Good day, and welcome to November 2023 trading update. Today's call is being recorded. At this time, I would like to turn the call over to Richard Menzies-Gow. Please go ahead.
Thanks, Elise, and good morning, everybody. Thanks for taking some time to dial in this morning. I know it's a busy day. Hopefully, you've had a chance to see the trading update we published this morning. My name is Richard Menzies-Gow. I'm the Investor Relations Director, and I'm here with Gareth Wright, our Group Finance Director. Gareth is going to just give a couple of short comments on the statement, and then we'll jump straight to Q&A straight after that. Over to you, Gareth.
Thanks, Richard, and as Richard said, good morning, everyone. Thanks for taking the time to join our ten-month trading update call. And yes, I'm gonna run through the highlights of the announcement that we put out this morning, and then we'll open it up to questions. The key dynamic behind today's market update is the strength of trading and the future bookings since our half-year results in July. This strong trading across the portfolio drives a further increase in 2023 revenues, operating profit and cash flow, and gives us confidence regarding our momentum into 2024. As you'll see in the release, our updated 2023 group guidance is for revenue of GBP 3.15 billion plus and operating profit of GBP 840 million plus.
That's an increase up from GBP 3.05 billion and GBP 790 million, respectively, so a 3% increase in revenues and a 6% increase in OP now. It's worth bearing in mind that the updated 2023 OP guidance is now around 20% higher than the OP guidance we gave at the start of the year, reflecting strong trading right across the portfolio. What's behind that strong trading? Well, I think what we say is we operate in two markets: the B2B market for international B2B events, specialist data, and digital services, and the academic market for knowledge makers and research institutions worldwide. Both those markets are in structural growth. In B2B events, we're benefiting from the world going more digital everywhere, constantly, and changing working practices that see people get together less frequently.
The reality is, your Teams calls or your Zooms calls have brought into a sharper focus the value of high-quality, professional, face-to-face interaction of the source that you get at our B2B events. Particularly, if you're launching new products, you're negotiating contracts, or you're building relationships, that's a lot harder to do virtually than it is face to face. In our academic markets, structural growth in original research and specialist knowledge, combined with the power of our specialist brands and a growing range of open research services, is accelerating growth, revenue growth in that market. We're the market leader in many areas of our specialization. We're good at it, and we're getting better with technology and data through the IIRIS platform we've built, meaning our products today are better than they were pre-COVID, and we think they'll be better again in three years' time.
So in both markets, this is driving more value to our customers, and this speaks to our ability to drive further growth in the future. There are also other dynamics behind the trading. Our international breadth is key, with today's guidance upgrade, particularly benefiting from the performance in the U.S., the Middle East, China, and Hong Kong since the half year. We've got a great range of specialist products and services that are deeply embedded within our customer markets and are being improved by continual operational capital investment, primarily through technology and data. And finally, our focus on growing specialist B2B and academic market products rather than B2C market products, is providing resilience and strength and giving us confidence around our outlook into 2024. We're quietly confident about that outlook.
Despite, you know, uncertain economic and geopolitical background in certain areas of the globe, we're not seeing a particular impact on our business. We continue to take a disciplined approach to capital allocation, balancing strong returns to shareholders, organic investment, and targeted acquisitions. Today, we've announced a GBP 150 million extension to our share buyback program, enabled by the strength of our balance sheet and the strength of our cash flows. We've bought back around about 1 billion shares, GBP 1 billion worth of value of shares since the divestment of Informa Intelligence. As we think, we think our shares are good value, our cash flows are strong, and our balance sheet is strong, we're extending that program. This leaves us with the flexibility to use our cash flows and balance sheets to build and buy further scale going forward.
This year, we've redeployed over GBP 1 billion worth of Informa Intelligence proceeds, but with leverage expected to be 1.3 times the year-end, we still have plenty of capacity to deliver further growth. So I think those are the key messages from the trading update that we've issued to the markets this morning, and I'm going to hand it back to Elise to take any questions that you may have on the call.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for question. We will take our first question from Steve. Your line is open. Please go ahead.
