Earnings Call: H2 2010

Feb 22, 2011

Summary

2010 was a record year, with higher profits, margins and cash generation, supported by digital subscriptions and resilient large events. Positive bookings and investment underpinned 2011 growth expectations, tempered by economic and regional uncertainty.

Good morning, everybody. Thank you very much for coming this morning. Adam and I are going to try to dovetail precisely in presenting this morning. I have to watch when I break because he's trying to monitor the one-day international in India against the Netherlands. So if he goes like that, we've probably got a wicket or something like that. I'm very pleased to announce our results, which are in line with expectations and which also are a record for Informa. In the last three years, we've seen a 10% CAGR in publishing revenues, 17% CAGR in publishing operating profit, a 3% CAGR in overall revenues, and a 6% CAGR in the overall operating profit. Given recent turmoil and crises, such a performance demonstrates the strength of our businesses. For those who like ancient history, our operating profit has grown from GBP 32 million 10 years ago to, as you can see, over GBP 300 million today. During 2010, we continued to strengthen our portfolio through greater depth in key growth industry sectors, a good geographical spread between developed and emerging markets, and also through the utilization of a format neutral approach to knowledge dissemination. Of course, the last few years have tested our model to the utmost, and it has not been found wanting. Early cycle products, especially events, while somewhat volatile, have managed to hold on to margin through strong cost management and as seen during 2010, without any disruption in long-term value or growth opportunities. As expected, our late cycle businesses, especially those in data and leading exhibition and conferences, have performed well. Our strategy, which is to focus on corporate subscriptions, to grow our digital content, to build market leading and resilience events, and to expand geographically with a bias towards emerging markets, has proved to be robust and appropriate. 65% of publishing revenue comes from subscriptions, which are now almost entirely digitally delivered. We've had strong renewals into 2011 on our academic journal business and seen overall subscription numbers grow except in the financial area. Taking books and subscription products together, 47% of all of our publishing revenues now come from digital products. Informa is now a digital business. It's only from a content and marketing perspective where we face the customer, but also in our back office and distribution systems. Through 2010, we continued to reduce the number of margin events, although at a lesser pace than in 2009. Quite separately, though, we focused on growing larger events, which by their nature tend to be market leading. These can either be exhibitions or large conferences, which will be the rallying point of a particular industry. We saw during the downturn how resilient this event class is, and it is relevant that in 2010, 49% of all of our event revenue came from the top 200 events. All three of our divisions are experiencing good growth in emerging markets, which are not just restricted to the BRIC countries. Particular focus and investment is being put into these markets, and already we are seeing good returns. We're a knowledge business, and as such, change of any sort is our lifeblood. In order to monetize change, our businesses have continued to innovate at all levels and through all of our media formats. This investment in organic growth is fundamental to how Informa is organized. Throughout all parts of our business and all the geographies we operate, we continue to launch new products and further develop existing ones. I will add to some of these themes later on, but for now, I would like to hand over to Adam. Thank you, Peter. Good morning, everybody. I am glad you mentioned cricket. We are being recorded today and I know a lot of our people watch the webcast. To our Australian colleagues, whatever happens over the next month, One Day Cricket is irrelevant. We won the Ashes, we retain them. You will no doubt have had a chance to have a look at the results earlier this morning, so let me try and highlight a few key points and extrapolate what I think this means for 2011. Firstly, let us cast our mind back 12 months, where many thought that the targets we set then, which I am glad to say we have hit, were conservative. If you look at the GDP numbers for our main markets over the past 12 months, somewhere between 1.5% and 2%, I think to have grown revenue in 2010, to have increased profits by 1.8%, to have increased margins, to have increased our free cash flow, and increased our earnings, is not too bad a performance and reflects the balance and strength of the Informa portfolio. Remember, 70% of our profits come from publishing, mainly subscriptions, which often lag any recovery. This financial performance and our confidence for the future has allowed the board to increase the dividend by over 20%, so that the payment in May will be GBP 0.095, making a total dividend for the year of GBP 0.14. This equates to 2.5 times dividend cover. We will aim to grow our dividend in line with earnings, although we have the flexibility in a year of low acquisition spend to reduce the cover further. Here is a bit more detail on the income statement. We have grown revenue despite proactively reducing volume again. During the course of 2010, we ran around 2,000 conferences, which is a fairly similar number to 2009, but probably around 10% less training courses. As we have said before, we are not rushing to put that volume back. Equally, on the publishing side, marginal titles were merged, eliminated, or sold. The overall aim is to create a more resilient earnings stream on both side of the businesses, although recognizing that it is the cyclical elements that deliver the bounce back. Profits are up thanks to a recovery in the events and training, and despite some investment in the second half of the year across the business, margins are up, too. The redundancy and restructuring costs shown in other adjusting items on this slide have reduced considerably, and we hope to reduce further or even eliminate in 2011. A quick mention on tax. There is more detail in the back of your packs. The adjusted rate has fallen to 24.4%. The comparative on this slide contains a significant deferred tax credit, and we remain on course to reduce the adjusted rate further in 2011 in line with the forecast given at the time of the move to Switzerland. Earnings are up 1.5%, but if you adjust for the impact of the rights issue in 2009, they are up 8%, which is in line with our medium-term annual target. Looking briefly at each of the divisions, it was a great year for our academic business. We benefited from some strong sales in emerging markets and had another strong finish. Growth was ahead of our expectations, particularly on the book side, which is the harder part of the business to predict. We continued to expand our print-on-demand activities, enhanced our journal and book products around our key HSS sectors, and spent time on our delivery platform, the latest version of which is due to be launched in the first half of 2011. Given the funding constraints across the developed part of the academic world, I would expect growth rates to fall a little bit in 2011. But overall, we will be delighted with the result, which is similar to this year. Within PCI, we saw a return to growth in the second half of the year, and the lag around subscription income started to alleviate a little. Datamonitor continued to grow. IBI consolidated titles and launched many new products. Their