Informa PLC Press Release

15 March 2022

2021 Full-Year Results

Informa (LSE: INF.L), the international B2B Markets, Knowledge Services and Business Intelligence Group today published results for the 12 months to 31 December 2021, reporting growth in revenues and profits, balance sheet strength and further progress on the 2021-2024 Growth Acceleration Plan II ("GAP II").

2021 Financial Highlights

·      Higher Revenues: Statutory revenue growth of 8.3% and underlying growth¹ of 6.1%, delivering Group revenues of £1,798.7m (2020 £1,660.8m), reflecting strength in Subscriptions, growth in Digital Services and the progressive return of Live and On-Demand B2B Events;

·      Growth in Adjusted Profit: Adjusted Operating Profit¹ of £388.4m (2020: £266.6m), driven by higher revenues and effective cost-management;

·      Improving Statutory Performance: Reduction in COVID-related exceptional costs and lower intangible amortisation and impairments, delivers statutory operating profit of £93.8m compared with a loss of £881.6m in 2020;

·      Strong Free Cash Flow¹: Higher adjusted operating profit, strong cash conversion and improving forward bookings for B2B Events, delivers Free Cash Flow¹ of £438.7m, more than £500m better than the £153.9m outflow reported in 2020;

·      Robust Balance Sheet:¹ Free Cash Flow growth, combined with currency effects, drives reduction in Net Debt to £1,434.6m (2020: £2,029.6m), in advance of GAP II divestments. Long-term, covenant-free Group financing provides resilience and flexibility.  

2022 Portfolio Focus, Balance Sheet Strength and Accelerating Growth

·      Guidance reconfirmed: 2022 revenue of £2,150m-£2,250m and adjusted operating profit of £470m-£490m, updated to reflect the expected phased divestment of the Informa Intelligence portfolio. ;

·      Consistent and improving growth at Taylor & Francis: Further expansion in Open Research services, a robust performance in Pay to Read Subscriptions and continuing eBooks momentum within Advanced Learning is delivering steady improvement in underlying revenue growth;

·      Further growth in B2B Digital Services: Continuing investment in B2B data through IIRIS, combined with further progress in Audience Development and Digital Demand Generation, expected to deliver continued growth in B2B Digital Services revenues;

·      Robust return of Live and On-Demand B2B Events: Enduring demand for specialist Live and On-Demand events is driving strong levels of participation and improving momentum in forward bookings across our portfolio of specialist brands;

¹In this report we refer to non-statutory measures including underlying results, as defined in the Financial Review on page 9 and Glossary on page 56.

·      Consistent growth at Informa Intelligence: Underlying revenue growth of 6.5% in 2021 and strong initial trading in 2022, ahead of planned divestments, underpinned by high levels of subscription renewals and continued growth in annualised contract values.

GAP II: Portfolio Focus, Balance Sheet Strength and Accelerating Growth

Through GAP II, Informa is creating a more focused, higher growth business with a robust balance sheet and increasing commitment to the two markets where we have leading brands and leadership positions of scale: Academic Markets and B2B Markets.

·      Increasing Portfolio Focus: Sale of Pharma Intelligence confirmed for £1.9bn, including c£1.7bn cash proceeds pre-tax, with completion expected in June. Financial Intelligence divestment process underway, with a further market update to be provided at the half-year;

·      Investment for Growth: GAP II investment programme underway, adopting a similar approach and methodology to that used effectively in GAP I. £150m of incremental capital expenditure and net operating costs committed to a range of projects over the next three years, including up to £75m in 2022. Targeting £200m± of incremental revenue by 2024 through further acceleration in Open Research, Smart Events and B2B Digital Services.

·      B2B Data and Analytics Engine, IIRIS: A priority GAP II investment is the proprietary B2B customer data and analytics platform, IIRIS, delivering collection, management and application of first party, fully permissioned data across our B2B Markets portfolio;

·      Audience Development & Digital Demand: NetLine (content syndication and lead generation) is operating alongside Informa Tech, immediately expanding the depth and reach of KEMA across 10 technology vertical markets (eg Enterprise IT, Cybersecurity). NetLine's proven digital product capabilities will be applied to our Tech brands, expanding content syndication and increasing lead generation quality and capacity, accelerating the development of enhanced Audience Development and Digital Demand Generation services: Target to expand the Group's overall Known, Engaged and Marketable Audience (KEMA) from 10m to 14m through 2022;

·      Robust Balance Sheet: The combination of strong free cashflow, capital allocation discipline and long-term, covenant-free financing, gives us resilience and strength, providing the flexibility to deliver GAP II, including increased investment in our two leadership businesses of scale (B2B Markets, Academic Markets) and accelerated returns to shareholders.

·      Shareholder Returns: Commencement of share buyback programme in February, with 17m shares bought and cancelled to date. Launch of second buyback tranche today, committing a further £200m and taking total returns to £300m within our Capital Returns Programme of up to £1bn. Ordinary dividends will be resumed with the 2022 interim dividend;

FasterForward on ESG: Long-term commitment to becoming a more sustainable business reflected in leading peer group sector ranking in 2021 Dow Jones Sustainability Index for the first time. Further expansion of sustainable practices continuing through Group-wide FasterForward programme, including in relation to Energy, Carbon, Waste and Content.

