Financial modelling

The business and operational impact of COVID-19 to date in 2020 is discussed on pages 4 to 11. The Government control restrictions adopted worldwide to limit the spread of COVID-19 have created a degree of uncertainty around the forecasting of Informa's physical events revenues. In response, in the going concern assessment period up to the end of 2021, the Directors have modelled a number of different scenarios based off three underlying sets of forecasts, representing the base case, an upside case and a downside case. Key assumptions made in these scenarios include the timing of when control restrictions are relaxed, allowing physical events to resume, and also the participation levels at these events as confidence returns.

In modelling the base case the Directors have assumed the following:

· No physical events are held until 2021, apart from in Mainland China, where events resumed operating in Q3 2020;

· All physical events in 2020 and 2021 have lower levels of participants compared to 2019, as confidence and participation is assumed to return gradually, with international travel also assumed to recover gradually;

· A gradual recovery of our event-led businesses in 2021, with revenue predominantly phased to the second half of the year; and

· A robust performance by subscriptions-led businesses in 2021, albeit with an assumption of some macro-economic impact impacting revenues compared to 2020.

In this scenario, the Group maintains liquidity headroom of more than £2bn but would breach the leverage covenant on the US Private Placement debt at the 2020 year-end.

In modelling the downside case, the Directors have assumed that there are no physical events held until the second half of 2021 apart from in Mainland China, where events are operating from Q3 2020. Furthermore, when physical events do return in the second half of 2021, it is assumed the revenue contribution is lower than in the base case, although additional cost savings are also assumed. All other assumptions are consistent with the Base Case. In this scenario the Group maintains minimum liquidity headroom of more than £2bn but would also breach the leverage covenant on the US Private Placement debt at the 2020 year-end.

Although the base and downside cases indicate a breach of covenants in the going concern period, the Directors are confident that a waiver for the leverage and interest cover covenants on the US Private Placement debt could be obtained from the debt holders, if required. Alternatively, given the strong liquidity position of the group the US Private Placement debt could be prepaid with existing liquidity so to avoid a breach of covenants. As a result, the Directors do not consider that the forecast covenant breach constitutes a material uncertainty in respect of going concern.

The Directors have also modelled a reverse stress test, which assesses the liquidity and covenant position if the Group had no gross profit from 1 October 2020 to the end of 2021 and all event-related cash collected as at 31 July 2020 was refunded to customers. In this test the Group maintains liquidity headroom of £0.8bn at a minimum but would breach the leverage covenant and would therefore require a covenant waiver. The Directors feel that the assumptions applied in this reverse stress test are extremely remote, given that the Group's subscription-led businesses continues to generate gross profit.

Going concern basis

Based on the scenarios modelled the Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily and have been able to form a reasonable expectation that the Group has adequate resources to continue in operation for at least twelve months from the signing date of these consolidated interim financial statements. The Directors therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements. The long-term impact of COVID-19 is uncertain and should the impact of the pandemic on trading conditions be more prolonged or severe than currently forecast by the Directors, the Group may need to implement additional operational or financial measures.

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 in the 2019 Annual Report and Accounts. Biographical details for the current Directors can be found on the Company's website: www.informa.com.

Responsibility Statement

We confirm that to the best of our knowledge:

a) the consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;

b) the consolidated interim financial statements, which have been prepared in accordance with the applicable set of accounting standards, give 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;

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

i. an indication of important events that have occurred during the first six months of the financial year and their impact on the consolidated interim financial statements; and

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

d) the interim management report includes, as required by DTR 4.2.8, a fair review of material related party transactions that have taken place in the first six months of the financial year and any material changes in the related-party transactions described in the 2019 Annual Report.

Approved by the Board on 20 September 2020 and signed on its behalf by:

Stephen A. Carter Gareth Wright

Chief Executive Group Finance Director

Independent Review Report to Informa PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement and related notes 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Deloitte LLP

Statutory Auditor

London, UK

20 September 2020 

Condensed Consolidated Income Statement

For the six months ended 30 June 2020

All results relate to continuing operations. Adjusting items are detailed in Note 4.

The notes on pages 33 to 57 are an integral part of these Condensed Consolidated Financial Statements.

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2020

1Amount includes movements on derivatives in cash flow (£0.1m) and net investment (£54.1m) hedge relationships

The notes on pages 33 to 57 are an integral part of these Condensed Consolidated Financial Statements.

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2020 (unaudited)

1 Total attributable to equity holders of the parent

The notes on pages 33 to 57 are an integral part of these Condensed Consolidated Financial Statements.

Condensed Consolidated Statement of Changes in Equity (Continued)

For the six months ended 30 June 2019 (unaudited)

1 Total attributable to equity holders of the parent,

The notes on pages 33 to 57 are an integral part of these Condensed Consolidated Financial Statements. 

Condensed Consolidated Statement of Changes in Equity (Continued)

For the twelve months ended 31 December 2019 (audited)

1 Total attributable to equity holders of the parent,

The notes on pages 33 to 57 are an integral part of these Condensed Consolidated Financial Statements. 

Condensed Consolidated Balance Sheet

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2020