Earnings Call: H1 2020

Jul 23, 2020

Ladies and gentlemen, thank you for standing by, and welcome to the Redact Interim Results 2020 Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. I would now like to hand the conference over to your first speaker today, Sir Anthony Hopkins, Chair. Please go ahead, sir. Thank you. Good morning, everyone, and welcome and thank you for joining our 2020 interim presentation, which for the first time for RELX is by OLECAST. Despite the challenging environment from around mid March onwards, we have continued to pursue our strategic priorities successfully. Our 3 largest business areas, STM, risk and legal, together grew sterling revenue and adjusted operating profit. And all 3 individually grew both underlying revenue and underlying adjusted operating profits. The whole organization responded extraordinarily well and rose to the challenge of maintaining high levels of customer service in hugely changed working conditions. With almost everyone working remotely at the peak, this was a remarkable achievement and is a testament to the quality and dedication of our staff around the world. I hope you will all also agree with me that this was a commendable financial result across about 85% of the company. Our Exhibitions business was hard hit by the COVID-nineteen pandemic and because of COVID related restrictions suffered an almost total lack of revenue for 3 months. It therefore inevitably went into loss, which caused our adjusted earnings per share to be 19% lower than last year at 0.37p Given the resilience of our 3 largest business areas and our strong financial position and cash flow, we have maintained our interim dividend at last year's level of 13.6 pence per share. Our long history of strong ESG performance, much of which has been in areas where we can use our skills to make a unique contribution, was again enhanced by the actions of Elsevier during the first half. Since January, Elsevier has mobilized all of its research content, data analytics know how and clinical insights to support the scientific and medical response to the COVID-nineteen pandemic. Elsevier's novel coronavirus information center provides researchers with free access to over 36,000 articles And to date, a number of article downloads from our free coronavirus content offering exceeds 100,000,000 dollars So thank you all for listening. Eric and Nick will now take you through the interim results in detail. Eric? Thank you, Anthony. Good morning, everybody. Thank you for taking the time to join us on our call today. As you've probably seen from our press release this morning, our 3 largest business areas, which together accounted for 84% of revenue and 87% of operating profit in the full year 2019 have held up well. All three delivered positive underlying revenue growth and adjusted operating profit growth in the first half with cash conversion rates in line with recent years. Our exhibition business has been significantly impacted by COVID-nineteen with a decline in revenue and a move into an operating loss from the first half. Throughout the pandemic, our first priority has been the health and safety of our colleagues, our customers and the wider community in which we operate. In our 3 largest business areas, we maintain product and service quality at high levels and our exhibition business has responded well to a challenging environment. We have also continued to make progress on our key strategic and operational priorities with our primary focus on the organic development of increasingly sophisticated analytics and decision tools supported by selective acquisitions. Looking at our revenue by format, you can see a consistent pattern across all of our business areas. Electronic revenue, which accounted for 87% of the first half total for the group, continued to grow well in all business areas at 3% to 4% underlying. Print revenue, which accounted for 7% of the first half total, declined at a steeper than historical rate across all business areas, with print down by 17% underlying in FDM and down by 19% in legal. Face to face revenue in the exhibition business declined by over 70% and face to face events in the other divisions, although very small, also declined dramatically. FCM delivered underlying revenue growth of 1% in the first half, with growth in electronic revenues of 4%, partly offset by a higher than historical rate of decline in print revenue of 17%. In primary research, both subscription renewal completion rates and new sales are in line with recent years so far this year. Growth in article submissions for both our subscription and open access journals accelerated with a total of 1,300,000 article submissions in the first half. Submissions to our subscription journals grew by over 25% and submissions to our expanded open access publishing program, which now includes over 4 30 dedicated journals, almost doubled for the 2nd year in a row. Databases and tools continue to drive growth across market segments through content development and enhanced functionality. The print book revenue decline 20% was steeper than in recent years, primarily due to distribution issues caused by COVID-nineteen. Going forward, whilst we could see some ongoing impact from the COVID-nineteen pandemic in our customer markets and restrictions on MVMT could continue to impact our ability to conduct new sales in person and distribute print products, overall revenue stability is supported by over 75% being subscription based. Risk and Business Analytics saw underlying revenue growth of 3% in a recovering market environment. Subscription revenue, which accounts around 40% of the total, saw only a limited impact from COVID-nineteen in the first half. Transactional revenue, which accounts for 60% of the total, softened and became more volatile following the introduction of restrictions of movements in the U. S. In March. Overall transactional revenue, which was growing in the high single digits in January February, fell in mid March before starting to recover in mid April with return to growth during May and a continued improvement in June. In insurance, where transactional revenue accounts for over 90% of the total, transactional volumes have improved since mid April with growth rates in shopping activity returning to pre COVID-nineteen levels first. Driving activity and claims volumes are increasing more gradually and are still below pre COVID-nineteen levels. In Business Services, where transactional revenue accounts for over 60% of the total, transactional growth rates have returned to pre COVID-nineteen levels in several segments such as fraud prevention with a more gradual recovery in some other areas. In data services, where subscription accounts for over 80% of revenues, COVID-nineteen related restrictions have impacted our different customer industry segments to varying degrees, and we're continuing to see some impact on new subscription sales and delays in product implementations by some customers. Going forward, the current run rate for underlying revenue growth is around half the growth rate of recent years. The full year outcome remains dependent on the pace of recovery in business activity in the U. S. And on the level of transactional activity in our customer markets. Legal delivered positive underlying revenue growth of 1% in the first half despite COVID-nineteen related print declines. Electronic revenue, which accounted for 88% of the total, grew by 4% in the first half, reflecting a strong start to the year and good growth in legal analytics, enabled in part by the completion of