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Rating Action:

Moody's changes outlook on Informa's Baa3 ratings to Stable

04 May 2022

London, May 04, 2022 -- Moody's Investors Service, ("Moody's") today changed the ratings outlook on Informa Plc ("Informa" or "the company") to stable from negative. Concurrently, Moody's has affirmed the Baa3 issuer and backed senior unsecured ratings of Informa.

The change in outlook to stable reflects (1) the prospects of continued recovery in the company's operating performance supported by the implementation of its 2021-2024 Growth Acceleration Plan (GAP II); (2) solid free cash flow generation in 2021 of GBP390 million (as defined by Moody's after capex and dividends), moderate reported net debt (covenant free) of GBP1.4 billion helped by a healthy cash balance of GBP884.8 million as of 31 December 2021; and (3) significant improvement in financial flexibility from the sale of Informa Intelligence portfolio in 2022/23 that is expected to generate net disposal proceeds of around GBP2 billion, at least 50% of which is likely to be gradually invested into the business (organically and inorganically) to bolster future growth.

On 10th February 2022, Informa announced that it had agreed to divest 85% of the equity value of Pharma Intelligence to Warburg Pincus for around GBP1.5 billion in cash (post-tax) while retaining 15% of shareholding in the business. Pharma Intelligence accounted for 40% and 50% respectively of Informa Intelligence division's reported revenues and adjusted operating profit for 2020. The sale has been approved by Informa's Board and is expected to complete by early June subject to regulatory clearances.

Informa has so far committed to GBP300 million of share buybacks (out of the circa GBP1 billion planned from the entire disposal proceeds) for 2022. The company has said that it is aiming to complete the sale of Financial Intelligence businesses in the late summer, with Maritime Intelligence remaining to be sold later in 2022/23.

"While meaningful execution risks exist, we expect the company to progress well with its planned disposals as well as with the implementation its GAPII strategic plan and prudently utilize its excess liquidity towards discretionary cash outflows (shareholder returns and acquisitions) in a way that it is able to achieve and maintain credit metrics in line with its Baa3 rating," says Gunjan Dixit, a Moody's Vice President – Senior Credit Officer and lead analyst on Informa.

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

RATINGS RATIONALE

Informa's revenues grew by 6.1% on an underlying basis to GBP1.79 billion in 2021 after recording a decline of 41% in 2020, supported by the progressive re-opening of events since Q4 2021, relaxation of Covid-19 related restrictions and increase in trading activities. The company's operating profit (adjusted by Informa) also saw a strong recovery of 36.1% on an underlying basis to GBP388.4 million in 2021. In 2022, the company has guided to achieving revenue of GBP2.15-2.25 billion and operating profit of GBP470-GBP490 million, reflecting the expected phased divestment of the Informa Intelligence portfolio.

Covid-19 recovery trend for Informa's events has been consistent in Q12022 and business normality is returning at pace in North America, Middle East and Europe. A majority of Informa's events are reliant upon local attendees and not on international attendees and therefore not impacted by international travel frictions. Informa has proactively shifted its events activity in China to H2 2022 as the region is currently affected by an increase in Covid-19 cases. While Moody's believes in the recovery potential of Informa's operating performance over 2022/23, it remains cautious of the uncertain global macro-economic environment that could delay recovery. The agency nevertheless recognizes that Informa does not have any commercial operations in Russia, Belarus and Ukraine and it is focused on creating a strong liquidity buffer with the sale of its Intelligence portfolio which the rating agency would expect it use more conservatively should the macro-economic situation worsen materially.

On 7th December 2021, Informa had announced its plans to dispose of its Intelligence division leaving the company focused on academic publishing, through Taylor and Francis (30% of 2021 revenue) and its B2B Events & Digital Services business (50% of 2021 revenue – including Informa Markets, Informa Connect, and Informa Tech) – with exhibitions returning to growth in the latter part of 2021 after widespread cancellations during the pandemic. The company expects the disposal of the division to realize net proceeds of around GBP2.0 billion. Upon the completion of the disposals, the company plans to return around GBP1.0 billion to shareholders through share buybacks and a special dividend over 2022/23 and also aims to return to c90% of 2019 revenue levels by 2024 (before any major acquisitions).