¹In this report we refer to non-statutory measures including underlying results, as defined in the Financial Review on page 9 and Glossary on page 56.

2021 Financial Summary

¹In this document we refer to Statutory and Underlying results. Underlying figures are adjusted for acquisitions and disposals, the phasing of events including biennials, the impact of changes from new accounting standards and accounting policy changes, and the effects of currency. It includes, on a pro-forma basis, results from acquisitions from the first day of ownership in the comparative period and excludes results from sold businesses from the date of disposal in the comparative period. Statutory figures exclude such adjustments. Alternative performance measures are detailed in the Glossary.

²In this document we also refer to Statutory and Adjusted results, as well as other non-statutory financial measures. Adjusted results are prepared to provide an alternative measure to explain the Group's performance. Adjusted results exclude adjusting items as set out in Note 7 to the Financial Statements. Operating Cash Flow, Free Cash Flow, Net Debt and other non-statutory measures are discussed in the Financial Review and the Glossary.

³ Restated to reflect impact of accounting policy changes in relation to Software as a Service

Current Macro Environment

Ukraine

Like many, we are shocked and saddened by events in Ukraine. Whilst Informa does not have any Colleagues or trading operations in Ukraine, we are contributing to humanitarian relief efforts both corporately and by supporting Colleagues. Specifically, alongside fundraising efforts and direct donations from our many individual brands and businesses, at a Group level our contribution includes a direct foundation donation to the Disaster Emergency Committee (DEC) and an extension and increase to Informa's Colleague charitable match-funding scheme to cover fundraising and personal donations up to £1,000 per Colleague. In addition, we have announced a match-funding scheme for Colleagues who sign up to the Homes for Ukraine scheme or similar government refugee support schemes, matching the monthly contribution or support provided by the government to those families that host Ukrainian families.

As we did during the COVID pandemic, we have expanded our long-standing commitment to supporting Colleague participation in volunteer activities, thereby enabling Colleagues to spend time with relevant charities and non-profit organisations supporting Ukraine.    

The Informa Group has no commercial entities or activities in Russia and Belarus. We have zero to minimal counterparty currency or other material exposure to those two markets, with revenues generated around the world from entities based in Russia or Belarus representing less than 0.1% of revenues in 2021.

Since the outbreak of the conflict, we have been closely adhering to the sanctions regime, ceasing any activities with sanctioned companies or individuals.

Whilst currently we have seen no impact on trading, we will continue to monitor the situation to assess any indirect impact on supply chains, credit markets, international travel and general levels of business activity and confidence.

The COVID-19 Pandemic

Over the last two years, COVID-19 had a significant negative impact on our B2B Markets businesses, whilst our Subscriptions, Data and B2B Digital Services businesses remained resilient. In the face of major disruption and uncertainty, the Group focused on stability and security, prioritising the safety of Colleagues and Customers and preserving the long-term value of our businesses and brands.

This included targeted funds and support lines for Customers, a seamless shift to remote working and the launch of a Colleague Support Fund to assist those facing financial hardship due to COVID-19.

We also implemented a major Events Postponement Programme to reschedule more than £300m of events revenue, while deploying a cost management programme to generate £600m+ of savings to operating profit.

Other actions included securing access to £750m short-term credit, issuing c£800m in bonds, a £1bn oversubscribed equity addition, the removal of all Group financial covenants from the balance sheet and the development of the industry wide AllSecure safety standard for hygiene and safety at events.

COVID-19 disruption also prompted a major acceleration in digital adoption and demand. In tandem, we accelerated the development of our own Digital Service capabilities, which are being further operationalised through GAP II. This will serve the Group well over coming years as an additional driver of growth and value, alongside the progressive return of Live Events.

Since Q4 2021, we have seen a progressive re-opening, relaxation of COVID-related restrictions and increase in trading activities and, whilst this is not yet everywhere, we will update the market as further geographies and locations open and relax or remove restrictions.

Trading Outlook

Guidance Reiterated for 2022

In 2022, the combination of consistent and improving growth at Taylor & Francis, further expansion in B2B Digital Services and the progressive return of Live and On-Demand B2B Events is expected to deliver further underlying progress. In addition, our Informa Intelligence portfolio of businesses continues to deliver consistent growth, underlining the potential to unlock embedded value via planned divestments this year.

Underlying Group guidance for 2022 remains unchanged from that provided at the December Capital Markets Day. However, following the announced sale of Pharma Intelligence, we have adapted the guidance range to reflect the expected timing of the divestment of our Informa Intelligence portfolio, with an assumption the Pharma Intelligence divestment completes by the end of the second quarter, the Financial Intelligence businesses in the summer, with Maritime Intelligence remaining in the Group for the full year.  

On this basis, the 2022 guidance range for Group Revenue is £2,150m to £2,250m and for Group Adjusted Operating Profit is £470m to £490m.

Academic Markets & Knowledge Services

At Taylor & Francis, our GAP II plan forms part of our longer-term modernisation programme that began in 2014. Since then, we have progressively established a digital-first culture and built digital infrastructure to deliver rapid product development and multi-format capabilities. This has enabled us to expand in the fast-growing Open Research market, developing a growing range of flexible, Pay to Publish services that complement and enhance the ongoing strength and resilience of our traditional Pay to Read products.