the new platform rollout. Print revenue, which accounts for 12% of the total, saw significantly steeper declines than in recent years at 19%, reflecting supply disruption and temporary customer office closures associated with COVID-nineteen. Underlying profit growth was well ahead of revenue growth, reflecting continued efficiency gains with dilution from recent portfolio effects resulting in an unchanged operating profit margin. Our new sales saw a dip in March April reflecting the impact of COVID-nineteen on the legal services industry, but has subsequently recovered to pre COVID levels. Going forward, the rate of growth will be dependent on the pace of recovery in the legal services industry and on our ability to conduct new sales in person and distribute print products. But overall revenue stability is supported by nearly 80% being subscription based. Exhibitions was significantly impacted by COVID-nineteen in the first half. Events representing around 15% of expected full year revenue took place in the January to mid March period before the closure of many venues. No events took place between mid March early June. Events representing around 20% of expected revenue that were due to take place in the first half and now be postponed until later in the year. Events representing around 30% are still scheduled for the second half as originally planned with a further 5% being rescheduled into 2021 and around 30% have been canceled. The disruption to our customers caused by COVID-nineteen has been significant and we have responded by accelerating the rate of digital experimentation in order to enable interaction among event participants and support the brand value of our exhibitions. Our second half exhibitions program has been launched this week with several events in China and one in Korea having opened successfully in the past few days. Going forward, depending on the impact and duration of the restrictions resulting from the COVID-nineteen pandemic, further rescheduling or cancellation of events may be necessary, making the full year outlook highly uncertain. In the first half, we continue to reshape our portfolio through selective acquisitions. We completed 7 transactions for a total consideration of £720,000,000 The largest of which was Email Age, the provider of email based fraud prevention solution, which complements threat metrics, adding powerful new contributory datasets and analytics to our digital identity solutions. These have continued to grow rapidly throughout the past few months with ThreatMetrix running at close to 30% growth and email age growing even faster. I will now hand over to Nick Luff, our CFO, who will talk you through our results in more detail. I will be back afterwards for a quick wrap up and our usual Q and A. Thank you, Eric. Good morning, everyone. Let me start by providing more detail on the financial highlights. Revenue at constant currency declined by 12% in the first half. Adjusted operating profit declined by 27% at constant currency, resulting in an adjusted operating margin of 26.8%, all driven by the drop in revenue and the operating loss in Exhibitions, of course. Adjusted earnings per share declined by 23% at constant currency, reflecting the fall in profits, slightly offset by the impact of the share buyback program. Cash from conversion was strong at 103%. Leverage at the period end was 3.2x, including leases and pensions, up from 2.5x at the year end, again driven by the loss in exhibitions. The interim dividend payable in September is unchanged at 13.6p On the share buyback, we had deployed £150,000,000 when the program was suspended in April, and we've confirmed today that the Board does not intend to resume the program this year. Revenue. The 3 largest business areas, Scientific, Technical and Medical, Risk and Business Analytics and Legal, continued to deliver underlying revenue growth. There was a small drag in STM and Legal from portfolio changes and a bit of help from currency in all three businesses. Growth in those three businesses was more than offset by the reduction in revenue from exhibitions. We haven't shown any underlying measures for exhibitions or the group Given the extent of event cancellations and postponements, underlying measures are not meaningful. But you can see the scale of the overall revenue drop for exhibitions and how that brought group revenue down to €3,500,000,000 a decline of 10% or 12% at constant currency. SCM and RMBA delivered underlying adjusted operating profit growth in line with or slightly ahead of the underlying revenue growth with cost action taken in reaction to the slower revenue growth compared to the full year last year. Legal's underlying profit growth was aided by continued efficiency gains and cost action taken in response to the steeper drop in print revenues. Portfolio effects were a small drag in profits for STM and RMBA and a larger one for legal where we lost the profit contribution from some software businesses that we sold last year. With sterling being weaker against the dollar than in H1 2019, currency was a help to profit growth in all three businesses. Exhibitions reported an adjusted loss of GBP 117,000,000 compared to a profit of GBP 231,000,000 in the first half of last year. The acquisitions loss brought the group adjusted operating profit down to £939,000,000 a drop of 24% 27% at constant currency. Turning to margins. Although STM's underlying profit growth was in line with underlying revenue growth, margins were higher as they benefited from exchange rate movements, including on the hedge book. RMEA saw a small increase in margin, legal reported margin was flat as strong underlying profit growth was offset by dilution from portfolio effects. At the group level, the loss in exhibitions resulted in a 5.1 percentage point reduction in the total margin to 26.8%. Here is the group level income statement. And again, you can see the impact of exhibitions on both revenues and operating profits. The adjusted net interest charge was $81,000,000 well below H1 2019 That reflects the lower effective interest rate on gross debt of 2.2%, down from 3.1% in the prior period. The adjusted tax charge was $151,000,000 Adjusted effective tax rate was 17.6%, with a reduction from the prior period due to a number of 1 off credits this year, including some benefits from the relaxation of interest deductibility restrictions in the U. S. Adjusted net profit of 7 $13,000,000 was down 24% at constant currency. Reported net profit, including acquired intangible amortization and disposal gains, was 548,000,000 dollars 0.37p adjusted earnings per share were down 19% or 23% of constant currency. Reported EPS was 28.4p. Cash flow was also impacted by the loss in exhibitions, which flowed through to EBITDA, albeit the drop in cash was less than the drop in profit. Group CapEx was $168,000,000 equivalent to 5% of revenue, in line with the previous full year. Cash flow conversion was strong at 103%. Cash flow conversion rates in the 3 largest business areas were in line with recent years with the group figure impacted by the dynamics of cash versus profit for exhibitions. Interest paid was $115,000,000 with the difference from adjusted interest expense primarily reflecting the cash element of the charge on early redemption of some long term bonds. You will remember that we announced an early bond redemption last December, and the accounting charge for that was recognized in 2019 the bonds redeemed and cash flowing in January 2020. Tax paid, excluding cash relief and acquisition related costs and disposals, was $227,000,000 with the reduction reflecting the lower tax charge for the period, albeit some of the cash benefit from the lower tax charge will be realized in later periods. Total free cash flow was $596,000,000 Turning to the uses of free cash flow. Acquisition spend was $720,000,000 including most significantly, EmailEdge and IG Analytics within RMBA. Total dividend payments were $617,000,000 and you can see the $150,000,000 spend on the share buyback that I mentioned earlier. Sterling is selling out the dollar during the first half, increasing net debt, expressed in sterling, by $415,000,000 Overall net debt at the end of June was 7,500,000,000 dollars Leverage, which we calculated in U. S. Dollars, was 3.2x, including leases and pensions or 3.8x when you exclude them. The leverage calculation uses 12 month trailing EBITDA to cover the second half of twenty nineteen, which is unaffected by COVID, plus the 1st 6 months of 2020, which includes the H1 operating loss for Exhibitions, which has, of course, pushed up the ratio. Coming year end, the ratio will be based on full year EBITDA with both halves impacted by COVID. On the other hand, debt levels will benefit from the dividend outflow being less in the second half and there being no share buyback as well as what looks like at this point lower M and A spend. Looking further forward, we would expect to bring leverage back towards our historic range over the next year or 2. During the first half, we completed 2 term debt issues, €2,000,000,000 with maturities between 4 12 years and a blended coupon of just over 0.4% and $750,000,000 with maturity of 10 years and a coupon of 3%. In addition to our bond funding, the group has access to committed bank facilities aggregating over $3,500,000,000 all of which are undrawn and $2,900,000,000 of which does not mature until 2023 or 2024. We can use these committed facilities or commercial paper backed by them to fund the remaining debt maturities this year and next while maintaining substantial liquidity headroom. So although bond markets remain very much open for us, if we had to, we could wait several years before needing to issue again. As I mentioned earlier, the effective interest rate on gross margins was 2.2% in the first half of twenty twenty, ninety basis points lower than in the first half of twenty nineteen, reflecting the benefit of refinancing historical bonds that have higher risk interest. Finally, I want to talk you through some of the dynamics around acquisitions for the rest of the year, firstly in terms of the event schedule and then overall revenue and costs. This chart is similar to the one Eric talked through earlier, which has a breakdown of 2020 events based on our originally expected revenue for the year. It also shows the number of events that fall into each category. When we look at 2020, we are comparing to our originally expected revenues at constant 2019 exchange rates and including around 5 percentage points of positive event cycling, which impacts both revenue and costs. As you can see, events representing around 50% of originally expected revenue are currently scheduled to take place in the second half, either in their original slot or having been displayed from earlier in the year. Clearly, there remains significant uncertainty as to which of these remaining events will run and what revenue attrition we may suffer on those that do. This next chart shows you where and when those remaining events are scheduled to take place. July August have very limited activity with events scheduled for those months focused on Asia, including the ones running right now that Eric mentioned. As you can see, there are no significant event schedules to take place in Europe until September, and October is the key month for North America. Looking at the income statement. In full year 2019, we generated just under $1,300,000,000 of revenue and an operating profit of $331,000,000 Of that, dollars 48,000,000 came from joint ventures. So the overall cost base of our business was $986,000,000 We are taking action to save costs. And based on our current event schedule at constant currency, we would expect savings in direct and indirect costs totaling around £300,000,000 for the full year. That is against our originally expected cost base, which would have increased from 2019 due to cycling effects. With that, I will hand you back to Eric. Thank you, Nick. Just to summarize what we covered this morning. Our 3 largest business areas are holding up well and again delivered underlying revenue growth and underlying adjusted operating profit growth in the first half. The full year outlook for the impact of COVID-nineteen varies by customer market. Our exhibition business has been significantly impacted by COVID-nineteen and the outlook for this business area remains highly uncertain. And with that, I think we're ready to go to Your first question comes from the line of Nick Pomsky from Barclays. First up on FTM, some speculation about the financial health of the U. S. Universities and the impact that there might be on renewals, new sales, etcetera, into 2021, 2022. Can you just give us an indication of what your sales force are hearing as U. S. Universities in particular are going through financially difficult times? And what your initial thoughts are on the potential scale of the impact on your journals business specifically inside SQM? Second question, can you just give us a little more color on the business services situation with some business analytics? I think you noted fraud is doing well, other areas slower to recover. Can you just tell us which area is recovering more slowly and what you're looking at to consider the likely trajectory of recovery there? Okay. So first of all, in STM, I mean, as you know, we think of ourselves as a service provider across all our different market segments. And therefore, in each different segment, we sort of work with the segment to adjust their cycles and how they manage their industry. In the FTM business for what you're talking about here, which is I think is primarily related to the primary research subscription business, that's very much an annual business. And most of our 14,000 institutional customers work on sort of calendar year cycle, even though some are in slightly different cycles. So that means at this point, we adjust in the absolute final phase of closing out last year, so which is basically done, but that's what we're closing out. And we haven't yet even started to look at the next cycle in any material way around the world. So it's too early to call what is happening going forward. However, I think it's interesting to note that part of our of the journals we own have been around for almost 200 years. And during that time period, we have seen a significant number of difficult economic period time periods and challenges for our different customer groups. And our approach has been and will continue to be to make sure that we engage directly with our different customers and make sure we fully understand their changing situation, if it is changing, their changing research priorities and what we can do to help them reach those objectives and make progress on those priorities in a way that is appropriate for them given their changing situation. What that is at this point, we don't know. But and we're also in the middle of the pandemic, of course. I think it's also interesting to see how this will shift the scientific and research priorities in the world given the increased emphasis on medical and clinical research. So there are some areas