Informa’s (INF) investors will no doubt have paid close attention to the annual numbers from its peer UBM (UBM), and vice versa. This time next year the two companies could be announcing results together if their proposal to merge into the world’s biggest media and events group goes ahead as planned.
In 2017, both companies reported double-digit growth in revenues and adjusted operating profits, strong cash inflows and a reduction in leverage. Their respective strategies for dealing with falling demand for print publications have borne fruit.
But that is why we are a little unsure of the timing of this merger. Informa has asked a lot of its shareholders in recent years, as it has unpicked and rebuilt its portfolio at great cost. Earlier in the year, chief executive Stephen Carter said that the group would focus on converting profits into cash and reducing net debt, which, at 2.5 times adjusted cash profits, has only just fallen into management’s target range. The acquisition is expected to send the group’s leverage back up to three times adjusted cash profits, although management said it expected highly visible revenue and strong projected cash flow would reduce net debt to below 2.5 times over time.
Meanwhile, Tim Cobbold, boss at UBM, admitted that “pure-play events has unashamedly been our strategy”. That is why the group has sold several print publications in recent years to produce a portfolio in which events contribute 86 per cent of revenues. So why is Mr Cobbold happy to let his company become part of a diversified group, after many years of streamlining?
The answer, it appears, lies in the scale and synergies that are due to come from the merger. Informa and UBM are “vertically and geographically complimentary”, according to Mr Cobbold and could deliver at least £60m in annual recurring operating synergies. For Informa, the deal is another opportunity to bulk up its events business. Last year, global exhibitions became the group’s largest division for the first time, after its 2016 acquisition of Penton Information Services sent reported revenues up 75 per cent to £560m.