This strategy has expanded our addressable market from a historical focus on University Library budgets to global research and development funding. Through GAP II, we are investing to further strengthen our digital service offering and this combination of a broader customer base and expanded range of services gives us confidence we can continue accelerating growth to 4%+ over the course of the GAP II period.

In 2022, we are targeting consistent and improving underlying growth through robust performances in Pay to Read Subscriptions and Advanced Learning, and further double-digit growth in Pay to Publish services. On the latter, our focus is on further improving our ability to track funding flows to enhance our marketing effectiveness, whilst also continuing to improve our speed to market and validation quality for Open Research publications.

In Pay to Read, subscription renewals remain robust, buoyed by strong submission volumes and ongoing demand for authenticated and trusted specialist research. In Advanced Learning, we continue to expand our eBooks list and improve the discoverability of our content, driving overall usage, underpinning pricing and driving further customer demand for digital access.

B2B Markets: Live & On-Demand B2B Events

Across our three B2B Markets businesses (Informa Markets, Informa Connect, Informa Tech), which operate in 30+ specialist B2B verticals, we are continuing to see a progressive return in confidence and levels of activity in Live and On-Demand Events.

To date, the majority of brands that have run in 2022 have been in North America and the Middle East, with our major brands in Europe traditionally scheduled from the second quarter. In Mainland China our events calendar starts after the holiday season and this year we planned for additional flexibility to allow processes and approvals to settle post the Beijing Winter Olympics. We expect to see major brands running from Q2, with activity building towards the traditionally busier second half of the year.

Encouragingly, we are seeing key components of successful Live and On-Demand Events steadily improve, including:

1.    Open markets, venue licences and location/city/government support: Major locations around the world are supporting the reopening of Live and On-Demand Events in 2022, with brands already having been successfully run in Las Vegas, New York, California, Miami, Monaco, Dubai and Riyadh.

2.    Exhibitor volumes: Similarly, despite most brands managing to shortened, sub-12-month sales cycles, exhibitor space commitments are progressively increasing. Across our major brands in Q1, total space sold is expected to be over 5m sq ft, up over 150% on a like-for-like basis versus last year;

3.    Attendee participation: As brands return to traditional calendar dates, albeit with most managing to shortened, sub-12-month sales cycles, attendee volumes are progressively rising. Across our major brands in Q1, total participation is expected to be over 400k, up 150% on a like-for-like basis versus last year;

4.    Attendee quality and Net Promotor Scores: As Brands return, we are seeing a higher concentration of committed buyers at events, leading to high levels of customer satisfaction. This is reflected in an 85%+ increase in average NPS scores across major Q1 brands where results have been published;

5.    Forward Bookings: Average bookings for Informa Market's major events brands (£5m+ revenue) scheduled for H1 2022 are already at 76% of 2019 revenue, with 94%+ of related cash collected;

6.    New product launches: Improving customer confidence is supporting the targeted launch of new brands, including in Luxury & Lifestyle (Miami International Boat Show) and in Technology (LEAP), the latter a showcase event in Saudi Arabia that was one of our largest new launches ever.

Additional components of growth for 2023 and 2024:

1.    Additional open markets, venue licenses and location/city/government support: Certain geographies and locations are further behind in the return from COVID-19 and are unlikely to pick up materially until 2023, including Hong Kong, India and a number of countries in ASEAN and Latin America.

2.    International and cross-continental participation: International and cross-continental participation at Live Events remains limited to date, albeit is more evident amongst our major brands. Our market research indicates demand for international access remains strong and so, as corporate travel restrictions unwind and travel budgets reinflate, we expect cross border participation rates to build.

B2B Markets: B2B Digital Services

Across our three B2B businesses, we are equally focused on further expanding in B2B Digital Services this year. This is underpinned by the ongoing development of our centralised B2B customer data and analytics platform, IIRIS. The progressive rollout of IIRIS' tracking, consent and engagement tools across our B2B brand portfolio is critical to expanding the volume of KEMA (Known, Engaged and Marketable Audience) in each of our 30+ specialist markets and, in turn, enhancing the capacity and quality of lead generation services we can provide.

In 2022 our target is to grow overall KEMA from 10m to 14m by deploying and activating IIRIS in all our major markets, whilst further educating and developing the breadth of data analytics talent across the Group.

Within Informa Markets, our focus is on strengthening our existing Audience Development products in Aviation & Aerospace, Agriculture and MedTech, whilst expanding our offering to additional customer markets, including Infrastructure, Construction & Real Estate and Health & Nutrition.

Informa Tech is building Audience Development and Digital Demand products, services and capabilities. In 2021, we acquired NetLine, (content syndication and lead generation) and our priority is to connect our Brands to NetLine's established syndicated publisher network and audience flows, immediately expanding content syndication and increasing our ability to deliver higher volumes of higher quality, targeted leads. Over time, NetLine's platform capabilities and experiences in using owned and syndicated content to increase the volume of engaged audiences will expand KEMA in the Tech markets we serve and accelerate the deployment of our Digital Demand solutions.

