Informa plc (LON:INF)

Earnings Call: H2 2018

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Mar 7, 2019

Summary

Underlying revenue grew 3.7%, adjusted operating profit rose 34%, and free cash flow increased 25.5%. Integration and synergies underpin a 2019 growth ambition above 3.5%, while fashion and FX remain key uncertainties.

We get started? Right. Good. Good morning, everybody. Thank you very much for coming. For those of you who are in the room, and for those of you who have dialed in either to the call or the webcast, thank you very much for joining. This is the presentation of our 2018 results. I have to say, on a personal point of view, I am genuinely excited about this morning because it is the first opportunity for us to be able to talk about what we have been doing inside the company, and there has been a lot going on. Creating a combined company has been a challenging and rewarding activity, not necessarily in equal measure. Nevertheless, broadly, we feel good about where the combined company has got to, and today is an opportunity to try and bring that to life for you. This slide is the official health warning disclaimer, but I am also going to offer a personal apology for those of you who I know spend a considerable amount of time following our company, which we are extremely grateful. When we are not grateful, we hand you over to Richard. I am conscious that we, in our efforts to put the company together into a highly functioning, compelling, and hopefully a powerful future engine for growth, it requires us to make decisions about where brands operate and how the business functions. The net consequence of that is, that means we are presenting the company to you in a way that is slightly different. I am conscious that means if you are running a model on the company, you are trying to rewire where X bit has gone to Y bit. We have tried to lay it out today in the deck, and we will try and give you a bit of color to bring to life the decisions we have made, why we have made them, and how the new company is going to operate. In the book that you have got, which I know you are not reading ahead on, if you are in the room, there is a set of appendices which try to give you more color and context on the detail of the operating structure. For us, 2018 was all about combination and creation, bringing together the combined company as a result of the combination with UBM, which started factually on June the 16th, although we have been planning for pretty much since the beginning of the year. That activity during 2018 came on the back of a program of change across the company, which has been running for quite some time. I think we made no secret back in 2013-2014 that what we were seeking to do was to improve the operational fitness of our business, give it more capability, build a platform for future scale, and then develop a strong market position, particularly in the Global Exhibitions market. We wanted to make the business more international. We specifically wanted to expand both in the U.S. and in Asia. We wanted to get the company into a regular cadence of investment for growth rather than running for profits. We wanted to drive more towards industry specialization because that is where we believed we would have long-term strength. That is what we set out to do. And for us, the combination with UBM was a natural next step in that process. This slide may actually be slightly different in your book, I think. Actually, you will notice in the book that we transpose the bottom circle on the right into the top. But really, this is just designed to show the revenue change by region and by mix. And really, it highlights the point that our exposure to North America and Asia has increased significantly in revenue mix. And the nature, the quality of our revenue by either subscription-based revenue or forward visible exhibitor revenue is considerably different from what it was quite some time ago. And that progressive improvement in mix and predictability was another key tenet of the Growth Acceleration Plan. This summarizes the trend growth. And my personal headline about how I would describe 2018 is sort of steady as she grows. We are moving the business forward on every measure. We are not trying to drive exponential growth in any particular metric. We want revenue growth. We want conversion. We would like to see that profit conversion improve a bit in 2019 on an ongoing forward basis. We have committed to keeping our margins above 30%. We have committed to increasing our dividend on a progressive basis. And we have made quite a focus on driving our cash flow, and Gareth will talk about that in quite some detail. And that is a powerful engine for the company, both in terms of delivery and giving us future optionality for further development. The summary here of where we have gone over the last few years starts on the growth line. We did 3.7% underlying growth in the year. The profit conversion wasn't quite one for one, and that is an area that we will focus on going into 2019. The margin was consistent, just below 31%. Our operating free cash flow, as I said, was high both at the absolute level and on conversion. And we have now done this three times at different scales, whether it be Penton, Hanley Wood, or UBM, and each of those are designed to give the company more depth and capability, particularly around market verticals, which I will come and talk about after Gareth has taken you through the detailed financials. Our leverage, as we predicted, we ended the year just below three times. We have done some work on our long-term financing to give ourselves some forward comfort that there is no concerns there, and we will see the company de-lever through the year. Our recommendation is an increase in the dividend of just over 7%, growing in line with earnings. How does that break down by the businesses? You see what we called in 2018, Global Exhibitions, growing at nearly 7%, 6.7%, comfortably ahead of the market. Our old conference business, now a much more content-led specialist business, growing at just above 2%. Strong performance on the revenue line. Some issues there on profit conversion, largely due to depreciation and catch-up, because that was an area where we really had under-invested. UBM in the stub period, in total, doing about 3.7%. Business Intelligence growing again, just above 2.5%, 2.6. And another very steady growth year for our research publishing business at 2.2%. And then you see how that tumbles down below that. Where are we on what we call the Accelerated Integration Plan? Well, we are slightly late in the results season, I suspect, in the calendar for some of you, but it is early March. The good news as it relates to this is the one-year anniversary of the AIP is in June, so that is coming at pace and rate. The headline is we are making, I would say, good progress at the commercial side of combination. What do I mean by that? What I mean by that is brand alignment, portfolio management, leadership appointment, sales platform, pricing, scheduling. We are very well advanced on combining these two businesses. We have moved fast. I think if you are inside the company, and I know some of you know many people inside the company, and some of you have been around the company, we have moved at pace. We have made no apology for that. I think that has been beneficial. Inevitably, when you are doing these things, it causes some human disruption, and we have tried to be as respectful as possible to those colleagues who have ended up leaving the combined company. It has allowed us to come into 2019 with a unified business where people know where they are, who they are, who they are working with, and have a shared set of targets and ambitions for the year. There is more work to do, still much work to do on the back end, whether it is sales order processing or marketing automation, or even the important areas of general ledger and standard ERP platforms. That work will run through the back end of 2019 and all of 2020. At the front end of how this business operates commercially, it feels like one business, and we feel very good about that. I am just going to highlight a couple of bits of the IP, because it comes in a series of different areas. On the operating model, as you will see from the way in which we are shaping the combined company, we are moving it more and more to a business organized around end markets. I am going to talk about that because that is where we see the future of the company. Our colleague, Patrick Martell, who used to run the Business Intelligence business, is now firmly in the driving seat as the Chief Operating Officer, and he has end-to-end responsibility for the systems operation, shared service side of the business. As he says, he now does not have a revenue line, he just has a very large cost line. His responsibility is to work through the back end consequences of creating this business of scale and how do we derive benefits from that. On portfolio management, which I will come back and talk about, we have already announced the disposal of the Life Sciences Media business. That should come as no surprise. It was much trailed historically by UBM, either implicitly or explicitly. Again, we moved pretty fast on that. It was not a bad business at all. It was a good business, as evidenced by the price we got. It was not a business where we were going to have a long-term position. So we spent quite a bit of time ensuring that we were handing that business over to a new owner in a good way for the colleagues who were leaving with that business. It leaves us, I think, much cleaner on the portfolio than it would have been otherwise. We are looking at some other businesses, up to about GBP 120 million in value, and we will continue that process through 2019. None of them bad businesses, all of them in growth, but not areas where we are going to invest for further scale. On the cost synergy side, we are confident where we are on target, ahead of target, and thereby facilitating the much-needed investment in the fashion portfolio, which we will deep dive on later. As a small point of record, the UBM brand will, as a trading brand, be retired by the end of the AIP program, and inside the company, we are well underway in that process. You see a little bit of it in the brand identity for the individual operating divisions. This slide, which for those of you who have ever spent any time covering or working in the networking business, looks a bit like the inside of a telephone street cabinet. This is to