that are going through a very busy period and certainly stepping up their efforts at the moment as well, but I think it's way too early for us to have a view on what that means for next year for U. S. Universities as you have as you asked. The risk situation, which ones are recovering faster, which ones more slowly, anything that relates to digital solution have continued to perform well during the time period. And anything that likes online digital services, those industries have done well. The industry segments that have done less well and continue to lag a little bit are, of course, industries that are dependent on physical retail or physical sort of hospitality and travel sectors. Those are some illustrations of what's lagging at this point, but we will expect to lag in recovery. But overall, after a dip between March April, the risk area has recovered very well and has considered a good trajectory all the way till now and you have heard how our run rate is at the moment. Thank you. Your next question comes from the line of Catharine Tait from Goldman Sachs. Please ask your question. Good morning, everyone. A couple of questions for me. Firstly, on STM, how much of the growth in your open access revenues that you sort of talked about is attributable to open access only journals versus the can you help us understand what proportion of articles Can you help us understand what proportion of articles are or articles being submitted are choosing to pay those APCs and go open access? Then on exhibitions, you touched briefly on the virtualization and digitization opportunities. Can you give us perhaps a few concrete examples of what you've been doing in this space? Are there any exhibitions that you have been able to fully translate over to sort of virtualization? And any help in terms of understanding the monetization of those or the monetization potential of those going forward would also be very helpful. And then finally just on legal and I suppose some of the other subscription revenues as well. Can you just give us a sense on the average contract length of these annual contracts or 3 year contracts? How should we think about that? Thanks very much. Okay. So I'm going to let Nick answer the second one later. But let me start with the first one on STM. The growth in open access, the rapid growth is and the growth rate we talked about in submissions to that they have doubled now in the first half again for the 2nd year in a row. Those are submissions to our standalone open access journals and not counting what's going on in our submission journals because when you submit you don't indicate your payment model. So the standalone Open Access is growing very rapidly and that's therefore the majority of the growth. You said in our subscription journals, which also accept sort of open access sponsored articles that you refer to as hybrid journals, just many couple of 1,000. It's a very, very small portion that are open access articles. I mean, order of magnitude, we're talking about low single digit percent ratio, right? It's a 2%, right? So it's very small. It's growing, but it's not growing at the same rate nearly as the stand alone open access journals. So Nick, you want to cover exhibitions? Yes. Catherine, I mean, we are, as you say, looking at various things that we can do to continue to serve customers whilst being unable to hold the face to face events. We've held a number of webinars that we I think about 400 we've held, which have had very good attendance. We've done some virtual exhibitions where live, the exhibitors will effectively be online whilst the attendees, again live, would be walking through in a virtual sense the exhibition and arranging looking at stands and then interacting and having virtual meetings and setting up meetings, doing that sort of thing. We did that for the Arabian travel market, for example, which I think we had something over 3,000 exhibitors for that and 12,000 attendees who came and attended the show in the event in a virtual way. So lots of things going on, lots of things we're trying to serve, and it's different depending on which segment you're looking at. I think it's fair to say that the initial revenues from those when you get to monetization are limited. And we are experimenting. We are doing things to continue to provide a service in the absence of a face to face event. But we're experimenting with different payment models and different ways of monetization, but it's early days on those. I think it's fair to say. And the last question you had was, I found this right, was legal. The length of contract. The typical legal contract is multi years and the typical length would be a 3 year contract for the larger law firms and the ones that have in-depth negotiations. When it comes to smaller institutions, smaller customers, smaller firms and corporate and so on, often it can be shorter than that and some have annual renewals as well. But the vast majority of our subscriptions are multi year and 3 years probably the average. Perfect. Thank you very much. And your question comes from the line of Patrick Wellington from Morgan Stanley. Please ask your question. Yes, good morning, Emily. Couple of questions. Just looking at the exhibitions business, you talked about $300,000,000 of cost savings and you've given us an idea of how the revenue might look in the second half. But clearly, many of those shows can be canceled. So can you tell us a little bit more about where that 300,000,000 dollars cost saves number might go to? And how we should think about the second half? You've got those shows coming up in October. My understanding is that if you want to avoid venue costs, you have to cancel 8 weeks or so in advance. So how is we are looking at it from the outside? Do you think we'll see that progression of event handling, if you like, and the handling of that cost base in the second half? And I guess my core question here is you've lost $117,000,000 in the first half in exhibition. Could you lose another $117,000,000 dollars in the second half? That's my first question. My second question just goes back to the STM business and print and this could go to the legal business as well. Do you think that there should be a recovery in print volumes in the second half now that presumably distribution is more is easier to carry out? Okay. I'm going to ask Nick to cover the exhibition's question, but let me first just answer briefly the print question. Yes, the situation is as you mentioned broadly similar in FDM and legal, which is that as the lockdowns happen across the world, most of them starting during the month of March, print distribution by itself became an issue. And in some cases, the customers that wanted it or thought they wanted it weren't even ready to receive it. So we had a bit of a disruptive period where there were delays and it was difficult. Towards the end of this time period of the first half, it has improved somewhat, but there's also a seasonality in print, which we said, in particular in STM, it's slightly larger in the second half. So we don't know what will happen to lockdowns and so on, but it seems like the practical distribution issues look like they should be getting better at this moment than they were at the worst time in the first half. What that means exactly in percent is very hard to predict. But you would think that the distribution issues should be less of a challenge in the current situation. Patrick, on your part about exhibitions, yes, the £300,000,000 of cost savings, of course, most of that comes from not running shows. So