GAP II: Portfolio Focus, Balance Sheet Strength and Accelerating Growth

The GAP II programme will increase focus and investment in the two markets where we have leading brands and leadership positions of scale, Academic Markets and B2B Markets.

Having divested all revenue from Informa Intelligence, our GAP II baseline, prior to any major portfolio additions, is to return Group revenues to c.90% of 2019 levels by 2024, whilst returning significant capital to shareholders.

GAP II - Increasing Portfolio Focus

A key commitment within GAP II is the decision to divest of our portfolio of high-performing Informa Intelligence businesses, unlocking the value created in these businesses over the last seven years and providing the funds to further strengthen our position in our two leadership markets.

In early February, we announced the first of these divestments, confirming a binding agreement with Warburg Pincus that values Pharma Intelligence at £1.9bn. This represented an attractive EV/EBITDA multiple, underlining the quality of the business, the strengths of its specialist brands and its future growth potential. Our confidence in future prospects led us to retain a 15% shareholding in the business which, along with Board representation, will support the separation process.

This divestment is expected to complete in the second quarter of 2022, at which point we will receive gross cash proceeds of c£1.7bn, against which tax of c£200m is expected to be incurred.

We are now engaged in the divestment process for our Financial Intelligence businesses, which includes the fund flow data business, EPFR Global, the fixed income pricing and information business IGM and the wealth management software business, Zephyr. The divestment process for these businesses is now underway and we will update on progress in the Summer.

Curinos, our partnership in Retail Banking that was created in 2021 through the combination of our FBX business and Novantas, stays within the Group as a value creation investment.

GAP II - Enhanced Shareholder Returns

As part of GAP II, subject to the full sale, completion and receipt of proceeds from the divestment of Informa Intelligence, we announced the intention to return up to £1bn of proceeds to shareholders through some combination of a share buyback programme and/or a special dividend.

Capital allocation discipline, combined with the pace and scale of the Pharma Intelligence divestment enabled the share buyback programme to commence in February, with an initial tranche of £100m. Since then, 17m shares have been bought and cancelled at an average value of 587p, for total consideration, including stamp duty and other costs, of just over £100m.

The strength of the Group's 2021 and 2022 underlying cashflows combined with our confidence in completing the Pharma divestment by the end of the second quarter, today enables us to commit a further £200m to the next stage of this buyback programme.

Improving momentum in the business and continued growth in free cash flows will see the Group resume ordinary dividends at the time of the 2022 Interim Dividend, at an initial annual pay-out ratio of one third of adjusted earnings.

GAP II - FasterForward on ESG

The Informa Group has been committed to best practice in sustainability for over seven years, through which time we have embedded sustainable principles and practices into all our brands and businesses. This has been recognised through certification as a CarbonNeutral® Company for the last two years and independently verified Science-Based Targets, as well as being ranked as the leading company in our peer group in the 2021 Dow Jones Sustainability Index.

Informa's long-term sustainability targets are formalised within FasterFoward, a group-wide programme launched in 2020. FasterForward strives to continually improve our sustainable business practices and have a positive impact across customer markets through products and services, with headline goals of:

1)   zero waste and net zero carbon business by 2030 or earlier

2)   embedded sustainability content in all Brands by 2025

3)   work to ensure we multiply our impact within the B2B and Academic communities we serve.

We are using the period of GAP II to accelerate our sustainable commitments and wider FasterForward ambitions in both of our leadership businesses. Following a number of years focusing on reducing energy use, in Academic Markets, we are working towards gaining CarbonNeutral® Product certification across our portfolio and made an important step toward this in 2021 by achieving CarbonNeutral® Publications status for our print journals and books. We are now expanding this into CarbonNeutral® Events through a focus on reducing our carbon footprint and then offsetting hard-to-abate emissions.

Across our B2B Markets businesses, our GAP II targets are focused on our North American and EMEA businesses delivering across four key categories:

·      Energy: all B2B Events will be powered by renewable electricity - from January 2022, more than 300 of our major event brands are powered by renewable electricity;

·      Waste: all B2B Events will be part of the Better Stands programme to eradicate single use exhibition stands - more than 300 brands signed up by the end of 2021;

·      Content: all B2B Events will incorporate Sustainability Inside, providing on-site content that accelerates sustainable development in our customer markets - 70%+ of surveyed events in 2021 are building sustainability content into their programme;

·      Carbon: all B2B Events will save our customers more carbon than we emit, underlining our role as a consolidator of business travel - relevant data capture was embedded across 60+ brands in 2021, with early outputs on business travel consolidation and efficiency supporting our target. In addition, a team was established to develop the product to maximise the opportunity to consolidate travel for our attendees.

Financial review

Through the 2021 Transition Year, as the world progressively began to start living alongside COVID-19, the Group's focus gradually shifted from stability and security to revitalisation and growth. Across our international portfolio of specialist businesses and brands, this helped to deliver improving revenues, profits and cash flow, in line with the guidance provided at our Half Year Results in July.