try to bring to life, how do you put these businesses together? Because it explains how we go from what was us, what was UBM, to what is the combined company. Essentially what we have done is made a series of judgments about where we want to specialize and where there is portfolio overlap, and what makes most sense in terms of operating model. If you start on my right-hand side of the chart, so what was the UBM portfolio, for those of you who followed that, imagine the UBM portfolio absent Life Sciences. What we have done there is in the main, as you can tell by that larger line, in the main, the vast majority of what was the UBM portfolio ends up inside what we are now calling Informa Markets. What was GE. So our market-facing exhibitions business. That is the way we think about it. Yeah, and I am going to take you down a notch on that in a second. The vast majority of that portfolio ends up in what we are now taking to market as Informa Markets. Some of that portfolio has gone into what we call Informa Connect, what was our old conference business, which has gone through a 4 or 5-year process of being repurposed to focus itself around end verticals. There, what we have done is those brands and businesses that were much more content heavy and much more about either meetings or connections or communities. For example, the CBD conference business, for those of you who know that business from the UBM portfolio, has ended up inside Informa Connect. It is a much smaller portion of the portfolio, but the product set is much more naturally fit in that more content curated events business than in the more transaction-led exhibitions business. We have made a decision to carve out and create a standalone business called Creatively Informa Tech, which is facing the technology markets. It is largely a North American business. In that business, we are putting all of our products and services that provide products and services to the technology markets, whether it be the enterprise markets or the security markets or the gaming markets or the service provider markets. There we have a range of assets, whether they be high-value conferences, curated brands, traditional exhibitions, ticketed exhibitions, research, data or subscription services. We are putting those together in a business called Informa Tech because we want to examine what the capabilities are for us to create unique, standalone, market-facing businesses which are neutral on the product, but very determined by what the end market is demanding. In a way, it is an experiment. It is a trial. We have done it in tech because we think it is a very dynamic market. We think it is a market that by definition, because of the customers there, are perhaps more open to innovation and change than some more traditional markets. We are doing it because we have got a very nice portfolio set. Some of what was inside the UBM portfolio, particularly the San Francisco-based tech portfolio, which really was very much a separate business inside what was previously called UBM Americas, sits now firmly inside that technology business. Informa Intelligence is what was Business Intelligence, minus the technology assets and conceivably minus some other businesses that were previously in BI that we are currently reviewing whether we are going to be a long-term holder of. In the main, what you are going to see us focus on in that business is pharma and healthcare, retail, financial, and maritime, because we believe those are areas where we have got good market position, strong brands, and we think there are the capability for further growth. Taylor & Francis, for the purposes of the front end of this combined business, is not affected. Obviously, at the back end, it benefits from the savings and the efficiencies that are created through scale. Therefore, that is a kind of ancillary benefit. Similarly, on the left-hand side of the chart, we have also used this as an opportunity to make some very minor changes in some of the portfolios. As I said, some things that were in Business Intelligence are now in Informa Tech, and there are a couple of smaller brands that were inside Global Exhibitions that we have moved into Informa Connect because they are much more content-led, curated businesses rather than transaction businesses. The net consequence of all of that, if you want to run numbers, produces this. It produces five businesses using pro forma numbers for 2018, not 2019, 2018. It produces an Informa Markets business at nearly GBP 1.4 billion. It produces the Informa Connect business at just over GBP 200 million. The Informa Tech business, similar, same-ish size. The Informa Intelligence business a little bigger. The Taylor & Francis business in revenue does not change. For those of you who can do rapid maths, and I know many of you in this audience can, these two sets of numbers do not add up. The reason why is because you have got to take out the Life Sciences Media business on a going-forward basis, which was about I am looking at Richard, who is on his email. Between 50 million and 60 million. Between 50 million and 60 million in revenue. That picture is just to try and help people understand when we talk about the Accelerated Integration Plan, combining the two companies, the AIP. Behind the numbers, behind the name, there is an enormous amount of work that has gone on and is going on to create, on a going-forward basis, five very market-focused businesses with a clear sense of identity and difference in what they do and who they do it for. I am going to pause there and hand over to Gareth to take you through the detail of the 2018 financial outcome. Thanks, Gareth. Cheers. Thank you, Stephen. Good morning, everyone. Thank you for coming to our 2018 year-end results. I think I would say in terms of financials, the headline of what we are reporting today is a set of financial results that demonstrate a further year of year-on-year improvement in the financial performance of the group against a backdrop of a year that has been a very full and busy year for Informa in which we have really achieved a lot. Here are the financial highlights for the year. Reported revenue growth was almost 35%, increasing to GBP 2.4 billion, and underlying revenue growth was 3.7%, a further acceleration over the 3.4% growth we reported for 2017. Interestingly and possibly slightly confusingly, the underlying revenue growth for the legacy Informa business was 3.7%. The growth for the UBM business in the stub period we owned it is 3.7%, and the overall growth for the group is 3.7%. If you get your head around that, the answer is always 3.7. Adjusted operating profit increased by 34% to GBP 732 million, and this increase in operating profit drove a 7% improvement in adjusted diluted earnings per share to 49.2 pence. Free cash flow was strong, increasing over 25% to GBP 503 million. This cash flow is going to bring our leverage back down towards our target range, with leverage at 2.9 times at year-end. In response to the earnings growth in the free cash flow generation, the board is recommending a 7.1% increase in the full-year dividend, which is covered 2.25 times by earnings. Walking down the income statement below operating profit, the interest charge for the year was GBP 82 million, with the year-on-year increase being driven by the increased debt following the combination with UBM. Our effective interest rate going into 2019 is about 3.7%, which implies an interest charge in the region of about GBP 100 million before IFRS 16, which I will come back to in a minute. The effective interest rate of 3.7% is a slightly lower rate year-on-year, reflecting the EMTN bond issuance in the middle of 2018. The effective tax rate decreased to just under 18% for 2018, primarily reflecting the changes in the U.S. tax law. We have previously communicated that the effective tax rate over the medium term for the enlarged group would be 19%, and that is what you should be expecting for 2019 and going forward, in terms of the numbers. Overall, that adds up to a 7% increase in EPS, which covered the 7.1% increase in the dividend. Just focusing on the revenue growth, let me walk you through how the 35% increase in reported revenue builds up. The most important thing for us on this chart is the 3.7% growth added through underlying revenue growth, increasing above the 3.4% delivered last year. Our combination with UBM added 35% year-on-year to the revenue, and the currency headwind of a weaker US dollar cost us about 3.8% in terms of reported growth. The impact of biennial phasing cost us 0.4% in the reported growth, and those four elements add up to the overall increase of 7% overall. On the subject of biennial phasing, on the top right-hand of the slide, we have sized the effect for you if you are looking to model it. You will remember that biennials were not a key dynamic for Informa, but they were actually a bit more of an important dynamic if you are trying to model the UBM results. This slide here gives you a clear steer on how you should be thinking about it for a combined group. What we would note is that biennials across the enlarged group are actually a relatively small effect in terms of the overall revenue number. Focusing on how the group results break down by division. Global Exhibitions delivered underlying revenue growth of 6.7%, delivered by a strong performance from the top 30 events, which in GE in 2018 represented about two-thirds of the revenue. That revenue growth increased operating profit by 6%. Academic publishing delivered a constant and consistent underlying revenue performance overall, delivering 2.2% revenue growth. That growth was split evenly between books and journals, which represents an improved performance year-on-year by the books business. Business Intelligence continued its trend of improving year-on-year underlying revenue growth, delivering 2.6% growth in 2018. This improvement reflects the benefits of investments in products and platforms for our revenue streams, and the OP increase of 0.9% also reflects the year-on-year cost increase from those investments, which partly offset the benefit of the revenue drop-through. Knowledge and Networking delivered a further year of improvement in underlying revenue growth, delivering 2.3% for the full year. This revenue improvement over the 1% reported in the third quarter IMS represents a strong trading performance in November, which is by far the largest revenue month of the year for K&N. Finally, for the period that Informa owned UBM, underlying revenue growth was 3.7%. For the