combined offerings in 2011 give us real confidence for this division with its high digital content, wide range of products serving niche areas, geographic diversity, and experience management. We expect this division to recover most of the profit fall it suffered in 2010, and look forward to telling you more about it at an investor day, which we are planning for the first half of this year. The margin decline in the second half reflects the investment that has taken place in this division, which we authorized as soon as we saw this top line starting to grow. For us, investment is about people. More people, especially on the sales side, more marketing spend, more products, and better platforms, all of which shows our confidence in this part of the business. Events and training saw better growth in the second half of the year. As you know, this is the smaller half for this part of the business, prompted by a tentative return to confidence in the U.S. market. We run less exhibitions in the second half, but those that did, like the Broadband World Forum, performed exceptionally well. Our conference businesses in Germany, Australia, and Scandinavia continued their recoveries. Our training business in the U.S. had a stronger end to the year, and if you exclude Robbins-Gioia, grew its profits by 19% over 2009. Interestingly, profits within training generated outside the U.S. doubled, too, over the year. So margins across the combined events and training division are now 17%, although don't forget we benefited this year from running IPEX in May. Our peak margins in 2007 were just short of 20%. Unlike a pure exhibition company, we have a long tail of small conferences and training courses. Our focus for this division will be to increase the number of larger, more resilient events, and I expect that we will see good growth in 2011 and another improvement in margins, although not to the mid-20s that others achieve, reflecting the very different composition of our portfolio. Just two seconds on Robbins-Gioia, not because the team there work less hard or are less important than any of our other teams, but it was a tough year, and its results caused the decline within what is disclosed as our U.S. events business. Robbins-Gioia now accounts for less than 4% of group revenues. Talking of disclosure, with an increasing focus on geo-cloning, the geographic divisional split, as shown in the press release and in the back of your pack, is becoming increasingly difficult to correlate with accounting rules. From this year on, we shall, in line with the rest of our peer group, disclose events and training as one division. Turning to the cash flow, it's been another good year for cash generation. We invested over GBP 5 million more in capital expenditure, yet with an increased focus on working capital, absorbed most of this to deliver again greater than 100% cash conversion. I would expect this trend to continue in 2011. Moving further down the cash flow, the free cash flow number, our key measure, was up again, and a free cash flow yield of 8.5% demonstrates one of the key attractions of Informa for value investors. We spent around GBP 50 million on acquisition, but only one was greater than GBP 10 million. There are lots more quality opportunities coming to the market, and we would expect to possibly double this spend in 2011, although again, we're not working on anything material. Each acquisition, regardless of size, has to pass stringent criteria around returns and cash payback. For those acquisitions that we completed in 2009, they generated a 19% return on their investment last year. As we integrate acquisitions and combine with other parts of the business, it is harder to track individual returns. But we remain convinced that the historic acquisition strategy has delivered value and helps drive organic growth. There is more detail in the back of your pack on overall returns on capital employed. As you can see on this slide, net debt ended the year at GBP 779 million, which is 2.3 times net debt to EBITDA, and thus well within the target we set at the time of the rights issue. This investment grade type ratio has had a positive impact on our funding costs, and we expect to stay within this range over the medium term. Cash generation remains strong and we de-gear quickly, so we have the opportunity to generate further value for shareholders, either through acquisitions or increased dividend returns. Talking of finance costs, I caused some confusion at the IMS around our interest charge, for which, apologies. I plead mitigation from the fact it was 4:00 in the morning in the U.S. So let me try again. The significant reduction in interest from 2009 to 2010 was caused by the rights issue. The private placement that we closed in December last year has a blended maturity of over 8 years and incurs a charge of 4.3%. The vast majority of the rest of our debt was swapped into fixed rates of between 5% and 6% at the time of the Datamonitor acquisition. These swaps predominantly expire in 2011. Overall, with an effective rate of interest of 5.1% and the reduction in debt really only coming in the last 2 months of the year, the interest charge for 2011 will be broadly consistent with 2010. All things being equal, with the swaps expiring in 2011, we should see the charge fall in 2012. We were particularly pleased with the private placement issue. It diversifies our sources of debt, was priced very attractively, demonstrating how the debt market views our portfolio of assets, and it demonstrates our solid investment grade. The covenants relating to the private placement debt are no more onerous than our existing facility. Looking at our existing facility, we are intending to refinance that within the first half of this year. Finally from me, a view on forward-looking indicators. Deferred income across the group is 9% higher at the end of December than it was in 2009. Renewal rates remain strong, and forward bookings on our large events are also positive. Although it is very early in the year, we certainly feel more positive than we did 12 months ago. We have carried out our own version of QE. We put budget aside for recruitment, product launches, marketing, with a view to stimulating the top line and seeing Informa return to solid single-digit organic growth. With a few selective acquisitions to boost our business, we are encouraged by our prospects and look forward to another year of progress in 2011. Finally, for those of you like me who struggle with numbers, I wanted to draw your attention to our latest best seller, "You Can Count on Monsters!" My 6-year-old thinks it's absolutely fab. For anyone wanting a copy, Taylor & Francis will only be too delighted to pass it on. It's the number one on Amazon in the academic world in Boca Raton at the moment. Now to someone who certainly needs no help with his numbers, Peter. Roger Horton, who runs the academic division, has got Adam on a commission on that book. If you can, buy it. It is actually fantastic, and I think it's probably our first best seller, so that's exciting from that perspective, too. Subscription revenue income from our database products accounted for 65% of publishing revenue in 2010, with strong renewals across all of our sectors. There's a very high inherent value in a subscription revenue stream, where most renewal rates are above 75% and many above 90%. It's similar to an annuity and provides an extremely solid base to our business. In academic information, we saw a 7% increase in the numbers of subscribers last year, 48 society journal gains, 3 journal acquisitions, and 20 new launches. Our market-leading public journals, especially in the area of humanities and social sciences, all enjoy very high renewal rates. These include