Industrial Alliance Insur & Fin Ser : 2016 Interim Results for Six Months to 30 June 2016

Press Release 28 July 2016

Informa PLC

Interim Results for Six Months to 30 June 2016

Continued Operational and Financial Progress in Peak Year of GAP investment

KEY FINANCIAL HIGHLIGHTS

• Accelerating organic revenue growth: +2.5% vs +0.2% in H1 2015 and +1.0% FY 2015

• Higher reported revenue: +4.7% to £647.7m (H1 2015: £618.8m)

• Increased adjusted operating profit: +6.3% to £202.2m (H1 2015: £190.3m)

• Higher statutory operating profit: +8.6% to £141.6m (H1 2015: £130.4m*)

• Growth in adjusted diluted EPS: +3.1% to 23.1p (H1 2015: 22.4p*)

• Increased interim dividend: up 4% to 6.80p (H1 2015: 6.55p)

• Robust balance sheet with secure pension position: Gearing of 2.4x (H1 2015: 2.4x)

• Strong underlying free cash flow, full year on track; first-half phasing with £20m

GAP investment: £67.7m (H1 2015: £116.4m)

London: Informa (LSE: INF.L), the international Business Intelligence, Exhibitions, Events and Academic Publishing Group, today reported solid growth in Revenue, Operating Profit and Earnings Per Share for the six months to 30 June 2016 in the peak investment year of the 2014-2017 Growth Acceleration Plan ("GAP").

• Operational and Financial Momentum in peak year of GAP Investment - robust trading and improving earnings visibility in all four Operating Divisions:

  • Global Exhibitions…Growing: Benefits of high quality Brand portfolio, scale and US expansion delivering continued double-digit growth;

  • Academic Publishing…Resilient: Simplified operating structure, focus on Upper Level Academic Market and further investment in specialist content and technology underpins a resilient performance, despite ongoing softness in physical books;

  • Business Intelligence…Improving: Operational fitness program producing continued improvement in organic revenue trend; on track for full year organic growth target, as customer focus increases annualised contract values and subscription renewal rates;

  • Knowledge & Networking…Restructuring: Lower first half revenue reflecting impact of restructuring programme combined with events phasing; focus on building market positions in Life Sciences, FinTech and TMT, including recent addition of US- based Light Reading;

  • Visibility of earnings: Accelerating organic, reported growth and targeted US expansion is increasing the proportion of recurring, subscription and forward booked revenue towards a threshold of two-thirds of Group revenues.

• 2014-2017 Growth Acceleration Plan - Disciplined Delivery in peak year of GAP Investment:

  • Investment: £45-50m to be invested in 2016, with around 30 product workstreams in progress; on track for release of enhanced platforms and products from 2016;

  • Capability: Continued GAP progress further improving operational fitness across the Group, notably in technology, talent, treasury, acquisition execution and integration;

  • Dividend: Solid operating performance and strong cash generation supports 4% increase in Interim Dividend, meeting the GAP dividend commitment;

  • Expansion of TMT Vertical: Organic US expansion, new London Technology initiative and addition of Light Reading enhance portfolio of specialist content, data products and high quality confexes in core TMT vertical;
  • Board Appointment: John Rishton, former Chief Executive of Rolls Royce Group plc, appointed as Non-Executive Director, adding further international experience;

Stephen A. Carter, Group Chief Executive, said: "Informa continues to deliver operational and financial progress as investment activity peaks in Year 3 of the Growth Acceleration Plan.

He added: "Our focus on delivery, combined with the scale benefits of our US expansion programme, gives us confidence we can again meet our full-year targets, including a third year of revenue growth and improved adjusted earnings."

• H1 2015 restated, see Note 3 for details.

  Financial Highlights

  H1 2016	H1 2015	Reported	Organic1
  £m	£m	%	%
  Revenue	647.7	618.8	4.7	2.5
  Operating profit	141.6	130.4
  Adjusted operating profit2	202.2	190.3	6.3	(0.7)
  Adjusted operating margin (%)2	31.2	30.8
  Operating cash flow3	123.2	153.7
  Profit before tax	98.9	118.9
  Adjusted profit before tax2	184.8	178.2	3.7
  Profit for the year	90.1	98.5
  Diluted Earnings Per Share (p)	13.8	15.0
  Adjusted diluted Earnings Per Share (p)2	23.1	22.4	3.1
  Dividend per share (p)	6.80	6.55
  Free cash flow3	67.7	116.4
  Net debt	1,054.9	911.7
  1In this document 'organic' refers to results adjusted for material acquisitions/disposals and the effects of changes in foreign currency rates. 2In this document we refer to adjusted and statutory results. Adjusted results are prepared to provide a useful alternative measure to explain the Group's underlying business performance. Adjusted results exclude adjusting items as set out in Note 5. 3Operating cash flow and free cash flow are as calculated in the Financial Review.