it's mostly direct costs. And generally speaking, you can save depending how far out you are, you can save most of the costs. Venue costs in particular, the venue, we have long term relationships with the venue providers. They're typically trying to work with us. They'd like to hold the shows as much as we would and very collaboratively are trying to work out what's the best to do and rescheduling and moving deposits we might have paid to future events and so on. And typically, that's been doable and we've also made that work and some of that $300,000,000 comes from that. As we look into the second half, clearly, whether we can save more will depend largely on how many shows we do end up running and indeed how far out we are when we make that decision not to run, as you rightly say. We are biased towards doing everything that we can to run these events. We'll try as hard as we can to our customers are very keen for us to have a presence in the market and they want to conduct their business. So we'll do everything we can to run events where we can do so safely and add value to the customers. So we will try to do that, but that does mean you risk some late cancellations. But generally speaking, we can make that work. We now incur some more costs, but we can make that work with the venue. But I think you have to take a if you're trying to take a view on what could happen in the second half, then clearly you'd have to take a view on how many shows will run, what the revenue attrition might be on those shows. And once you've plugged in our $300,000,000 of cost savings, what additional we might say if we don't run quite so many shows. I mean, I guess, you will have some revenue in the second half, which you didn't have in the second quarter. And you've obviously got, if you like, more warning of your of the need potentially to cancel shows. So one would have thought that your run rate profitability would be better in the second half than the first half. Is that fair? Well, I think the first half clearly is a tale of the first 10 weeks when we are running largely normally and then the remaining, whatever it is, 16 weeks where we weren't running at all. So now they're virtually not running at all. Now clearly, as you say, we have got some revenue in the second half of running some shows right now. But the outlook is, as you saw from the chart, the shows are concentrated in September, October, November period. So we'll have to see when we get there whether we're able to run those shows or not and how much revenue we can generate. Okay. And a quick structural one. Do you think your exhibition customers are finding something else to do given that they can't attend exhibitions? I do think there's a sort of structural challenge to exhibitions because of that marketing spend potentially being diverted perhaps permanently into other things. Well, I think every business, of course, is trying to find the best way to operate that it can in the current environment. But given the desire we've seen from customers to for us to continue to hold events to provide a service where we can, we've got, I think, these events in Guangdong that we opened yesterday, I think we had 14,000 visitors. So that will tell you there's still a strong demand to come to face to face events, and they are an important part of the overall mix of how businesses look to push their products into their markets. But clearly, it will vary from sector to sector. And as we've seen over many years and different sectors, how important face to face is for them and going to events is for them will vary, but we'll have to see how that develops. Great. Thank you. Your next question comes from the line of Sami Kassard from Exane BNP Paribas. Please ask your question. Thank you and good morning, gentlemen. I have 2 topics please to discuss, Exhibitions first on STM. In exhibition, can you elaborate, comment on the revenue attrition that you have seen for the shows held post COVID in June July? Are we talking minus 20 ish percent or more or less? 2nd on STM. We've seen John Wiley and half a dozen other publishers announcing a price freeze for that 2021 renewal cycle. Will you be able to push up prices like you have done in previous receptions? Would you expect to hold prices unchanged? And lastly, on the Offerpay Open Access revenues, which are growing very rapidly, can you remind us of the share that these revenues account for in STM? And also comment on the recent changes that we've had in China with regards to the research assessment exercise then moving away from the impact factor from selling slicing, incentivizing publication in Chinese local language journals. What type of impact do you think this could have on the publishing industry? Thank you. Okay. I'll ask Nick to cover the exhibition part. Yes. Sami, the recent shows, the ones in June that we held in China had a couple, who actually had revenues ahead of the prior addition from the year before. Now I'll be careful how you interpret that. Obviously, the exhibitors we had booked in some time before even COVID struck. But nonetheless, we actually had rung slightly up. In the ones we're running right now, there's actually quite a wide range. Some are up on the previous edition. Others are it seems quite a significant knock. And it all depends on where how well progressed the selling was, how much rescheduled the show was. And again, I'm not sure I would read too much into that in terms of what that means for other shows in other geographies, in other sectors later in the year, you could have very different dynamics. But there's a range. But on average, the July shows a bit down but not too bad. Thank you, Nick. Okay. On STM, as you know, we said this before, we think of Isola as a service provider providing a wide range of services to our customers. And we always have a thorough objective to pursue each one of those service or product categories trying to offer higher quality than other major providers and do that at a lower effective price to the customers and other major providers. So what you mentioned here is sort of high level list price communications, which are at this point in time almost not that applicable to most of our customers. What often matters with each customer is the type of arrangement they have and the type of agreement and what's included and how the spend evolves inside that agreement. And our approach is going to be as I said before to make sure we fully understand our customer situation how they are evolving and make sure that they get what they want to get from us and they have appropriate depth and breadth of content and analytical tools and that they can do that at an economic equation that it continues to be attractive to them regardless of which type of challenges that they face over the next couple of years. But our philosophy continues to be that we should be very quality value equation and that we work with our customers during difficult time periods. When it comes to the open access author pays, the way we look at it, our overall open access number of articles are now just over a bit into double digit share of our overall article count. And our revenue share is because of the way we're running and growing these and launching many, including launching 50 of them in the first half, The overall revenue share is now in the high single digits from that. So it's a slightly lower revenue share than it is in article share on purpose and by strategic design. When you look at the changes to research valuation frameworks and moving away from just solely focusing