Morning. I think that's me, Steve Liechti from Numis. I've got three, please. Morning. One is, you kind of mentioned it earlier on in terms of confidence in forward bookings. But can you give us any more detail in terms of forward booking trends for next year? Anything you can give us, I guess, there? So that's the first question. The second thing is, again, thinking about 2024, if your longer-term target is 5% organic growth, are you still thinking you're gonna get above that in 2024 on a normalized basis, you know, as things get back to, you know, wherever they might get to, or is 5% probably more realistic? Second question.
And then third question is, is there actually any weakness in events anywhere that you can reference? I know you talked very positively, across the board, but anywhere where cracks are beginning to appear for any reason would be helpful. Thank you.
Okay, well, maybe taking those in reverse order. No, look, I think the trading performance across the year has been very strong. You know, if you look at our major event brands, you know, there's all the event brands are basically on or above the budget we set for them for the year, which I think is indicative of, you know, a consistent performance across the brands. And then when you throw in areas of expansion like the Saudi business, which is really an organic startup this year, yeah, that's growing.
You know, I think it gives us, you know, real confidence in the structural growth in the products that I talked to in my opening speech, and there's no particular area where I'd say, where we're concerned about the performance in 2023, versus where we started the year. You know, really, in overview, everything's, you know, proven, you know, very positive and very, you know, good in terms of its performance. In terms of 2024, I think we'd say, you know, we will be above 5%, I think would be our view from where we stand at the moment. You know, I think we're, you know, still enjoying, you know, good growth in the markets.
As we said in the release, you know, really, almost all the areas of the business are above 2019 levels of trading. The only one that would be close is probably Hong Kong, which might be around it. China, as a whole, is definitely well ahead. So it's not about sort of recovery growth now, it's strong, you know, structural growth in the products and the business overall, but we would look to be above the 5% average in 2024. And that growth algorithm that we outlined at the half year is still how we're thinking about the business in the longer term. And then forward bookings into 2024, I think we'd say, you know, we're pleased with the way it's looking.
You know, different shows book in different ways on a forward cycle, but the shows where we'd expect to see bookings, you know, are booking up well, and, you know, we'd see overall, if you look between our events businesses, and our subscription business, and our advanced paid for services, you know, we'd say we can see, you know, around about GBP 1 billion worth of 2024 revenue already from where we stand now.
Steve, just to add to Gareth, I mean, on the 5% number, you're right, it's sort of our framework of long-term guide. I think there was a plus in there. And as you'll know, covering us for a while, pluses are important in the way we guide. So I think we said 5% plus, and as Gareth said, I think going to next year, given what we can see and what's secured already, I think definitely we'll be in plus territory.
Perfect. Thank you very much.
Thanks!
We will take our next question from James Tate, Goldman Sachs. Your line is open. Please go ahead.
Thank you. It's James Tate from Goldman Sachs. I think two questions, please. So firstly, and you just mentioned there, you've secured around GBP 1 billion in revenue year to date from advanced bookings. How does that compare versus last year, if you sort of exclude the acquisitions you've done and sort of just to understand what's the underlying growth you've seen there? And then secondly, you've sort of upgraded margin guidance for the full year. Does that mean, does it make comps tougher for next year? Can you still grow margin? And could you walk us, help us with some of the moving parts of sort of the biennial events and Tarsus and investment in HIMSS, and what this sort of underlying margin improvement could look like? I think consensus is around two percentage points for 2024.
Do you think you can still achieve that? Thank you.
Thanks, James. Yeah, I mean, look, in terms of the growth in forward bookings, I think we would say that it's, you know, consistent with the growth that we have, that we've got in consensus. I think it's consistent with the growth outlook for the business that we're talking about. I think what we're really trying to say there is that, you know, at this point, the forward visibility of the business is good, and, you know, we're getting lots of questions from, you know, fund managers, et cetera, around, you know, the forward outlook and, you know, if people are concerned about recessions, or they're concerned about geopolitical macro risk, you know, in, in the global markets. And what we're saying there really is, look, we're not seeing any of those particular headwinds, as we stand at the moment.
