This is part two of our interview with Informa CEO Peter Rigby. Read part one and watch a video interview here.
How much do you need to know what’s going on in your industry?
If you really need to know, Peter Rigby wants to help you.The company he has run since 1998, multinational information and intelligence publisher Informa, has built a 2.7 billion business out of telling people – now overwhelmingly digitally and increasingly in real-time – what they need to know to make more money and stay ahead of competitors.
The downturn in ad spending brought on by cyclical and long-term structural pressures and the banking crisis made the last few years nightmarish for advertising-based business models. But Rigby, speaking from his company’s London HQ on an unusually pleasant Winter afternoon, is fittingly sunny about where Informa stands right now.
“We are in good health. We have market leading products in various sectors and over the last three years they have done very well – some others declined a little bit. To have the market-leading conference in a sector, even in a downturn, is a good place to be.
“If you’re in information, if you’ve got advertising and things that are slightly discretionary then you’re going to feel it in a downturn. But that’s why B2B can be very interesting, particularly to the investor.”
Investor confidence, recessionary pressures
Investors have been keen too: Informa’s share price started 2010 at 355p but at the start of this year fetched a 407p price and has since climbed to 433p.
Rigby is cautious of giving away any real numbers, at least until the company’s preliminary full-year results on February 22, but admits that 2010 failed to match 2007-8 in revenue terms. Informa’s Asian divisions fared well, the UK (where Informa’s business interests are small), Europe and Scandinavia were all suffered but the “United States is sluggish and southern Europe is awful. Luckily we’re not big in Spain and Italy,” says Rigby.
Informa cut back literally thousands of small-sized events in 2008-10 to focus on market-leading properties, yet in 2009 exhibition and delegate revenue made of 32 percent of the company’s total. Some look to Informa’s events as a bellwether for the wider industry, so how are they doing?
“They’re definitely on the up. Our events are the things that have the most geographic spread. They’re a very good bellwether – we saw stuff happening in 2007 and 2008 in the US that made us know something was up. And similarly we’ve seen the upturn most quickly on the events side.
“Leading events pretty well held their own. It’s not really what we do, it’s a poor example, but we own the Monaco Yacht Show – fantastic event, market leading for superyachts, and it didn’t decline at all throughout the downturn.”
Really? People still sold superyachts during the credit crunch? At least someone was making money…
“Well, it’s not just that. People decided that if they were not there, they didn’t exist any more. The choice was simply ‘are we going to exhibit at Monaco or not?’ It’s the only place to be.”
Events elsewhere were varied: financial ones were hit hard but the market-leading events were much more resilient.
Indebted to history
In the last five years, Informa sealed some major deals. Most notably it bought Datamonitor at the very top of the private equity boom for 510 million in a highly leveraged acquisition. It rejected many more, including a takeover of Germany’s Springer Science + Business Media; a mooted merger with UBM and an acquisition offer from a private equity consortium which in 2008 valued the business at around 3.4 billion.
Debt rose to 1 billion and there was external talk at the time of the company breaching its banking covenants – as happened at Informa’s B2B media peer Incisive Media. However, this didn’t happen and Rigby insists he never believed it was likely. In 2009 the company eased its debt pile with a 242 million rights issue in 2009 and the debt is now manageable. But does he think the company and the industry went too far down the road of leveraged buy-outs and debt?
“No I don’t think so. We were probably not that different to others. At the time we acquired Datamonitor we had a net debt to EBITDA ratio of about 5 and we said we’d get it down very rapidly and we did – to 4, 3.5 and at the end of last [financial] year it was 2.6, 2.7.
“In 2006-7 nobody thought that three and a half times net debt-to-EBITDA for a cash-rich company like we are was an issue – but then the world changed. But what didn’t change is that we converted 100 percent of its net profits into cash.”
He continues: “The net affect was that we had share price pressure and that starts people circling around. We eventually resolved it with a rights issue, we reduced the debt, because if we hadn’t and just carried on forever that’s not a great place to be.
“We never breached a covenant, we don’t believe we were ever in that much danger of breaking one, but who knows how long the world was going to be bad, so you can’t say that with 100 percent certainty.”
Would he have done things differently? “Yeah, of course – with hindsight, if you knew, you wouldn’t buy businesses at the top of the market. But on the other hand, you never know that’s the top of the market.”