full year 12-month period, UBM growth was 2.8%, which was driven by a 4.1% increase in what in UBM parlance would have been called events revenue. I am just going to talk through five specific areas I think are directly relevant to the results, and I also think will help add color and understanding for you in terms of our numbers, and also help you a bit with modeling the group going forward. As you will remember from previous Informa results presentations, free cash flow is a key financial metric for us in terms of the performance of the group. We have delivered another strong year of cash flow results, increasing free cash flow by 25.5% to just over GBP 500 million. That is a free cash flow yield of 7.6% for 2018. We turned 91% of our operating profits into operating cash flow. But that result included an adverse phasing effect from the timing of the UBM completion, and if UBM had been owned for the full year, the full 12 months, the operating cash conversion would have been around 100%. Of note also, if UBM had been owned for the full year, the free cash flow for the combined group would have been GBP 600 million plus for 2018. In terms of the balance sheet, we have done a lot of work on the balance sheet this year, refinancing the UBM acquisition borrowings and also just improving the maturity of the group's debt. Leverage was 2.9 times at the end of the year. You will remember that through the UBM combination, we looked to use the balance sheet effectively and efficiently, and as a result of that, leverage increased to 3.1 times at completion. Where we started to reduce our revenue back down to our target range, which is 2 to 2.5 times, and by the end of the year, we had reached 2.9 times leverage. In terms of our financing, we have got a balanced mix of funding sources and maturities. Our most recent use is the refinancing of the revolving credit facility which completed in February. That is now in two tranches maturing in 2022 and 2024. Refinancing was secured on more favorable terms than the existing credit facility, and we brought in two new syndicate members who increased our exposure and coverage in the Far East. While covering financing and refinancing, I would also like to note that in 2018, the group issued its inaugural public bond to refinance the UBM acquisition borrowings. This issuance was oversubscribed in June and has traded well in the markets since issuance. The result, as you can see from the maturity graph, is that we now have no maturities until the fourth quarter of 2020, leaving us with a secure and flexible financing structure for the group. We have a group that delivers an attractive, robust, and resilient 30% plus margin. I want to just take a moment to explain the year-on-year progression in the margin, in the underlying Informa business, which principally relates to two specific dynamics around FX and around investment. The FX effect principally arises from the weaker US dollar on the operations in Global Exhibitions and academic publishing. We have also invested in the group to upgrade our technology platforms and our digital capabilities through the Growth Acceleration Plan, which completed in 2017. The year-on-year full year effect of the depreciation has had a 0.9% drag on margins for the group overall. Going into 2019 with the revenue approaching GBP 3 billion and a profit margin consistently above 30%, the full year effect of UBM will be a slightly lower margin than where we finished 2018. This will be more than offset by the benefit of the synergies coming through in the results. Another area I know that you all focus on a lot is foreign exchange, where the legacy Informa business had an exposure to the U.S. dollar. In the enlarged group, this continues to be the case with the U.S. dollar, a large portion of our revenues at around 56% of the combined group for 2018. I wanted also to highlight that for operating profit, the effect is even more marked, with around 70% of the group's OP generated in dollars or currencies pegged to the dollar because our costs are weighted to sterling. I suspect you've had an IFRS 16 slide in every results presentation you've seen this earnings season. Here's ours. The key message is that the impact on our reported income statement results is minimal. OP will increase by about GBP 4 million-GBP 6 million. The net interest charge will increase by about GBP 11 million-GBP 15 million, and the net effect on earnings is a decrease of somewhere around half a penny. There'll be no backward adjustments for IFRS 16 into our 2018 results. This will be going forward dynamic only. To confirm, we'll be reporting under IFRS 16 at the half year results for 2019. Coming back out of those focus areas, I just want to talk about the UBM AIP synergy targets, which are consistent with what we've discussed previously. That's GBP 50 million in-year benefit in 2019, which we have clear visibility over. We're targeting GBP 60 million on a run rate basis by the end of 2020, and GBP 75 million on a run rate basis by the end of 2021. If you're looking to model these benefits, what we'd say is around half of the benefits arise in Informa Markets, which are where most of the duplication between the businesses occur. The remaining half of the benefit is generated in central corporate functions, and therefore is passed back to the divisions in the form of lower cost allocations. While we're talking about the new operating structure, I'd also like to point you towards the appendices that Stephen mentioned, where we've provided you with a clear basis for 2017 and 2018 revenue and OP results on the new basis. As Stephen said, this is excluding Life Sciences Media, but also I'd like to note excludes IFRS 16. It's actually a 2017 and 2018 set of numbers. This actually should give you a good basis for modeling the group going forward on a division by division basis. Before I wrap up, I just want to paint a picture of the enlarged group from a cash flow and a capital perspective. The enlarged business will generate revenue of almost GBP 3 billion at an attractive 30% plus margin, generating around GBP 900 million plus of OP. With strong cash conversion, we turn the OP generated into GBP 600 million plus of free cash flow, which gives us optionality at scale. Currently, a key focus of free cash flow is paying down our borrowings. We've already reduced leverage to 2.9 times at year-end. We remain committed to consistent investment for growth, allocating in the region of 3%-4% of revenue each year to CapEx. The markets in which we operate are attractive and highly fragmented, allowing a continuing pipeline of opportunities for potential inorganic growth across all our divisions to be considered. As you know, we have a clear focus on shareholder returns, growing our dividends consistently over the last couple of years from 2% growth to 4% growth to 6% growth, and this year, 7% growth. This is now an annual cash commitment of around about GBP 300 million, but that is readily affordable with our free cash flows. Wrapping up, going into 2019, our revenue streams give us great forward visibility with over 65% of revenue from forward booked exhibition contracts, subscriptions, and sponsorship contracts with cash received in advance for all those revenue streams. As I've said before, we're delivering a solid, resilient 30% plus margin generated off a revenue base of almost GBP 3 billion. With strong cash conversion, we turn the OP generated into over GBP 600 million of free cash flow, which gives us optionality at scale. We reduced leverage at the year-end to 2.9 times, down from 3.1 times at the completion of the UBM combination. Consistent investment in our business has resulted in increased underlying revenue performance over the last couple of years, and we think that's a dynamic for us going forward that will continue. Overall, it'll result in a progressive dividend policy delivering increased returns to our shareholders. I'm now going to pass you back to Stephen, who's going to take you through the remaining couple of slides. Thanks, Gareth. Right. Sorry, I've just been de-clipped. I'll put it here. Okay. Just to step out of our business for a little bit, and look at the world that we operate in. We talk about what we call the knowledge and information economy. I'm not going to dwell on this other than to say that there are plenty of people better qualified than I to give you a view on the left-hand side of the chart. Needless to say, there's much going on in the world, much commentary, much news flow, much macroeconomic discussion. Broadly, with the exception of the specific impact of foreign exchange volatility, which Gareth has spoken to, and a little bit of softness in terms of Chinese participation as a result of the mood music at the back end of last year. Broadly, our business is relatively steady regardless of most of this. The great strength of our business is that it doesn't operate in the macro, it operates in the micro. Which doesn't mean that it's immune, but it does mean that it's much more resilient than I think many people often give it credit or comfort for being. That really takes you to the right-hand side of the chart. Our view has been, which is not very revelatory, but has driven what we've done, that the world increasingly rewards specialism, and in specialism comes security. Because specialism gives you expertise, and in expertise you can deliver value. Some of that is driven by technology, some of that is driven by connectivity, whether that be digital connectivity or the increasing ease of travel. Some of it is driven by an exponential rise in information demand, and some of it is driven by the fact that you can find out everything, but can you find out what you want to find out? The net consequence of that is we have taken the view that if you build market positions in robust, resilient B2B markets, there is a long-term opportunity for the company, and that is where we choose to spend our time. This looks across all five of our businesses. I am just going to pick out the three that are highlighted in the boxes. I am sure we will get into some more of it in the Q&A. If you take our biggest business now by size today, although I am struck by how many people now say to me, "Now that you are a very large events company, what does it mean for the rest of the group?" I remind them that five years ago, this was our smallest business. Nevertheless, it is now our biggest business. What are the real strengths of this business? The main strength is around the specialist B2B brands, and I am