So that's really what we're trying to give assurance of, around that number. In terms of the margin, you're right that the margin has ticked up a bit in 2023. And we still expect it to tick up again in 2024. We talked at the start of the year or middle of the year, around the evolution over time of being around about a 26% margin in 2023, then 28% in 2024, and looking to get to sort of circa 30%, you know, in the medium term. And that's what we would still broadly commit to as a shape. You're right, that we're slightly ahead of where we thought we would be in 2023, and therefore-...
Still give commitment to the sort of, you know, circa 28% for 2024, rather than a two percentage point increase, because some of that benefit in, you know, 2023 is areas like China and Hong Kong have just traded better in the year than we thought they would. So there's plenty of other moving parts in the margin that we can dig into, but overall, I think the key message we want to give is that we do see another acceleration in 2024. And we're still, you know, focusing on the, the longer term target of circa 30% in the medium term, and that's 30% alongside the 5%+ revenue growth that we talked to, in the answer to Steve's questions.
Thank you.
Thanks, Steve.
We will take our next questions from Carl Murdock Smith. Your line is open. Please go ahead.
Hi. Thank you very much. It's Carl from Berenberg. Two from me. First, can we have an update on the difficulties you talked about for H1 in the tech industry? So you talked about digital media marketing services and lead generation revenues being in decline in at H1. Can you provide an update on that? And then secondly, just in terms of the pedant's question around financials. So at H1, you talked about interest costs of around GBP 30 million for the full year. You talked about an effective tax rate of 19% and minority interest costs of between GBP 45 million and GBP 50 million. Are you still comfortable with those comments at H1 or any evolution to those? Thank you.
Okay. Well, in terms of the technology market, you know, what we'd say there is, yeah, you're right, that has been a one of the tougher end markets that we've traded into this year. But, you know, I think our performance of the bits of our business has been, you know, pretty good actually, when you look at some of the comps out there in the market. The events business has traded well in that space, and has seen, you know, good recovery, in particular areas like Black Hat in the U.S. and Game Developer Conference earlier in the year. And the events seem to have come back well, both in terms of delegates and specs, which again, I think speaks to the structural growth of the events products that we spoke about in the opening, you know, introduction.
The research products in that area have been sort of solid, you know, mid-single digit growth, and, you know, good retention rates in terms of subscriptions, and yeah, continue to grow well. And I think there is, you know, more opportunity for that business or that part of the business to grow, going forward. And then in terms of the audience development, digital demand generation area, which is the bit of our business that's been more challenged by the, you know, slowing in the technology end market, that has seen a small decline in year-on-year. But as I say, better than, you know, most of the peers that we can see in that market, if not better than all of them, actually, in terms of the performance.
So that gives us confidence around the fact that the product is good, and that there is a, you know, good opportunity to grow that going forward. I'd expect the technology market, you know, to be back in structural growth in the, you know, short to medium term going forward. And therefore, you know, our place in that industry, our positioning in that industry, I think will serve us well, going forward. I think it's a good market, and I said we have no particular concerns about our products. And indeed, we've continued to develop them, during 2023. So if you look at something like Industry Dive, before we acquired it, that would normally do about 4 dives a year. That's new launches. This year it's gonna do, you know, double that.
Again, that speaks to the fact that we're getting more product out into the market, and I think we're well positioned for recovery there, which I think really will come. I don't think it's a kind of if, I think it's a when. And therefore, I think we're pleased about our position, in that, in that business. On your what you described as pedantic financial questions, I've never described them as pedantic questions.
I might.
You might. Yeah, exactly, yeah. I'm not sure which ones particularly we want to highlight. I know there's some ones like CapEx you mentioned. Yeah, that's still 19%. I think. One thing I would mention is non-controlling interests. I know in some of the consensus numbers, that looks a little bit light because our NCI numbers in, you know, places like Curinos, in China, as it performs better, and in Saudi as well, those are a bit stronger. And I think again, in 2024, they'll be stronger again. So I think that's an area probably to look at in terms of modeling, to make sure you've got that in the right place for both 2023 and 2024.
