Exhibitions. Informa Plc, which became the world’s largest exhibitions organiser in 2018 with its £3.8bn acquisition of UBM, has begun divesting non-core operations with the $100m sale of its life sciences portfolio to MJH Associates. The New Jersey-based publisher of Pharmacy Times, Dentist’s Money Digest, and Contemporary Clinic (advised by Oaklins DeSilva + Phillips), now claims to be the largest medical media group in the US. The properties acquired from Informa include: Medical Economics and Dermatology Times; animal care titles including DVM360 and Vetted; Spectroscopy and BioPharm International; Dental Products Report; and three veterinarian conferences. The deal is one of at least three that Informa is hoping to complete in the next few weeks. As the UK-listed company prepares to report its 2018 results and success in squeezing post-acquisition cost savings from UBM, the relatively small disposals are the easy bit. Informa now has some 400 events brands, including 24 of the 250 largest exhibitions in the US. But – unlike UBM – it’s still also a large-scale business and professional publisher. That’s not a challenge – for now. But investment analysts, who had warmed to CEO Stephen Carter’s audacious exhibitions strategy, are now a bit more edgy about the evident risks in buying UBM complete with scarcely-digested major acquisitions in the US and Asia. It is just four years since one analyst described UBM’s then $1bn acquisition of Advanstar in the US as “a big and brave strategic move” and raised “questions about its quality and growth potential…”. Informa executives say they never expected to get the same kind of early performance from UBM’s portfolio as from their existing events, which is just as well because the 2018 growth rate of UBM exhibitions may have been one-third lower than those of Informa. Much of the disappointment is down to Advanstar’s largest events, for the fashion industry. Last year, Informa nervously told investors: “We’ve now had a chance to pore over…both the Advanstar acquisition and the bolt-on acquisitions that were done following… And, in round numbers, that business was targeted to do around $200m of revenue by the end of 2018, and it’s currently tracking to do about $150m.” In Las Vegas this week, Informa insiders joked about whether the $15m investment pledged by executives to their largest event, the twice-yearly Magic fashion convention, was “new” money or just “lost” profit from UBM. The early wobble underlines the risk taken by Informa in acquiring a business that had so recently narrowed down to exhibitions after decades of being across almost everything in media, consumer and B2B. That’s presumably one reason why UBM – which had been actively shedding its information and publishing businesses – still had a long tail of under-profitable events. But the warning signs were everywhere on Advanstar, a company with a patchy portfolio and a colourful history of being bought, sold and going bust. There’s no panic because Informa’s tightly-managed core business may be doing much better than investors expected – and UBM only a little bit worse. The reality means having to pedal harder to justify an exhibitions strategy which commits to:
- Global growth through ‘geo-cloning’ of exhibitions
- Embedding data services into event platforms
Those familiar objectives go to the heart of why four rival companies, each operating in more than 30 countries, are chasing Informa for global leadership in exhibitions. They all believe in the scale economies of worldwide events, especially in the developing nations of Asia, and are appetised by relatively fragmented exhibition ownership: there’s a lot of consolidation still to come. But the success of geo-cloning in any exhibitions sector frequently depends as much on the local circumstances of markets, competition and venues as on the strength of the brands. Likewise, it is not clear exactly how data will help to future-proof trade shows and, indeed, what is the potential risk of digital disruption. The Informa difference is that, for now, it’s sticking with its publishing and information businesses. It’s only the latest major company to believe that these can help to grow exhibitions. Many others (including Reed and UBM) tried but gave up publishing to became exhibition specialists. It’s easy to see why. Unlike most traditional media, the $30bn global exhibitions industry has been growing, in real, terms consistently for much of the past 15 years, even though the great fear is whether they can be digitally disrupted. Informa and its trade show rivals are variously involved in plans to build year-round buyer-visitor digital relationships. Although “online exhibitions” and webinars have mostly under-delivered, it is easy to believe that the rising cost of exhibition participation (not to mention the cost, hassle and interruption-risks to travel) may help to spawn digital solutions that capture the imagination – and at least some of the revenues – of exhibitors. But Informa’s CEO has other things on his mind. His investor presentations amplify the supposed synergies between Informa’s ‘business intelligence’ and its exhibitions. But the company which claims its £500m-revenue Taylor & Francis academic publishing “is an information business with similarities to, and cross-over with, the rest of the group in areas such as content production, data management and digital delivery” doesn’t even dare to connect that with exhibitions. It’s not unusual, of course, for CEOs to want to retain soundly profitable divisions, however peripheral they have become. But it is clear that Informa’s forecast of £3bn revenues within two years (and EBITDA margins of 32%+) will come 60% from exhibitions. The company describes itself self-consciously as being “at the heart of the Knowledge and Information Economy… one of the world’s leading B2B Events, Information Services, and Upper Level Academic Publishing businesses.” So, it’s a conglomerate. Informa’s 2017 numbers are instructive: exhibition revenues grew by 8% but everything else increased by 2% or less. While the company, which grew out of the 1998 merger of International Business Communications and Lloyd’s List, quietly fillets its B2B information group with the expected divestment of its agribusiness portfolio (reportedly to AgriBriefing) and IGM credit/FX, investors may start to question the role of academic publishing which (pre-UBM) was responsible for 30% of Informa’s revenue, 38% of operating profit and its highest margins. The £200m+ of academic profit comes from 2,700 journals and no fewer than 140,000 books, including 7,000 new editions every year. The questions keep coming with operations that are 53% dependent on subscriptions but 47% on single copy sales, and the fact that less than 30% of the books revenue is digital. The division is expected to grow by 2% in 2018 but may actually be worth some £3bn (or 40% of Informa’s current market cap) to one of the larger STM players. It may take a major new exhibitions target (the shaky Emerald Expositions in the US?), some trading squalls – or approaches from Springer Nature, Wolters Kluwer, Wiley or private equity – to persuade Informa to cash-in the academic publisher that was a £500m bargain back in 2004. Or will RELX, the STM and business-tech monolith, want to swap Taylor & Francis (and some cash) for its distinctly non-core £300m-profit Reed Exhibitions? Either way, the smart money is on Informa becoming an events-only business. A bit like UBM.