Our subscriptions-led businesses grew on an underlying basis throughout the year, demonstrating their consistency and resilience. Across our B2B Markets businesses, our broad geographic mix meant that as regions gradually relaxed COVID-19 restrictions, we saw a progressive increase in live events activity and the ability to generate more revenue. At the same time, our teams continued to develop our range of B2B Digital Services, generating new revenue streams with the potential for further growth and expansion in the future.

Income Statement

The results for the year ended 31 December 2021 reflect the strong trading performance in our Informa Intelligence and Taylor and Francis subscription businesses, together with the return to growth and improving momentum across our three B2B Markets businesses (Informa Markets, Informa Tech, Informa Connect), with the continued relaxation and removal of COVID-19 restrictions and the return of Live and On-Demand events in our main markets in Asia, North America and the Middle East.

¹ Restated for impact of Software as a Service (see note 3)

Statutory income statement results

The growth in our businesses noted above represents an 8.3% increase in revenue to £1,798.7m, and a 6.1% increase on an underlying basis. Every Division achieved underlying revenue growth in the year.

The Group reported a statutory operating profit of £93.8m in 2021, compared with an operating loss of £881.6m for the year ended 31 December 2020. Both periods reflect some impact of the COVID-19 disruption on our Live and On-Demand events portfolio, with the losses in the prior year significantly higher due to the non-cash goodwill impairment of £592.9m. Adjusted operating profit was £388.4m which was a growth of 36.1% on an underlying basis, again with underlying growth arising in all our Divisions.

There was a profit on disposal of £111.1m in the year principally related to the gain on the disposal of three businesses in Informa Intelligence, namely: Asset Intelligence, Barbour ABI and Barbour EHS.

Statutory net finance costs reduced by £183.1m to £67.8m, with adjusted net finance costs reducing £29.6m to £67.8m. The main driver of this decrease in statutory finance cost was the non-recurrence of one-off costs associated with debt refinancing in 2020 and the full year effect of the combination of the reduction in average net debt levels and reduced rates following this refinancing that completed in H1 2020. The COVID-19 Financing Action Plan implemented in 2020, included debt reductions and rescheduling by replacing Private Placement debt with lower cost EMTN financing and an equity issue.

The combination of all these factors led to statutory profit before tax of £137.1m in 2021, compared with a loss before tax of £1,140.9m in the year ended 31 December 2020.  The profit in the year led to a statutory tax charge of £48.9m in 2021 compared to a tax credit of £102.3m in the prior year.

This profit outcome translated into a statutory diluted earnings per share of 5.2p compared to a diluted loss per share of 73.4p for the year ended 31 December 2020. The improvement primarily reflects the stronger trading and the reduced impact of one-off COVID-19 costs, partially offset by the full year effect of the equity issue of 250.3m shares in H1 2020. Adjusted diluted EPS grew to 16.7p from 9.8p in the prior year.

Measurement and Adjustments

In addition to statutory results, adjusted results are prepared for the Income Statement. These include adjusted operating profit, adjusted diluted earnings per share and other underlying measures. A full definition of these metrics can be found in the glossary of terms on page 56. The Divisional table on page 12 provides a reconciliation between statutory operating profit and adjusted operating profit by Division.

Underlying revenue and adjusted operating profit growth on an underlying basis are reconciled to statutory growth in the table below.

Adjusting Items

The items below have been excluded from adjusted results. The total adjusting items included in the operating profit in the year were £294.6m (2020: £1,148.2m), with the decrease largely due to the non-recurrence of the non-cash impairment of goodwill of £592.9m incurred in 2020, reductions in other impairment charges, reorganisation and restructuring costs, and lower COVID-19 related costs. The most significant items in 2021 were intangible asset amortisation of £268.4m and a credit of £23.6m for one-off insurance receipts associated with COVID-19-related event cancellations.

Intangible amortisation of £268.4m relates to the historical additions of book lists and journal titles, acquired databases, customer and attendee relationships and brands related to exhibitions, events and conferences. As it relates to acquisitions, it is not treated as an ordinary cost. By contrast, intangible asset amortisation arising from software assets and product development is treated as an ordinary cost in the calculation of operating profit, so is not treated as an adjusting item.

Reorganisation and redundancy costs reduced significantly compared to 2020 following the conclusion of the Group's severance programme in 2020. Integration costs also reduced compared to 2020 as a result of the integration on prior year acquisitions nearing completion.

Onerous contracts and one-off costs associated with the pandemic reduced significantly compared to the prior year with a charge of £9.7m in 2021. This reflects the reduction in the level of events cancelled or postponed due to COVID-19, where the costs could not be recovered, typically relating to venues and event set-up. There was a one-off insurance credit of £23.6m in 2021 associated with insurance cash receipts related to events cancelled due to COVID-19.

The table below shows the results and adjusting items by Division, highlighting further the strength in our Subscription-led businesses, Informa Intelligence and Taylor & Francis, and the growth experienced in our B2B Markets businesses of Informa Markets, Informa Connect and Informa Tech as there has been some recovery from the impact of COVID-19 on Live and On-Demand events.

¹Intangible asset amortisation is in respect of acquired intangibles, and excludes amortisation of software and product development

Adjusted Net Finance Costs

Adjusted net finance costs, consisting of the interest costs on our corporate bonds and bank borrowings, decreased by £29.6m to £67.8m. The decrease primarily related to the full year benefit of lower debt levels in the year following the 2020 refinancing and equity issue together with the full year benefit from lower interest rates in the EMTN.