I think, I think you mentioned 45-50, Carl, on, on minorities at Karsten. But I mean, I think for this year, that's-
23, that's fine, yeah.
Gareth says you'd expect that to step up again, because those three areas are growing pretty strongly. So you'd expect to see that step up again next year.
I think the other one was just the interest you mentioned. I think you said around GBP 30 for this year. Maybe a bit better than that, I think, because we've outperformed a bit, and cash flow is strong. So that probably is an area where we'd expect a bit of a better outcome or a lower number in 2023.
That's fantastic. Thank you very much. And just to be clear, when I say pedants, I mean it, definitely as a compliment in my vernacular. Thank you.
Thanks, Carl.
Thank you. We will take the next questions from Nick Dempsey. Your line is open. Please go ahead.
Yeah, good morning, guys. I've got three questions. So first of all, just on your free cash flow guidance of GBP 575 million plus. I think your consensus is some way over GBP 600 million. Can you maybe talk about the difference here? Were we all too optimistic on the change in working capital, and if so, what's driving that? And what? Is cash tax perhaps higher than the other area that I think might possibly be the difference? Second question, pricing in events into 2024. I guess RELX talked about 5% at one point, kind of industry feeling is some sort of mid-single digit number. So are you seeing that as well, sort of mid-single digit across the board on average, of price increases for events into 2024?
The third question, been getting a number of questions on the Middle East, as I'm sure you have. Can you just give us some indications of how Dubai and Saudi shows have been resilient in the past to conflicts in the wider region?
Okay, well, a few different themes in there. I'll kick off, and I'm sure Rich will come in. Yeah, on free cash flow, as you said, we upgraded the number to GBP 575+, in terms of our update going out today. Yeah, that's an increase over where we were at the half year, but definitely you're seeing in the working capital line, particularly in sort of China, and a bit in Hong Kong, you know, as those events recover, we're using roll forward deposits, particularly in China, because we thought that market was gonna trade in 2022, particularly the second half of the year, then at the last minute, it didn't, and we had quite a lot of receipts in the balance sheet at the end of that year, which we've rolled forward to this year's show.
So that's coming through in the OP, and the revenue is refraining, but a bit less in the cash flow, because the receipts were kind of already in the balance sheet. In terms of, you know, some of the other numbers, you know, I think, you know, tax is a bit will be going up a bit year-on-year. I'm not sure sort of what number's out there, but, you know, somewhere around sort of, you know, GBP 130-GBP 140 or something for tax is definitely a higher number than in 2022, because the profitability of the business has gone up as it's recovered from COVID. So that would be a number to look at.
Interest, as we touched on, you know, is a lower number in 2023, because of the lower levels of debt that we're carrying. But overall, you know, that gives us, you know, a number around GBP 575, but as Richard touched on earlier, you've always got to watch the pluses in our announcement. So that's definitely a GBP 575+.
Would you like to talk on pricing?
Yeah, you want pricing?
Yeah. I mean, look, Nick, you know, we always talk about price to value, and I think the thing that we are excited about in our business is that our product today is better than it was in 2019. You know, technology and data are allowing us to get a better product that gives more value to exhibitors, more value to attendees, and in three years it'll be better again. We can see that roadmap. That allows you to price the value. And so for a customer, you feel like you're getting more out of the product, and you can price to that. And so I think that gives us confidence over the next few years of how that value can materialize.
Specifically on numbers, we tend not to allude to, but I think that where you talked about, I think we feel, you know, confident of it at least being around those sort of levels. So I think other commentary in the market would be sort of consistent. But I think for us, the focus is on how do we drive a better experience for attendees, you know, more value for exhibitors, use our data to really help them spend the right time with the right people, match buyers and sellers better, allow them to access contact at the point of sale, to really drive, you know, more value for them from the time they've spent with us. And that, I think we're pretty excited about, not just next year, but over the next three to five years.