the renewal rates for 2011, which as you all know, occurred towards the end of last year. The move from paper-based to online journals has proved to be a powerful tool to our sales and marketing teams, especially as actual usage of content is so transparent and open. We saw usage levels increase by 40% last year, especially as we invested in improving our online systems and enhancing our product offering. In PCI, renewal rates were flat on 2009, especially in IBI and Datamonitor. Lloyd's List, which is the oldest daily newspaper in the world, saw subscription revenue in 2010 increased by 221% as we improved the product content. This week, the oldest becomes the newest as we launch an iPad version of the List. Similarly, within PCI, we have added to our offering in the important area of clinical trials. Here, the original Citeline products have spawned complimentary subscription databases for the pharmaceutical industry, including Trialtrove and Sitetrove. This group of products showed 21% revenue growth year-on-year. In 2011, a further product, Trialpredict, will be added to that stable. Datamonitor has flat renewal rates year-on-year, but enjoyed a 9% increase in number of high-value subscriptions of over GBP 20,000 per annum and a small increase overall in the total number of subscribers. Also in this drive to higher value subscriptions, which includes, of course, the general move to site license as opposed to individual subscriptions, IBI saw its yield per subscriber increase by 6%. On the financial subscription side, we knew during 2009 already that some of the banks, such as Lehman's, et cetera, would no longer be around, and that inevitably we would have a late cycle effect. Interesting enough though, overall renewal rates in 2010 in the Informa Financial Information business were 87% as opposed to 84% in 2009. Unfortunately, there were some big nonrenewals, but towards the end of 2010, we saw evidence of a return to profit and subscriber growth. During 2010 also, we acquired EPFR, which is a U.S.-based funds flow monitoring business. Lots of numbers and statistics here, but the overall take-home message is how quickly Informa has adapted to the digital world. Back in 1998, for example, the corresponding figures would be single digit at best. So a few facts. Although 74% of publishing revenue is digital, if you exclude books, this figure rises to 92%. Less than 2% of our total group revenues come from advertising. If you break down the 88% of digital revenues in PCI, IFI and Datamonitor are 100% digital, and IBI itself 78%, up from 63% in 2009. Within academic information, we are really starting to benefit from digital book revenues, which grew by 46% in 2010, and where we now have some 32,000 e-books available out of a total backlist of some 65,000. Of course, it's important not only to develop digitally, but also to monetize the transition. Going back to Lloyds List with lloydslist.com, we saw subscription revenue increase by 21% and the yield per subscriber by 30%. Our maritime database, Lloyd's List Intelligence, which has also been revamped, making extensive use of satellite tracking systems and enjoyed a 10% increase in revenue in 2010. Lastly, IBI also increased its number of digital books with e-book revenue improving from GBP 400,000 in 2009 to over GBP 800,000 in 2010. We continue to develop our platforms across the various businesses with the current major investment being informaworld 2, which will launch later this year. Quite separately from the products, we are establishing and building social media communities which support and extend our overall customer databases. Somewhere in the room is Isabel, right at the back, who is our Chief Marketing Officer. If you want to ask her about social media, she knows all that we know about that. A webinar such as this, often sponsored, are proving to be an extremely successful event, and certainly social media is now a very important part of our marketing and product mix. A lot of you want to know about our resilient events, and as we increase the amount of revenue we generate from our market-leading events, we want to do that because these become more resilient and visible, but we also increase the quality of our earnings. The most resilient events consist of 200, or the top 200, which in 2010 accounted for 49% of the events revenue. About half of these events were actually trade shows or exhibitions, which grew by 8% over 2009, and which in 2011, in total numbers, will grow to a total of 127. During the year, we saw a 10% increase in the number of events generating revenues of over GBP 500,000, and this trend will continue in 2011. We had some particular stars last year, such as Arab Health, Middle East Electricity, and Handelsblatt Energy, which I have only identified particularly because they have already outperformed again in 2011, i.e., they have run so far this year and have booked healthily at an improved level for 2012. So those are part of the deferred income in the bag. The total number of events, as Adam told you earlier, declined by a further 8% in 2010 over 2009 to a total of just over 7,500. All the reduction was in the training area. In the events business generally, as marginal delegates returned, we saw margins improve to 17% overall, which, if we exclude the U.S. government contractor Robbins-Gioia, would actually increase to 17.9%. 2010 saw an improvement across our events businesses worldwide, with the exception of Spain and Italy, and in the Middle East, the Cityscape series. As the world moved out of the financial crisis, we, like many, saw a particular success in our financial events, where revenues increased by 19% and operating profits by 59%. That covers things like the SuperReturn series, our hedge fund events, and our fund of funds events. Within events too, our training PI businesses, again excluding the government contractor, saw revenues up by 3% and operating profits by 19%. Over the last few years, we have spoken about our success at geo-cloning, and within our top 200 events, there are about 36 which have been geo-cloned. A great example here is how we have built our SuperReturn series from a single event in 1998 with 100 delegates to seven separate events in the series in 2010 with a total of 2,000 delegates. We've also had major success in cloning our COMM series events for the telecoms market, especially in Africa, where we saw a 60% revenue growth in the last three years. Geo-cloning is essentially an organic activity, and even where we've acquired a business like EuroMediCom, which we did in 2010, we've looked to roll out this highly successful event elsewhere. Particularly exciting in 2011 will be our China geo launches using our Beijing office in areas such as health, education, and career development. As part of our focus to grow our top events, both in absolute numbers and also as a percentage of the total events profits, we made some small acquisitions in 2010. Earlier in the year, as mentioned before, we acquired EuroMediCom, which is active in the area of anti-aging aesthetics, and the next running of that event will be in Monte Carlo in March. We're all going. Those of us who are getting older are going anyway. We've also acquired a small exhibition business in Brazil. Right at the end of the year, we bought a group of exhibitions in Australia covering a variety of verticals which will sit well with our existing conference and publishing activities there. Taking the BRIC countries first, we achieved revenue growth of 30% in 2010 in emerging markets with a total revenue of GBP 58 million. This includes both publishing and events. Of the total, about 24% comes from China, which saw year-on-year growth of 44%. India accounts for about GBP 15 million of our total group