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Rating Action:

Moody's changes Informa's outlook to negative, affirms Baa3 ratings

19 Mar 2020

London, 19 March 2020 -- Moody's Investors Service, ("Moody's") today changed the ratings outlook on Informa Plc ('Informa' or the company) from stable to negative. Concurrently, Moody's has affirmed the Baa3 issuer and senior unsecured ratings of Informa.

The change in outlook to negative reflects the pressure developing on the company's revenues and EBITDA in 2020 from show delays and cancellations caused by the coronavirus outbreak across geographies. Informa has so far traded GBP250 million of its GBP1.9 billion annual Events revenues. The company has recently announced the cancellation, or biennial rephasing to 2021, of 13 shows in 2020 worth GBP25 million in revenues and the postponement of 115 shows worth GBP400 million in revenues into the second half of 2020.

"If the coronavirus related disruptions end in the first half of 2020, then Informa's performance may not be as adversely affected. However, should the disruptions continue in the second half of the year, the company's credit metrics could get materially worse," says Gunjan Dixit, a Moody's Vice President -- Senior Credit Officer and lead analyst on Informa.

"With Moody's adjusted Gross Debt/ EBITDA of 2.8x at the end of 2019, Informa has limited headroom within the Baa3 rating for any material under-performance. We are nevertheless comforted by the company's liquidity position and recognize that the events business could recover rapidly in 2021 in the instance coronavirus related disruptions are not long-lived", adds Ms. Dixit.

A list of all affected ratings can be found at the end of this press release.

RATINGS RATIONALE

Moody's notes that Informa delivered operating performance in 2019 slightly ahead of its plan. The company's reported net leverage declined to 2.5x in 2019 (from 3.1x on acquisition of UBM) in line with the company's medium term leverage range of 2.0-2.5x. However, the rapid and widening spread of the coronavirus outbreak in 2020, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The B2B events sector has been one of the sectors most significantly affected by the shock. More specifically, despite Informa deleveraging to 2.8x on a Moody's adjusted Gross Debt/ EBITDA basis, it sits at the upper end of its own target leverage range. Whilst it has almost one third of its revenue coming from subscription-related businesses, its exposure to B2B events has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, particularly if the outbreak continues to spread or remains an issue for a prolonged period.

Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Today's rating action reflects the impact on Informa of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered.

65% of Informa's overall revenues is Events-related which is cyclical by nature and exposed to the possibility of a broader economic downturn. Informa's Markets division is highly exposed to disruption from coronavirus (show delays and cancellations). 35% of Informa's overall revenues are subscription-related and continue to trade well in Q12020, underpinned by strong renewal rates, at 90%+ on average, and consistent low to mid-single digit growth in annualized contract values.

At its 2019 results presentation, Informa highlighted two scenarios to illustrate the impact on the business performance from coronavirus. Scenario I assumes that no further events were held in the first half of 2020 but second half of 2020 operated as normal. In this scenario, Informa would aim to reduce its indirect costs by GBP70 million. Assuming these cost savings, Moody's estimates that the negative impact on company's reported EBITA (adjusted operating profit) would be around GBP60-65 million. This should have a small negative effect on the company's leverage in 2020.

Scenario II assumes no further events at all in 2020. In this scenario, the company aims to save a total of GBP675 million in direct and indirect costs. Assuming these cost savings, Moody's estimates that this scenario would still represent a GBP420-430 million EBITA reduction. While Scenario II appears extreme at this stage, downward ratings pressure on Informa's ratings will be imminent, if coronavirus related disruptions appear to continue beyond the first half of 2020.

Informa indicated that its forward bookings for events in 2021 have been good, for those events that ran successful in January and February this year. There may be some issues related to traffic of shows (shows that have been postponed to H2 2020 reappearing quickly in H1 2021). To offset this there are some biennials shifted out of 2020 into 2021. Overall Informa at present appears to think the net impact on 2021 would not be meaningful.

The Board has proposed a final dividend of 15.95p per share representing a 7.3% increase on the final dividend in the prior year. But if the situation starts deteriorating more towards scenario II, it remains to be seen if the company will change its stance towards dividend payments. Dividends will be tabled for approval at the company's AGM on 12 June 2020 and are currently due to be paid on 10 July 2020. Company's decision to continue with the dividend payments despite worsening operating trends would certainly be credit negative.

In 2020, Informa has secured a surplus, committed credit facility of GBP750 million which will provide full flexibility through the current period of market volatility. Together with the undrawn GBP900 million revolving credit facilities (due 2023/25), this gives Informa around GBP1.5 billion undrawn committed liquidity. The company had cash and cash equivalents of GBP195.1 million as of 31 December 2019 with no material debt maturities before 2022, when GBP96.1 US private placement related debt falls due.

The company's US private placement notes are the only debt which have covenants and, they account for around GBP1.1 billion of debt. The covenant ratio under the notes indenture is at 3.5x net debt/EBITDA based on pre- IFRS 16 numbers, average FX on the debt and a full year of M&A (LTM). This ratio stood at 2.5x at the end of 2019. While Moody's believes that the company liquidity should be fine even in a stress scenario, a covenant waiver might be required at some point.

RATIONALE FOR NEGATIVE OUTLOOK

Negative outlook on the rating captures the risk of deterioration in the company's operating performance and credit metrics due to the delay/ cancellations of shows due to the coronavirus outbreak.

Stabilization of outlook would require (1) disruptions in the company's events caused by the coronavirus outbreak to fall away; (2) resumption of growth in the revenues and profitability of the events business and (3) maintenance of credit metrics well within the triggers defined for the Baa3 rating on a sustained basis.

WHAT COULD CHANGE THE RATING UP/DOWN

While a rating upgrade is unlikely in the next 18 months, given the company's high leverage historical track record of targeted acquisitions, upward pressure could develop should Informa's Moody's adjusted gross leverage decline to below 2.5x on a sustained basis and Moody's adjusted retained cash flow (RCF)/net debt rise above 20%.

Downward pressure could arise if there were reduced expectations of a business recovery starting from H2 2020 as well as failure to maintain a conservative financial policy such that its Moody's adjusted gross leverage rises above 3.0x on a sustained basis and Moody's adjusted RCF/net debt declines to materially below 15%. A weakening in the company's liquidity profile could also exert downward pressure on the rating.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

LIST OF AFFECTED RATINGS

Outlook Actions:

..Issuer: Informa Plc

....Outlook, Changed To Negative From Stable

Affirmations:

..Issuer: Informa Plc

.... Issuer Rating, Affirmed Baa3

....Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa3

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

COMPANY PROFILE

Headquartered in London, UK, Informa Plc is a London Stock Exchange listed publishing and events company with operations in 30 countries. In 2019, the company generated revenues of GBP2.9 billion and adjusted operating profit of GBP933 million.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Gunjan Dixit
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Peter Firth
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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