going to take that down a notch in a second. The international spread of the business, it is a much more diversified business, both in reach and location, and the depth in those markets. That gives us a lot of confidence about the future resilience and opportunity if we deliver what we believe our customers want. Looking to the other side of the slide, what was our biggest business five years ago is still a very significant part and important part of the group. The academic research publishing business. That is a business and an industry going through much discussed change, particularly as it relates to journal-based research publishing. There is a nontrivial amount of change going on in reference book content consumption as well. There are definitely library budget constraints in the more developed world. There is a material transition going on, as we have seen in the last five years. Open access has gone from effectively none of our business to 10% of our business. That transition is ongoing. But the fundamentals of that business, the end market fundamentals. Is there an expansion in knowledge? Yes. Is there an expansion in learning? Yes. Is there an expansion in institutions? Yes. Is there an expansion in advanced learning, second degrees, post-graduate degrees? All of those things are true. But the product that we are needing to offer is changing. No doubt about that. We have taken the market position that the approach to that maximizes your ability to serve your authors and your institutions is to be flexible about how you deliver your products and service. That flexibility is serving us very well. In Tech, I have touched on this. Here, we believe we have got really some very strong customer relationships that cut across products. We think that provides a cross-marketing opportunity, and we believe there is an opportunity, therefore, for us to develop some integrated solutions. For that set of reasons, we have set Tech up as a standalone business with a plan to try and double the size of that business over a period of time. Much else we could talk about, but it gives you a little bit of a sense of how we feel about it. Just taking it down into industry specialization by the markets. These are the key verticals that we have built or bought positions in. Most of them, not all of them, have a very similar set of characteristics. Some of them are very significant businesses on a standalone basis. Our healthcare and pharmaceuticals business in that market is north of GBP 200 million in revenues, nearly the same size as our tech business, which we have just talked about. We have some extremely strong and longstanding brands in those markets, and they operate in multiple geographies, operating and servicing different parts of the value chain in those industries. What I have done here, or what we have done here, is to try to break down how should you think about these businesses and why have they got some fundamental resilience, as opposed to up and down cycle concerns. These are probably, in our now still learning experience, the five features that it helps to be guided by, not to be determined by, but to be guided by. Fragmentation in the market helps. If there is a significantly large community of buyers and a significantly large community of sellers, the product that is a trade show satisfies a clear market and customer need. High levels of fragmentation creates a fertile environment for a scale trade show proposition. If the buyers and sellers in that community are operating in high-end value markets, that also creates very fertile ground for a sustainable product and market proposition. If the market is international, the buyers and the sellers trade in a relatively open and free way across both borders and boundaries, at some point in the supply chain, that also creates a very fertile environment for a trade show. Self-evidently, if the end market has got long-term structural growth. To pick two, health and nutrition and healthcare, fundamentally, we all want to live longer, we all want to live healthier, and we all want to eat better. For all those reasons, the structural growth characteristics of those markets are really very attractive. One that is not so often commented upon, and the older I get, the more I believe this, is age is a virtuous thing. Because longevity in this market doesn't give you the gifted right of permanence, but it gives you a structural position in the industry calendar. As long as you are not complacent about that, or you don't under-invest in the business, as we discovered in the fashion industry, then you earn the right to be the default meeting place for the market. The question is, what do you then do with that? How do you invest to innovate and refresh? If you can line all of those things up in each of these markets, you build a very strong market platform from which you can drive growth and returns. Talking about fashion, not that it is my job to be a research salesperson, but there is a very detailed and rather fine note from Malcolm, which I am sure many of you have seen on the fashion industry, and the trade shows, not just our own, but other players in the market. We spotted this early on. We went into the UBM transaction knowing that this was an issue. It had been much discussed by the management of UBM. I think if we had a surprise, and I do not think this is a cheap criticism of the previous management, I think we were surprised that the plan to solve for it was essentially to manage the margin. Now, I might have made the same decisions in the context of the UBM portfolio, but in the context of the Informa portfolio, that is not why we own businesses. We own businesses to grow them. You cannot grow a business by managing its margin and taking costs out. You have to invest in it. We made a very early decision that if we wanted this to be a sustainable business, you had to invest in it. To invest in it, we would have to up the level of synergies, so the price of the investment came from the benefit of the combination, which seemed a fair quid pro quo to shareholders. We put an early estimate that the likely cost of that would be between GBP 10 million and GBP 50 million, and there is nothing we have learned since then that convinces it needs to be more. We have made some significant change in leadership, and we discovered two operating gaps, lowercase G-A-P, in the way in which that business was being run. One was that the dates and the scheduling on a forward basis for the portfolio, at a minimum, had been under-managed. In the events business, this is a statement of the obvious, you do not want to under-manage your dates and your scheduling. That is the first thing you have got to get right. We have done a lot of work on looking at the dates and the scheduling of that portfolio. The second issue was that in the main show, the MAGIC show, there was literally a practical logistical disconnect in the way in which that show was being housed on the ground in Vegas. That split location in Vegas was creating a high level of discontent and inefficiency for both attendees and exhibitors. We have put a lot of work into changing both the dates and scheduling. Actually, that is one of the hidden benefits of the combination because it has allowed us as a scale operator to go and have conversations with the major venue operators to reschedule and rework the dates in a way that makes sense for the end market and for the venues and the location. There is work to be done on the brand architecture. There are too many brands. It is too complicated, and we need to do that. There had been little work done on integrating the BGA portfolio into the fashion portfolio, and we will get that done. The database had been overworked and under-refreshed. Ultimately, that is the key thing you own as an operator beyond the dates and the brands. There is work to be done there, and there is some investment that needs to be done in price. At a very practical level, this is a fashion trade show. I am not a fashion expert, as is probably obvious, but nevertheless, you want it to look good. It needs to feel good. This is an experiential product, and you cannot do that on the cheap. Or you can, but ultimately, your customers will notice it. There needs to be some investment in the theater and in the quality of the experience. That is the fashion GAP program, and we are making good progress on it. We have had more questions on fashion than we have had on Open Access in the last 6 months, which is saying something. I am sure we will get into it in the Q&A. The three that I would pick up in this session are, is this a structural cyclical problem? I think the answer is yes. It is both a structural and a cyclical issue. We are setting about the structural and operational challenges with pace and focus, and I am confident that as we go into 2020, we will begin to see the benefits of that. The cyclical changes, we do not control that, but do we believe that it is fundamentally an ex-growth product or service? No, we do not. There is no reason to believe that this product and portfolio cannot adapt to stem the decline. Do we believe moving the MAGIC show to one single venue will make a difference? We believe it will make a significant difference. We will report back on that after we have had that experience this year. How long before you can start to see improvements? I would be disappointed if we are standing here next year, talking about 2019 going into 2020, where we do not have some forward visibility on how that business is improving, and I am sure we will get into it in a lot more depth in the Capital Markets Day in May. Beyond fashion, beyond tech, below the brand radar of Informa Markets, this march to industry specialization is increasingly how we are running the business, whether it is in health and nutrition, in infrastructure, what we call ICRE within Informa Markets, aviation and aerospace, and maritime and transportation. In each of these markets, we are building off and around the show brands, the event brands, the exhibition brands, and the media properties that we have kept because we believe they either have a value as a marketing proposition or to drive traffic or to give us information about what customers want and need, or the data products we see surrounding the market as a place to build moats and strength and resilience in our business. Tech we have talked about. What is gone into tech is at the top of this. It is a mixture of what came out of UBM Tech, KNN, TMT, and Ovum. A mixture of different communities. We have