on impact and higher and particularly you mentioned China. We think this is a very good thing. We think it's very good that the different approaches to evaluating research, researchers, research success is broadening. And we have played a major role in trying to design alternative evaluation metrics. We continue to work on that, continue to broaden the suite of ways of measuring and evaluating science. We think that's a very good thing. We're very engaged. And I think that we will see a broadening of those evaluation tools around the world, not just in China. And we think that's only positive. But I understand for Sitecore and other alternative metrics, but what about submissions coming from China instead of coming through the years? Do you think article submissions will be impacted by the change in the framework? Well, the article submission rate from China, as you probably know, has been very strong for us and all major publishers for a long time and it continues to grow very strongly. And we believe that our role is to make sure that we offer a wide range of different research segment publications as well as different quality tiers so that every author that wants to publish with us should be able to publish with us regardless of which location they come from and what the definition is on where they would like to be published. We've had a long presence in China for many, many years and we're very involved there. And I believe we're positioned well to manage through whatever changes might come. But normally, these kind of changes are very slow. They come very gradually. And we don't see that as a material negative. Eric. And your next question comes from the line of Adam Berlin from UBS. Please ask your question. Hi, good morning. Thanks for taking the question. Just one from me. I just want your help reconciling the change in constant currency numbers and the change in underlying growth numbers on Slide 14, where in each for the SCM risk and legal, you kind of got better or the same change in underlying growth in constant currencies. You're having kind of a negative exposure revenue effect in all those 2 businesses. With the fact that you spent net, I think it's something about GBP 860,000,000 on acquisitions in the last 12 months, if you look at H2 2019 and this period. What can you just explain what the kind of negative drag is despite that spend and when that should start to reverse out so you actually see a positive revenue from all the M and A you can do? Thanks. Yes, Adam. I mean, you're effectively focusing on the portfolio effects on the numbers and what they do between the column headed change underlying and column headed change constant currency. And if you look at the 3 businesses there, SDM, we haven't although we've made a few acquisitions in that business, they haven't been particularly large. So they're not being major contributors. We have been disposing of some smaller historic activities, some book portfolios that just have a there's a 1% drag there. In risk, you've got both acquisitions and disposals going on. Obviously, the acquisitions this year, Email Age and ID Analytics come into that number. But they only came in this year partway through the first half. We didn't have any significant acquisitions coming into the numbers in last year in risk. And against that, you've got some disposals, things like Farmers Weekly, etcetera, that are coming out of the numbers, which tend to be more mature businesses with more established revenue basis. So that's where you get the 2 offsetting factors, which leave you plus 3 underlying and plus 3 change in constant currency. And then legal is a bit of a drag. And again, on the acquisition side, you've got Noble coming to the numbers, but it's a fast growing small business. So its revenue base isn't that large yet. And on the flip side, you've got some, again, disposals. I mentioned those software assets that we sold last year, software businesses coming out of the numbers and again some print disposals. So there's a few things going on in each of the 3 that net net add up to a small overall drag in these numbers. And sorry, just a follow-up question is when does that in H2, should that come the other way because you've got the full effect of those acquisitions coming through? Or there's been quite a few years now where we see kind of the impact in that M and A has been negative on revenue despite quite a lot of spend. So just want to understand when that starts to come through with numbers. Yes. Clearly, you'll get a full 6 month period from EmailAid and ID Analytics coming into the second half. So and their revenue will be in for the full period. As Eric mentioned, EmailAid is growing very fast. So that will obviously contribute. They will clearly from their 12 month anniversary next year, they will come into underlying. So there won't be in that gap between the underlying and the constant. And on the disposal front, we are I don't think we have any, maybe we have one print magazine left that we've been doing a number of those which have been coming out of the risk business. And that's been going the other way. But those are largely done now. So I'm not saying we won't have other disposals, but those ones particularly are largely behind us. Your next question comes from the line of Matti Lejonen from Bernstein. Please ask your question. Good morning. You mentioned that the events currently taking place in the exhibition segment are mostly in Asia. And based on the listings on the Read website, it looks like mostly China and Japan. Now what's the reason we don't have more exhibitions occurring in other low incidence areas COVID-nineteen? Is it, for example, mainly travel restrictions? Or what's the color there? Yes. So I mean partly it's just when the shows are scheduled. I mean this is typically a quiet period for exhibitions. We don't normally actually have many exhibitions scheduled for the July work period. Japan is an unusual situation because we were expecting it to be the Olympics. So not many events now fortunately, many events are brought forward, and we held them back in February, which is good now. But other events have been moved away from this July or the August period in Japan because of that. I think if you look at the rest of the world, then a lot depends on what the government restrictions and requirements are. You might have seen that in France, for example, large gatherings are allowed from the 1st September in the U. K. Exhibitions can operate from the 1st October. And so they're not even though coronavirus cases may be slow in those countries, the restrictions haven't been lifted yet. So those it does vary from market to market. And that's why you see the schedule that we showed you on Slide 22, the mix in terms of geography and timing and why September to December period is the key. Very helpful. Thank you. Your next question comes from the line of Kaddish Kumar from HSBC. Please ask your question. Hi, good morning. It's Rajesh Kumar, not Kabbage Kumar. When you look at your portfolio of businesses, what areas have become more interesting since the pandemic? And which areas need a rethink in terms of capital allocation? That's the first question. 