revenue and is the fourth most important territory for our books business after the U.S., U.K., and Japan. Interestingly, the emerging markets now account for 13% of the total revenues of academic information, and this showed 28% growth over 2009. A good return from our strategy of increasing the sales force in areas where we anticipate higher growth. It's not just, though, in academic information where we've achieved growth. It's also where we've been able to expand our products generally into emerging markets. As well as the growth in the telecoms business, we've increased our presence in Asia, biopharmaceutical industry through Scrip, and Datamonitor has invested through putting salespeople into most of our local Informa offices. On the events side, we've used our Chinese agency business, again based in Beijing, to boost outbound sales of Chinese customers into our other marketplaces, especially in Arab Health, but also in a number of other areas, including Middle East Electricity. Performance improvement, which saw 25% revenue growth in the emerging markets, also saw its profits increase from GBP 0.8 million in 2009 to GBP 2.1 million in 2010. Within Informa, as part of the annual budget process, there's significant emphasis on new product development, new launches, innovation, and organic profit growth. Nowadays, not only do you need to create new products and address new markets, both vertically and geographically, but you have to deliver what the customer wants rather than we dictate the format. Already, we have seen our subscription products become totally digital in a short space of time. We've also seen the advent of the e-book and increasing importance of online booksellers such as Amazon. On the event side, we make extensive use of webinars and can increasingly support annual events with online or virtual equivalents. For the first time, one of our businesses is handling this webinar online congress. This is being done internally without the money going outside the group. In the training business, although it is still the case that the majority of training consists of stand and deliver, blended training, including some interactive electronic content, is increasingly the norm. Within IPI, the ability to deliver directly into a customer's intranet for dissemination across the customer's employee base of news, data, analysis, legal information, and modeling capability has been a huge boost for Informa. It is not just new products in the geo-cloning as such that has helped us to grow organically, but also through the sharing of best practice. We have continued to roll out our group marketing system in France, thus enabling more effective cross-marketing and cross-selling initiatives. We have also used our Informa office infrastructure, especially in new markets, to boost sales teams. During 2010, we saw 11% growth of our staff in Asia, and we relocated to Asia a number of senior managers. The crystal ball bit, which changes these days from hour to hour from watching the TV this morning. Certainly, the worldwide crisis of the last few years has caused us to review our business and to ensure that our product range is as strong and as relevant as it can be. We have culled weaker events and publications and discovered where our business is most robust. As a result, we have an increasingly high-quality subscription business, especially in PCI. We are moving to larger events with more resilience and visibility, and overall enjoying the benefits of operational gearing from margin efficiency in most parts of the business. Academic Information has performed well throughout 2010, has certainly benefited from digitization, has diversified geographically, especially into emerging markets, and continues to benefit from an improving books business. In terms of current trading, academic renewals are in line with 2010. PCI has, through the second half of 2010 and moving into 2011, seen the stabilization of the late cycle effect on subscriptions. In events and training, as anticipated, we are seeing an increase in average delegate numbers, and sponsorship and exhibition sales remain strong. Although there remains some global economic uncertainty and regional political instability, we face all of these as a much stronger business than a year ago. The good momentum from last year has continued into the new year, and the group is trading in line with our expectations. Thank you very much, and Adam and I will be pleased to answer any questions. Thank you. It is Richard Menzies-Gow from Merrill Lynch. Maybe three really quick ones. First of all, can you just maybe just a general comment just on Middle East, given you got some quite good exposure there, just if you are seeing any sort of impact from some of the disruption in various countries. Second point, maybe just in terms of overall investment, can you give us a flavor, maybe in 2010 versus 2009, just sort of general overall investment, what the growth was year-on-year and whether 2011 there will be a further step up in overall investment or you are running at sort of similar levels. And the third point, maybe just a bit more of a feel on forward bookings on events. I know you obviously had a very strong January. I think Arab Health was up 20% or so. That falls out of your forward bookings, but just generally a bit more detail on where the run rate is. I will answer the first one. Maybe it is not as relevant. Adam and I were both in Dubai 2 weeks ago. Most of our business is based in Dubai, a little bit in Abu Dhabi, and almost none of our businesses is in the countries which are currently having the political instability and which is likely to continue. I guess from our perspective, our businesses are relatively unaffected. The view in Dubai was that they might benefit from what is going on elsewhere, but I think that is maybe more hopeful and conjecture just now. Currently, no. I think a lot of this is down to confidence, and I think providing that the main centers where we operate remain trouble-free, that we will be fine and we are not affected by what is going on in Egypt or Tunisia or Morocco or Iran or Iraq or Libya or Bahrain or however long the list, Jordan, goes on, luckily. In terms of investment, the capital investment difference between 2010 and 2009 was GBP 5 million. We will spend roughly around about GBP 25 million-GBP 27 million again in 2011. But the point on investment was more around operational expenditure. Hard to sort of quantify exactly what the difference between year on year is, but I think it is more the sentiment. We are recruiting. The last couple of years it has been about cutting. It has been about even on the pay side, cutting and taking people out of the business. It is now about recruiting, boosting sales force, and having the right tools at our disposal to get that top line to grow. We saw a change, really, in confidence through 2010 and wanted to invest behind that and hope that the economies around the world can play their part to kick the business on in 2011. Forward bookings is always a slightly difficult one because at any point in time, it will vary depending on when a show will run and whether it moves from month-to-month, year-on-year. They are up year-on-year at the moment. We have run three big shows. As you said, Richard, they have all shown growth over 2010, and they have booked, as Peter said in his talk, strongly into 2012. The trade shows and exhibition model works well. They were resilient through this cycle, and they have come out of it very strongly. The forward bookings for those shows that we have got coming up in the next few months are showing growth over 2010. So it is in the sort of range of mid-single digits. I am very happy with where the trade show business sits at the