Then on the Middle East question, yeah, I think you're right in that, you know, Saudi Arabia and Dubai are the or the United Arab Emirates are the two key areas to talk about there. And we operate events across the region in places like Bahrain, Egypt, Qatar, Turkey, but really Saudi and the UAE are the two material areas, which between them probably generate about 75% of our revenue from that region. And, you know, as you kind of allude to in your question, I mean, they have traded robustly through periods of crisis in the past. They're not sort of casual about it.
They watch the happenings in the region with appropriate sensitivity and concern, but their view is that, you know, business is business, and we'll keep trading, you know, through the period, through the concerns. And that's certainly what we're seeing at the moment. We're operating a number of shows in Dubai, in Turkey and Saudi this week, actually, and, you know, they're all going ahead with appropriate sort of security arrangements and appropriate, you know management, you know, of the situation, but they're all proceeding. In the end, say, across Dubai, Bahrain, Saudi, Turkey, Abu Dhabi, they're all happening this week. So I think that shows that the region is still trading and gives us confidence about the ability to trade through the next couple of months.
So, sorry, just a quick follow-up. The Dubai Air show, I think is now, is it? or is it-
Yep.
the first day today? No issue at all with that one? I know it's a big one.
Yeah, it's a big one. You're right. That was one of the ones we acquired with Tarsus. No, it looks like it's running for a good addition. I think it actually opened yesterday, technically, so it is actually up and running. And, yeah, we made the appropriate, you know, security measures, et cetera, around it, but nothing particularly in terms of the trading on that. I think it'll be a good addition of the show, and good to get that one operated under our belt in our first year of ownership. As you say, it's a big show and a key one in the Tarsus portfolio.
As an aside, Nick, I mean, the headlines coming out of it, I mean, you know, record commercial airline orders. I mean, the industry itself, I think, interestingly, just bouncing back very strongly sort of post-COVID, and you can see that in the level of orders that seem to be coming out of it. And as Gareth said, it's super busy there.
Brilliant. Thanks, guys.
Thanks a lot.
Cheers, Nick.
We will take our next question from Sami Kassab. Your line is open. Please go ahead.
Thank you, and good morning, everyone. Two questions, if I may, please. Within the 5%+ growth algorithm, could you outline how much you would expect from the launches of new shows versus pricing versus volumes, please? And secondly, will you continue to benefit from the Hong Kong government subsidies for the new cost in 2024? Thank you.
Yes, Sami. Like I say, materially, in the 5%+ growth, really, that's about volume. It's about growth in the markets we serve, and it's about, you know, pricing and how the increasing value of our products, it translates into pricing conversations with our customers. I mean, we do do launches, but the Saudi Arabia launches are, I'd say, you know, a bit more of a, you know, anomaly rather than the norm. I mean, just the scale of those launches and how quickly they've got to scale has been unusual.
So there'll be a bit of, you know, Saudi Arabian growth in the numbers, but generally, launches are a much smaller scale, and certainly in the materiality of our numbers, is materially gonna be about volumes, pricing, new products and services, and structural growth, rather than about launches in specific markets.
And on the subsidies, Sammy, I mean, you're right, we definitely benefited from that this year. I think I'm right in saying there will be some benefit flowing into next year, maybe not quite the same level. I think our view has been you wanna lean into that and reinvest some of that to really, you know, maximize the experience for your attendees and, you know, drive better retention, better volumes in terms of sort of numbers. So, I mean, you're right in that there will still be, I think, some benefit through to next year, although not the same amount. But we'll look to use that, I think, and just to sort of invest behind the product.
Thank you.
Thanks a lot. Cheers.
Once again, if you would like to ask a question, please press star one. It appears there are no further questions at this time.
Great. Well, thanks very much, Elise, and thanks to everyone listening. I'm sure there'll be lots of other questions in follow-up, so don't hesitate to get in touch. Either myself or Gareth are around all day, if you wanna have a conversation. But thanks for dialing in, and speak to everyone soon.
Thanks, everyone.
This concludes today's call. Thank you for your participation. You may now disconnect.