2nd one is on exhibitions. When you look at the rebookings for next year, what are the conclusions your business managers are drawing about customer preferences, digital versus physical? Are they thinking that there are segments where people might go more digital? Or is it likely to be is it likely to return to physical exhibitions as that remains the preference? Or is it differ widely by business line? And finally, on the risk and analytics in the insurance segment, Could you you mentioned a few data enhancements and could you run us through what are the key customer challenges you are being asked to help them with? It could be a discussion around the wider risk business, but specifically insurance segment. Okay. Well, I'll have Nick's going to cover the exhibition side, but let me first talk about the overall portfolio here. Well, what I think has become interesting to us during this unique time period is that our 3 largest business areas have held up and performed exactly as we would have expected in a very challenging time period. And it's interesting to me that perhaps all the trends we were expecting have continued to happen, but perhaps accelerated slightly during this time period. So that risk, if you look at our first, risk has continued to perform very well throughout this time period and the direction we have been going with risk to add more digital identity solutions has been very consistent with the way the world has developed. And the world has developed faster in that direction during the lockdown than maybe we had even predicted. So the risk division is doing as expected. It's heading in the direction we expected, perhaps even faster than we thought. And the digital solutions that's the 2 largest acquisitions we made over the last 3 years in ThreatMetrix and Email Age are doing very well and supporting that direction. So it's all positive and perhaps a bit faster. If you look at the 2 large subscription based businesses in STM and legal, again, they are behaving as we would expect and strategically also on the path that we wanted them to be, which is that the electronic revenue growth, both subscription and transactional, has held up well and perhaps even increased slightly in the growth rate during this time period. But the print declines, which have continued which have been there for many years continued and perhaps accelerated during the spring partly for logistical issues and partly I think because people are spending more time online something we have been trying to drive for many years. So again, I think our strategy for those 3 divisions is exactly as expected and we're doing well. We think they've helped us well and if anything accelerated. When it comes to exhibitions, I think it's very difficult to make any judgment right now on what this means. We have always said that exhibition is a good business that has good return on cash and both organic development and acquisitions, but it has event risk, meaning it has the risk we've seen in the past when it comes to SARS or MERS or ash clouds or swine flu, other events that have happened. Historically, they have tended to be regional or last for a certain period of time. This is certainly more global downturn and a more a longer time period of downturn than we've seen before, but it is what we thought was the risk factor for exhibitions, the event risk. So when it comes to portfolio and cash allocation, allocation of capital, if you look at where we spent our capital over the last few years, it has been very heavily weighted towards the risk division and digital solutions, but also towards digital analytical solutions to the other areas and small plug in add ons and exhibitions. I believe that there's no fundamental change to that even if you put our heads together and try to rethink it now. So I think it's heading in the same direction. I think at the moment, there's not a lot of volume of acquisition activity and flow in the marketplace because many companies are looking at potential for the company we think have slowed down those initiatives and spending more of their time on actually operating, running their own business during this time period. So at this moment, it's less active. Your question on the rebooking of exhibitions for next year, I think it's very hard to draw any conclusions is the short answer. In many instances, we because we've done this year's show, we haven't held this year's show. So rebooking for next year's show is distorted by that. Equally, when we cancel the show, we often get customers who just roll over their booking to the next show and put their deposit against the next event the following year. And that's obviously again distorting things. So very mixed picture, depends on geography, sector and very hard to draw any overall conclusions, but it's a mixed. And your risk question on risk, what we do in insurance to help the industry at the moment, we have over the last now probably a few decades driven growth in insurance by launching new analytical tools based on incorporating different data sets in our modeling to help economics for the insurance community of many different decision points through our point of contact all the way to renewal and point of claim and so on. And we've continued to do that in Rolodex during this time period. But what has become very interesting to many of our customers is the way we have through our contributory databases and other tools that we look at across the insurance companies, we have a unique view of what's going on across the market and what's going on by different geographies. So we have been helping our customers by summarizing overall trend daily and weekly in terms of shopping activity and driving activity and adding drivers to insurance policies and so on that have been going through an unprecedented period in the U. S. As a whole and state by state. So when it is completely anonymous and added up and cumulative, those have been data sets and dates that we believe have been very helpful to the customers and that they seem to be appreciating it. So that's pretty much what's been going on now. Thank you. Your next question comes from the line of Jamie Bass from Berenberg. Please ask your question. Hi, there. Just a really quick one for me. I'm sorry if this has already been clarified. But you mentioned in the press release your run rate for underlying revenue being about half of what it was before. Just to clarify, is that run rate year to date? Or is that for this quarter? Very easy question. That is the run rate we're seeing right now during the first effectively 3 weeks of July. This is the July run rate we're talking about here at the moment. This is the actual run rate right now in the Risk division on a total revenue run rate basis at the moment. Okay, perfect. Thank you very much. And your And your next question comes from the line of Henrik Slottboom from Zlai Tia. Good morning, gents. Thanks for taking my question. Eric, you've said a lot about STM this morning already and the word that constantly or the phrases that fall in this respect are service provider. Now you recently entered into a new contract with the Dutch Universities And I see a shift in a number of things. The word partnership pops up quite regularly. There's a different stance towards content ownership. Is this where the industry is heading in your view? That's the first part of the question. And the second part, I don't think I could answer on, but I'll ask it anyhow. Is this model is under this model the margin for STM sustainable at the level where it is right now? Okay. Yes, we think of ourselves as a service provider in the STM industry, and we think of ourselves as a service provider across a wide range of products. As you have noticed, it seems again the most of the questions here seem to be about academic primary research subscriptions to the academic market, which a bit below half of the STM division. We really focus