Informa, the FTSE 100 events and exhibitions group that is the largest company of its kind in the world, has turned to its investors for £1 billion to strengthen its balance sheet. The cash call took place this week in the form of a new equity placement. Dividends and discretionary spending have also been cancelled and the company’s board and senior management have agreed pay cuts.
The company organises over 500 events a year, many of them world famous industry showpieces including the Monaco Yacht Show and China Beauty Expo. But with all mass gatherings around the world suspended since early March, and for the foreseeable future, the Covid-19 pandemic has hit Informa hard. Harder, said the company yesterday as it announced its intention to tap investors, than it initially anticipated.
The company’s share price rose 2.5% in early trading this morning, following yesterday evening’s announcement.
Informa chief executive, Lord Carter of Barnes, commented that the company’s events division had, unsurprisingly, suffered “material disruption”, as a result of the international lockdown which currently covers around half of the world’s population.
However, Lord Carter was also keen to stress his belief that the company’s exhibitions business will bounce back. However, he said expectations are now for that to be a “gradual and phased” process, with normality not returning until at least the third quarter of the year.
Events is, however, not the only unit under the Informa group umbrella. The FTSE 100 company also owns the Lloyd’s List shipping news service and academic publisher Taylor & Francis. The company has already this week sold 250.2 million 400p shares to the institutional investors that control 99% of the company. The placement was priced at a 4% discount to the Informa share price at Wednesday’s close, with Lord Carter commenting.
“This will give us enough strength on our balance sheet to see us through 2020, whatever happens.”
The company has also applied for the Bank of England’s emergency Covid-19 commercial paper programme. A planned dividend has been suspended along with all discretionary spending and scheduled salary reviews for employees.
Lord Carter, a former Labour government minister and head of the communications regulator Ofcom, will, along with the company’s chief financial officer, take a 33% cut in his salary. Senior management and non-executive directors will see their salaries reduced by 25%. The £1 billion cash call will be used to reduce debt to £1.4 billion from its present level of £2.36 billion.
The company, which is the result of the 1998 merger between IBC Group and Lloyd’s of London Press, is currently valued at around £5.5 billion. In 2018 the company paid £3.8 billion for events specialist UBM. That acquisition saw Informa become the largest exhibitions company in the world but also increased debt levels.
Around 65% of total revenues come from the exhibitions business with the remaining 35% generated by digital publications subscriptions and business information services. The latter two business units have so far weathered the pandemic lockdown well. However, exhibitions set to earn the company £460 million in revenue have been suspended. Informa hopes they will be able to go ahead later in the year. Events accounting for around 10% of exhibition income have been permanently cancelled. The majority of ticket holders for delayed events have chosen to role bookings over to the dates events will hopefully be able to take place.
The company is also in talks with holders of over £1 billion of debt sold through the US private bond market, with terms and conditions stipulating the company maintains its debt level to below 3.5 times underlying earnings. A 60% drop in revenues due to delayed events means it is likely that condition will be breached. The new capital raise means if existing debt holders don’t agree to a change in their terms, the company now has “other options”, such as buying back bonds.