moment, which is why we want to continue to grow it. Hi, it is Mark Braley at Deutsche Bank. Just two questions. First one is just cash tax. Can we think about that as being roughly equivalent to P&L tax over the next few years? The second one is the academic information growth. From memory, in the first half, you had a sort of benefit from what you described as potentially one-off e-book sales. I am kind of wondering how one-off did that prove to be. Should we think about that as being the main reversing factor in pulling down 2011 growth, or how much of an underlying slowing should we assume? Yeah, one-off is probably not the best description for it, because it is core business, but it is just they are difficult to predict, and it was quite a big lump. I guess perhaps the one impact of what is happening in the Middle East is that that has been a geographical region where we have been successful. If we ended up with a prolonged period of difficulty there, it certainly means that market will be harder to tap into for some of the e-book deals that we have done in the past, or some of the journals that we managed to sell into the university libraries there. We have worked hard on diversifying the academic business away from the U.S. and the U.K. core markets. They had a fantastic year in 2010. As I said, we would expect that growth to be smaller in 2011. I think given what is happening around the world in academic funding, if we can hold those results in line with 2010 overall or slightly bigger, then that will be a great result. Cash tax is much more of a dark art than a science. I think the easiest way to look at it for forecasting is to make it equivalent to the P&L charge. It never, of course, will be that. It will always depend on how some of the structures and some of the historic years get resolved with various revenues. That is by far the easiest way to look at it, Mark. If I can anticipate there is something material one way or the other, I will let you know as soon as I know. Hi, gentlemen, it is Andrea Beneventi from Exane. Three questions, if I may. One, on academic information. You mentioned good trading in books. How much of the growth for the year came from books out of the 5% organic? Second, on cost, could you please highlight the cost inflation that you expect in 2011, especially on personnel cost? Third one on printing, binding, and distribution cost. I understand the point of shifting revenues from print to online, and I would like to know how much savings did you make out of this cost in 2010 and how much do you expect for 2011, please? The majority of the growth on the academic side have come from the books. We keenly priced our journals this time last year for the renewal into 2010. Very cognizant of what was happening to our customers, and they have done the same again as part of this renewal. I would say that probably two-thirds of the growth has come from the book side and a third on the journal side. Cost inflation, hard one to look at. We have, for the first time in the last 3 years, looked at pay increases within the business. At least we are no longer in the situation where people will have taken pay cuts, so we have looked at putting that back into the business. Overall, we try and ensure that costs equate to relevant inflation rates around the world. Certain parts of the world in which we operate, the cost will go up much higher than the general inflation here or in the U.S. By and large, people costs are by far the biggest cost to the group. As you know, the way the remuneration structures work here, a vast majority of pay in rations is linked to performance. That is our way of managing the cost base. In terms of the production binding and distribution cost, mostly what has happened in terms of the books business has happened in the last six years, where the books business has moved from a sort of 6%, 7% margin business to maybe an 18%, 19% margin business. But it is through a number of factors. We have printed less, we have written off less. The costs of production have come down because we have been able to print on demand and print to order. In practice, although there is exponential growth in e-book revenue, it is from a tiny base. Most of what we have done to improve the books margin has taken place, and we will not have huge savings from pure production costs. Thank you. Okay. Simon Davies from Collins Stewart. Three questions, if I may. Firstly, just on Datamonitor. In the statement, you talked about closer integration of the Datamonitor business. Can you flesh out those comments in terms of possible costs and restructuring benefits next year? Secondly, you talked about top 200 events generating 49% of revenues. Any clues as to what proportion of profits in events came from those top 200? Any guidance in terms of volumes for events this year? Finally, on training, you said profits up 19% ex Robbins-Gioia. What was it including Robbins-Gioia? I am sure there were four questions there, Simon. Let me go in reverse order. Without Robbins-Gioia, the corporate training business was pretty flat year on year. So once you include Robbins-Gioia in that, then they were pretty flat. So that was the impact on the training business in terms of the profitability. Top 200, 49% of revenues will be about 70% of profits. The volumes we would expect across the whole of the piece to be pretty similar with this year with the 7,500 that Peter talked about. But you will see a change in the, as Peter said, we will run 120, 130 exhibitions as opposed to the 90 that we ran in 2010, and that is what we are intending to do. So there will be a change towards more exhibitions, more larger conferences, and keeping the tail of the training courses where they are. Datamonitor. Datamonitor. I am hoping there won't be a big cost involved in this. We are integrating back offices, and there will be a cost to that. We will see what that turns out to be in terms of how we disclose that, but it is not going to be a huge number. We are looking at the moment in terms of how many people we can relocate around the business to see what, if any, redundancy cost will be involved. In terms of the benefits, we think that putting together the suite of products across the sectors in which Informa Business Information and Datamonitor operates will provide our customers with a much better offering. I think there are synergies to be had around sales teams working together. There are synergies around putting the products side by side, and we think that it is going to enhance our customer offering just the right time for this division, as we have started to see some growth come from it. There will be a little bit of back office play, and it will save us some cost. It will take us a bit of cash to get that out, but hopefully not too much. Overall, it positions the larger chunk of PCI. As I said, we will talk about this more in May, but the vast majority of this division is the IBI and Datamonitor business. There are some fantastic products in that. Across the big sectors, the pharma sector, the financial sector, the telecom sector, I think we are positioned very well for 2011 and beyond. Good morning. It is Johnathan Barrett from Singer Capital Markets. I have got three questions for you this morning. The first one is just on your emerging markets exposure. You have clarified the level of revenues coming from that area. I wonder if you could tell us what proportion of your operating profit is being generated from those regions as well. Second question relates to the potential for you to put up prices significantly this year, maybe next. A number of comments and indications from your peers seem to suggest that customers are willing to perhaps take a little bit more in terms of cost increases as they