put a new leader in that business who ran half of what was the Business Intelligence business, so he knows the Ovum business pretty well, and he has had a long career history in the tech industries, both in the networking world and in the enterprise software world. We will watch this space on this, but we will do a deep dive on this at the Capital Markets Day to give people more sense of what we are doing in that business. In 2019 going into 2020, as we get even more certainty around the delivery or the over-delivery of the cost synergies, the question then becomes, so where is the growth? Show us the revenue synergies. That, as we have talked about before, is a series of different steps. Some of those we are beginning to see already, some of those we are doing already, some of those we are definitely using in the development of the portfolio and the digital product, particularly the directory product. Some of it will take a little bit more time to cook for 2020. We have got a dedicated team we have set up inside Informa Markets, led by an ex-UBM executive called John van der Valk, running what we are calling Informa Advance, which is a series of digital service products, in order to provide additional service delivery, insight information, and hopefully therefore for us, revenue and delivery from our portfolio. The PPM I am not going to dwell on. The two businesses that we are in intense discussion with at the moment are our IGM and agribusiness portfolios. I am always very conscious that I am having both an internal and an external conversation at these events, and this involves colleagues who work inside and for Informa. Until we make a decision where we are confident that there is a home for this business that is a good home in every sense of the word, it remains within the Informa portfolio. We are clear where we want to invest for further scale, and that is largely in this market around pharma, healthcare, retail, financial, and maritime. For 2019, this is the theme of 3.7%. Just to rack up how that looks from 2018 going into 2019, to reprise Gareth's point, if you therefore look at what did old Informa, if you want to call it that, do in 2018 or deliver in 2018, we delivered 3.7% underlying growth in that old Informa portfolio. Coincidentally and conveniently, because it makes it easier to remember, so did the UBM business in the stub period that we own that, delivered 3.7%. They have a more back-end weighted portfolio by volume of revenue. Therefore, in 2018, new Informa with that stub period delivered 3.7%, but the full year of UBM was nearer 2.8%, and that was largely a function of the fashion decline and the underperformance in life sciences. Which therefore, if you wanted to look at a pro forma comp, it would be around 3.4%. What we have laid out here is what we are setting as ambitions for each of the divisions on a per-division basis, with an ambition of taking the combined group in a full year to north of 3.5% growth in 2019. Hopefully some of you have got this date in the diary, Friday the 10th of May. It will be in London this year. We have not yet determined the location, which we are clearly failing our own dates are important test and location scheduling is important test, but I am sure there is a good reason for that. We will get the location out to you in short order. I do hope as many of you as possible will free to join us. There will be a full lineup of the management teams from the different businesses. It will be a first outing in full for Annie Callanan from Taylor & Francis to give a sense of what we are doing in that business. Allow us to bring to life the tech business and to display our other businesses, and in particular, Informa Markets in its full glory. Thank you very much for listening. Slightly longer presentation. We are trying to help bring to life the anatomy of the new company. I hope it was useful, and we would really welcome some questions. Three questions in the front, please, and then three questions on the left. Hi, it is Will Packer from Exane BNP Paribas. Three questions, please. Firstly, my understanding is that the world's largest exhibition venue is opening in Shenzhen in July. You have a business there. You are now the biggest player in China. I understand you have some wall bound shows there and nearby. Could you just talk about how big an opportunity the new venue in Shenzhen is for you? Secondly, within the new Informa Markets, back of the envelope, 20% of revenue is from the old UBM marketing services business and about 10% of profits is. This has been a long-term challenged asset. Could you just talk about of those bits going into Global Markets, what is the underlying operating performance to help us with our modeling? Finally, back of the envelope again, it feels like, in both academic and BI, despite another year of improving growth, there has been almost negative operating leverage. How should we think about the growth and profitability going forward as you continue to deliver good growth there? Thanks. Okay. Why do I take the last and the first, and I am not sure I entirely understood the second, but I am going to give you some time to work out an answer. On the last, I think that is true. I think the BI margin was steady, I would say. But I think you are right. We would be keen to see that as that business focuses in its new guise as Informa Intelligence on markets where we believe we have got better brands, better market position, and a long-term growth opportunity that you would see that margin stabilize and then over time grow. I think in AP, that was mainly an FX effect in the main, and combined with the fact that we invested actually very well, very effectively, in our books platform, in particular three or four years ago, and that has produced some quite significant benefits. There is a depreciation kicker in that business. I am not sure we are driving that business for any more profitability, Will. It is a highly profitable business as it is. I think we are trying to keep that balance right between steady revenue growth and I think acceptable and attractive profitability. I would not particularly look for more profit conversion in that business. I think more broadly in the group, I think there are opportunities in Informa Markets and in our central cost structure as a result of scale. I think net, we would like to see some progression on the profit line. Shenzhen, 100% right. It is a thing to behold, the investment in infrastructure in Shenzhen. As you know as well as I do, possibly better, one of the great strengths of the Chinese market is that it is very suited to the trade show product. Manufacturing is a key part of that economy. We are in quite significant discussions with Shenzhen about both the portfolio we have got, how we could get more extension and other brands that we might bring to Shenzhen. Yeah, that is a good opportunity. The marketing services question, apologies, I did not quite catch. In terms of the marketing services question, I think the percentage of markets that will be marketing services going forward is a bit lower than perhaps you have estimated. I wonder if the fact that actually a lot of the Life Sciences Media portfolio is marketing services, and that is now come out, perhaps reduces that number in terms of the overall impact. But in terms of the going forward view of our operation there, which is 4.5% plus underlying growth, that accommodates all the dynamic around the remaining marketing services in that number. Obviously, if you take fashion out of there on the back of an envelope, that gets you back to closer to 6% growth, for Informa Markets, closer to where the GE business was historically. Just to clarify one comment you made around BI. Can the underlying margins of BI improve in FY 2019? As you know, I am very reluctant to give specific margin guidance. But I am very happy to be overruled by the Group Finance Director. We have a longer-term ambition for our profit growth to become closer to our revenue growth. That is absolutely where we want to be as we come out of the Growth Acceleration Plan investment period. But beyond that, into specifics, as you know, we have never gone into specific year-on-year future guidance on margins. Thanks. Thanks. Nadeem Whittaker from Liberum. Again, three questions. First of all, just in terms of academic, when RELX had their results today, they were very helpful in providing a breakdown of their customers, the total number of customers, sort of types, and so on. And that sort of was helpful for us not getting panicked if there were a couple of contracts that were in dispute. I just wondered if you could give similar sort of breakdown, just sort of number of total of contracts you have in academic, sort of split the types of organizations, and maybe any other detail that would be quite useful. The second question is just in terms of the new structure. Obviously in terms of the organization has gone through a lot of change over the past couple of years, and now again, we have got another change, in terms of divisional structure and how people will be allocated. Could you just give us a feel for how you will make sure that there is no disruption to the business? You are making sure you handle things, for example, the incentive plans are tied into existing organizational structures, how you manage those. And the third thing, just in terms of markets, is that if you look in terms of there is a lot of talk about value-added services in markets, for example, extra services for optimization in terms of attendees. And you seem to have two approaches. You seem to have a RELX approach, which is to say, we'll include that within the price, so that we won't try to drive organic revenue growth upwards through those. You have some other peers who are suggesting they see it as a good opportunity to get further organic revenue growth within that market. I just wonder where you stand in terms of that debate. Okay. Those are very good questions, and they take quite a lot of time to answer in proper detail. On AP, I mean, I can't comment on other people's business, but I'm not sure, without being glib, I hope, that there is enough detail that we could give that would satisfy everybody. I suspect you're talking mainly about the journals business rather than the books business. I think I've been reasonably open. We publish circa 3,000 journals. We have, I don't know, I'm looking at Richard, 14,000, 15,000 institutional relationships around the world. We work with 65, 70, 75 consortia around the world. We renew