Informa made a £51 million operating loss in 2014, and the problems are still stemming mainly from its business information division that constains more traditional publishing operations
Though the overall growth figures are largely flat – an increase of £7 million in revenue to £1137 million and a drop of £600,000 in adjusted operating profit compared to the previous year, group finance director Gareth White suggests the information provider is now in a good position to invest in and accelerate growth from a few divisions in particular.
But where’s the revenue coming – and not coming – from? And should Informa be thinking about ditching the bits of the company that aren’t delivering revenue growth to focus on the parts that look more promising?
Informa saw its exhibitions business grow from £160.2 million in revenue to £200.2 million, an organic growth rate of 18.9 percent. That’s as a result of its expansion into previously untapped markets with a focus on ‘geo-cloned’ events. That saw an acceleration in its revenue from North & South America, the Middle East and Asia even as growth slowed in continental Europe and the United Kingdom.
The diversification into new markets geographically coincided with a concerted effort to broaden its events portfolio, with the acquisition of Virgo Group, Hanley Wood Exhibitions and Orlando MegaCon events company, which variously offer events based around construction, pop culture and health.
That all suggests a company looking to solidify its standing as a major player in events and one which, based on the results, one that is seeing a lot of success in doing so. The exhibitions side of the business is not forecast to perform quite so strongly in 2015, however, given the absence of biennial and quadriennial events from the slate.
Informa’s academic publishing arm also saw growth, though not to the same extent. Its revenue grew three percent organically to £408.9 million – although in terms of operating profit the division saw an actual fall of 0.6 percent to £150 million. That was largely due to the satisfactory performance of journals and print books, and a slower than expected shift to ebooks which is affecting the industry as a whole, as related in the results:
“Ebook sales varied month-to-month through 2014 and while overall growth remained strong, the trend suggests print will remain important for some time. We continue to take a neutral approach to product format. All our production and design processes are digital but we have the flexibility to supply customers in the format they want with relatively low differences in marginal cost.”
The biggest contributors to Informa’s overall pre-tax loss of £51 million were its business intelligence and knowledge & networks divisions.
Business intelligence overall revenue was down from £305.9 million in 2013 to £281.7 million last year, a fall of 8.5 percent. In terms of operating profit, that led the division to make £75.2 million, significantly down on the £86.8 million of the year before. In the press release, that fall is ascribed to:
“… challenging trading conditions, which resulted in lower one-off product sales and a decline in advertising revenue. Subscription trends continue to vary by vertical and product but average renewal rates remain low by historical levels.”
Meanwhile, in the analysis of the division’s performance in the presentation that accompanied the release, there was an acknowledgement that there had been a lack of subscription management and an inconsisent incentive structure to attract new subscribers. In terms of products, Informa also says its portfolio was too widely diversified – as a result of which its strategy over the next two years focuses on restructuring around the keys verticals of Pharma & Healthcare, Finance, Maritime & Law, Technology/Media/Telecoms and Agra.
That restructuring – and creating a greater incentive structure for subscribers to re-up – is paramount for Informa, which saw 87 percent of the revenue for the business information division coming from subscriptions.
By contrast its knowledge and networks (mainly training focused) division saw a 3.2 percent fall in overall revenue year on year to £246.2 million and an operating profit of £41.5 million, and what success it did see came from pre-existing investment in delegate experience and “deep community engagement”.
Where now for Informa?
That events would be big business for Informa is not in itself news – in our roundup of Exane’s analysis of its results in June it only merited a single sentence – but the continued struggle of its business information segment remains troubling.
Nevertheless, the renewed focus on streamlining its BI segment around its core five subjects is heartening, as is the admission that it needs to focus more on creating greater incentives for subscribers.
Divesting itself of its slowing BI division might make sense right now, but subscription strategies such as Informa’s plan over the next two years – essentially doubling down on providing a valuable service for its existing subscribers – take a while to bear fruit.
The huge growth in its events business and an increase in the amount of cash available for Informa to reinvest in its BI division are positive signs, even if the overall performance might be disappointing for some.