There were no adjusting items in finance costs or finance income in 2021. The amounts in the prior year include costs associated with the restructuring and rescheduling of debt, which included make-whole interest payments to debt holders.

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

Taxation

Approach to tax

The Group continues to recognise that taxes paid are part of the economic benefit created for the societies in which we operate, and that a fair and effective tax system is in the interests of tax-payers and society at large. We aim to comply with tax laws and regulations everywhere the Group does business and Informa has open and constructive working relationships with tax authorities worldwide. Our approach balances the interests of stakeholders including shareholders, governments, colleagues and the communities in which we operate.

The Group's Effective Tax Rate on Adjusted Profits (as defined in the glossary) reflects the blend of tax rates and profits in the jurisdictions in which we operate. In 2021, the Effective Tax Rate on Adjusted Profits was 17.0% (2020: 15.0%).

The calculation of the Effective Tax Rate on Adjusted Profits is as follows:

¹ Restated for impact of Software as a Service (see note 3)

Tax payments

During 2021, the Group paid £41.6m (2020: £32.9m) of corporation tax and similar taxes on profits, with the year-on-year increase reflecting the higher profit before tax reported in the year.

A breakdown of the main geographies in which the Group paid tax is as follows:

The reconciliation of the adjusted tax charge to cash taxes paid is as follows:

¹ Restated for impact of Software as a Service (see note 3)

At the end of 2021, the deferred tax assets relating to US and UK tax losses were £106.8m (2020: £124.9m) and £34.7m (2020: £42.3m) respectively. These are expected to be utilised against future taxable profits.

Goodwill is not amortised as it is subject to impairment review, and as a result, there is no charge to adjusting items for goodwill amortisation. However, there can be an allowable tax benefit for certain goodwill amortisation in the US and elsewhere. Where this benefit arises, it reduces the tax charge on adjusted profits.

The amortisation of intangible assets is considered an adjusting item. The £13.6m (2020: £13.4m) of current tax credits taken in respect of the amortisation of intangible assets is therefore also treated as an adjusting item and included in the tax credits in respect of adjusting items.

Tax contribution

The Group's total tax contribution, which comprises all material taxes paid to, and collected, on behalf of governments globally was £267.2m in 2021 (2020: £257.2m). The geographic split of taxes paid by our businesses was as follows:

In addition to the above, in 2021 we collected taxes on behalf of governments (e.g. employee taxes and sales taxes) amounting to £166.6m (2020: £169.4m).

Earnings Per Share

Adjusted diluted Earnings Per Share (EPS) was 6.9p higher at 16.7p (2020: 9.8p), largely reflecting higher adjusted earnings of £251.8m (2020: £139.9m), partly offset by a 5.9% increase in the weighted average number of shares arising from the full year impact of the shares issued in 2020.  The weighted average number of shares used in the calculation of 2020 diluted EPS excludes potential shares of 6.8m that were excluded as they were anti-dilutive due to the loss in the year.  Therefore, the number of shares used in 2020 for the calculation of diluted EPS is the same as the number of shares used in the calculation of basic EPS.

An analysis of adjusted diluted EPS and statutory diluted EPS is as follows:

¹ Restated for impact of Software as a Service (see note 3)

¹ Restated for impact of Software as a Service (see note 3)

Dividends

In April 2020, as part of the Group's response to the COVID-19 pandemic as part of our COVID-19 Action Plan, and following consultation with Shareholders, the Board announced the temporary suspension of dividends to shareholders and this continued into 2021. At the December 2021 Capital Markets Day, we announced our intention to resume ordinary dividends. This will commence with the 2022 interim dividend, at an initial pay-out ratio of one third of annual adjusted earnings. 

Currency Movements

One of the Group's strengths is its international reach and balance, with colleagues and businesses located in most major economies of the world. This means the Group generates revenues and costs in a mixture of currencies, with particular exposure to the US dollar, as well as some exposure to the Euro and the Chinese Renminbi.

In 2021, approximately 58% (2020: 63%) of Group revenue was received in USD or currencies pegged to USD, with 9% (2020: 9%) in Chinese renminbi and 8% (2020: 5%) received in Euro.

Similarly, we incurred approximately 48% (2020: 48%) of our costs in USD or currencies pegged to USD, with 8% (2020: 7%) in Chinese renminbi and 3% (2020: 2%) in Euro.

Each one cent ($0.01) movement in the USD to GBP exchange rate has a circa £8m (2020: circa £8m) impact on annual revenue, and a circa £3m (2020: circa £3m) impact on annual adjusted operating profit.

The following rates versus GBP were applied during the year:

Free Cash Flow

Cash management and cash generation remain a key priority and focus for the Group, providing the funds and flexibility for paying down debt, future organic and inorganic investment, and consistent Shareholder returns. Our businesses typically convert adjusted operating profit into cash at a strong conversion rate, reflecting the relatively low capital intensity of the Group. In 2021, absolute levels of cash flow improved significantly year-on-year but remains lower than historical levels due to the continued impact of COVID-19 on our B2B Markets businesses.