The Intelligence business generated GBP348 million in revenue and GBP110 million in operating profit (adjusted by Informa) in 2021 and accounted for around 19% and 28% of Informa's overall revenue and operating profit respectively. This business showed strong resilience during the pandemic and is expected to grow 6% over 2022. By selling this business, Informa will lose the diversification of its revenues from a growing business segment and will become more exposed to its trade show business whose performance is correlated to economic cycles and exposed to the trends in containing the spread and severity of Covid-19. Informa will nevertheless remain geographically diversified with its events and publishing brands leading in their respective markets. While Moody's believe that Informa will be successful in disposing of the entire Intelligence division in 2022 at an attractive average EV/ EBITDA multiple of at least 16x, Moody's think the business risk profile of the company will somewhat weaken for the time being as it will lose this growing resilient division.

Informa's growth strategy over 2021-24 is well defined but it carries meaningful execution risks. As part of GAP II, Informa has publicly announced that it plans to invest a net GBP150 million in incremental capex and opex (split 80:20 respectively) in 2021-24 to fund programmes to expand digital services in B2B Events & Digital Services (Informa Markets/Connect/Tech) and Academic Markets & Knowledge Services (Taylor & Francis) with the aim of generating around GBP200 million of incremental revenue by 2024. The net GBP150 million of investment is expected to be front-end loaded, with 50% in 2022, and the rest 30% and 20% respectively between 2023 and 2024. Management has also communicated plans that "New Informa" will be 40%+ digital by 2024.

Aside from the announced organic investments and share buybacks, Informa will have strong financial flexibility (helped by GBP1 billion of unutilized disposal proceeds and the healthy free cash flow generation expected over 2022/23) to invest further in organic and inorganic growth. Informa ended 2021 with a reported net leverage of 2.8x which equates to a Moody's net debt/ EBITDA of 3.0x (and 4.8x on a gross basis). The company is committed to maintaining an investment grade rating and in that context Moody's would expect it to eventually utilize its excess liquidity in a way such that it can achieve a gross debt/ EBITDA (Moody's adjusted) of below 2.75x while successfully implementing GAPII and improving the growth prospects of its business. Event risk related to the successful execution and integration of add-on acquisitions will nevertheless remain high for Informa in the next 12-24 months.

RATIONALE FOR STABLE OUTLOOK

Stable rating outlook reflects Moody's expectation that Informa will continue to successfully implement its GAPII strategic plan and manage its future investments in such a way that it is able to sustain credit metrics (Moody's adjusted Gross Debt/ EBITDA of below 2.75x and RCF/ Net Debt of well above 15%) in line with the Baa3 rating.

Besides analyzing Informa's gross leverage, the rating agency will also take into consideration the healthy cash position that will remain on the company's balance sheet following the disposal of Intelligence businesses. To the extent some of this cash is earmarked for future investments into the business or debt reduction, Moody's will positively incorporate it in its analysis.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Upward pressure on the Baa3 rating could develop should the company (1) execute well on its future growth strategy of strengthening its market position in B2B market access as well as expanding the open research business within Taylor and Francis, while maintaining strong level of profitability; (2) reduce its gross leverage (Moody's adjusted) to below 2.25x and improve its retained cash flow (RCF)/net debt (Moody's adjusted) to above 20% on a sustained basis.

Downward pressure on the rating could arise should (1) Informa's operating performance not see recovery and growth according to its own plan, (2) the company engage in acquisitions and shareholder returns such that its Moody's adjusted gross leverage remains consistently above 2.75x and Moody's adjusted RCF/net debt falls approaches 15% and (3) the company's liquidity profile weakens materially.

LIST OF AFFECTED RATINGS

Affirmations:

..Issuer: Informa Plc

.... LT Issuer Rating, Affirmed Baa3

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

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

Outlook Actions:

..Issuer: Informa Plc

....Outlook, Changed To Stable From Negative

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Business and Consumer Services published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1287897. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

Headquartered in London, UK, Informa Plc is a London Stock Exchange listed publishing and events company with operations in 30 countries. In 2021, the company generated revenues of GBP1.8 billion and adjusted operating profit of GBP388 million.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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

Mario Santangelo
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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