  Divisional Highlights

  H1 2016	H1 2015	Reported	Organic
  £m	£m	%	%
  GLOBAL EXHIBITIONS Revenue	192.9	168.8	14.3	11.6
  Statutory Operating Profit	71.4	59.5	20.0
  Adjusted Operating Profit	88.3	77.7	13.6	10.0
  Adjusted Operating Margin (%)	45.8	46.0

  Revenue	214.7	195.0	10.1	0.9
  Statutory Operating Profit	48.2	45.2	6.6
  Adjusted Operating Profit	72.9	66.7	9.3	(3.5)
  Adjusted Operating Margin (%)	34.0	34.2

  ACADEMIC PUBLISHING

  Revenue	134.6	138.8	(3.0)	(0.5)
  Statutory Operating Profit	17.9	17.5	2.3
  Adjusted Operating Profit	26.9	28.2	(4.6)	(4.4)
  Adjusted Operating Margin (%)	20.0	20.3

  BUSINESS INTELLIGENCE

  Revenue	105.5	116.2	(9.2)	(4.7)
  Statutory Operating Profit	8.6	8.2	4.9
  Adjusted Operating Profit	14.1	17.7	(20.3)	(27.7)
  Adjusted Operating Margin (%)	13.4	15.2

  KNOWLEDGE & NETWORKING

  ENQUIRIES
  Informa PLC
  Stephen A. Carter, Group Chief Executive	[phone]
  Gareth Wright, Group Finance Director	[phone]
  Richard Menzies-Gow, Director of Investor Relations	[phone]
  Teneo Strategy
  Tim Burt / Ben Ullmann	[phone]

  ANALYSTS AND INVESTORS

  There will be a presentation to analysts at 10.30am on 28 July 2016 at Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ. A simultaneous webcast of the analysts' presentation will be available via the Company's website (www.informa.com).

  Trading Outlook

  Over recent years, Informa has pursued a strategy of International expansion, particularly in North America and now generates nearly 60% of revenue in US Dollars, with around 25% in Sterling and 7% in Euros. This provides resilience and leaves us well positioned to manage current regional variances, including the impact on activity from the short-term uncertainty following the recent UK Referendum.

  2014-2017 GROWTH ACCELERATION PLAN ("GAP")

  Operationally, the focus remains on the Disciplined Delivery of GAP in its third year. Between £45m and £50m will be invested in 2016 across around 30 product and platform workstreams, up from £25m last year. As in 2015, this will impact earnings through increased operating and capital expenditure, although the benefits of product enhancements will also begin to flow through later this year.

  PHASING AND TIMING

  As normal, a number of timing issues impact the revenue split between the first and second half of the year. The Divisions most affected in 2016 are Knowledge & Networking, where several large confexes (most notably Partnerships in Clinical Trials, RiskMinds and Fund Forum Africa) have moved into the second half, and Academic Publishing, where customer purchasing patterns continue to trend later in the year. Both are expected to even out, weighting growth to the second half in both businesses.

  Phasing also had an impact on first half cash flow with several one-off year-on-year movements, which combined with the scheduled step-up in GAP investment to £20m impacted half-year cash conversion. Underlying cash flow trends remain strong and full year cash generation continues to be on track.

  GLOBAL EXHIBITIONS

  In 2016, the benefits of scale and US expansion across our portfolio of 180 market leading exhibition Brands is delivering further strong growth and consolidating our position as the third largest commercial organiser globally. We also continue to make good progress in developing our digital and data capabilities, as we look to deepen customer engagement and use technology to enable us to monetise our strong customer relationships in new ways, as part of our Market Maker strategy in key verticals.

  With good visibility through the remainder of 2016, we remain confident we can deliver a third year of strong organic growth, as we continue to build and buy a scale international Exhibitions business.

  ACADEMIC PUBLISHING

  The Academic market remains relatively resilient but short-term budget pressures continue to affect some regions and sectors, particularly Books. Longer term we continue to see evolving customer demands for greater flexibility and innovation in relation to digital access, format and pricing.

  Our strategy to focus on the Upper Level Academic Market and invest in the depth and quality of content as well as the technology that drives discoverability by academics continues to position us well to meet these demands. The successful consolidation of our operations into a single global Books and single global Journals business has also increased efficiency and brought us closer to customers.

  This increased operational focus and ongoing cost discipline gives us confidence we can meet our targets for the year, including organic revenue growth at least in line with 2015 levels.

  BUSINESS INTELLIGENCE

  The growing demand for data and intelligence to justify investment decisions, corroborate strategy and drive competitive advantage underpins the market for specialist business information.

  The reorganisation and revitalisation of our business to be more customer oriented and focused on subscriptions is producing a steady improvement in operating performance, with renewal rates close to 90%, customer pipelines stronger and Annualised Contract Values growing year-on-year.