The following table reconciles the statutory operating profit/(loss) to Operating Cash Flow (OCF) and Free Cash Flow (FCF), both of which are defined in the glossary.

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

² Working capital movement excludes movements on restructuring, reorganisation, COVID-19 costs and acquisition and integration accruals or provisions as the cash flow relating to these amounts is included in other lines in the Free Cash Flow and reconciliation from Free Cash Flow to net funds flow. The variance between the working capital in the Free Cash Flow and the Consolidated Cash Flow Statement is driven by the non-cash movement on these items.

³ Amount includes £nil (2020: £161.7m) of make-whole interest paid in respect of the early repayment of private placement and bond debt

⁴ 2020 restated for impact of Software as a Service (see note 3)

Free Cash Flow was substantially higher than 2020 due to the higher levels of adjusted operating profit, effective management of working capital, as well as a reduction in one-off related COVID-19 costs and lower net interest payments.

Net capital expenditure was £48.8m (2020: £41.9m), equivalent to 2.7% of 2021 revenue (2020: 2.5%). We expect full year 2022 capital expenditure to be at a level closer to 5% relative to revenue.

The working capital inflow of £147.2m was £229.1m higher than the outflow in 2020, reflecting strong cash controls and cash management and the benefit from improved levels of cash collections for future events, reflecting the recovery in our B2B Market businesses, together with lower levels of refunds driven by fewer event cancellations in year.

Net cash interest payments of £74.4m were £197.2m lower than the prior year, largely reflecting the non-recurrence of one-off interest payments in 2020 of £161.7m that incurred restructuring Group borrowings to remove all financial covenants. There were also reduced fees relating to amortisation of fees. 

The calculation of Operating Cash Flow conversion and Free Cash Flow conversion is as follows:

¹ 2020 restated for impact of Software as a Service (see note 3)

The following table reconciles net cash inflow from operating activities, as shown in the consolidated cash flow statement to Free Cash Flow:

¹ 2020 restated for impact of Software as a Service (see note 3)

Net cash from operating activities increased by £617.6m to record an inflow of £471.6m, principally driven by the increased profits in the year, together with improved cash collections related to forward event bookings.

The following table reconciles cash generated by operations, as shown in the Consolidated Cash Flow Statement, to Operating Cash Flow shown in the Free Cash Flow table above:

¹ 2020 restated for impact of Software as a Service (see note 3)

The following table reconciles Free Cash Flow to net funds flow and net debt, with net debt reducing by £595.0m to £1,434.6m during the year, driven by a positive Free Cash Flow of £438.7m and £280.9m of disposal proceeds, partly offset by £90.9m of spend on acquisitions.

1. Amount excludes lease cash repayments or receipts

Financing and Informa leverage

The strong free cash flow performance in the year, together with disposal proceeds helped to reduce net debt by £0.6bn in the year to £1.4bn at 31 December 2021 (31 December 2020: £2.0bn).

The Group retains significant available liquidity, with unutilised committed financing facilities available to the Group of £1,094.6m (31 December 2020: £1,050.0m). Combined with £884.8m of cash, this increased available group level liquidity at 31 December 2021 to £1,979.4m (31 December 2020: £1,349.4m). 

Following the proactive management of our financing structure, the average debt maturity on our drawn borrowings is currently 3.9 years (31 December 2020: 4.8 years), with no significant maturities until July 2023.

Following the repayment of the Private Placement loan notes in 2020, there are no financial covenants on our group level debt facilities in issue at 31 December 2021. There are financial covenants over £36.8m of drawn borrowings in the Curinos business.  The Informa leverage ratio at 31 December 2021 was 2.8 times (31 December 2020: 5.6 times), and the Informa interest cover ratio was 7.8 times (31 December 2020: 3.6 times). Both are calculated consistently with our historic basis of reporting of financial covenants which no longer applied at 31 December 2021. See the glossary of terms for the definition of Informa leverage ratio and Informa interest cover.

The calculation of the Informa leverage ratio is as follows:

1 Refer to Glossary for details of the adjustments to EBITDA and Net Debt for Informa leverage ratio

The calculation of Informa interest cover is as follows:

1 Refer to Glossary for details of the adjustments to EBITDA for Informa interest cover

Corporate development

Informa has a proven track record in creating value through identifying, executing and integrating complementary businesses effectively into the Group. In 2021, cash invested in acquisitions was £90.9m (2020: £176.3m), with £68.2m net spend relating to acquisitions net of cash acquired (2020: £77.3m), £3.3m of cash paid for business assets (2020: £7.3m), £10.3m (2020: £45.9m) for acquisition and integration spend, £1.5m (2020: £44.9m) for the cash settlement on the exercise of an option relating to minority interests and £7.6m (2020: £0.9m) relating to other investments.

Net proceeds from disposals amounted to £280.9m (2020: £10.4m).