them on probably a 40% a year basis because some of them are one-year contracts, some of them are two-year contracts, some of them are three-year contracts, some of them are longer. It's a very granular business. I think the difficulty from, and easy for me to say, from an outside in, is that the headline conclusion doesn't apply on a granular basis. I think that's part of the challenge in the policy debate, is that people are trying to come up with a single point solution for a very multifaceted market. We had taken a very clear position internally, which we don't spend a lot of time making headlines about externally, which is we'll be flexible. We're flexible. We're flexible on products, we're flexible on pricing, we're flexible on contracts. That flexibility is because we believe that's what the authors and institutions want. That seems to be serving us pretty well. I love your question on business disruption. If I'm allowed a very brief moment of congratulations to the business, I think one of the achievements of the company in the last 12 months, is that we've delivered, I think, a really strong, solid performance whilst doing a major transaction and combining it in real time. That's easy to say in these meetings and presentations on PowerPoint, but as you know well, Steve, it's hard to do on the ground in 40 locations around the world with multiple colleagues with history and background and culture and human input. A large part of that has been around aligning leadership roles, responsibilities, compensation, incentives, targets, and spending time with the people in the business to ensure. Now, I'm not holding out that it's perfect for every single person inside the company. Far from it. But all I can tell you is, across the business, we have put a lot of time into this, and many leaders in the company, that has been a big part of their year. I think we see that in our performance, and I believe we will see that again in 2019. Extra services, that is an interesting one because it depends what you mean by an extra service. I mean, an obvious extra service is, I don't know, let us take an example. A digital storefront product or a research analytical product that you tack on as part of a space sale or a standard sale. But actually, you can do extra services on a traditional booth sale, either in quality or location or value or tracking traffic or doing a quality analysis on traffic. So extra services comes, I think, in lots of dimensions. I think one of the great strengths of this business, partly because it has been doing very well for the last few years, not just us, but the industry, is that the opportunity to add more value to the core product as well as do other things still remains. That is what is driving growth in this business. It is not a business like other media businesses I have been in or seen, where there is a market price for inventory, which is set as either high, medium, or low. I think there are other things you can do around the core product as well as other services. That is, I think, what gives us real confidence. Sorry, can I just ask a quick follow-up? One of your peers in academic, John Wiley. Their view on the journals part was essentially, if you combine, they think that the traditional journals, flat revenues moving forward, open access providing the growth and the totality of journals growth, we should consider probably around 2%-3% growth. So does that sound a right figure to you? I think that is broadly sensible. There is more growth in open access than there is in the traditional paywall model. But the volume of the market today is still in subscription. The proportion of research funding that is going to APC-funded open access is small today. It is 11, 12, I don't know, what is it? 12% of our revenue? But it was zero five years ago. So even if you just do a straight line extrapolation, it is going to grow. But I think your number is broadly right. Good morning. It's Chris Collett from Deutsche. Just a few questions. One was, sticking with Taylor & Francis, I think in 2018 you had a really good performance on e-books. Just wondering, is that something that we should factor in on a more recurring basis? Was there some one-offs there? Second question. When you think about some of the more vertical specializations that you're moving towards and I think about some of the verticals within exhibitions, are there any that you think particularly lend themselves to the addition of more content, particularly more subscription and information content? Then lastly is just a quick question for Gareth. UBM had some pretty expensive bonds maturing in 2020. Just wondering what your plans are for them. Do you want to take the bond question, Gareth? Yeah. You can see that bond maturity on the debt maturity graph that I talked to earlier. It's in Q4 2020, so we've got about 18 months of runway leading up to needing to refinance that. At the moment, we're open-minded about what we're going to do, but the two obvious options are to either use our inaugural public bond issuance we made in 2018 as a platform for further public bond issuance. But I think we'll also price-test the U.S. PP market at the same time to make sure we're getting the cheapest financing that we can secure. E-books, you are right. We did, we had a very strong year in e-books. The trend lines seem consistent, although even in my time, even in the last five or six years, I have seen it go up and down, Chris, as have you. I am not predicting an end to the physical artifact. But if one were looking at forward trends, I think that will continue. I think one of the things that Serv does very well, is that the books platform that we essentially built ourselves, what we call a UVX platform, has made it materially easier for users to be able to find, discover, and use our e-book product. That has really driven volumes. So much of this, if you are running an archive-based reference business, so much of it is about discoverability and ease of use. But I think you are right on your forward predictions. Categories, I just brought this slide back up. Probably the top three on your question would be healthcare and pharmaceuticals, H&N, and beauty and aesthetics. I think those would be the three categories where at scale you would see kind of an obvious market need. We do a bit of it already. If I was self-critical, I would say we are not doing enough of it because we sort of don't need to. If I was optimistic, I would say we are now much more organized around verticals and spending time and management effort looking at what are the ancillary products and services that people want, and how do we use the information. We are sitting here today, and I am very glad to be here, but if I wasn't here, I would be in Anaheim, where we have got our Natural Products Expo. That is a vast gathering of a community in an industry which is changing and incredible. That is like a technology business at the pace and rate with which trends are moving. There is a real opportunity for us there. We are taking advantage of it to provide customers with analysis, reports, data, forward trends, and we are uniquely positioned to see that and access that information. But those would be the three I would pick out. There was one more question just behind you, and then I will go to the left-hand side of the room. Over there. Oh, hi. It is Patrick Wellington at Morgan Stanley. Do you want to talk a bit about the rebooking in the Middle East? Because you talk about rebooking in real estate, or in property rather, being quite strong, and in health, I think. But you miss out healthcare and pharmaceuticals, and we have had a couple of big shows in the Middle East. So do you want to talk about that? On fashion, I notice you have got that slide up. You generously give them one tick for structural growth, so I am not sure what the value of those ticks is. But it does kind of raise the question of, can we make fashion a growth business as opposed to just a less bad business. Then I suppose the third one is shape of the group. So we have got the new shape of the group here. You have five divisions, four of which are growing 2%-3% organic. That is roughly half percent of sales. Then you have exhibitions growing slightly slower than it used to, at 4.5%. I am just thinking about the future growth generation of this business. It is a little bit tricky to ask exhibitions to grow faster. Can we get those businesses growing at 2%-3% to contribute more highly? Then just to complete our models, you always talk about doing about a 30% margin. What are the boundaries of your margin ambition? Is this 30%, about 30%? Does it go up to 32%, 33%? Where do we see that going once we are through the UBM process? I will let Gareth take the last question, Patrick, but let me be clear, it will not go to 33%. Good question on the Middle East. We have had some major shows already this year. We had a very strong performance in both Arab Health and MedLab, which as you recall was the breakout show that we took out of it. It was the technology subset show that we broke out of Arab Health 3 years ago. 2 years ago? 3? Two. 2 years ago. In both those shows, perform well and rebook well. I think we are slightly more cautious on Middle East Electricity and on Cityscape. I do not have any data to share with you. I am not flagging a problem, but I think we are slightly more cautious on it. For a long time, viewers of our exhibitions business, one of the things that I think gives our portfolio much more strength is that even if I look at the business that we call Inside Informa Markets, Middle East and Africa, because we do run that on a geographical basis, it is much more diversified. We now have a very nice business in Egypt, which is growing extremely well. We have a nice business in Turkey, which is growing well. We have a nice business in Bahrain, which is doing well. We have a nice business in parts of the U.K. and Europe, which are actually spot shows, but are solid. So we are much less dependent solely on the Dubai engine, which 5, 6 years ago really was the core of our exhibitions business. If I was looking forward into 2020, one of the other things that gives us some confidence is that, of course, 2020 is the Expo year in Dubai. We look into 2020, I think reasonably confident that will be fine. I think the question then is what happens in 2021 in that part of the world. On fashion, fair cop on the single tick. My only defense, or our defense, would be, we talk about fashion, but of course, our fashion portfolio is not a generic thing. There's a show and a brand that operates in the women's apparel market, in the footwear market, in the men's market, in the offcut market. Actually, some of those brands and shows are doing quite well, are growing. Sourcing has been a real headache. In that market, you wouldn't even give it a no tick. You'd give it a minus tick. Part of the reason why we put one tick was when we were debating the slightly arbitrary judgments on the tick analysis, our view was that there were some parts of the fashion market which are not structurally out of growth. That does give us some confidence to your probably on-point question, which is, short-term, we want to stop the decline. Do we believe that there is a route to getting this business back into growth? We do. Margins, Gareth. We've reported 31% as the margin for 2018, including a stub period for UBM. On the 50 million of synergies, you can do the maths on that, and that should improve the margins by around about 1.5% to 2% going forward. You'll also remember that UBM, on a full year basis, generally had an operating margin in the high 20s. We bring in the full year effect of UBM in 2019. That adds a bit of a headwind on the margin. Net net, what you'd expect is the margins come out somewhere between 31% and 32%, so slightly up year on year in terms of the modeling. I suppose it's a bit of a medium term question, because you've also got the UBM biennial year. I just see Informa as it's quite a high margin. 