  At the same time, GAP investments in product and platforms are progressing well and we are on schedule to start progressively rolling out enhanced and upgraded product, with more than 35 individual releases expected over the next 18 months. This gives us continuing confidence in our ambition to deliver positive organic revenue growth in 2016, positioning us well as we enter the last year of GAP.

  KNOWLEDGE & NETWORKING

  Increased specialisation and globalisation of business and professional verticals is driving value in niche networks and communities, underpinning the market for Community Content, Connectivity and Data.

  We entered 2016 with a streamlined portfolio and simplified operating model and the focus is now on building strong community Brands within our three core verticals of Life Sciences, Finance and TMT. The addition of US-based Light Reading will enhance the latter, adding valuable data, specialist content and high quality events, as well as a broader capability in monetising community relationships.

  This increased focus and operational capability is driving some improvement in underlying trading and as first half events phasing evens out through the second half, we remain focused on delivering or exceeding our target of flat organic revenue growth in 2016, despite continued softness in the energy and resource vertical and any potential volatility caused by the outcome of the UK Referendum.

  Operational Review

  During the first half of 2016 the Group continued to focus on the Disciplined Delivery of the 2014-2017 Growth Acceleration Plan ("GAP") in Year 3 of the programme, ensuring we implement and realise our plans for increased capability and accelerated growth. The level of operational fitness across Informa continues to steadily improve and combined with the benefits of our US expansion programme this is driving operational and financial momentum.

  INVESTMENT FOR GROWTH AND ACCELERATION

  The organic investment programme remains a key element of GAP, with around £90m being invested over three years across the Group. This year we expect to spend between £45m and £50m on the programme, the peak year for investment as many of the 30 plus product and platform workstreams move into the build and implementation phase. Activity levels on these projects are high across all four Operating Divisions but particularly so within Business Intelligence and Knowledge & Networking, where the GAP programmes are at a more advanced stage.

  Examples of the scope of projects underway include:

  • Academic Publishing: Product Delivery Platforms, Discoverability Tools, Content Digitisation and meta-tagging, Customer Analytics, Marketing Automation, Author Lifecycle Management, Digital Academic Services;

  • Business Intelligence: Insight and Intelligence platforms, Customer Insight & Analytics, Data and Content expansion, Brand Proposition and Web Estate

  • Global Exhibitions: Data Capture, Market Maker Platform, Digital Content & Marketing; Brand Proposition and Web Estate

  • Knowledge & Networking: Digital Transformation, Master Data Management; In-Event Engagement, Event Experience, Sales Optimisation

As we enter the Delivery phase of GAP through 2016, product and platform developments will start to deliver benefits. Within Knowledge & Networking, we have already launched the first phase of the CORE platform to improve its digital content and marketing capabilities. Similarly, in Business Intelligence, we have already re-launched its vertical Brand structure. More significantly, towards the end of 2016 we will start to release upgraded products with enhanced functionality as our insight and intelligent platforms start to bear fruit.

TARGETED EXPANSION OF TMT VERTICAL

Over the last two years, we have been purposefully expanding our presence in the growing TMT vertical. Within Business Intelligence, a new Managing Director for the vertical was appointed earlier this year to grow and expand its main market facing brand, Ovum, with a particular focus on building its presence in North America. Within Knowledge & Networking, we have also been steadily adding capability in the US, building on the success of our West Coast-based Internet of Things Brand. Earlier this year, to capitalise on this momentum we opened a new office in San Francisco, co-locating colleagues from both Divisions focused on the TMT market.

In the UK, we also recently announced a major new Technology initiative in London to showcase the UK's technology community and attract major global players to the capital. We are bringing a number of existing event Brands, such as 5G World, VR & AR World and Apps World together with some proposed new launches under the banner TechXLR8, which through a number of partnerships we plan to build into a broader Technology festival in London.

The July 2016 addition of Light Reading is the next stage of our TMT expansion programme. Founded in 2000, Light Reading is a US-based, business-to-business digital information, marketing and events business with a strong reputation and loyal following within the global TMT community. Through its Light Reading and Heavy Reading information products and high quality confexes, it has grown rapidly in recent years to become a key partner to a broad range of companies within the TMT space.

Alongside its broad range of specialist TMT data, knowledge and customer relationships, Light Reading brings capabilities in areas such as specialist content, digital communities, and targeted marketing that can be applied more widely across Informa. The deal is expected to be immediately accretive to Group earnings and deliver a positive return on investment in the first full year of ownership.

Both Light Reading and the London Technology initiative will become part of the Knowledge & Networking Division but there is strong overlap and opportunity for synergies elsewhere in the Group. The combination of all of the above with our various other operations in the TMT vertical now gives us a business with revenue of more than £100m.