are expecting to see that across the board. If you could tell us about what level of price increases you think you might be able to achieve, both in events and in the publishing arena. The last question, just going back to an earlier comment that you made about operational gearing. I wonder if you could tell us about what you think you can achieve in terms of improvement in operating margin and what the flow-through effect might be from growth in revenues this year. Thank you. I think that when the operational gearing impacts more on the events and training side, I think we feel there is some scope to move on the margins. I think we need to look at this on a medium-term basis. If you launch product, particularly on the exhibition side, we would be satisfied with an exhibition which is brand new breaking even. Therefore, that will obviously have an impact short term on the margin. You look at an exhibition launch on a three-year cycle, so that by the end of the third year, it would be an established event and would be commanding the sort of high margins that trade shows if they are market leading in the right geography command across the world. So we see some scope there. I think depending on how successful we are on product launches, which will have a drag on the margin, that will have an impact on quite where that operational leverage comes through on the overall events and training. The conference business is very highly operationally levered. Delegate numbers do drop through to the bottom line, and we saw good increases in delegate numbers last year on a like-for-like basis, and we have seen a good start to the year in terms of delegate numbers moving forward. So we would expect to see the events and training margin increase. The publishing margins are very strong, particularly on the academic side. Maybe we are reaching a point where mid 25.5% for the group, that is perhaps the right margin to be. That is where we continue to invest in the business, which is why on the PCI side, we were happy to take a cut in margin in the second half of the year to invest for the future. So I would think in the round, you should not really look at it. It depends on the balance of the business between publishing and events, but the events margins have got some room to grow. The publishing margins are where we would like them to be. So depending on that balance will be where the group margin ends up. I think I'll take the middle one and leave Adam for the last one. I think it's an interesting point about prices because I'm not sure that is the case, and I think it differs a little bit from sector and market to market. If you took our academic business, which is about 35% of our profitability in an environment where people are dealing with reduced library budgets and reduced academic budgets, to actually increase prices to any extent doesn't seem to be intuitively sensible, so we're not. In terms of the PCI business, or the various businesses within PI, the goal there has actually not been specifically to increase prices like you would for a Mars bar, if it goes up by GBP 0.10 or whatever. It's been actually to sell more product. Instead of dealing with single subscriptions, which we used to in hard copy terms, historically, we are selling into databases, and we're selling all sorts of different products into, say, a pharmaceutical company. So taking the clinical trials area, us adding to Citeline with Sitetrove and Trialtrove, and et cetera, is actually so that we can go to our main point of contact at these organizations saying, "This is the suite of products," and to try to add sales that way rather than saying it's gone up by 3% or 4%. So that's really the goal, that we actually become part and parcel of people's everyday work, and we not only provide news, but we provide data, and we provide analysis, and we provide retro-digitized content if appropriate, and in the financial area, that we provide modeling capabilities. On the events, more than anywhere else, there's almost a price for an event. There's a price for a delegate to go to a conference, and there's a market for that. There's also a price per square meter to exhibit at an exhibition. And we tend to be almost across the board at the high end of those, where especially if the event is a market-leading event, or for example, where a conference or an exhibition is venue-bound, i.e., there's no more space. So that more so gives you the opportunity to ration spare space unless you can persuade the hall owner to build a new hall or to find you some more space. So I think that we're probably at the premium end of pricing, generally speaking, and we certainly don't want to take over advantage of that. It's very hard to split down to the profits because of the way we run the group on an emerging markets basis. So it's probably the easiest thing to say, it's about roughly the same amount of profits. You have some, as Peter said, some very strong publishing assets within the emerging markets in China and India, and they would definitely be some of our higher margin businesses. Equally, we've got some of our smaller exhibitions that we're looking to grow, which will probably have margins below the overall group margin. So there'll be a mixture, but roughly, we'll make about 12% of profits in those regions. The mix of the emerging market business is actually fairly similar to the group mix in terms of academic PCI. It's probably slightly weighted more towards publishing at the moment because we've been more established around India and China on the Taylor & Francis side, but very much within the pure definition of emerging markets. You're taking the UAE out of it, out of the rest of the world segment. The focus will be around trying to grow our exhibition business there, so to have a broader events and training business. Thank you. Thank you. It's Alex DeGroote at Panmure Gordon. Morning, everybody. Just one question on the financial model, please. Last year, you did GBP 230 of free cash flow before dividend, so GBP 150 after dividend. Given where we are in the references to strong balance sheet, is the thinking on surplus free cash flow now after dividend that that will be redeployed in acquisitions? Because I note the slide at the back of the pack alluding to return on investment, and characteristically, you have been an industry consolidator in the past. It's an absolute key measure, Alex. We'd anticipate that free cash flow to be absolutely at those sort of levels again in 2011. As I tried to allude to, the two sources of use for those funds are either to shareholders or to acquisitions. We think that acquisitions are very much part of the growth story within Informa. The record in terms of small bolt-ons delivering increased value, as I said, for the 2009 ones, 17%, 18% show the value that we can bring to this business. Equally, we think that the record on larger acquisitions stands up well. So we will look at what's out in the market. There are a lot more things available at the moment on the quality end within the media sector. Like I say, we're not looking anything big at the moment. Certainly, there is the ability to spend more money than the GBP 50 million we spent on acquisitions this year. But we'll only do it if it meets the criteria that generates value for shareholders. Good morning. It's Giasone Salati from Banco Espírito Santo, incorporating Execution Noble. Can't wait to get to these results. I think it's about three questions. First of all, with the below the line restructuring charges in events. They happened quite late in the year. What was the reason for that, and what is the visibility on anything else happening in the same way? The background for this, we have seen advertising spending and many of the cyclical