30% plus is a high margin. We shouldn't really expect ex synergies from acquisitions, much underlying margin improvement multi-year, I guess is the question. Yeah, I think we haven't really guided out into the medium terms in terms of margin. We've given you the quite specific numbers on the biennials if you want to model that out and have a look at it. I think what we're trying to do is we're trying to get a balance between consistent growth through investment in the business, and making sure the underlying revenue growth hopefully continues to improve, but certainly stays where it is in terms of the current range. The margins, around about 31%-32%, as you say, are very attractive margins, and we're comfortable with them at that sort of level. Okay. Do you mind if we just move to the left-hand side, Nick? Just for I don't want half the audience feeling neglected. Good morning. It's Adam Berlin from UBS. Three questions for you today. Welcome. Thank you. First question is, could you just clarify what was the organic growth in 2018 in the new Informa Markets business? Then can you summarize for us, what are the reasons that could go up in 2019, and what are the reasons that could come down? The second question is, you talk about GBP 120 million of assets you still want to sell. Are the margins in that group of assets above 30% or below 30%? So do they have a positive or negative effect on the group margin as those are disposed of? The third question is, you talked about around 70 consortia that you negotiate with on the journal side. Can you give us some idea in how many of those consortia negotiations you've reached some form of deal where you include the open access and the subscription in these publish and read type deals like the Wiley have done publicly in Germany? Is that just one or two, or is that more common? Thanks very much. Okay. Let me try and take the second and the third. I might let you answer the first, because I don't have that pro forma in my head, I'm afraid. Yeah. On 120 million, I'm not just picking up on your question, Adam, but I did not say that there was 120 million of revenue that we were going to sell. I said there was 120 million of revenue that we were reviewing. The reason why I draw that distinction is might we end up either retaining some of it? Possible. Might we end up in a joint venture with someone? Possible. Might we end up disposing of it? Possible. So I'm just being precise. Actually, some of those businesses are very nice margins. So I wouldn't counsel you to reset the margins on the basis of if we did end up in a disposal of all of them, would it materially change the margins? It would probably improve the growth rate for our Informa Intelligence business, but I don't think it would reset the margin. You'll forgive me if my answer on your question on the consortia is no. I wouldn't choose to give you any information. I personally, we have always taken the view that we're not a commentator on our contractual negotiations with our customers. Sorry to interrupt. Final question. I think what we've done is we've been very clear on the guidance for 2019. So we've given you a sense of the revenue numbers for 2018, and our view on the growth for 2019, and that should give you a clear idea of how to model it out. What we've intentionally done is tried to simplify the message, because there's a lot of moving parts and it's quite complicated. So we've not looked to go through a whole lot of historic data on principle on previous growth numbers. But obviously the guidance we've given is absolutely informed by the previous numbers in the past. So I think we've given you a good basis to go ahead and do the modeling on by giving you the 2018 number and the 2019 growth expectation. Thank you. Okay. Morning, it is Katherine Tait from Goldman Sachs. First question from me. On open access reaching 10% of your business from zero, 5 years ago. Can you talk us through how that, if at all, has impacted the margin profile of that business? How the economics of open access versus the more traditional subscription journals plays out. Secondly, just on Informa Tech, you talked about potentially being 2 times the size over a medium-term period through cross-marketing solutions, et cetera. Could you just flesh that out a bit, help us understand how much of that really is just from cross-selling opportunity versus incremental investment that might be needed in the business? Then finally, just on fashion, if you could just give us an update on how the client mix of that business is changing. Are you seeing more and more participation from the online players and how you see that going forward? Thank you. Okay, I will have a go. On OA, if you look at our academic business over the last period, I think we have seen what I would say a very marginal reduction in the margin over the period. I do not carry in my head whether that is directly attributable on open access because it is not an apples to apples comparison. Our experience to date in open access, whether it is a hybrid contractual structure, sorry to go back to your question, Adam, or whether it is a standalone dedicated OA journal, is that the market is finding a price for those services. Some of those are spot arrangements, some of those are bundled arrangements, some of those are combined separately with a subscription arrangement, and some of those are priced together. So it is quite difficult. When you aggregate it up, we still believe we are getting the balance right between price and revenue and margin. We have invested more in capability, both on the open access side and on the book side, and that has been sensible. We are not ringing an alarm bell on it, is how I would describe it. But we are being, I think, sensibly flexible with individual customers, which is why we do not get into a kind of public discussion about contract X or contract Y, because they are very different, and they are very different depending upon which part of the world you are in. They are very different depending on which scholarly community you are dealing with. I think often in the open access debate, people do under-recognize that the percentage of research funding for academic research in humanities and social sciences that comes from public funds is very small. It is very small. So the dynamic of the source of the funding, the author, the institution, and the price is quite different than it is in STM. It is quite a different market. On tech, I do not know yet. The team are fresh in the driving seat. We have set an ambition over a, I think, a sensible time period that we see it is a growth market. We have some very nice brands and market positions. We have an enormous amount of traffic, both through our shows, through our research products, and through our media products in that portfolio. We think that gives us a very nice position. Might we deploy some targeted acquisition capital in that market to fill out our footprint in those parts of the tech community where we see opportunities? We might over time. But I think in 2019, we want to turn it into a functioning combined business so that our customers can see a sense of the value. Fashion, I do not know if we have traded enough to be able to answer it. The temptation if you do what I am doing for a living at events like this is to try and provide good news. We have traded some of the fashion brands under our watch this year. We were, I think it would be fair to say, somewhere between reassured and pleasantly surprised that the attendee level in the February shows was actually pretty strong. We were even more pleasantly surprised that the mix in that attendee was equally diverse. But one swallow does not make a spring, as they say. So give us time. Then we will go across to the other side of the house. It is Natasha Brilliant from Citi. Three questions. Firstly, just on the revenue synergies, you gave us a bit more color on that, but I wondered if you could maybe quantify the impact or the benefits for this year and next year. Secondly, on your sort of acronym-based programs, we have had the GAP, we have had the AIP, and now the PPM. Is that an indication that beyond the sort of GBP 120 million of revenues that you are looking at at the moment, we should expect to see ongoing sort of portfolio management? Finally, looking at the five new divisions, four of them are rebranded with Informa within the title. The last one is not. Well, it should. Should we read anything into that? Good. Well, we were wondering if someone would ask that question, Natasha. Thank you for asking it because it allows me to say no. You shouldn't read anything into it other than in that world, we have one of our strengths, I think as a research publisher, is that we have strong brands. I'm sure some of you here and others will know our Routledge brand well, the Taylor & Francis brand, the CRC Press brand. And it seemed to us that just imposing the Informa brand on that market for corporate neatness was not necessarily the right answer. I would read nothing into it. The director in charge of acronyms and project