on all the different tools, data sets and analytics for science and research across the world. You specifically asked about the Dutch deal. Every customer is unique and different, especially large ones of scale. And without going into any one specific customer in detail, I can tell you that the Elsevier headquarters have been in the Netherlands for 100 of years or the current business has headquartered there for over 130 years. And we are a unique service provider and a unique position in that country, not just to spend time talking about what the question of journal subscription content, but rather discuss how we can help the country advance science. And science does not need to be only accessible. It has to be transparent. It has to be reproducible. We have to have significant emphasis on underlying data sharing and data verification and how you can go into the scientific research data underneath. What we've also seen during the COVID pandemic is that it has to be interdisciplinary. And we've seen increasing data sets that it also has to be collaborative. Quality is always higher over every year we look when you have more than one institution involved and there is collaboration across borders and so on. These are the kinds of things we're talking about in the Netherlands, which is our headquarter location in order to advance and make finance open and structured, not just the portions that we tend to talk about, which is sort of a subscription renewal. There are also other important aspects of science that are very getting a lot of attention at the moment. That is science also has to be inclusive. And we have that means that we have to factor gender and race into doing science. The actual conduct of science and designing experiment has to be in how we select the science to fund, how we select the science to publish and how it then gets disseminated and articulated. So there are all these aspects that have been taken into account and are included in the country, which is the location of our headquarters. So it's a very, very broad situation. Last question you asked about margins. We don't think about margins. We don't manage margins. We don't have margin targets. We manage product and product quality and analytics quality to our customers and we want to make sure that we offer those at a higher quality and a lower effective cost, meaning better value equation for our customers than other major providers. If we do that, we can drive revenue and we can accelerate revenue growth over time by having higher value add components of our offering. Then we manage our cost structure separately and we try to approach our cost structure evolution with the same level of sophistication, technology and analytical tools as we do to build product for our customers. We use that those tools to build systems and tools for our internal professional and manage the cost growth. So we believe more importantly here that we can drive high value for our customers and therefore continue to drive revenue growth and that on a separate basis in a separate role we try to run our cost growth to be as efficient as possible and keep a low cost growth. That's how we think about the revenue and profit generation in that sense. Okay. Thank you very much. Have a nice day. Thank you. And your next question comes from the line of Tom Singlehurst from Citi. Please ask your question. Tom here from Citi. Thank you so much for taking the questions. A couple on STM, I apologize. In an answer to an earlier question, you talked about price not necessarily being a sort of unitary focus in negotiations and it's about iterating the sort of service offering. I mean, one iteration for a lot of well, for a number of university library has been to move away from bundled deals. I know we're talking about primary research here again, but the market seems to focus a lot on the sort of growth impact on subscription revenues. You see some libraries talking about 50% plus savings. I was wondering whether you could comment on the net sort of impact to revenue as customers move from subscription to more sort of pay per view type models. That's the first question. And then the second question, I know you won't want to comment on specific customers, but in the spirit of the conversation about the Netherlands and transformative agreements. Can you at least give us a sense of whether negotiations are ongoing at the current time with project deal in Germany and the University of California? Thank you. Yes. Let me try to address your first question. Yes, the focus what I look at when you talk about the question of price is the way we think of this and the way our customers think about it is what's their total level of spend and what do they get for that spend and what's their spend envelope? How are they changing priorities and they're changing financial strength. So we together with our customers focus on the question of what are they spending and what do they get from that? How do they want to change what they get or change their spend, right? Our objective is always to help each research institution get the best value for their money that they can get. And we try to work with them all to make sure they have the appropriate depth and breadth of content for their level of research intensity as it is evolving. And we believe that if we can serve them properly over time, they will be a better customer for us and we will add more value over time. So that's how we think about it. It's a question of their spend and the range, the depth and breadth of content and the types of analytical tools. You made one assumption. You made a statement that I think was surprising to me. You talked about people moving away from bundled deals. The way we see this is, of course, that we offer a broad range of product and service options. You can range from buying individual articles or subscribing to individual journals, group of journals, subject collections, our broadest collections. You can also for those have either full ownership rights, permanent ownership or you can effectively subscribe to annual viewing rights. You can buy back files and content sets and so on. So it's a full range of alternatives. We have around 14,000 customers now around the world. And every year, a few dozen of those opt out of the broadest collection, right? And that has happened now for over a decade. And every year also several more dozens opt into our broadest collection, sometimes even hundreds of the way you call it on the headline for the primary research subscription business, which is to that we call it on the headline for the primary research subscription business, which is significantly higher than it has been before. So the starting point assumption has not been true so far. But I also think that we have such a range of alternative collections, such a range of ownership and viewing, right, that I think it's slightly oversimplified to only look at that even though it has been growing and we continue to see a gradual increase in it at this moment. You asked the question of other customers. Do I want to talk about what the situation is and how we're negotiating with a few of the other of the 14,000 customers. And I'm going to decline to speak about specific customer negotiations or discussions. I thought you might, but that's worth a go. Thank you very much. Thanks, Tom. We have no further questions at this time. Please continue. Okay. Well, thank you very much for joining us today. And we look forward to seeing you again soon, hopefully at some point back in person. Thank you. Thanks.