business accelerating. So maybe myself, but the last thing I would have expected was restructuring in events. Secondly, On M&A track record, maybe I'm going to make myself very unpopular, but different people have different opinions on track record. Could you give us very precise indication of where you're looking for acquisitions, if it is emerging markets, technology, if it is academic books or else? I think, lastly, on margins, did I get that right that you are effectively guiding for about stable margins at group level, including margin expansion within events, so we should expect, possibly, the commercial division to do some further margin reduction? How do I square that with what I thought was an implied guidance for about GBP 350 million adjusted operating profit for 2011? Let me start with the last one. I do not know where the 350 came from. Reuters consensus for next year has EBITDA at about GBP 350-GBP 360. I think you have to look at currency into all of that as well. We have not given any formal guidance yet for 2011. Let me get this one out of the way. We are happy with where consensus sits at the moment. I think I spoke to most people at the back end of last year and thought that people were being a little bit optimistic about 2011. I would countenance all my comments with the basis that it is February 22nd, and the world looks an uncertain place again. We are confident of growth. If the consensus number is at GBP 350-GBP 360 of EBITDA, I think it would be a great performance for Informa next year. One has to watch the dollar as we go through the year and see where we end up. It has obviously had a big move from the average rate last year. Obviously, if the events and training margins increase and group margins stay the same, then that obviously implies the publishing margins come down a little bit. It depends on the balance of the business. It depends what we buy and what the proportion of profits is between the 70/30 split that we have at the moment. Certainly would not look at the professional and commercial margins coming under further weakness. I think that is where we will see some improvement. The academic margins are very strong, and maybe that is where we might lose a little bit. We are talking in the margin. I think if the events and training margins come up 100 basis points, then either the group margins will be stable or they will be a little bit higher, depending on what happens on the publishing side. Do you want to talk acquisitions or do you want me to answer? No, I will talk about acquisitions. Only to say, yes, we will argue about this. There is no point doing that. We have always had and we continue to have our criteria on looking as an acquisition, which is not to buy a trophy either, but to buy things that fit into the business and which we can add value to and to bring the overall multiple down. We stick very rigidly to that and will continue to do. In terms of areas, generally we take the view that we want to improve the quality of the business, increase shareholder value, and therefore we will look at acquisitions or assets where they have those characteristics where we can add value to them. Some of them might be in academic books or small groups of academic books or journals, or in individual exhibitions or trade shows or small groups of trade shows like we acquired at the end of the year in Australia. The overall goal there is that we improve the overall quality of the business and we reduce the amount that is, if you like, the volatile tail that Adam talked about. Every time we look at one, those are our criteria, and then the financial criteria is the ones that we have set and we stick to. The restructures in events and training have just come about in some of the weaker areas of the business. Some of the small conference companies where economically they have struggled. We have highlighted in the past, and we have taken decisions to restructure management, combined offices, taken some properties out. I would agree that we would see that hopefully now coming to the end, and the vast majority of the restructuring that took place in that division took place in 2009. It was some of the smaller businesses where we have taken more radical decisions at the back end of last year. Just one follow-up on acquisitions. If there are any restructuring associated with these acquisitions, will they be treated above the line or below the line? It would depend on the materiality of the acquisition. What we try and do with adjusted numbers is ensure that we have got a like for like representation, so we make it absolutely clear how the business is set. If you do a large acquisition and there is a large restructuring with it, then it is likely that we would show it within the middle column as an adjusted item. If you do a smaller one, you will not. But you can guarantee everything will be very transparent, and you will be able to see exactly where the number appears. Patrick Wellington from Morgan Stanley. Can I ask a bit more about the events business? Can you give us, because it's changing quite a lot, a rough split between the four parts: so training, events, exhibitions, and Robbins-Gioia in terms of turnover? My second question is, in your statement, you say that you've got 76 events with turnover of over half a million. So let's call that GBP 38 million. You also said, I think just now that you've got 200 events providing 49% of revenue, which is GBP 275 million. So can you zero it down a bit on some of your bigger events? Because there's obviously a smaller group of bigger events there. My third question is, are you a bit embarrassed by your conferences? As we go through these result statements, there's more and more of an emphasis about the larger scale events. Are you trying to get out of conferences without advertising that too obviously to the market because you don't fancy the model anymore? I'll do the last bit. Absolutely 100% not embarrassed by the conference business. More than half of the 200 larger events are big conferences, market-leading events, some of which I described earlier on. We only run conferences that are profitable and which are repeatable and which tie in with our And a lot of which tie in with our publishing products too. So no. What we're trying to do as a business is to have a higher percentage of our overall events, which are large-scale events and are more visible and maybe more resilient and are clonable. But it doesn't mean that in terms of doing that we can't have a tail of events which are inevitably going to be more volatile through the cycle, and will therefore, at times, have a lower margin. We've seen very well how that's happened over the last 2 or 3 years, that those smaller events have tended to lose delegates and lose margin. As the markets have improved, those delegates have come back and the margins increased again. Absolutely not embarrassed because we are a business with a combination of publications, a combination of events, large events, some exhibitions, and a relatively small amount of exhibitions, which is, to Adam's point, of trying to make a comparison with a pure exhibitions business as opposed to a business with exhibitions and conferences. I expect, given that that's the nature of the business and that's what drives much of our activity and which cleanses our database, which is important to us, I'd expect that's the way for us to continue. We don't really look at it this way, but let me try and help. 20% roughly of the events revenue is exhibitions, 40% is conferences, and the balance you could probably split 30% to corporate training and 10% to Robbins-Gioia of the events business, the events revenue. Now, remind me of your second question, Patrick. I was trying to work that one out. I think