names is at the back of the room. I don't know what the sequel to GAP, AIP, and PPM is. But all joking aside, I think we've become much more disciplined as a company about regular portfolio management in the business. The PPM, we did as a more group-run process because post the acquisition of UBM, it seemed an appropriate time. And when you're making these decisions, as I was trying to lay out earlier, about how do you combine two companies, there's no point in putting people through an awful lot of pain if then six months later, actually, you've got a different view of the future of that business. So part of it was to try and deal with the human consequences, so we had a more structured program. But on an ongoing basis, portfolio management, I think, is a key part of the discipline. The revenue synergies for 2019 are in the growth numbers that we've put out. Putting a specific number on it, you will forgive me if I do not, Nick. Yeah. Hi, Nick Dempsey from Barclays. Two questions. I am surprised Patrick did not ask this question, but there is a 0.4 point impact from phasing between reported and organic growth. Can we think about how that works next year? Are there some Informa Global Exhibitions biennial drags in there, which you count inside that, which will unwind in 2019? Are there things that fell out of December into January that will help you? How can we think about that number when we are modeling for 2019? Second question, in terms of cash restructuring, we have 74 million of acquisition and integration costs in cash in 2018. I know there is often some timing differences between cash and P&L. How can we think about that kind of number in 2019 and 2020? You are on point, mate. On the phasing point on the revenue graph, the way we do the underlying revenue growth numbers is that we do adjust for biennials to make it a proper like-for-like comparison. Therefore, when you are bridging across that sheet to get to the reported growth, you need to take into account the fact that 2017 was an up year in terms of biennials, and therefore, to adjust between the underlying growth to reported growth, you need to take out the effect that actually the comp from 2017 is harder in the reported numbers. So that is why there is a minus 0.4 on that revenue bridge, and therefore, in 2019, you should see it go the other way around because in 2019 it is an up year, and therefore, a reverse. In terms of sizing it, I think you can probably do that off the GBP 75 million and GBP 95 million revenue numbers that are on the top right-hand corner of that revenue chart. In terms of the cash costs for our restructuring and integration costs, there is certainly an ongoing cost of that program into 2019 and 2020. I think we have previously talked about a GBP 100 million total cost of that program. You can see what we have done in 2018. The balance I think predominantly would be in, if I had to place it, split half and half 2019 and 2020, I think in terms of the balance of the remaining costs to be expended in that area. Just a quick follow-up. So GBP 100 million total, there was GBP 74 million done, but some of that GBP 74 million is not part of the GBP 100 million, right? It is more kind of- No. other one-offs, right? Yeah, exactly. Some of that GBP 74 million is the transaction costs. Probably about half transaction costs and about half integration costs in 2018. So yeah, half of that is not related to the GBP 100 million. We have still got 60. If we take half of 74 is 37, 100 less that, we have still got 60-ish to go. That is how you want to think about it in terms of the modeling. We can pick up on the details in terms of getting the numbers spot on, but that is broadly how you want to think about it in terms of the shape of it over the next couple of years. Thanks, Nick. There is a question just on the left-hand side. Two questions there. Thanks. Matthew Walker from CS. Two questions. First one is again on free cash flow. Just to clarify, so that free cash flow number is including ordinary restructuring costs, so GBP 13 million or so, but it is not including acquisition integration costs. So I guess my question is, you said it was roughly GBP 600 million for a full year in 2018. That included a negative working capital swing of GBP 50 million. Also, you should have some natural growth in free cash flow roughly in line with operation profit growth, whatever. So really, that sounds pretty conservative. What are you baking into your GBP 600 million-plus free cash flow guidance for 2019? Because in theory, you should be getting GBP 50 million benefit from working capital plus 5% growth in that number. So it sounds a bit conservative. Second question, which Stephen may like more is, in the private markets, exhibition companies are going for extremely high multiples, anywhere between sort of 12 times, 15 times EBITDA. Yep. What do you think explains the big difference between public market valuations of companies like yours, exhibitions companies in the private markets? Is the private equity people overvaluing these businesses or is the market undervaluing these businesses? Good question. You tell me. We had this discussion at our board meeting just this week. I think there have been five, maybe six transactions in the private markets, effectively the private markets, since we closed the UBM deal. I think the average multiple is materially higher, and there are no synergies to speak of in any of those transactions. So if you do a post synergy comp, they are at least two, maybe even three turns higher on average. I think, what is my own view? Here I am massively editorializing. There is a lot of capital out there. It is looking to be put to work. And, there are not many assets of quality. But the fundamental resilience of these businesses is very strong. I think the public markets still see these businesses as media cycle businesses. I think the private markets see them as resilient, predict fundamental difference in nuance. That is my own personal view. But some of it, I think, is to do with a significant supply of capital and a relatively lower supply of assets. And if you are a seller, that is a beautiful thing. On your first question, which I will give to Gareth, but I do not think we guided to GBP 600 million plus for 2019, did we? We talked about GBP 600 million plus from the combined group. Yeah. I agree with everything you said. The one thing that you didn't mention, though, was the cost of interest. In working out the combined group number, we took into account a full year of the cost of the acquisition financing to combine the group. That, therefore, is an extra cash outflow that you didn't list out in your other numbers. That's one of the reasons why it's probably slightly lower than you were expecting. How much would you attribute to that, then? Well, broadly, we're looking at numbers that you can see you're about a GBP 640 million payment to the shareholders of UBM, was the number. If you take that at, say, 3.7%, which I've said is the 19 interest rate, you can do the maths on that. It'll give you something about 25 million, I think, would be an interest cost. That sort of thing is what you've got to take into account as well as just the growth. Okay, is there a burning final question? I do not want to close it down, but I am conscious we have taken. There is one more question just there, if we may. Then a nice, gentle last question. I will try my best. Hi, it is Giasone Salati from Macquarie. Two questions, please. In academic publishing, have you had any talks ended with any of the institutions or have you had any contract ended, without naming it, of course? Secondly, we spoke a lot about potential disposals and multiples in the exhibitions segment. What do you think is the right size of Informa? Do you feel like you are now at scale? It is a peculiarly fragmented global landscape with B2B exhibitions, and you have been leading the consolidations. Where do you want to go? Well, thank you for those. Those are two last questions. I think on the contracts, we try not to get into public dispute territory because we do not find it helpful. Have we taken a position in any of these contractual negotiations where sadly, in a metaphorical week, by Tuesday, we cannot come to terms and therefore we have had to walk away? Yes. More often than not, by Thursday, we are back talking again. We find that not being public about it makes that a lot easier. I am not sure in these transition markets, having theologically public views helps. I do not think it helps the customer, and it certainly does not help us. But we are firm about what we will do and what we will not do, and that combination of being clear on our own terms is part of what contributes to our commercial performance, but not being inflexible is, I think, what has helped us avoid major large-scale contractual walkaways where there is no rapprochement later in the week. On exhibitions, interesting question. It is a very difficult market to size to do a sort of total addressable market. But if you try to do one, we are maybe 10% of it. So as Richard knows, one of the words that I tend to red line whenever I see it written down is scale. I do not think we are a scale player. I think we have depth and breadth, and I think that helps us. I think in some markets, Shenzhen, which Will talked about earlier, or Dubai or Vegas, these are the major centers of this market. We are now a very material customer for those major centers. That's very helpful. Do I believe there are other opportunities for us? Yes, I do. Do we look at them all? We do. Slightly to Matthew's question, I would say, and maybe some people in the room would disagree, I think we've been pretty disciplined about what we've acquired, but we've been equally disciplined about what we haven't acquired. Some of that is driven by price, but most of it is driven by is it a portfolio of brands that has got long-term resilience in markets where we can build specialization. That's the key, I think, for us going forward, is how do we infill either geographically or in categories where we can see that being beneficial. If you can't do that, it's just market share, and that's not valuable. That's how we think about it. Can I thank you very much for your attendance. I apologize for the slightly longer slide presentation, but it was designed to try and explain the combined company. Thank you very much for your interest in our company, and we'll see many of you, I hope, at the Capital Markets Day. Thank you.

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