Acquisitions

On 28 May 2021, the Group combined its existing FBX business with Novantas, Inc. to create the Curinos business. The Novantas business provides quantitative and qualitative competitive intelligence solutions for US retail banks and forms part of the Informa Intelligence division. This combination seeks to create a leading competitive intelligence and specialist data business serving the retail banking markets. The agreement is structured as an acquisition of Novantas on a cash and debt free basis by Informa and private equity firm, Inflexion, with Informa contributing its FBX business as non-cash consideration valued at £101.7m. None of the Group's existing liquidity was used to finance the acquisition.  Informa owns 56% of the equity voting shares of the combined business and has control to direct the relevant activities of the combined business and therefore fully consolidates the results of Novantas.  

The non-controlling interest at the acquisition date represents the total of the non-controlling share of the fair value of the Novantas net assets acquired together with the non-controlling interest share of the carrying value of FBX that has been contributed and the non-controlling interest share of the value of preference shares that have been issued by Inflexion and Novantas management to the combined business.

Other acquisitions included the purchase of NetLine Corporation on 30 November 2021 for total consideration, net of cash acquired, of £43.0m. NetLine is an online B2B multi-channel content marketing network providing targeted branding and high-quality lead generation and forms part of the Informa Tech Division. On 30 September 2021 the Group acquired Clinerion AG, a leader in medical data informatics used in accelerating the process of drug development. Clinerion forms part of Pharma Intelligence within the Informa Intelligence Division and total consideration was £19.4m.

Pensions

The Group continues to meet all commitments to its pension schemes, which include six defined benefit schemes, all of which are closed to future accruals.

At 31 December 2021, the Group had a net pension surplus of £1.6m (31 December 2020: net deficit of £71.4m), comprising a pension surplus of £15.5m (31 December 2020: £nil) and pension deficits of £13.9m (31 December 2020: £71.4m). Gross liabilities were £735.2m at 31 December 2021 (31 December 2020: £786.8m). The decrease in liabilities is predominantly driven by the increase in the discount rates used for calculating the present value of the pension liability, with rates for UK schemes increasing 60 basis points from 1.30% in the prior year to 1.90% at 31 December 2021, in line with increased yields on benchmark high quality corporate bonds.

The triennial funding valuations for the three main UK schemes were completed in 2021. These showed a funding valuation deficit of £56.0m for the UBM Pension Scheme as at 31 March 2020, a deficit of £24.6m in the Informa Final Salary Scheme as at 31 March 2020 and a deficit of £3.7m in the Taylor & Francis scheme as at 30 September 2020.  Financial market conditions have significantly improved since the valuation date, meaning the aggregate funding positions of these schemes has improved, and in line with Regulator guidance to use post valuation experience, we have agreed with the respective Trustee Boards to allow for this in calculating the required deficit repair contributions from the Group,

The agreed cash contributions are consistent with the amounts paid in recent years, with contributions being £2.5m p.a. for the UBM Pension scheme, £2.0m p.a. for the Informa Final Salary, and £0.25m p.a. for the Taylor & Francis scheme.  The UBM pension scheme amount will increase to £3.75m p.a. when the Group resumes the payment of dividends to shareholders. 

Software-as-a-Service (SaaS) restatement

In 2021 the IFRS Interpretations Committee published two agenda decisions clarifying how arrangements in respect of a specific part of cloud technology, Software-as-a-Service (SaaS), should be accounted for. These concluded that a SaaS arrangement conveys to the customer only the right to receive access to the supplier's application software in the future is a service contract rather than a software lease or intangible asset. As such, it concluded that these arrangements should be expensed rather than shown as an intangible asset. It also addressed how a customer should account for the costs of configuring or customising the supplier's application software in a SaaS arrangement that is determined to be a service contract. In the majority of cases, such costs should be expensed, instead of being shown as an intangible asset, unless the spend results in "identifiable" assets and meets the recognition criteria in IAS 38 Intangible Assets.

Following these interpretations, the Group updated its accounting policy in relation to SaaS arrangements which resulted in a restatement of the 2020 results with a reduction to profit before tax of £1.2m, with a £1.0m reduction to 2020 earnings (see note 3 for further details).  These adjustments to 2020 relate to the expensing of SaaS intangible assets capitalised in 2020 partly offset by the reversal of intangible asset amortisation charged in 2020 that relates to items no longer qualifying as intangible assets.

Divestment and share buyback

On 10 February 2022 the Group announced the binding agreement to divest Pharma Intelligence to Warburg Pincus for £1.9bn. Pharma Intelligence is the largest business within the Informa Intelligence division and is a leading provider of specialist intelligence and data for Clinical Trials, Drug Development and Regulatory Compliance. 85% of the equity value is to be realised at closing, equating to c.£1.7bn in cash, with Informa retaining a c.15% shareholding in the business going forward and having board representation.  The estimated profit on disposal is £1.4bn, with this amount being subject to the net assets at the completion date and the results of a valuation exercise on the non-cash consideration. Completion of the sale is expected by early June 2022 subject to relevant regulatory clearances.

None of the Intelligence businesses met the criteria to be disclosed as held for sale at 31 December 2021, and therefore are not presented as discontinued operations for the year.

The group also announced on 10 February 2022 that it was commencing a share buyback programme with the intention of returning a proportion of the proceeds from the divestment to shareholders. The first tranche of this programme committed up to £100m towards buybacks. As part of the Full Year Results, the Group confirmed this tranche had been completed and launched a second tranche of a further £200m, which will run through to the AGM in June.