you've probably called it. In the statement, you say you've got 76 events with turnover of over half a million GBP. GBP 70 million. GBP 38 million. But you also said you've got 50% of your events revenue in the top 200, which is GBP 275 million revenue, which implies you've got a small group of very large events. Can you give us a bit more information about those? Yeah. So they are things like this year, IPEX, every year, Arab Health. The Cityscape portfolio would fall into those. Monaco Yacht Show would fall into that. Middle East Electricity that Peter's talked about. Some of the telecom shows, Broadband World Forum that I mentioned, the COMM series that Peter mentioned. We've got another one coming up in Switzerland, Vitafoods, which we run in May. So across a number of different verticals, and hopefully ones that are relatively familiar to you that we've mentioned in the past. So they are the very big ones at the top of the list. I am sorry, I am doing the UBM comparison here. They give you a top 20 shows forward booking number. I think you had a bit of a go at that at one stage earlier this year. Do you want to give us an equivalent sort of how many of those shows I should know what Reid's do and say, "No, we do not do any forecasting. We just concentrate on running our business. We have to edit this now. I think you are spot on, to be honest, because you only just hang yourself doing this sort of thing. Those shows have traditionally been very We talked about Cityscape. The one thing about Cityscape is that 3 years ago, when it had its best ever year, it was a Dubai show, and since then it has been run twice in Saudi Arabia. It has been run in Abu Dhabi as well as in Dubai and in other parts of the world. So it is now become a portfolio of shows. And although 2008 was the bonanza year, it is highly profitable, and is a great part of the portfolio. Those shows throughout this cycle or crisis or whatever you call, have performed exceptionally well. Those that we have rebookings for, as in firm orders, so those that we are about to run are growing over 2010. Things like Arab Health that we have just run, the re-sign was stronger than it had been in the past. And as you know, they have a month of sort of cooling off period, so it is not booked yet into the system, but it shows the indication for the appetite to come back and be at that show again next year. So I think to cut down to the top 20, the key is that we want that, whether it is the top 76 or top 20, to keep growing, and that we think that there are those shows lower down the list that we can push further up and deliver more shows that have greater than half a million GBP worth of revenue. Could I just add a little bit here? And that is that we considered doing that as well, and we could easily do that, Patrick. But we think it is, for our business, misleading because with an exhibition, there is a rebooking. We go through a big rebooking process. But we have only got 100-ish exhibitions out of 7,000 events. So there is a lot more events where there is not a rebooking where we get delegates come in within the last 2 to 3 months of the date of the event. So yeah, we could do the top 20, and we could have it. It would be quite a high rebooking percentage. But I think it might be misleading to then to read that through across the whole events portfolio. But certainly, we can, and it would be a good number. Just like the UBM number, it would be a good number. Can you give us the average delegate number, if you like? Because you refer to it, but initially Well, again, we could take 60,000 going to one event and 5,000 going to two. You refer to it, but initially. Well, again, we could take 60,000 going to one event and 5,000 going to 2,000 training events. I think it is a misleading number. All we will tell you is on the smaller conferences, which declined during 2008 and 2009, that during 2010, the average delegate numbers increased on those. Hi, it is Rakesh from Goldman's. Just a couple of questions. First of all, on your deferred income number, you have got publishing running up about 9% organically. I just wondered what should make us cautious or slightly hesitant to think about that as being the run rate for that business, especially given it is largely subscription over 12 months. Then secondly, I wondered if you could give us an idea of how Datamonitor performed in the second half of the year, because I think you said at the first half it was running at about flat. So I wondered if that had seen material improvement, both towards the end of the year and where we are at the beginning of the year, after you have done the renewal process. Thanks very much. Well, Datamonitor doesn't renew on an annual basis, so it doesn't have a renewals process in the same way as, say, something like Taylor & Francis in its early days in 2011. It ended the year growing its sales, and as Peter mentioned, the number of high-value subscribers has increased. We have refocused the business a little bit during 2010 around its really strong areas and started to look at some of the marginal areas. That's part of the thinking behind the integration with Informa Business Information, that we're going to be able to drive that business forward. So I think it ends the year in a stronger position than it started it, or ended 2010 stronger than it started. I think the prospects for 2011 are encouraging. It's done very well from its geographic expansion around the world. We'd see that as being an important area of growth for Datamonitor. The deferred income number, in terms of the publishing, yeah, we wouldn't be looking at 9% top-line growth across that part of the business. It obviously depends on timing of how things have renewed. It's skewed a little bit by the academic renewal, and how much of that is already sitting in the balance sheet. I think that overall, what we can say on the publishing side is that renewal rates have been good. We feel positive about both parts of the publishing business. Having seen, certainly on the professional side, a decline in revenue in recent years, the second half recovery in PCI and getting back to top-line growth was very encouraging. As I said, we've invested behind that, and we'd look for good growth in 2011. Just finally, just on academic information. We heard from Springer Science+Business Media that they thought where their renewals process had ended up, they could do around 3% growth in 2011. Would it be silly to assume that's the kind of growth we should think about at Informa, despite your science and HSS split? It's great when you're private, isn't it? You can come up with any number you want. I think that that would not be a silly number for our business. We are a very different business to Springer Science+Business Media from a mix, as you say. Ultimately, the result will come down to what happens on the books, and I think our books business did exceptionally well last year. They've got a very tough comparator to beat, but knowing that management team, they will do their level best to beat it. On the books, Springer have a buy as much as you can carry principle. They actually just deliver tens of thousands of books at very low prices. That's their books model, and it's absolutely not our books model, but they're a different sort of academic book than ours, too. It's not quite comparing apples with apples, I think. That's them, and we've run on the academic side, a very good books business and grown the margin there, but also grown the top line as well. Thanks very much. Thank you. Well then, many thanks to everybody for attending. Thanks very much for the questions, and we'll see you in July. Oh, no. We'll see you when we have our Investor Day. Yeah, absolutely. Thank you very much. Thank you.